<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
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MiniMed Inc.
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<PAGE> 2
PROXY
[MINIMED LOGO]
MINIMED INC.
12744 SAN FERNANDO ROAD
SYLMAR, CALIFORNIA 91342
May 1, 2000
Dear Stockholders:
It is my pleasure to invite you to attend the 2000 annual meeting of
Stockholders of MiniMed Inc., which will be held on Thursday, June 22, 2000,
beginning at 10:00 a.m. (PDT), at the Performing Arts Center at California State
University, Northridge, 18111 Nordhoff Street, Northridge, California 91330. The
Performing Arts Center is located on Zelzah Avenue between Prairie and Plummer
Streets in Northridge, California. For your convenience, a map is enclosed with
this Proxy Statement. Detailed information about the meeting and the items on
which the stockholders will act is described in the accompanying Notice of
Annual Meeting and Proxy Statement. Also included is a Proxy Card with an
accompanying postage paid return envelope. IT IS IMPORTANT THAT YOU VOTE YOUR
SHARES WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. I urge you to review
carefully the Proxy Statement and to vote your choices on the enclosed card.
Please sign, date and return your Proxy Card in the envelope provided as soon as
possible. If you do attend the meeting, your Proxy can be revoked at your
request in the event you wish to vote in person.
I look forward to seeing you at the meeting.
Sincerely,
/s/ ALFRED E. MANN
Alfred E. Mann
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
MiniMed Inc. (the "Company") will hold its annual meeting of stockholders
on June 22, 2000, at 10:00 a.m., Pacific Daylight Time, at the Performing Arts
Center at California State University, Northridge, 18111 Nordhoff Street,
Northridge, California 91330. The Performing Arts Center is located on Zelzah
Avenue between Prairie and Plummer Streets in Northridge, California. The annual
meeting of the stockholders will be held for the following purposes:
1. To elect three (3) Class 1 Directors to serve as directors for
three-year terms. Such Class 1 Directors shall serve until the 2003 annual
meeting of stockholders or until their respective successors are elected
and qualified. The Board of Directors intends to nominate the three persons
identified in the accompanying Proxy Statement as Class 1 Directors.
2. To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche LLP as auditors for the fiscal year ending December 29,
2000.
3. To act upon other matters that may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed May 1, 2000 as the Record Date for
determining the stockholders entitled to receive notice of and to vote at the
annual meeting, or any adjournment or postponement thereof.
Alfred E. Mann and Eric S. Kentor have been appointed as proxy holders,
with full rights of substitution, for the holders of MiniMed Inc. common stock.
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors
/s/ ERIC S. KENTOR
Eric S. Kentor
Senior Vice President, General Counsel
and Secretary
May 1, 2000
Sylmar, California
<PAGE> 4
[MINIMED LOGO]
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- JUNE 22, 2000
INTRODUCTION
As a stockholder of MiniMed Inc., you have a right to vote on certain
matters affecting the company. This proxy statement discusses the proposals you
are voting on this year. Please read it carefully because it contains important
information for you to consider when deciding how to vote. Your vote is
important.
In this proxy statement, we refer to MiniMed Inc. as the "Company" or
"MiniMed." We also refer to this proxy statement, the proxy card and our 1999
annual report as the "proxy materials."
The Board of Directors, which we also refer to as the Board, is sending
proxy materials to you and all other stockholders on or about May 8, 2000. The
Board is asking you to vote your shares by completing and returning the enclosed
proxy card.
Unless we state otherwise, all information in this proxy statement
concerning Company common stock reflects the stock dividend distributed to
stockholders of record on April 1, 1999.
This proxy statement includes summary information on the Company's
financial performance. This information is historical and is not predictive of
future results. More detailed information regarding the Company's financial
performance may be found in the Company's Annual Report accompanying this proxy
statement.
QUESTIONS AND ANSWERS
Q: WHO CAN VOTE AT THE ANNUAL MEETING?
A: Stockholders who owned Company common stock on May 1, 2000 may attend and
vote at the annual meeting. Each share is entitled to one vote. There were
31,747,146 shares of Company common stock outstanding on May 1, 2000.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A: This proxy statement describes proposals on which we would like you, as a
stockholder, to vote. It also gives you information on these proposals, as
well as other information, so that you can make an informed decision.
Q: WHAT IS THE PROXY CARD?
A: The proxy card enables you to appoint Alfred E. Mann and Eric S. Kentor as
your representatives at the annual meeting. By completing and returning the
proxy card, you are authorizing Mr. Mann and Mr. Kentor to vote your shares
at the meeting, as you have instructed them on the proxy card. This way, your
shares will be voted whether or not you attend the meeting. Even if you plan
to attend the meeting, it is a good idea to complete and return your proxy
card before the meeting date just in case your plans change. If a proposal
comes up for vote at the meeting that is not on the proxy card, Mr. Mann and
Mr. Kentor will vote your shares, under your proxy, according to their best
judgment.
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Q: WHAT AM I VOTING ON?
A: We are asking you to vote on:
- the election of three Class 1 Directors for three-year terms. Such
Class 1 Directors shall serve until the 2003 annual meeting of
stockholders or until their respective successors are elected and
qualified;
- the ratification of Deloitte & Touche LLP as the Company's auditors
for the fiscal year ending December 29, 2000; and
- any other matter which may be properly raised at the meeting. We do
not presently know of any other business which may come before the
meeting.
Q: HOW DO I VOTE?
A: YOU MAY VOTE BY MAIL. You do this by completing and signing your proxy card
and mailing it in the enclosed, prepaid and addressed envelope. If you mark
your voting instructions on the proxy card, your shares will be voted as you
instruct. If you do not mark your voting instructions on the proxy card, your
shares will be voted for the three named nominees for Class 1 Directors and
for the ratification of Deloitte & Touche LLP as the Company's auditors for
the fiscal year ending December 29, 2000.
YOU MAY VOTE IN PERSON AT THE MEETING. We will pass out written ballots to
anyone who wants to vote at the meeting. However, if you hold your shares in
street name, you must request a proxy from your stockbroker in order to vote
at the meeting. Holding shares in "street name" means you hold them in an
account at a brokerage firm.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It probably means that you have multiple accounts holding MiniMed common
stock at the transfer agent or with stockbrokers. Please complete and return
all proxy cards to ensure that all your shares are voted.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?
A: You may revoke your proxy and change your vote at any time before the polls
close at the meeting. You may do this by:
- signing and delivering a written notice of your intent to revoke your
proxy to Mr. Kentor, MiniMed's Corporate Secretary, at 12744 San
Fernando, Road, Sylmar, California 91342; or
- signing another proxy with a later date.
Your attendance at the annual meeting will not automatically result in the
revocation of a proxy previously delivered.
Q: WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm, under certain
circumstances, may vote your shares. Brokerage firms have authority under New
York and American Stock Exchange rules to vote customers' unvoted shares on
some "routine" matters. All of our proposals described later under "Proposals
To Be Voted On" are routine matters. If you do not give a proxy to vote your
shares, your brokerage firm may either:
- vote your shares on routine matters; or
- leave your shares unvoted.
When a brokerage firm votes its customers' unvoted shares on routine matters,
these shares are counted to determine if a quorum exists to conduct business
at the meeting.
A brokerage firm cannot vote customers' unvoted shares on non-routine matters
(so called "broker non-votes"). In such situations, the affected shares will
be counted for purposes of determining the presence or
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absence of a quorum for the transaction of business, but will not be included in
the vote totals and will not be counted as present for purposes of determining
whether a non-routine matter has been approved.
We encourage you to provide instructions to your brokerage firm by giving
your proxy. This ensures your shares will be voted at the meeting.
