SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
VERTEX PHARMACEUTICALS INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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[LOGO]
April 9, 2002
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vertex Pharmaceuticals Incorporated to be held on Friday, May 17, 2002, 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. This year,
in addition to the election of three directors, stockholders are being asked to
approve amendments to the Company's Employee Stock Purchase Plan.
Regardless of the number of shares of Common Stock you may own, your vote is
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,
/s/ Joshua S. Boger
JOSHUA S. BOGER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
VERTEX PHARMACEUTICALS INCORPORATED
130 WAVERLY STREET
CAMBRIDGE, MASSACHUSETTS 02139-4242
TELEPHONE (617) 444-6100, FAX (617) 444-6680
VERTEX PHARMACEUTICALS INCORPORATED
130 WAVERLY STREET
CAMBRIDGE, MA 02139-4242
(617) 444-6100
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2002
Notice is hereby given that the 2002 Annual Meeting of Stockholders of
Vertex Pharmaceuticals Incorporated (the "Company") will be held on Friday,
May 17, 2002, at 9:30 a.m. at the Company's headquarters, 130 Waverly Street,
Cambridge, Massachusetts, for the following purposes:
(1) To elect three directors to the class of directors whose term expires in
2005;
(2) To approve amendments to the Vertex Pharmaceuticals Incorporated
Employee Stock Purchase Plan; 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 26, 2002, 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
KENNETH S. BOGER
CLERK
April 9, 2002
VERTEX PHARMACEUTICALS INCORPORATED
130 WAVERLY STREET
CAMBRIDGE, MA 02139-4242
(617) 444-6100
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PROXY STATEMENT
FOR 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 17, 2002
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 2002 Annual Meeting of Stockholders to be held on May 17, 2002 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 9, 2002.
The Annual Report to Stockholders for the fiscal year ended December 31, 2001 is
being mailed to the stockholders with this Proxy Statement, but does not
constitute a part hereof.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. The
Company has retained D. F. King & Co., Inc. to assist in the solicitation of
proxies at an estimated cost of approximately $4,000. 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.
VOTING PROCEDURES
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Meeting,
please take the time to vote by completing and mailing the enclosed proxy card
as soon as possible. We have included a postage-prepaid envelope for your
convenience.
WHO CAN VOTE? In order to vote, you must have been a stockholder of record
at the close of business on March 26, 2002 (the "record date"). Stockholders
whose shares are owned of record by brokers and other nominees should follow the
voting instructions provided by their broker or other nominee. As of the record
date, there were 75,344,652 shares of Common Stock issued, outstanding and
entitled to vote. Each share of Common Stock is entitled to one vote on each
matter to be voted upon.
HOW DO I VOTE? If your shares are held of record in your own name, you may
vote by completing and returning the enclosed proxy by mail or by voting in
person at the Meeting.
1
VOTING BY MAIL. You may vote by mail by completing and returning the
enclosed proxy. Your proxy will be voted in accordance with your instructions.
If you do not specify a choice on one or more of the proposals described in this
Proxy Statement, your proxy will be voted in favor of that proposal. You may
revoke your proxy at any time before its exercise by delivering a written
revocation or a subsequently dated proxy to the Clerk of the Company or by
voting in person at the Meeting.
VOTING IN PERSON AT THE MEETING. If you attend the Meeting, you may deliver
your completed proxy card in person or you may vote by completing a ballot which
will be available at the Meeting.
VOTING SHARES HELD IN "STREET NAME." If your shares are held in the name of
a bank, broker or other holder of record, you will receive instructions from the
holder of record that you must follow in order for your shares to be voted. If
your shares are not registered in your own name and you plan to attend the
Meeting and vote your shares in person, you should contact your broker or agent
in whose name your shares are registered to obtain a broker's proxy card and
bring it to the Meeting in order to vote.
WHAT CONSTITUTES A QUORUM? In order for business to be conducted at the
Meeting, a quorum must be present. A quorum consists of the holders of a
majority of the shares of Common Stock issued and outstanding as of the record
date. Shares of Common Stock present in person or represented by proxy
(including shares which abstain or do not vote with respect to one or more of
the matters to be voted upon) will be counted for purposes of determining
whether a quorum exists. If a quorum is not present, it is expected that the
Meeting will be adjourned until a quorum is obtained.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL? The affirmative vote of the
holders of a plurality of the shares of Common Stock entitled to vote at the
Meeting is required for the approval of Proposal 1, the election of directors.
The affirmative vote of the holders of a majority of the shares of Common Stock
present or represented and voting at the Meeting is required for the approval of
Proposal 2, the approval of the amendments to the Vertex Pharmaceuticals
Incorporated Employee Stock Purchase Plan.
HOW ARE VOTES COUNTED? Shares which abstain from voting as to a particular
matter or are held in "street name" by brokers or nominees who indicate on their
proxies that they do not have discretionary authority to vote as to a particular
matter ("broker non-votes") will not be voted in favor of such matter, and will
also not be counted as shares voting on such matter. Abstentions and broker
non-votes are not relevant to the tabulation of votes on Proposal 1, the
election of directors. Broker non-votes will not be relevant to the tabulation
of votes on Proposal 2, approval of amendments to the Vertex Pharmaceuticals
Incorporated Employee Stock Purchase Plan, because brokers will have
discretionary authority to vote on that proposal. Also, because approval of
Proposal 2 requires a majority of the shares of Common Stock present or
represented and voting at the Meeting, abstentions will have no effect on the
outcome of voting on Proposal 2.