Q: HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A: To hold the meeting and conduct business, a majority of the Company's
outstanding shares as of May 1, 2000, must be present at the meeting. This is
called a quorum. Shares are counted as present at the meeting if the
stockholder either:
- is present and votes in person at the meeting; or
- has properly submitted a proxy card.
Q: HOW MANY VOTES MUST THE NOMINEES HAVE TO BE ELECTED AS DIRECTORS?
A: We use the phrase "yes vote" to mean a vote for a proposal. For Class 1
Directors, the three nominees receiving the highest number of yes votes will
be elected as directors. This number is called a plurality.
Q: HOW ARE VOTES COUNTED?
A: You may vote either "for," "withhold authority" or "against" each nominee.
You may also vote "for," "against" or "abstain" on the proposal to ratify
Deloitte and Touche LLP as the Company's independent public accountants for
the fiscal year ending December 29, 2000. If you withhold authority or
abstain on any matter or for any nominee, it will be counted as a negative
vote. If you give your proxy without voting instructions, your shares will be
counted as a yes vote for each nominee and for the ratification of Deloitte &
Touche LLP. Voting results are tabulated and certified by our Inspector of
Elections, Harris Trust Company of California.
Q: IS MY VOTE KEPT CONFIDENTIAL?
A: Proxies, ballots and voting tabulations identifying stockholders are kept
confidential and will not be disclosed except as may be necessary to meet
legal requirements.
Q: WHERE DO I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting. We will publish
the final results in our quarterly report on Form 10-Q for the second quarter
of 2000. We will file that report with the Securities and Exchange
Commission, and you can get a copy of this report by contacting our Investor
Relations Department at (818) 362-5958 or the SEC at (800) SEC-0330 for the
location of its nearest public reference room. You can also get a copy on the
Internet through the SEC's electronic data system called EDGAR at
www.sec.gov.
Q: WHO PAYS FOR THE SOLICITATION OF THE PROXIES?
A: The Company is paying for the distribution and solicitation of the proxy
materials. The costs associated with the solicitation of proxies include but
are not limited to expenses for the preparation, assembly and mailing of this
Proxy Statement, the Proxy Card and any additional materials furnished to
stockholders. Proxies may be solicited by directors, officers and regular
employees of the Company personally or by mail, telephone or telegraph.
However, employees do not receive additional compensation for soliciting
proxies. Copies of solicitation material will be furnished to brokerage
houses, fiduciaries and custodians that hold shares of common stock of record
for beneficial owners for the purpose of forwarding such materials to such
beneficial owners. As a part of this process, the Company reimburses brokers,
nominees, fiduciaries and other custodians reasonable fees and expenses in
forwarding proxy materials to stockholders. The Company does not, at this
time, intend to hire any third parties to solicit proxies on its behalf.
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YOUR VOTE IS IMPORTANT AND YOU ARE ENCOURAGED TO MARK YOUR PROXY CARD
PROMPTLY SO THAT YOUR SHARES CAN BE REPRESENTED.
PROPOSALS TO BE VOTED ON
PROPOSAL 1 -- NOMINATION AND ELECTION OF CLASS 1 DIRECTORS
Pursuant to the Company Certificate of Incorporation and Bylaws, the Board
of Directors of the Company is divided into three classes: Class 1, Class 2 and
Class 3. The following chart details the current composition of each Class of
Directors and the respective expiration dates of each member of the Board of
Directors:
<TABLE>
<CAPTION>
TERM TO EXPIRE AT
ANNUAL MEETING IN
-----------------
<S> <C> <C>
CLASS 1 DIRECTORS David Chernof, M.D 2000
Carolyne Kahle Davis 2000
John C. Villforth 2000
CLASS 2 DIRECTORS William R. Grant 2001
David H. MacCallum 2001
Thomas R. Testman 2001
CLASS 3 DIRECTORS Alfred E. Mann 2002
Terrance H. Gregg 2002
</TABLE>
As the term of Class 1 Directors is set to expire at the 2000 annual
meeting, the Board of Directors has approved three nominees to serve as Class 1
Directors. The Bylaws of the Company require the three nominees receiving the
highest number of yes votes to be elected as directors. Stockholders eligible to
vote at the annual meeting have one vote per share and do not have cumulative
voting rights with respect to the election of directors. Shares represented by
Proxies marked "withhold authority" for one or more nominees will be counted as
a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A YES VOTE FOR EACH NAMED NOMINEE.
CLASS 1 DIRECTOR NOMINEES
The Class 1 Director nominees were proposed by the Organization and
Compensation Committee of the Board of Directors and approved by the Board. If
any of the Class 1 Director nominees should decline or be unable to act as a
director, the persons named in the Proxy will vote in accordance with their best
judgment with respect to alternative candidates. The Company knows of no reason
why the nominees would not be available for election or, if elected, would not
be able to serve.
The following is information with respect to the nominees. Each of the
nominees currently serves on the Board.
DAVID CHERNOF, M.D., age 64, has been a Director of the Company since July
1994. Since January 1999, Dr. Chernof has been President of DCHC -- Health Care
Consultants, a health care consulting firm. Previously, he has served as Chief
Medical Officer of LA Care Healthplan, a health maintenance organization, from
October 1996 through December 1998. Previously, Dr. Chernof was an independent
medical and health care services consultant. From 1991 to July 1995, Dr. Chernof
served as the Senior Vice President and Corporate Medical Director of Blue Cross
of California, where he was responsible for medical policies, physician
relations, utilization and quality monitoring programs and technology
assessment. Dr. Chernof was a member of the Blue Cross of California Board of
Directors from 1987 to 1991 and was in private practice from 1968 to 1991. Dr.
Chernof is a member of the Audit Committee of the Board. Recently, Dr. Chernof
was appointed to the faculty of the School of Policy, Planning and Development
at the University of Southern California as a Senior Fellow. Dr. Chernof is a
member of the Audit Committee of the Board.
CAROLYNE KAHLE DAVIS, PH.D, age 68, has been a Director of the Company
since May 1997. Ms. Davis currently serves as an independent business advisor to
numerous companies. Ms. Davis served as
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National and International Health Care Advisor to Ernst & Young, an
international auditing, accounting and consulting firm from October 1985 until
her retirement in April 1997. From March 1981 until August 1985, Ms. Davis
served as Administrator of the Health Care Financing Administration, a
sub-cabinet position reporting to the Secretary of Health and Human Services.
The Health Care Financing Administration is the agency responsible for the
Medicare and Medicaid programs. Previously, Ms. Davis served as Associate Vice
President for Academic Affairs at the University of Michigan, and Dean of the
University of Michigan School of Nursing. Ms. Davis currently serves on the
boards of Beckman Instruments, Inc., a manufacturer of instruments for
laboratories, Merck & Co., Inc., a pharmaceutical company, Beverly Enterprises,
Inc., a provider of long-term healthcare through nursing facilities and other
home health centers, and The Prudential Insurance Company of America, a company
which provides a range of insurance services. She is also a member of the
Institute for Medicine. Ms. Davis is a member of the Audit Committee of the
Board.
JOHN C. VILLFORTH, age 69, has been a Director of the Company since May
1996. He has served since September 1990 as President and Executive Director of
the Food and Drug Law Institute, a non-profit organization whose mission is to
increase knowledge about the laws and regulations pertaining to foods, drugs,
cosmetics, medical devices and biological products. Prior to 1990, and for 29
years, Mr. Villforth was a Commissioned Officer in the U.S. Public Health
Service in the Department of Health and Human Services, the last 19 years of
which he was assigned to the Food and Drug Administration. Mr. Villforth retired
from the Public Health Service in August 1990 with the rank of Assistant Surgeon
General (Rear Admiral). During his tenure, he held the positions of Director,
Center for Devices and Radiological Health of the Food and Drug Administration,
which we call the FDA, (1982-1990); Director, Bureau of Radiological Health of
the FDA (1969-1982); and Chief Engineer, U.S. Public Health Service (1985-1990),
among other positions. Mr. Villforth served on the board of Target Therapeutics,
Inc. (subsequently acquired by Boston Scientific Corporation), a medical device
company, from 1992 to April 1997, and the board of BRI International
(subsequently acquired by Quintiles Transnational Corp.), a contract research
organization for the biotechnology, pharmaceutical and medical devices
industries, from 1992 to 1997. Mr. Villforth is a member of the Organization and
Compensation Committee.
CURRENT CONTINUING CLASS 2 DIRECTORS
(TERM EXPIRES 2001)
WILLIAM R. GRANT, age 75, has been a Director of the Company since June
1994. He has served as managing General Partner and Chairman of Galen Associates
since 1989. Previously, Mr. Grant served as President and Vice Chairman of Smith
Barney Inc., President and Chairman of Mac-Kay Shields Financial Corporation,
and Vice Chairman of SmithKline Beecham. Currently, Mr. Grant serves on the
boards of Allergan, Inc., a provider of eye care and specialty pharmaceutical
products, Ocular Sciences, Inc., a manufacturer of contact lenses, Vasogen,
Inc., a developer of immune modulation therapies for treatment of various
diseases, Westergaard.com, Inc., an internet publisher and broadcaster providing
web-based investment research and Quest Diagnostics, Incorporated, a clinical
laboratory testing company. He is a Trustee of the Mary Flagler Cary Charitable
Trust and is a member of the General Electric Pension Advisory Emeritus Board.
Mr. Grant is Chairman of the Organization and Compensation Committee of the
Board.
DAVID H. MACCALLUM, age 62, has been a Director of the Company since July
1994. In May 1999, he joined Salomon Smith Barney, a subsidiary of Citigroup,
Inc., a major financial institution, where Mr. MacCallum serves as the Global
Head of Health Care Investment Banking. Previously, Mr. MacCallum served as
Executive Vice President of ING Baring Furman Selz LLC, which we call ING
Baring, from April 1998 to May 1999. Prior to that he was the Managing Director,
Investment Banking, for UBS Securities LLC from May 1994 to April 1998. Mr.
MacCallum served as Co-Head of Investment Banking of Hambrecht & Quist from 1991
to 1994. Prior to 1991, Mr. MacCallum was a Managing Director of Hambrecht &
Quist. He is also a Director of Bionix Implants, Inc., a medical device company
and Advanced Bionics Corporation, a medical device company. Mr. MacCallum is a
member of the Organization and Compensation Committee of the Board.
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<PAGE> 9
THOMAS R. TESTMAN, age 63, has been a Director of the Company since July
1994. Mr. Testman retired from his position as Managing Partner with Ernst &
Young, an international auditing, accounting and consulting services firm in
October 1992 after 30 years of continuous service. During his tenure he held the
position of National Director of Management Consulting Services, served on the
operating committee of the firm from 1976 to 1980, was Western Regional Director
of Consulting Health Care Services and managed area audit and tax practices.
During the last three years, Mr. Testman has served as the interim Chief
Executive for Techniclone Corp., a cancer treatment developer. He also formerly
served as a director of Nichols Institute, a publicly-held laboratory company
that was sold to Corning, Inc. in 1994. He currently serves on the board of
directors of Chromavision Medical Systems, Inc., a medical device manufacturer,
in addition to serving as a director of six privately held health care
companies. Mr. Testman is Chairman of the Audit Committee of the Board.
CURRENT CONTINUING CLASS 3 DIRECTORS
(TERM EXPIRES 2002)
ALFRED E. MANN, age 74, has served as Chairman of the Board and CEO of the
Company since its incorporation and was President until 1994 and from October
1995 until October 1996. Until March 1994, Mr. Mann served as the Chairman of
the Board of the General Partner of MiniMed Technologies Limited, a California
limited partnership, which we call MMTL, a predecessor of the Company which was
also engaged in the design, manufacture and marketing of hospital intravenous
pumps and electrostimulation devices primarily for restoration of hearing for
the deaf. Mr. Mann has also served as Chairman of Advanced Bionics Corporation,
which we call ABC since 1994 and as CEO from 1994 to February 1996. ABC is the
successor to the electrostimulation business segment of MMTL. From 1985 to
September 1992, Mr. Mann was also President and CEO of Siemens-Pacesetter, Inc.,
a manufacturer and distributor of cardiac pacemakers. Mr. Mann founded and from
1972 until 1985 was Chairman of the Board and CEO of Pacesetter Systems, Inc., a
California corporation and predecessor of Siemens-Pacesetter, Inc. Prior to
1972, he was President of Spectrolab, an electro-optical and aerospace systems
company, and Heliotek, a semiconductor and electro-optical components
manufacturer, which companies Mr. Mann founded in 1956 and 1960, respectively,
and which were sold to Textron Inc. in 1960. Mr. Mann is currently Chairman of
the Board of Trustees of the Alfred E. Mann Foundation for Scientific Research,
a medical research foundation. Mr. Mann is also founder, and President of the
managing entity, of Medical Research Group, Inc. that conducts research and
development activities relating to medical devices. Since March 1998, Mr. Mann
has served as a Trustee for the University of Southern California. Mr. Mann
holds a B.A. and an M.S. degree in physics from the University of California,
Los Angeles.
TERRANCE H. GREGG, age 51, has been a Director of the Company since August
1998. Mr. Gregg was promoted to President and Chief Operating Officer in
October, 1996. From February to October 1996, Mr. Gregg served as Executive Vice
President, Operations. Mr. Gregg joined the Company as Vice President of
Regulatory Affairs and Clinical Research in September 1994. Prior to his
employment with the Company, Mr. Gregg spent nine years as Vice President of
Governmental Affairs for Ioptex Research, the ophthalmic surgical products
subsidiary of Smith & Nephew, plc. Prior to joining Ioptex Research, Mr. Gregg
was responsible for Regulatory Affairs, Clinical Research and Quality Assurance
for divisions of Allergan, Inc. Mr. Gregg earned a Bachelor of Science degree in
zoology from Colorado State University in 1971. Mr. Gregg currently serves on
the boards of Hemotherapies, Inc., a privately held company, Vasogen, Inc., a
developer of immune modulation therapies for treatment of various diseases, and
Ocular Sciences, Inc., a manufacturer of contact lenses.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $8,000, payable
quarterly, and meeting fees of $1,000 per meeting of the Board of Directors and
$500 per meeting of a committee of the Board of Directors. For meetings convened
via telephone, non-employee directors are compensated at the rate of $500 per
Board meeting and $250 per committee meeting. Directors are entitled to defer
all or part of such cash compensation until their retirement or other
termination from the Board, or other predetermined dates. Deferred amounts
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either accrue interest at a fixed rate or are credited to units which are
converted to shares of MiniMed common stock upon distribution. Directors are
also reimbursed for out-of-pocket expenses incurred in connection with
attendance at such meetings. Directors who are employees of the Company receive
no compensation for service as a member of the Board.
Non-employee Directors are each granted options to purchase 5,000 shares of
MiniMed common stock upon election to the Board, with additional grants of
options to purchase 5,000 shares on June 1 of each successive year that the
Director serves on the Board, each at an exercise price equal to the fair market
value of the Company's common stock on the date of grant. Such options vest over
a three year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Organization and Compensation Committee currently consists of
Mr. Grant, who serves as Chairman, Mr. MacCallum and Mr. Villforth. Mr.