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
2
ensuing year at eight, three of whom are to be elected at the Meeting for a term
expiring at the 2005 Annual Meeting, two whose terms expire at the 2003 Annual
Meeting, and three whose terms expire at the 2004 Annual Meeting. The President
of the Company need not be a director.
Roger W. Brimblecombe, a director of the Company since 1993, Donald R.
Conklin, a director since 1994, and Stuart J.M. Collinson, a director since
2001, represent the class of directors whose term expires at the Meeting. The
Board has nominated Dr. Brimblecombe, Mr. Conklin and Dr. Collinson for election
to the class of directors whose term will expire in 2005.
Dr. Collinson has been nominated for election to the class of directors
whose term will expire in 2005 pursuant to an agreement among Dr. Collinson, the
Company, and the Company's wholly-owned subsidiary Aurora Biosciences
Corporation ("Aurora"), which was entered into in connection with the
acquisition of Aurora by the Company in 2001. The agreement pursuant to which
Dr. Collinson has been nominated provides that the Company shall nominate
Dr. Collinson for election to the Board, recommend in this proxy statement that
Dr. Collinson be elected to the Board, include Dr. Collinson's election to the
Board with any other proposals with respect to which the Company engages a proxy
solicitation firm, and vote any proxies held by the Company in favor of
Dr. Collinson's election unless the proxy instructs otherwise.
Shares represented by proxies will be voted for the election as directors of
Dr. Brimblecombe, Mr. Conklin and Dr. Collinson unless otherwise specified in
the proxy. If any of the nominees for election to the Board should, for any
reason not now anticipated, be unavailable 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. Brimblecombe, Mr. Conklin or Dr. Collinson will be unable to serve if
elected.
The table below sets forth certain information with respect to the nominees
for election to the Board and those directors whose terms of office will
continue after the Meeting.
EXPIRATION OF
FIRST PRESENT
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND ELECTED OR PROPOSED
NAME AND AGE OTHER BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
------------ --------------------------------------------- -------- --------------
Roger W. Brimblecombe, Ph.D., D.Sc., 72 Chairman of Vanguard Medica Ltd. from 1991 to 1993 2005
(1) 2000, Chairman of Core Group plc since 1997,
and Non-Executive Chairman of Oxford
Asymmetry International plc from 1997 to
2000. Various Vice Presidential posts in
SmithKline & French Laboratories research and
development organization between 1979 and
1990. Also a Director of several other
companies located in Europe.
Donald R. Conklin, 65 (2) (3) Executive Vice President of Schering-Plough 1994 2005
Corp. from 1986 to 1996; retired from
Schering-Plough in 1996. Also a Director of
AlfaCell Inc. and Ventiv Inc.
3
EXPIRATION OF
FIRST PRESENT
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND ELECTED OR PROPOSED
NAME AND AGE OTHER BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
------------ --------------------------------------------- -------- --------------
Stuart J. M. Collinson, Ph.D., 42 Partner at Forward Ventures. Dr. Collinson 2001 2005
served as the President, Chief Executive
Officer and Chairman of the Board of Aurora
Biosciences Corporation from 1999 to 2001 and
as a consultant to Aurora from December 1998
to May 1999. Chief Executive Officer of
Andaris, Ltd., a privately held
biopharmaceutical company, from June 1998 to
November 1998. Various senior management
positions with Glaxo Wellcome from December
1994 through June 1998, most recently serving
as Co-Chairman, Hospital and Critical Care
Therapy Management Team and Director of
Hospital and Critical Care.
Joshua S. Boger, Ph.D., 50 A founder of the Company; Chief Executive 1989 2004
Officer since 1992 and Chairman of the Board
since 1997; President of the Company from its
inception in 1989 until December 2000; and
Chief Scientific Officer from 1989 until May
1992. From 1987 to 1989, Senior Director of
Basic Chemistry at Merck Sharp & Dohme
Research Laboratories.
Charles A. Sanders, M.D., 70 (2) Retired in 1994 as Chief Executive Officer 1996 2004
and in 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 Squibb Corporation, including
that of Vice Chairman. Currently a Director
of Biopure Corporation, Edgewater Inc.,
Genentech, Inc., Genaera Pharmaceuticals
Inc., Pharmacopeia Inc., Scios, Inc., and
Trimeris Inc.
Elaine S. Ullian, 54 (1) President and Chief Executive Officer of 1997 2004
Boston 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 Hologic Inc.
4
EXPIRATION OF
FIRST PRESENT
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND ELECTED OR PROPOSED
NAME AND AGE OTHER BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
------------ --------------------------------------------- -------- --------------
Barry M. Bloom, Ph.D., 73 (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 from 1973 to 1993. A Director
of Cubist Pharmaceuticals, Inc., Incyte
Genomics Inc., Neurogen Corp. and Microbia,
Inc.
Bruce I. Sachs, 42 (2) General Partner at Charles River Ventures 1998 2003
since 1999. From 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.