MacCallum is also a director of Advanced Bionics Corporation. Mr. Mann, the CEO
and the Chairman of the Board of Directors of MiniMed is a founder, the Chairman
of the Board of Directors and a significant stockholder of Advanced Bionics
Corporation. The following information relates to transactions by the Company in
1999 with certain Directors of the Company:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 1, 1998, the Company sold assets and transferred technology
related to its implantable pump program to Medical Research Group, Inc., which
we call MRG, and entered into a series of related transactions. MRG was founded
by Alfred E. Mann, founder, Chairman, CEO and largest stockholder of MiniMed.
Mr. Mann continues to hold a substantial equity interest in MRG.
MiniMed sold assets, consisting primarily of inventories and equipment to
MRG in exchange for a note receivable of approximately $3.6 million. No gain or
loss has been recognized on the sale of these assets. The note receivable is due
and payable in full on December 31, 2003, and accrued interest is payable on
December 31 of each year prior to maturity. The note bears interest at a rate of
7.0% annually. The note is secured by the assets sold to MRG and guaranteed by
Mr. Mann. The Company has also leased facilities and improvements to MRG at
which MRG will carry out its activities. The obligations of MRG under the lease
are guaranteed by Mr. Mann. Certain employees of the Company involved in the
manufacturing operations and research and development activities related to the
implantable pump product line have become employees of MRG. The Company retained
exclusive distribution rights to the implantable pump product line for specific
medical conditions, including diabetes. Pursuant to the Implantable Pump License
and Distribution Agreement entered into on September 1, 1998 and amended on June
8, 1999, MiniMed is required to purchase implantable pump units from MRG at
negotiated prices, and is obligated to purchase minimum quantities in 2000 and
2001 and must purchase minimum quantities in future periods in order to preserve
its exclusivity rights. MiniMed purchased approximately $2.4 million of
implantable pumps from MRG in 1999. Future minimum purchase commitments for
implantable pump units based upon current prices are:
<TABLE>
<S> <C>
2000............................ $ 9,784,000
2001............................ 8,935,000
-----------
Total........................... $18,719,000
===========
</TABLE>
The Company is responsible for pursuing regulatory approval of the
implantable pump for the treatment of diabetes and has provided MRG with a
working capital line of credit of $3.0 million, which will bear interest at 7.0%
annually. Any amounts borrowed under the line of credit are due on or before
December 31, 2001 and will be secured by a pledge of MiniMed common stock owned
by Mr. Mann. To date, MRG has not borrowed any funds under this line of credit.
MRG has also granted MiniMed an option to acquire exclusive world-wide
distribution rights to MRG's long-term glucose sensor, currently under
development, for $30.0 million. The option is exercisable upon MRG's achievement
of certain development milestones. MRG is attempting to integrate its long-term
glucose sensor technology with the implantable pump. MRG has completed the
development of certain improvements to the implantable pump.
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The Company leases a portion of its principal facility in Sylmar,
California to Mr. Mann. Under the terms of the lease, the amount of space being
leased is 23,400 square feet with a monthly rent of $8,424 per month for the
lease term, which expires in 2001. Pursuant to the terms of the lease, Mr. Mann
is also responsible for paying for tenant improvements made to the facilities,
in the amount of $4,050 per month over the balance of the term (which includes
an interest factor of 7.5%). The lease may be terminated by either party upon 90
days notice prior to the end of any calendar year. If the lease is terminated by
Mr. Mann, he will be obligated to continue to repay the Company for the tenant
improvements until such time as the Company occupies and utilizes the space. The
Company believes that the terms of the lease reflect the fair rental value of
the space. A portion of that space has been subleased by Mr. Mann to MRG, and a
portion has been made available to the Alfred E. Mann Foundation for Scientific
Research, a medical research foundation founded by Mr. Mann, at no charge.
Mr. MacCallum, a Class 2 Director of MiniMed was the Executive Vice
President of ING Baring Furman Selz LLC, which we call ING Baring, from April
1998 until May 1999. During Mr. MacCallum's tenure as the Executive Vice
President of ING Baring, MiniMed negotiated and finalized a financing
arrangement relating to its new worldwide headquarters. ING Baring and some of
its affiliates arranged the financing, received underwriting fees of $1,239,500
and will receive $20,000 per year to serve as agent for the lenders under the
credit agreement until the loans under that agreement are paid in full. ING
Baring will also receive $5,000 per year as agent to the lenders under a
revolving credit agreement until outstanding loans made under that agreement
have been paid in full and the commitments to make additional loans have
terminated. ING Baring is a participant in a lender syndicate.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes of ownership of the Company's common stock with the
Securities and Exchange Commission. Executive Officers and Directors are
required to furnish the Company with copies of all Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
certain of the Company's directors and executive officers that no other reports
were required, the Company notes that all such Forms were filed on a timely
basis by reporting persons, except for a series of transactions by Mr. Grant
whereby Mr. Grant gifted 10,000 shares of the Company's common stock to a
foundation of which he is a trustee. Such foundation subsequently sold these
shares. Once Mr. Grant became aware of his filing obligation regarding these
transactions, he included them on his annual filing.
8
<PAGE> 12
COMPANY STOCK PERFORMANCE
The following graph summarizes cumulative total stockholder return data
(assuming reinvestment of dividends) for the period commencing when the
Company's common stock was first registered under the Securities Exchange Act of
1934, and began trading on The Nasdaq National Stock Market (July 25, 1995)
through December 31, 1999. The graph assumes that $100 was invested on July 25,
1995 (i) in the common stock of the Company, (ii) in the Mid-Cap 400 Index and
(iii) in the Standard & Poor's Health Care (Medical Products and Supplies) 500
Index. The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
HLTH CARE(MED
MINIMED INC PDS&SUPP)-500 S&P MIDCAP 400 INDEX
----------- ------------- --------------------
<S> <C> <C> <C>
24-Jul-95 100.00 100.00 100.00
Dec-95 96.15 126.80 108.21
Dec-96 248.08 151.15 124.20
Dec-97 299.05 199.90 154.84
Dec-98 805.77 238.09 223.18
Dec-99 1126.92 273.14 206.72
</TABLE>
ACTIVITIES OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 11 meetings during 1999, and its standing
committees also met from time to time to address matters within their respective
areas of responsibility. Each member of the Board of Directors was present for
75% or more of the total number of meetings of the Board of Directors and the
total meetings held by all committees of the Board of Directors of which he or
she served.
COMMITTEES OF THE BOARD
The standing committees of the Board consist of an Audit Committee and an
Organization and Compensation Committee.
AUDIT COMMITTEE
During 1999, the Audit Committee proposed and the Board of Directors
approved a new Charter. The Audit Committee may only consist of independent
directors who are, or undertake to become, sufficiently
9
<PAGE> 13
conversant with financial matters in order to fulfill such directors'
obligations as members of the Audit Committee. The principal duties of the Audit
Committee are to provide assistance to the Board of Directors in fulfilling its
responsibility to stockholders, potential stockholders and the investment
community relating to the Company's financial reporting practices. The
responsibilities of the Audit Committee include (i) reviewing the annual
financial statements of the Company; (ii) reviewing the quarterly and annual
financial results of the operations of the Company; (iii) reviewing the scope of
the plan of annual audit, related fees and results of audits; (iv) reviewing any
material changes to the Company's accounting and financial reporting practices;
(v) reviewing the Company's risk management strategies; (vi) reviewing the
Company's cash management and investment policy; (vii) recommending to the Board
the retention or replacement of the independent accountants; (viii) reviewing
periodically the adequacy of the Company's accounting, financial and internal
audit organizations; (ix) reviewing for adequacy the Company's policies
regarding related party transactions and similar matters; and (x) acting upon
other matters relative to accounting or financial matters that the Audit
Committee or the Board deem appropriate. In doing so, it is the Audit
Committee's responsibility to maintain free and open means of communication
among directors, the Company's independent accountants, management, and the
internal personnel and financial managers of the Company. The current members of
the Audit Committee are Mr. Testman (Chairman), Ms. Davis and Dr. Chernof, none
of whom is a current or former officer or employee of the Company or any of its
subsidiaries. The Audit Committee held 3 meetings during fiscal year 1999, and
in 2000 has held a meeting to review the 1999 results of operations prior to the
Company's public release of financial results for 1999. The Audit Committee
regularly meets privately with the Company's independent auditors, outside of
the presence of any Company officers or other personnel.
ORGANIZATION AND COMPENSATION COMMITTEE
The Organization and Compensation Committee may only consist of independent
directors. The primary responsibilities of the Organization and Compensation
Committee is to review and approve significant changes to the Company's
organizational structure, monitor and evaluate the performance of the Company's
executive officers review and approve the Company's management succession and
changes, review and approve compensation levels and incentive programs for the
executive officers of the Company. The Organization and Compensation Committee
is also responsible for reviewing qualifications of potential candidates for
election as directors of the Company from whatever sources obtained, and making
recommendations to the Board with respect to nominees, establishing criteria to
evaluate director performance, and recommending assignments of directors to
committees of the Board. The current members of the Organization and
Compensation Committee are Mr. Grant (Chairman), Mr. MacCallum and Mr.
Villforth, none of whom is a current or former officer or employee of the
Company or any of its subsidiaries. The Organization and Compensation Committee
held 4 meetings during fiscal year 1999. A report of the Organization and
Compensation Committee with respect to executive compensation matters appears
below.
10
<PAGE> 14
REPORT OF THE MINIMED INC.
ORGANIZATION AND COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
OVERALL POLICY
The MiniMed Organization and Compensation Committee of the Board of
Directors is composed entirely of independent, non-employee directors. In
fulfilling its obligations, the Organization and Compensation Committee reviews
and approves corporate organizational structure; monitors the performance of
executive officers; evaluates the CEO; reviews and approves management
succession and changes; establishes compensation levels and incentive programs
for executive officers; and approves directors' compensation. In order to assist
the Organization and Compensation Committee with the discharge of its
obligations, in 1999 it retained the services of Coopers & Lybrand LLP to advise
it relative to the competitive position of the Company's compensation levels and
practices for the Company's executive officers.
In establishing the Company's executive compensation program, the
Organization and Compensation Committee takes into account current market data
and compensation trends for comparable companies, gauges achievement of
corporate and individual objectives, and considers the overall effectiveness of
the program. The Organization and Compensation Committee bases the compensation
program on the following principles:
- The compensation program has three elements: basic annual salary, annual
incentive awards, and stock options.
- Executives' interest in the business should be linked to the interests
and benefits received by the Company's stockholders.
- Compensation levels for executive officers are benchmarked to market
information from general industry surveys, additional surveys conducted
by outside consultants and from proxy materials of other similar
companies. Peer group information is developed on the basis of industry
(medical products/research companies), revenues, profits and other
similar criteria. In 1999, the peer group was selected from among
companies deemed to be comparable to the Company. Accordingly, companies
selected include those (i) whose securities are publicly traded, (ii)
with high market capitalization relative to revenues and (iii) with a
record of high growth and high performance.
- Compensation is tied to performance. A significant part of the total
compensation opportunity is in the form of an annual incentive bonus
award, to be earned only if specific financial goals are met and value is
created for stockholders. Likewise, award amounts are based upon the
achievement of specific financial goals, as well as upon individual
accomplishments.
In considering compensation levels prior to 1999, the Organization and
Compensation Committee had historically targeted compensation levels for Company
executive officers at the median of peer group companies. In 1999, the
Organization and Compensation Committee acknowledged that the Company had
experienced significant success during the prior years in terms of stockholder
return, earnings growth, revenue growth and other metrics. The Organization and
Compensation Committee identified the continuing retention of the executive
officers as a key goal, and endeavored to increase the base salary of the
executive officers annually, on an incremental basis over successive years, in
order to assure appropriate pay for performance.
The compensation program for the executive officers is described below.
BASE SALARY: Competitive base salaries are determined for each executive
based on a review of the salaries in the selected group of peer companies and
similar survey data. In conjunction with the competitive data, actual salaries
are established based on executive roles and responsibilities, position titles,
and the skills, experience and performance of individual executives.
ANNUAL INCENTIVES: For the 1999 fiscal year, annual bonuses were based upon
an annual incentive plan for executives, the general terms of which previously
were approved by the Organization and Compensation Committee and the particular
1999 performance goals were approved in early 1999. The purpose of the plan is
11
<PAGE> 15
to (i) provide competitive pay in order to attract and retain qualified
executives, (ii) provide incentive to meet MiniMed financial and
individual/functional objectives, (iii) reward managers who significantly impact
financial performance, (iv) encourage teamwork and (v) encourage adherence to
the corporate culture of the Company. The plan provides for bonus awards based
upon the achievement of predetermined Company revenue and earnings per share
objectives and individual performance objectives. The Company believes that the
achievement of the objectives create additional value for stockholders.
STOCK OPTIONS: The Company's long-term incentive program consists entirely
of stock options granted at 100% of fair market value which generally vest over
a five-year period, although the most recent stock option awards for the CEO and
President vest over three years. The number of options granted to individual
executives is based on a combination of factors, including competitive market
practice, executive roles and responsibilities, performance assessments and
prior stock option grant levels. The Organization and Compensation Committee
believes that stock options are a key ingredient in linking executive interests
to stockholder interests and represent the primary capital accumulation
opportunity for executives. Therefore, significant stock option grants are
critical to retain, attract, and motivate qualified executives.
1999 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER: In determining the 1999
salary and annual incentive award for the CEO, the Organization and Compensation
Committee considered all aspects of Company and individual performance. As in
prior years, the primary evaluation criteria included leadership, strategic
planning, financial results, succession planning, strategic partnering, and
external and Board relations.
The Organization and Compensation Committee recognized that the total
annual cash compensation (base salary and annual bonus) for the CEO historically
has been below the median of CEOs in industry comparators and general industry
companies of similar size and market position. Beginning in 1999, the
Organization and Compensation Committee began to increase the relative
compensation for the CEO to better reflect the results of operations and
stockholder return for the Company.
Mr. Mann's leadership enabled the Company to achieve significant financial
results in 1999, while continuing to invest heavily in future opportunities for
the Company. For fiscal year 1999 the Company's sales increased 53%, net income
grew nearly 68% and earnings per share increased from $0.46 per share to $0.70.
During 1999, the Company also introduced several significant new products.
Pursuant to the Company's executive incentive bonus plan, Mr. Mann received a
bonus equal to approximately 80.4 % of base salary, in recognition of 1999
performance.
The CEO was granted an option to purchase 100,000 shares of common stock
February 25, 2000 with term of eight years, an exercise price of $87 per share
and a vesting period of three years. This amount provides long-term incentive
opportunity tied directly to stockholder value creation.
OMNIBUS BUDGET RECONCILIATION ACT (IRC SECTION 162(M)): The Organization
and Compensation Committee periodically reviews the implication of Section
162(m) of the Internal Revenue Code of 1986, as amended, regarding the
deductibility of executive compensation for the CEO and next four most highly
compensated executive officers. Compensation paid in 1999 for any single
executive did not exceed the limits of Section 162(m) and was therefore fully
deductible by the Company. The Organization and Compensation Committee will
continue to monitor the implications of Section 162(m) for executive
compensation programs.
William R. Grant -- Chairman
David H. MacCallum
John C. Villforth
12
<PAGE> 16
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers are generally elected annually by the
Board of Directors for a one year term and serve at the pleasure of the Board.