------------------------
(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, 2001, the Board held seven 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 two meetings during 2001. The
Compensation Committee Report appears at page 11 of this Proxy Statement.
The Audit Committee, which includes Donald R. Conklin, Bruce I. Sachs, and
Charles A. Sanders, met six times during 2001. The primary purpose of the Audit
Committee is to provide independent and objective oversight of the accounting
functions and internal controls of the Company. The Audit Committee also assists
the Board in fulfilling its responsibility to the stockholders relating to
corporate accounting, the reporting practices of the Company, and the quality
and integrity of the financial reports of the Company. The Audit Committee
Report appears at page 18 of this Proxy Statement.
5
The Nominating Committee, which includes Barry M. Bloom and Donald R.
Conklin, did not meet during 2001. The Nominating Committee's role, following
consultation with all other members of the Board, is to make recommendations to
the full Board as to the size and composition of the Board and to make
recommendations as to particular nominees.
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 26, 2002, by (i) each stockholder 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 person named in the
Summary Compensation Table below, and (iv) all directors and current executive
officers as a group.
SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF TOTAL
---------------- --------------------- ----------
Wellington Management Company LLP (2)....................... 10,420,480 13.8%
75 State Street
Boston, MA 02109
FMR Corp. (3)............................................... 10,064,067 13.4%
82 Devonshire Street
Boston, MA 01909
J.P. Morgan Chase & Co. (4)................................. 3,759,085 5.0%
270 Park Avenue
New York, NY 10017
Vanguard Specialized Funds--Vanguard Health Care Fund (5)... 3,755,400 5.0%
Post Office Box 2600
Valley Forge, PA 19482-2600
Barry M. Bloom (6).......................................... 62,500 *
Joshua S. Boger (6)(7)(8)................................... 2,438,290 3.2%
Roger W. Brimblecombe (6)................................... 47,500 *
Stuart J. Collinson (6)..................................... 325,902 *
Donald R. Conklin (6)....................................... 90,500 *
Bruce I. Sachs (6).......................................... 62,500 *
Charles A. Sanders (6)...................................... 73,500 *
Elaine S. Ullian (6)........................................ 78,100 *
Vicki L. Sato (6)(8)........................................ 997,444 1.3%
John J. Alam (6)(8)......................................... 140,777 *
Lynne H. Brum (6)(8)........................................ 115,761 *
Iain P. M. Buchanan (6)..................................... 222,356 *
All directors and current executive officers as a group (16 4,701,268 6.2%
persons) (9)..............................................
------------------------
* Less than 1%
6
(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 has or shares voting
power and/or investment (including dispositive) power. The persons and
entities named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them, except as noted
below. Attached to each share of Common Stock is a Preferred Share Purchase
Right to acquire one-half of one hundredth of a share of the Company's
Series A Junior Participating Preferred Stock, par value $.01 per share,
which rights are not presently exercisable. 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, 2001.
(2) Wellington Management Company LLP has shared voting power as to 6,411,380 of
these shares and shared dispositive power as to all 10,420,480 shares. The
shares owned beneficially by Wellington Management Company LLP include
shares as to which Wellington Management Company LLP acts as an investment
advisor to Vanguard Specialized Funds-Vanguard Health Care Fund.
(3) FMR Corp. has sole power to vote 151,300 of these shares and sole power to
dispose of all 10,064,067 shares.
(4) J.P. Morgan Chase & Co. has sole power to vote 3,175,999 of these shares,
shared power to vote 95,676 of these shares, sole dispositive power as to
3,610,609 of these shares and shared dispositive power as to 148,476 of
these shares.
(5) Vanguard Specialized Funds--Vanguard Health Care Fund has sole voting power
and shared dispositive power as to all 3,755,400 of these shares. The shares
owned beneficially by Wellington Management Company LLP include shares as to
which Wellington Management Company LLP acts as an investment advisor to
Vanguard Specialized Funds-Vanguard Health Care Fund.
(6) Includes shares which may be acquired upon the exercise of options
exercisable within 60 days after March 26, 2002, as follows: Dr. Bloom,
62,500 shares; Dr. Boger, 1,372,760 shares; Dr. Brimblecombe, 47,500 shares;
Dr. Collinson, 322,623 shares; Mr. Conklin, 47,500 shares; Mr. Sachs, 62,500
shares; Dr. Sanders, 67,500 shares; Ms. Ullian, 77,500 shares; Dr. Sato,
932,100 shares; Dr. Alam, 121,936 shares; Ms. Brum, 108,561 shares; and
Mr. Buchanan, 221,353 shares.
(7) Includes 207,500 shares held in trusts for the benefit of Dr. Boger's
children. Dr. Boger disclaims beneficial ownership of these shares.
(8) Includes shares held in the Company's 401(k) Plan, as follows: Dr. Boger,
8,740 shares; Dr. Sato, 5,832 shares; Dr. Alam, 1,307 shares; and Ms. Brum,
2,240 shares.
(9) Includes an aggregate of 3,352,896 shares which may be acquired upon the
exercise of options exercisable within 60 days after March 26, 2002 and an
aggregate of 18,119 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, 2001 and
written representations that no other reports were required, 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, except that Dr. Alam filed one Form 4, which
reported one transaction, and Dr. Collinson filed one Form 3, late.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation earned during the fiscal years ended December 31, 2001, 2000, and
1999 by the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer who served
as executive officers at December 31, 2001 or during 2001 (the Chief Executive
Officer together with such other persons being hereinafter referred to as the
"Named Executive Officers").