As of May 1, 2000, the Company's executive officers are:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Alfred E. Mann.................. 74 Chairman of the Board and Chief Executive
Officer
Terrance H. Gregg............... 51 President and Chief Operating Officer
Stephen A. Bowman............... 55 Senior Vice President, Sales and Marketing
Eric S. Kentor.................. 41 Senior Vice President, General Counsel and
Secretary
David Morley.................... 53 Senior Vice President, Operations
Kevin R. Sayer.................. 42 Senior Vice President, Finance and Chief
Financial Officer
</TABLE>
The following is information with respect to the Company's executive
officers who are not members of the Board.
STEPHEN A. BOWMAN joined the Company as Senior Vice President, Sales and
Marketing in March 1999. Prior to joining the Company, Mr. Bowman served as Vice
President, International Sales and Marketing of Sulzer Intermedics, a
manufacturer and distributor of implantable and disposable medical products,
where he served as Vice President -- International Sales and Marketing from
October 1992 until March 1999 and as Vice President -- Worldwide Marketing from
May 1992 to October 1992. Mr. Bowman served as Director -- Western Region at
Sulzer Intermedics from May 1991 to May 1992. Previously, from November 1989 to
April 1991, Mr. Bowman was General Manager of Biotronik, a manufacturer and
distributor of implantable medical products. Prior to joining Biotronik, Mr.
Bowman held various positions with Medtronic, Inc., a medical technology and
device company, Johnson & Johnson, a healthcare products company, and Del Monte
Foods Company, a manufacturer and distributor of food products. Mr. Bowman
earned a B.A. degree in Marketing from San Diego State University in 1968.
ERIC S. KENTOR was promoted to Senior Vice President in February 1996. Mr.
Kentor joined the Company in May 1995 as Vice President, General Counsel and
Secretary. Prior to joining the Company, Mr. Kentor was Vice President, Legal
Services, of Health Net, which at the time was California's second largest
health maintenance organization, where he held various positions beginning in
March 1994. From March 1994 until May 1995, Mr. Kentor also served as Executive
Counsel of Health Net's parent corporation, Health Systems International, Inc.
Previously, from 1987 until 1994, Mr. Kentor practiced with the law firm of
McDermott, Will & Emery, where he was elected partner in 1992. Mr. Kentor
received a J.D. degree from the UCLA School of Law in 1986.
DAVID MORLEY joined the Company as Senior Vice President, Operations in
January of 1998. Prior to joining the Company, Mr. Morley served as Executive
Vice President of Operations at St. Jude Medical, Inc. (formerly Pacesetter
Systems, Inc.), a manufacturer of cardiac pacemakers and related products. At
St. Jude Medical, Mr. Morley was responsible for all manufacturing and quality
activities at facilities in California, Arizona, South Carolina and Sweden. Mr.
Morley received a B.A. from Duquesne University in 1968, an M.A. from the
University of Pittsburgh in 1970 and an M.B.A. from California State University
Northridge.
KEVIN R. SAYER was promoted to Senior Vice President, Finance, in February
1996. Mr. Sayer joined the Company in May 1994 as Vice President, Finance and
Chief Financial Officer. Prior to joining the Company, Mr. Sayer spent the
previous 11 years with Ernst & Young, where he specialized in providing
auditing, accounting and consulting services to high growth companies, primarily
in the health care and high technology industry segments. Mr. Sayer received a
B.S. in accounting from Brigham Young University in 1981 and received a Masters
degree in accounting/information systems from Brigham Young University in 1983.
13
<PAGE> 17
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth, for the year ended December 31, 1999, the
compensation paid by the Company to Mr. Mann, the Company's Chairman and CEO,
and each of the other four most highly compensated executive officers of the
Company who received salary and bonuses in excess of $100,000 during 1999, for
all services rendered in all capacities in which they serve. We refer to such
individuals collectively as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by the Named
Executive Officers during the fiscal years 1999, 1998 and 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ------------
OTHER ANNUAL SECURITIES
SALARY BONUS COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION: ($) ($) ($) OPTIONS(#) COMPENSATION($)
---------------------------- ------- ------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Alfred E. Mann 1999 322,404 259,200(1) -- 100,000 507(2)
Chairman of the Board and 1998 274,231 173,757(3) -- 0 3,300(4)
Chief Executive Officer 1997 250,507 137,000(5) 35,784(6) 180,000 --
Terrance H. Gregg 1999 298,943 204,750(1) -- 100,000 3,406(7)
Director, President and 1998 233,769 124,031(3) -- 0 3,626(8)
Chief Operating Officer 1997 185,000 88,708(5) -- 140,000 4,680(9)
David Morley 1999 210,961 121,500(1) -- 40,000 4,155(10)
Senior Vice President, 1998 161,539(11) 82,688(3) -- 60,000 2,393(12)
Operations
Eric S. Kentor 1999 201,730 118,800(1) -- 30,000 3,058(13)
Senior Vice President, General 1998 164,539 77,963(3) -- 0 2,313(14)
Counsel and Secretary 1997 150,000 61,650(5) -- 50,000 3,663(15)
Kevin R. Sayer 1999 193,828 113,400(1) -- 30,000 2,233(16)
Senior Vice President, Finance 1998 156,631 74,183(3) -- 0 3,537(17)
and Chief Financial Officer 1997 145,000 59,470(5) -- 40,000 1,465(18)
</TABLE>
- ---------------
(1) Includes performance bonuses accrued by the Company in 1999 but paid, at
the election of the Company, in 2000.
(2) Includes a service award of $507.
(3) Includes performance bonuses accrued by the Company in 1998 but paid, at
the election of the Company, in 1999.
(4) Includes a matching contribution of $3,300 to a 401(k) plan.
(5) Includes performance bonuses accrued by the Company in 1997 but paid, at
the election of the Company, in 1998.
(6) Includes an automobile allowance of $18,971 and reimbursement of $16,813 in
medical expenses.
(7) Includes a service award of $101 and a matching contribution of $3,305 to a
401(k) plan.
(8) Includes a matching contribution of $1,034 to a 401(k) plan and a term life
insurance premium of $2,592.
(9) Includes a matching contribution of $3,113 to a 401(k) plan and a term life
insurance premium of $1,566.
(10) Includes a matching contribution of $3,311 to a 401(k) plan and a term life
insurance premium of $844.
(11) Mr. Morley became employed by the Company on January 19, 1998.
(12) Consists of a term life insurance premium of $2,393.
(13) Includes a matching contribution of $2,693 to a 401(k) plan and a term life
insurance premium of $365.
14
<PAGE> 18
(14) Includes a matching contribution of $1,733 to a 401(k) plan and a term life
insurance premium of $580.
(15) Includes a matching contribution of $3,135 to a 401(k) plan and a term life
insurance premium of $528.
(16) Includes a service award of $101, matching contribution of $1,780 to a
401(k) plan and a term life insurance premium of $352.
(17) Includes a matching contribution of $2,686 to a 401(k) plan and a term life
insurance premium of $851.
(18) Includes a matching contribution of $957 to a 401(k) plan and a term life
insurance premium of $508.