LONG-TERM
COMPENSATION
AWARDS
----------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (# OF SHARES)(1) COMPENSATION
--------------------------- -------- -------- -------- ---------------- ------------
Joshua S. Boger,................................... 2001 $474,994 $150,000 125,000 $ 7,650 (2)
Chairman and Chief Executive Officer 2000 $407,134 $250,000 175,000 $ 21,196
1999 $389,584 $ 88,000 174,000 $ 19,872
Vicki L. Sato,..................................... 2001 $400,010 $100,000 100,000 $ 7,650 (3)
President 2000 $332,124 $150,000 125,000 $ 7,291
1999 $311,844 $ 77,961 124,500 $ 6,938
John J. Alam,...................................... 2001 $256,958 $ 32,120 52,563 $ 7,650 (3)
Senior Vice President, Drug Evaluation and 2000 $229,424 $ 45,884 50,250 $ 7,403
Approval 1999 $215,410 $ 21,541 44,500 $ 5,662
Lynne H. Brum,..................................... 2001 $197,548 $ 34,571 48,027 $ 6,541 (3)
Vice President of Corporate Development and 2000 $172,510 $ 25,876 29,650 $ 7,650
Communications 1999 $161,980 $ 24,297 24,500 $ 5,971
Iain P. M. Buchanan,............................... 2001 $221,572 $ 7,967 33,236 $21,303 (4)
Vice President of European Operations 2000 $232,102 $ 9,284 32,300 $ 21,672
1999 $213,516 $ 21,793 24,500 $ 21,352
------------------------
(1) Adjusted to reflect the two-for-one stock split effected in August 2000.
(2) Represents the value of the Company's matching contributions under the
Company's 401(k) Savings Plan. Prior years include amounts representing
certain insurance premiums paid by the Company on Dr. Boger's behalf.
(3) Represents the value of the Company's matching contributions under the
Company's 401(k) Savings Plan.
(4) Represents the Company's contribution to Mr. Buchanan's personal pension
scheme account.
8
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, 2001.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR PRICES DATES 5% 10%
---- ---------- ------------- -------- ---------- ------------ ------------
Joshua S. Boger..................... 125,000 2.9% $24.66 12/10/11 $1,939,932 $4,913,865
Vicki L. Sato....................... 100,000 2.3% $24.66 12/10/11 $1,551,946 $3,931,092
John J. Alam........................ 52,563 1.2% $24.66 12/10/11 $ 815,749 $2,066,300
Lynne H. Brum....................... 48,027 1.1% $24.66 12/10/11 $ 745,353 $1,887,985
Iain P. M. Buchanan................. 33,236 0.8% $24.66 12/10/11 $ 515,805 $1,306,538
------------------------
(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.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information with respect to the options
to purchase Common Stock exercised by the Named Executive Officers during 2001
and options held by such persons at December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
NUMBER OF AT FISCAL YEAR-END FISCAL YEAR-END (1)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
Joshua S. Boger.......... 1,288 $ 13,769 1,285,360 484,550 $17,934,248 $2,591,112
Vicki L. Sato............ 79,000 $2,036,640 881,150 349,350 $12,161,312 $1,765,802
John J. Alam............. -0- $ 0 92,486 154,495 $ 860,482 $ 681,176
Lynne H. Brum............ -0- $ 0 90,970 106,447 $ 943,491 $ 406,834
Iain P. M. Buchanan...... -0- $ 0 205,430 93,806 $ 2,875,559 $ 410,912
------------------------
(1) The value of unexercised in-the-money options at fiscal year-end assumes a
fair market value for the Company's Common Stock of $24.66, the average
price per share of the Common Stock as reported in the Nasdaq Stock Market
on December 31, 2001.
9
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements with Dr. Boger, Dr. Sato 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 and Dr. Sato 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 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 the
vesting 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.
Dr. Collinson has an employment agreement with Aurora that became effective
upon completion of the Company's acquisition of Aurora and is guaranteed by the
Company. Under this agreement, Dr. Collinson remained an employee of Aurora for
six months following the acquisition, for which he (i) was entitled to be paid
an aggregate of $361,986 in compensation; (ii) received (a) an option to
purchase shares of Common Stock, (b) vesting of all his unvested stock options
granted in accordance with Aurora's 1996 Stock Plan, (c) the right to
reimbursement of reasonable expenses of relocation to the United Kingdom
incurred within 12 months following termination of his employment, and (d) the
right to COBRA payments for up to 18 months; and (iii) was granted forgiveness
for a loan of $132,000 payable to Aurora. Additionally, in accordance with the
employment agreement, Aurora and Dr. Collinson entered into a Non-Disclosure,
Non-Competition and Inventions Agreement, pursuant to which he is entitled to an
aggregate of $800,000, payable in installments. On April 2, 2002, upon
termination of the six month employment term, and pursuant to the employment
agreement, Aurora retained Dr. Collinson as a part-time consultant for a term of
four years, at the rate of $80,000 per year.
The Company also has an employment agreement with Mr. Kenneth Boger, Senior
Vice President and General Counsel, which may be terminated by either the
Company or Mr. Boger at any time. The agreement provides that, if Mr. Boger's
employment is terminated under certain circumstances in connection with a
change-in-control, Mr. Boger will be entitled to 12 months' severance pay, 18
months' acceleration of the vesting of outstanding stock options, additional
payments required to compensate Mr. Boger if such payments and benefits result
in certain adverse tax consequences, and continuation of certain employee
benefits for up to 12 months. The agreement also contains a noncompetition
provision.
All outstanding options granted under the Company's 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 2001, the Company paid to each non-employee director an annual
retainer of $12,000, plus $2,500 for each Board meeting attended and $250 for
each Committee meeting attended on a regular Board meeting day, or $500 if the
Committee meeting was not held on the same day as a meeting of the full Board.
Meetings held by conference call generally are compensated at half the standard
rate. In
10
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 Common
Stock's then fair market value. Those 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 7,500 shares of Common Stock under the 1996
Stock and Option Plan, exercisable immediately at a price equal to 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 2001, 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
among 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 2001 were determined by the Committee in late 2000. Salary
increases over 2000 salary levels were based on the Committee's subjective
evaluation of the individual executive's performance in 2000 and its estimation
of the salaries being offered to senior executives at companies with which
Vertex competes in hiring and retaining qualified executives and key scientists.
In addition, the Committee considered the results of the 2000 BIOTECHNOLOGY
COMPENSATION SURVEY, a survey conducted by Radford Associates and the Salary
Information Retrieval System. These surveys included companies in the
biotechnology and pharmaceutical industries which voluntarily participated in
the surveys. 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 companies with stock
quoted on the Nasdaq Stock Market, 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 2001 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 overall performance in 2000 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 2001 individual
11
and Company performance. In determining base salaries for Dr. Boger and
Dr. Sato, 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 2001, 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 2001. The amounts of the cash bonuses
awarded to Dr. Boger and Dr. Sato were approximately 31.6% and 25% of their
respective 2001 base salaries, reflecting the Committee's determination that a
significant proportion of the compensation of those 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 2001, including enhancing the Company's capabilities
in drug discovery through the acquisition of Aurora and advancing and expanding
the Company's product pipeline by achieving several key product development
goals. It was the Committee's judgment that each of those 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 are 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 2001, 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 33,236 to 125,000 shares vesting in
quarterly installments over five years. 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 2001. 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 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 2001 base salary of $474,994 represented an increase of
approximately 16.7% over his 2000 salary, indicating the Committee's evaluation
of Dr. Boger's performance as excellent. The Committee believed that
Dr. Boger's resulting 2001 salary was near the middle of the range of base
salaries paid to chief executive officers of comparable companies. The Committee
set the 2001 base salary at this level in order to provide opportunities for
significant incentive cash bonuses based on individual and Company performance.
12
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 2001 in enhancing the Company's capabilities in drug discovery through
the acquisition of Aurora, advancing and expanding the Company's product
pipeline by achieving several key product development goals, and making a number
of important hires that brought new talent to the Company's management team. The
amounts of Dr. Boger's 2001 cash bonus and stock option award, for the purchase
of a total of 125,000 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 limits to $1,000,000 per
executive the amount of compensation paid to the Company's Chief Executive
Officer or any of the Company's other most highly compensated executive officers
named in its Summary Compensation Table 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 qualify as performance-based compensation plans.
Submitted by the Compensation Committee:
Barry M. Bloom
Roger W. Brimblecombe
Elaine S. Ullian
13
PERFORMANCE GRAPH
CUMULATIVE TOTAL RETURN
BASED UPON AN INITIAL INVESTMENT OF $100 ON DECEMBER 31, 1996
WITH DIVIDENDS REINVESTED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DEC-96 DEC-97 DEC-98 DEC-99 DEC-00 DEC-01
Vertex Pharmaceuticals Incorporated $100 $82 $74 $87 $355 $122
NASDAQ Stock Market (U.S.) $100 $122 $173 $321 $193 $153
NASDAQ Pharmaceuticals Stocks $100 $103 $131 $247 $308 $262
Source: Georgeson Shareholder Communications, Inc.
14
PROPOSAL 2:
APPROVAL OF AMENDMENTS TO
THE VERTEX PHARMACEUTICALS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan (the
"Purchase Plan") was adopted by the Board of Directors in 1992, and has been
approved by the stockholders. Under the Purchase Plan, eligible employees have
the right to purchase Common Stock on favorable terms through payroll
deductions. The purpose of the Purchase Plan is to encourage the Company's
employees to share in the economic growth and success of the Company through
stock ownership. As of December 31, 2001, approximately 875 persons were
eligible to participate in the Purchase Plan. A copy of the Purchase Plan, as
proposed to be amended, is attached as Appendix A.