OPTION GRANTS IN 1999
The following table summarizes option grants in 1999 to the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS EXERCISE OR OF APPRECIATION FOR
UNDERLYING GRANTED TO BASE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME: GRANTED(#)(1) FISCAL YEAR ($/SHARE)(1) DATE 5%($) 10%($)
----- ------------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Alfred E. Mann........ 100,000 9.41% 42.6250 2/26/07 2,035,154 4,874,548
Terrance H. Gregg..... 100,000 9.41% 42.6250 2/26/07 2,035,154 4,874,548
David Morley.......... 40,000 3.76% 42.6250 2/26/07 814,062 1,949,819
Eric S. Kentor........ 30,000 2.82% 42.6250 2/26/07 610,547 1,462,365
Kevin R. Sayer........ 30,000 2.82% 42.6250 2/26/07 610,547 1,462,365
</TABLE>
- ---------------
(1) All options granted in 1999 were non-qualified stock options granted
pursuant to the MiniMed Inc. Third Amended and Restated 1994 Stock Incentive
Plan, which we call the 1994 Plan. All grants in 1999 had exercise prices
equal to fair market value, as defined in the 1994 Plan. With the exception
of the options granted to Messrs. Mann and Gregg, all grants become
exercisable over a five year period with 20% becoming exercisable on each
anniversary of such grant. The grants to Messrs. Mann and Gregg become
exercisable over a three year period with 33.3% becoming exercisable on each
anniversary of such grant.
(2) The potential gains shown are net of the exercise price and do not include
the effect of any taxes associated with exercise. The amounts shown are for
the assumed rates of appreciation only and may not necessarily be realized.
Actual gains, if any, on stock option exercises depend on the future
performance of the Company's common stock, continued employment of the
optionee through the term of the option and other factors.
STOCK OPTIONS
The Company has outstanding options to purchase shares of MiniMed common
stock, including options granted under the 1994 Plan and options granted by
MMTL, predecessor to the Company, pursuant to its 1992 Amended and Restated
Stock Plan, which we call the MMTL Plan, which options were assumed by the
Company and became exercisable to purchase shares of common stock of the
Company. Under the MMTL Plan, options to purchase 1,960,900 shares of common
stock of the Company were granted. No additional options will be issued under
the MMTL Plan. As of March 31, 2000, under the MMTL Plan, options to purchase
142,770 shares of common stock remained outstanding, and options to purchase
1,619,846 shares had been exercised. Under the 1994 Plan, as of March 31, 2000,
options to purchase 5,130,464 shares of common stock have been granted, of which
options representing 1,015,704 shares have been exercised and options
representing 3,779,660 shares of common stock remain outstanding. Also, as of
March 31, 2000, 2,704,636 shares of common stock remained available for future
grants of which 335,100 options had been previously canceled and made available
for future grants.
15
<PAGE> 19
The following table sets forth certain information with respect to the
unexercised options to purchase common stock of the Company held by the Named
Executive Officers as of December 31, 1999 and options exercised by the Named
Executive Officers in the fiscal year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/31/99(#) AT 12/31/99($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred E. Mann............. -- -- 408,000 252,000 26,574,000 12,711,000
Terrance H. Gregg.......... 13,000 1,187,100 167,000 210,000 10,762,175 9,533,550
Eric S. Kentor............. 24,000 1,676,307 89,000 92,000 5,838,225 4,781,950
David Morley............... 12,000 525,432 -- 88,000 -- 3,835,000
Kevin R. Sayer............. 32,000 1,977,682 79,000 68,000 5,241,825 3,218,300
</TABLE>
- ---------------
(1) Based on the closing price of $73.25 on The Nasdaq National Stock Market on
December 31, 1999.
CHANGE OF CONTROL AGREEMENTS
The outstanding options to purchase shares of common stock of the Company
will become exercisable in full in the event of a "change in control" of the
Company unless the Board of Directors elects to include a provision in any award
expressly providing that such acceleration does not apply. "Change in control"
under these plans is defined as (i) the acquisition by any person of 50% or more
of the combined voting power of the Company's outstanding voting securities;
(ii) the sale, lease or other disposition of all or substantially all of the
Company's assets, such as by merger, consolidation or otherwise; and (iii) the
dissolution or liquidation of the Company. The Organization and Compensation
Committee may also, in its discretion, accelerate the exercisability or vesting
of any Award (as defined in the 1994 Plan) in accordance with the administration
of the 1994 Plan.
In February 1999, the Company entered into agreements with Messrs. Mann,
Gregg, Kentor, Morley and Sayer, providing for severance benefits to such
officers in the event of termination of their employment in connection with a
change of control of the Company occurring prior to February 2001. In August
1999, the Company entered into a similar agreement with Mr. Bowman in the event
of termination of his employment in connection with a change of control of the
company occurring prior to August 2001. The severance benefits are payable if
the Company terminates the employment of an officer without cause or the officer
voluntarily terminates his employment for good reason (generally consisting of
adverse changes in responsibilities, compensation, benefits or location of work
place) within two years after a change of control or three months prior to and
in connection with, or in anticipation of, such a change. The benefits are also
payable if the officer voluntarily terminates his employment for any reason
within 30 days after the expiration of one year after a change of control.
"Change of control" is defined to mean:
- the acquisition of beneficial ownership of 30% or more of the
outstanding shares of voting stock of the Company by any person, entity or
group, subject to certain exceptions including acquisitions by Mr. Mann and
acquisitions of shares beneficially owned by him as a result of his death
or transfers during his lifetime to charities or members of his family or
certain entities in which charities or members of his family have a
majority of the beneficial interest;
- any change in the directors of the Company after which a majority of
the directors consists of persons who (1) were not serving as directors
when the severance benefit agreements were entered into or (2) were
selected for election by stockholders, or elected to fill vacancies on the
Board, by directors referred to in clause (1) or were themselves selected
or nominated as described in this clause (2);
16
<PAGE> 20
- a sale of all or substantially all of the Company's assets or a
merger, consolidation or reorganization of the Company unless the holders
of the outstanding voting shares of the Company immediately before any such
transaction own at least 70% of the outstanding voting shares of the
Company or a successor company immediately after the transaction; or
- a liquidation of the Company.
The severance benefits generally consist of a lump sum payment equal to two
times the officer's annual base salary and two times his average annual bonus
determined over the three prior years (subject to certain exceptions), a
prorated portion of the bonus for the year of termination, continuation of
Company life, health and disability insurance for two years or until any earlier
date when other full time employment is obtained providing health plan benefits
without an exclusion for pre-existing conditions, continuation of the use of a
Company car for one year or until any earlier date when other full time
employment is obtained and acceleration of the date when outstanding stock
options become exercisable. The benefits (other than acceleration of the vesting
dates of stock options) are subject to reduction to avoid the taxes and loss of
deductions associated with "excess parachute payments" under the Internal
Revenue Code.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is a tabulation indicating those persons or groups who are
known to the Company to be beneficial owners of at least 5% of the outstanding
shares of common stock of the Company as of March 31, 2000. The following
information is based on reports on Schedules 13D or 13G filed with the
Securities and Exchange Commission or other information deemed to be reliable by
the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES BENEFICIALLY
OF BENEFICIAL OWNERS OWNED PERCENT OF CLASS
-------------------- ------------------- ----------------
<S> <C> <C>
Alfred E. Mann............................... 8,812,635(1) 27.32%
12744 San Fernando Road
Sylmar, CA 91342
Janus Capital Corporation.................... 3,590,080(2) 11.54%
Thomas H. Bailey
100 Fillmore Street
Denver, Colorado 80206-4923
</TABLE>
- ---------------
(1) Includes 547,333 shares which Mr. Mann has the right to purchase under
outstanding stock options which are exercisable or become exercisable within
60 days of March 31, 2000. Also includes 312,000 shares owned by the Alfred
E. Mann Foundation for Scientific Research, which we call the Foundation, of
which Mr. Mann is a trustee. As a trustee, Mr. Mann shares voting and
investment power with respect to the shares owned by the Foundation. Mr.
Mann disclaims any beneficial interest in the shares owned by the
Foundation.