AMENDMENTS
On March 26, 2002, the Board of Directors approved amendments to the
Purchase Plan to be effective upon approval by the Company's stockholders. The
effect of these amendments is to (i) eliminate a requirement that an employee
have been employed by the Company for six months before being eligible to
participate in the Purchase Plan; (ii) increase the maximum percentage of an
employee's salary which may be contributed to the Purchase Plan from 10% to 15%,
and permit the Board of Directors to change the maximum contribution percentage
to an amount between 10% and 20% without obtaining shareholder approval;
(iii) change the duration of each offering period ("Period") from six months to
twelve months, with an option, exercisable by any employee during any Period, to
terminate the Period at the end of six months; (iv) delete the requirement that
stockholder approval be obtained for amendments to the Purchase Plan which
change eligibility requirements, change the method of determining the purchase
price for Common Shares or materially increase the benefits accruing to
employees under the Purchase Plan; (v) clarify the maximum aggregate dollar
amount of Common Stock that an employee may purchase under the Purchase Plan;
and (vi) increase the number of shares of Common Stock available for issuance
under the Purchase Plan by 600,000.
Currently, the Purchase Plan provides that all employees (i) who are
employees of the Company or a subsidiary on an offering date, (ii) who are
regularly employed for more than 20 hours a week and for more than five months
in a calendar year by the Company or a subsidiary; and (iii) who have been an
employee for at least six months are eligible to participate in the Purchase
Plan. The proposed amendment would delete the requirement that an employee have
been employed for six months on an offering date in order to participate in the
Purchase Plan.
Prior to amendment, the Purchase Plan provided that an employee may elect to
have up to 10% of his or her salary deducted for the purpose of purchasing
Common Stock under the Purchase Plan. The Board of Directors may increase this
amount to 20% without stockholder approval. The proposed amendments to the
Purchase Plan would increase the current maximum contribution percentage to 15%,
and allow the Board of Directors to set the maximum deduction percentage in the
future to any whole percentage between 10% and 20%. Additionally, the Purchase
Plan currently provides that an employee may not purchase more than $25,000
worth of Common Stock in any calendar year, based on the fair market value of
the Common Stock determined at the offering date. The proposed amendments would
increase the limit
15
in subsequent calendar years to the extent allowed by Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), governing employee stock
purchase plans.
The Company makes two offerings to purchase Common Stock under the Purchase
Plan each year, one on April 1 and one on October 1. Currently, the Purchase
Plan provides that each Period shall be six months long. As amended, the
Purchase Plan will provide that each Period extends either for twelve months,
or, if an employees so elects within the 30 day period prior to the six month
anniversary of the offering date, for six months.
Currently, the Purchase Plan requires stockholder approval for any amendment
to the Purchase Plan which would increase the number of Common Shares available
to be offered under the Purchase Plan; change the method of determining the
purchase price for shares of Common Stock; materially increase the benefits
accruing to participants in the Purchase Plan; or materially change the
eligibility requirements for participation in the Purchase Plan. To permit the
maximum flexibility allowed by applicable Code provisions, the Purchase Plan as
amended would require stockholder approval only for amendments which increase
the number of shares of Common Stock available for issuance under the Purchase
Plan.
As of April 1, 2002, 124,576 shares of Common Stock remained available for
issuance under the Purchase Plan. The proposed amendments would increase the
number of shares of Common Stock available for issuance under the Purchase Plan
after the effective date of the amendments by 600,000 shares, to 724,576. On
April 1, 2002, the closing sale price for the Common Stock on the Nasdaq Stock
Market was $28.40.
The Board believes these amendments will help the Company to attract and
retain qualified employees and provide further incentives to employees as a
result of their equity interest in the Company.
SUMMARY OF THE PURCHASE PLAN
The Purchase Plan is administered by the Compensation Committee of the Board
of Directors, which has the power to construe and interpret the Purchase Plan
and to determine all questions that arise under the Purchase Plan. Because
participation in the Purchase Plan is voluntary and employees may withdraw from
the Purchase Plan at any time during a Period without penalty, the benefits to
be received by any particular person or group are not determinable by the
Company at this time.
Employees are eligible to participate in the Purchase Plan as described
above. Additionally, no employee is eligible to participate in the Purchase Plan
if he or she would possess five percent or more of the voting power of the
Company's or any subsidiary's common stock immediately after making a purchase
under the Purchase Plan. If the Company receives requests from employees to
purchase more than the number of shares available during any offering, the
available shares will be allocated on a pro rata basis to subscribing employees.
The price at which an employee may purchase Common Stock under the Purchase
Plan is 85% of the lower of (i) the mean of the highest and lowest quoted
selling prices of the Common Stock on the day a Period commences, and (ii) the
mean of the highest and lowest quoted selling prices on the day the Period ends.
The Board of Directors may at any time terminate or amend the Purchase Plan.
However, the Board of Directors may not amend the Purchase Plan without approval
of the stockholders of the Company if any such amendment would increase the
number of shares of Common Stock reserved under the Purchase Plan.
16
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of Common Stock acquired under the
Purchase Plan.
TAX CONSEQUENCES TO PARTICIPANTS
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. In general, an employee will not recognize
U.S. taxable income upon enrolling in the Purchase Plan or upon purchasing
shares of Common Stock. Instead, if an employee sells Common Stock acquired
under the Purchase Plan for an amount that exceeds the purchase price, then the
employee will recognize taxable income in an amount equal to the excess of the
sale price of the Common Stock over the purchase price, partially as ordinary
income and partially as capital gain, depending upon the date of the sale. If
the employee sells the Common Stock more than one year after acquiring it and
more than two years after the applicable offering date, and the sale price of
the Common Stock is higher than the purchase price, then the employee will
recognize ordinary income in an amount equal to the lesser of (i) 85% of the
fair market value of the Common Stock on the offering date; and (ii) the excess
of the sale price of the Common Stock over the purchase price. The balance of
the income will be treated as long-term capital gain. If the sale price of the
Common Stock is less than the price at which the employee purchased the Common
Stock, then the employee will recognize long-term capital loss in an amount
equal to the excess of the purchase price over the sale price of the Common
Stock.