(2) As reported by Janus Capital Corporation, which we call Janus Capital, and
Thomas Bailey, in their joint Amended Schedule 13G, for the year ended
December 31, 1999, filed on February 14, 2000 with the Securities and
Exchange Commission. Pursuant to the filing, (a) Janus Capital has sole
voting and dispositive power as to 3,590,080 shares of common stock of the
Company; (b) Thomas H. Bailey owns approximately 12.2% of Janus Capital; and
(c) Mr. Bailey disclaims beneficial ownership over any shares of the
Company.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 2000, the number of shares
of common stock beneficially owned by each of the current directors of the
Company, including the three nominees to serve as directors of the Company, by
each Named Executive Officer, by all directors and executive officers as a group
and the percentage those shares bear to the total number of shares of common
stock of the Company outstanding as of
17
<PAGE> 21
that date. Unless otherwise indicated, all persons named as beneficial owners of
the Company's common stock have sole voting and investment power with respect to
such common stock.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
NAME OF INDIVIDUAL OR BENEFICIALLY
NUMBER OF PERSONS IN GROUP OWNED(1) PERCENTAGE OF CLASS
-------------------------- ---------------- -------------------
<S> <C> <C>
Alfred E. Mann................................ 8,812,635(2) 27.32%
David Chernof, M.D............................ 0 *
Carolyne Kahle Davis.......................... 8,500 *
William R. Grant.............................. 162,580 *
Terrance H. Gregg............................. 179,926 *
David H. MacCallum............................ 33,746 *
Thomas R. Testman............................. 16,750 *
John C. Villforth............................. 23,750 *
Eric S. Kentor................................ 88,351 *
David Morley.................................. 601 *
Kevin R. Sayer................................ 63,000 *
All Directors and Executive Officers as a
group (12 persons).......................... 9,389,839 28.71%
</TABLE>
- ---------------
* The amount shown is less than 1% of the outstanding shares of common stock.
(1) Includes the following numbers of shares which the executive officer or
director has the right to purchase under outstanding stock options which are
exercisable or become exercisable within 60 days of March 31, 2000: Mr.
Mann -- 547,333, Mr. Grant -- 43,750, Mr. MacCallum -- 30,250, Mr.
Testman -- 13,750, Mr. Gregg -- 178,333, Mr. Kentor -- 85,000, Mr.
Sayer -- 63,000, Mr. Villforth -- 23,750, all directors and executive
officers as a group (12 persons) -- 993,666.
(2) Includes 312,000 shares beneficially owned by the Foundation of which Mr.
Mann is a trustee. As a trustee, Mr. Mann shares voting and investment power
with respect to the shares beneficially owned by the Foundation. Mr. Mann
disclaims any beneficial interest in the shares owned by the Foundation.
In addition to the foregoing beneficial ownership amounts, the directors
listed below elected to defer all or a portion of their annual retainer and
meeting fees. These amounts will be applied to the purchase of units which are
equivalent to shares of the Company's common stock. As of March 31, 2000, such
amounts constitute units relating to the following number of shares of the
Company's common stock:
<TABLE>
<CAPTION>
COMMON SHARE
NAME STOCK UNITS
---- ------------
<S> <C>
Carolyne K. Davis...................... 869.27
William R. Grant....................... 3,938.13
David H. MacCallum..................... 2,142.76
Thomas R. Testman...................... 5,943.02
John C. Villforth...................... 3,069.36
</TABLE>
18
<PAGE> 22
PROPOSAL 2 -- RATIFICATION OF SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors has
selected Deloitte & Touche LLP to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending December 29, 2000.
Deloitte & Touche LLP served in this capacity for the year ending December 31,
1999. Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting and will be available to respond to appropriate questions of
stockholders and to make a statement if they desire.
The Board of Directors is submitting the approval of Deloitte & Touche LLP
to the stockholders as a matter of good corporate practice, although it is not
required to do so. Should the stockholders fail to provide such ratification,
the Board of Directors will reconsider its approval of Deloitte & Touche LLP as
the Company's independent public accountants for the year ending December 29,
2000. Even if the selection is ratified, the Board of Directors, in its
discretion, may direct the appointment of a new independent accounting firm at
any time during the fiscal year if the Board of Directors believes that such a
change would be in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A YES VOTE FOR PROPOSAL 2.
REQUIREMENTS AND PROCEDURES FOR SUBMISSION
OF PROXY PROPOSALS AND DENOMINATIONS
OF DIRECTORS BY STOCKHOLDERS
Nominations for the Board of Directors: The Company expects to hold its
2001 annual meeting on June 7, 2001, although the Company retains the right to
change this date, as it may determine. The Company's Bylaws provide that written
notice of proposed stockholder nominations for the election of directors at the
2001 annual meeting of stockholders must be received at the principal executive
offices of the Company not less than 90 days nor more than 120 days prior to the
meeting, or between February 7, 2001 and March 9, 2001, as currently scheduled.
If, however, less than 100 days' notice or public disclosure of the date of the
meeting is given to stockholders, the notice must be received no later than the
close of business on the tenth day following the day on which the notice of the
date of the annual meeting was mailed or public disclosure was made. Notice to
the Company from the stockholder who proposes to nominate a person for election
as a director must satisfy the requirements of the Securities and Exchange
Commission and the Company's Bylaws. Stockholders wishing to nominate persons
should contact the Company's Secretary at 12744 San Fernando Road, Sylmar,
California 91342.
Proposals: Any stockholder who intends to present a proposal to be included
in the Company's proxy materials to be considered for action at the 2001 annual
meeting of stockholders must satisfy the requirements of the Securities and
Exchange Commission, and the proposal must be received by the Secretary of the
Company on or before January 1, 2001, for review and consideration for inclusion
in the Company's proxy statement and proxy card relating to that meeting.
The Chairman of the annual meeting may decline to allow the transaction of
any business or the consideration of any nomination which was not properly
presented in accordance with these requirements. The requirements with respect
to nominations of persons for director do not affect the deadline for submitting
stockholder proposals for inclusion in the proxy statement, nor do they apply to
questions a stockholder may wish to ask the meeting. If the Company changes the
date of the 2001 annual meeting of stockholders, stockholders will be notified
in accordance with the Company's Bylaws.
19
<PAGE> 23
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the annual meeting. If other matters are properly brought
before the meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By order of the Board of Directors,
/s/ ERIC S. KENTOR
Eric S. Kentor
Senior Vice President, General Counsel
and Secretary
May 1, 2000
20
<PAGE> 24
PROXY PROXY
MINIMED INC.
12744 SAN FERNANDO ROAD
SYLMAR, CALIFORNIA 91342
PROXY FOR THE JUNE 22, 2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF MINIMED INC.
The undersigned stockholder of MiniMed Inc. ("MiniMed") hereby appoints
Alfred E. Mann and Eric S. Kentor, and each of them, the lawful proxies of the
undersigned, each with the power of substitution, to vote as designated below
all the shares of Common Stock of MiniMed held of record by the undersigned on
May 1, 2000 at the Annual Meeting of Stockholders to be held on June 22, 2000
or any and all adjournments or postponements thereof.
IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR EACH OF
THE NOMINEES FOR CLASS 1 DIRECTOR, FOR THE PROPOSAL TO RATIFY AUDITORS, AND IN
THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
1. ELECTION OF CLASS 1 DIRECTORS
David Chernof, M.D. [ ] FOR
Carolyne Kahle Davis [ ] WITHHOLD ALL
John C. Villforth [ ] FOR ALL EXCEPT
---------------------------------
(Except nominee(s) written above)
2. RATIFICATION OF DELOITTE & TOUCHE LLP
AS AUDITORS [ ] FOR
[ ] AGAINST
[ ] ABSTAIN
DATE:
-------------------------------------------
-------------------------------------------
Signature(s)
-------------------------------------------
Please sign as shares are owned, and date
this proxy. If a joint account, each joint
owner must sign. If signing for a
corporation or partnership or as agent,
attorney or fiduciary, indicate the capacity
in which you are signing.