If the employee sells the Common Stock within one year after acquiring it or
within two years after the offering date (a "Disqualifying Disposition"), then
the employee will recognize as ordinary compensation income an amount equal to
the excess of the fair market value of the Common Stock on the date that it was
purchased over the purchase price plus either (i) capital gain in an amount
equal to the excess of the sale price of the Common Stock over the fair market
value of the Common Stock on the date that it was purchased, or (ii) capital
loss in an amount equal to the excess of the fair market value of the Common
Stock on the date that it was purchased over the sale price of the Common Stock.
This capital gain or loss will be a long-term capital gain or loss if the
employee held the Common Stock for more than one year prior to the date of the
sale and will be a short-term capital gain or loss if the employee held the
Common Stock for a shorter period.
TAX CONSEQUENCES TO THE COMPANY
The offerings of Common Stock under the Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor the
sale of Common Stock acquired under the Purchase Plan will have any federal
income tax consequences to the Company except that the Company will be entitled
to a compensation deduction with respect to any ordinary compensation income
recognized by an employee upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations on deductions for certain employee
remuneration contained in Section 162(m) of the Code.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENTS
TO THE VERTEX PHARMACEUTICALS INCORPORATED EMPLOYEE STOCK PURCHASE PLAN AS
DESCRIBED ABOVE. A MAJORITY OF THE VOTES PRESENT OR REPRESENTED AND VOTING AT
THE MEETING IS REQUIRED FOR SUCH APPROVAL.
17
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP ("PWC") has served as the Company's independent
accountants since 1989. Representatives of PWC 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.
The Board of Directors has not yet appointed independent accountants for the
Company's 2002 fiscal year. The Audit Committee of the Board, in accordance with
its charter, is in the process of evaluating independent accountants and, after
its review is complete, will make a recommendation to the Board on the selection
of independent accountants for the 2002 fiscal year.
AUDIT FEES. Aggregate fees for professional services rendered by PWC in
connection with its audit of the Company's consolidated financial statements as
of and for the year ended December 31, 2001 and its limited reviews of the
Company's unaudited condensed consolidated interim financial statements were
$271,485.
FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES. During the
year ended December 31, 2001, PWC rendered no professional services to the
Company in connection with the design and implementation of financial
information systems.
ALL OTHER FEES. In addition to the fees described above, PWC billed the
Company aggregate fees of $520,575 during the year ended December 31, 2001, for
the following professional services:
Audit-related services...................................... $454,461
Income tax compliance and related tax services.............. $ 47,988
Other....................................................... $ 18,126
Audit-related services fees included fees for issuance of consents, the
issuance of a letter with respect to the merger with Aurora qualifying for the
pooling of interests method of accounting, issuance of a letter with respect to
the preferability of the Company's 2001 change in accounting principle for
revenue recognition, and the audit of the Company's 401(k) employee benefit plan
and various other accounting matters.
AUDIT COMMITTEE REPORT
The Audit Committee is appointed by the Board of Directors to review the
Company's financial matters. Pursuant to a written charter adopted by the Board,
the Committee assists the Board in overseeing and monitoring the integrity of
the Company's financial reporting process, its compliance with legal
requirements and the quality of its audit process. Each member of the Audit
Committee meets the independence requirements set by the Nasdaq Stock Market.
The Audit Committee has reviewed and discussed the audited financial statements
for the fiscal year ending December 31, 2001, with management and with the
Company's independent auditors, PWC. The Committee also discussed with PWC the
matters required to be discussed by Statement on Auditing Standards No. 61
relating to the conduct of the audit. The Audit Committee received a written
disclosure and letter from PricewaterhouseCoopers LLP regarding its
independence, as required by Independence Standards Board Standard No. 1. The
Audit Committee also further discussed with PWC their independence and
considered whether the independent auditors' provision of non-audit related
services is compatible with maintaining the auditors' independence. The Audit
Committee also considered other areas of oversight relating to the financial
reporting and audit
18
process that the Audit Committee determined appropriate. Based on the review and
discussions referred to above, the Audit Committee recommended to the Board that
the audited financial statements be included in the Company's 2001 Annual Report
on Form 10-K to be filed with the Securities and Exchange Commission.
Submitted by the Audit Committee:
Donald R. Conklin
Bruce I. Sachs
Charles A. Sanders
19
OTHER MATTERS
The Meeting is called for the purposes set forth in the notice. The Board
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 2003 ANNUAL MEETING
In order to be considered for inclusion in the Proxy Statement for the
Company's 2003 Annual Meeting of Stockholders, stockholder proposals must be
received by the Company no later than December 10, 2002. If the Company does not
receive notice of any matter to be considered for presentation at the 2003
Annual Meeting, although not included in the Proxy Statement, by February 24,
2003, 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.
Proposals should be sent to the attention of the Clerk at the Company's offices
at 130 Waverly Street, Cambridge, MA 02139-4242.
Stockholder nominations for election to the Board at the 2003 Annual Meeting
of Stockholders may be submitted to the Clerk of the Company no later than
February 17, 2003 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 Securities and Exchange 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
KENNETH S. BOGER
CLERK
April 9, 2002
20
APPENDIX A
VERTEX PHARMACEUTICALS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
(amended and restated subject to stockholder approval
on May 17, 2002)
ARTICLE 1
PURPOSE AND DEFINITIONS
SECTION 1.1. PURPOSE. The purpose of the Vertex Pharmaceuticals
Incorporated Employee Stock Purchase Plan is to provide employees with an
opportunity to purchase Common Stock in the Company through payroll deductions,
thereby encouraging employees to share in the economic growth and success of the
Company through stock ownership.
SECTION 1.2. DEFINITIONS. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) "BENEFICIARY" with respect to a Participant, means the beneficiary
designated by the Participant under the group term life insurance plan
maintained by the Company or such other beneficiary as may be designated by
a Participant for purposes of this Plan.
(b) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and references thereto shall include the valid
Treasury regulations issued thereunder.
(d) "COMMITTEE" means the Compensation Committee of the Board of
Directors.
(e) "COMMON STOCK" means shares of the $.01 par value common stock of
the Company and any other stock or securities resulting from the adjustment
thereof or substitution therefor as described in Section 3.4.
(f) "COMPANY" means Vertex Pharmaceuticals Incorporated or any
successor by merger, purchase, or otherwise.
(g) "COMPENSATION" means the cash compensation received by an Employee
for services, including pre-tax employee compensation made to the Company's
401(k) savings plan, but not including overtime or bonuses.
(h) "EFFECTIVE DATE" means July 1, 1992.
(i) "ELECTION" means an election by a Participant to terminate an
Offering Period on an Election Date, which election shall be made within the
thirty day period prior to the Election Date and shall be in writing on a
form furnished by the Company for such purpose and shall be made by having
such Participant complete, sign and file such form with the Company in the
manner prescribed by the Company.
(j) "ELECTION DATE" means the six month anniversary of an Offering Date
for any Offering Period.
A-1
(k) "EMPLOYEE" means any person who receives a regular stated
compensation from the Company or a Subsidiary other than a pension,
severance pay, retainer, or fee under contract.
(l) "FAIR MARKET VALUE" of a Share of Common Stock on a particular date
shall be the mean between the highest and lowest quoted selling prices on
such date (the "valuation date") on the securities market where the Common
Stock of the Company is traded, or if there were no sales on the valuation
date, on the next preceding date within a reasonable period (as determined
in the sole discretion of the Committee) on which there were sales. In the
event that there were no sales in such a market within a reasonable period,
the fair market value shall be as determined in good faith by the Committee
in its sole discretion. The Fair Market Value as determined in this
paragraph rounded down to the next lower whole cent if the foregoing
calculation results in fractional cents.
(m) "OFFERING" means the offering of shares of Common Stock to
Participants pursuant to this Plan.
(n) "OFFERING DATE" means each April 1 and October 1 after the
Effective Date and prior to October 1, 2007, provided that the first
Offering Date will be the Effective Date. If any such date shall fall other
than on a business day, then the Offering Date shall be the next succeeding
business day.
(o) "OFFERING PERIOD" means either (i) the period from an Offering Date
through the one year anniversary of such Offering Date or (ii) if a
Participant validly exercises an Election, the period from an Offering Date
through the six month anniversary of such Offering Date.
(p) "PARTICIPANT" means an Employee who has elected to participate in
the Plan.
(q) "PLAN" means the Vertex Pharmaceuticals Incorporated Employee Stock
Purchase Plan, an "employee stock purchase plan" within the meaning of
Section 423(b) of the Code, together with any and all amendments thereto.
(r) "STOCK PURCHASE ACCOUNT", with respect to a Participant, means the
account established on the books and records of the Company or a Subsidiary
for such Participant representing the payroll deductions credited to such
account in accordance with the provisions of the Plan.
(s) "SUBSIDIARY" means any corporation, fifty percent (50%) or more of
the total combined voting power of all classes of stock of which is
beneficially owned, directly or indirectly, by the Company.
ARTICLE II
PARTICIPATION
SECTION 2.1. PARTICIPATION REQUIREMENTS.
(a) COMMENCEMENT OF PARTICIPATION. Subject to Section 2.2 and
Section 3.2(b), each person who is an Employee on the Effective Date may
elect, pursuant to Article IV, to become a Participant in the Plan on such
date. Each person who becomes an Employee after the Effective Date may
become a Participant in the Plan on the Offering Date coinciding with or
next following the date on which such person becomes an Employee.
(b) ELIGIBILITY OF FORMER PARTICIPANTS. If a person terminates
employment with the Company after becoming a Participant and subsequently
resumes employment with the Company, such person
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will again become eligible to participate on the Offering Date coinciding
with or next following such resumption of employment with the Company.
SECTION 2.2. EXCLUSIONS. Notwithstanding any provision of the Plan to the
contrary, in no event shall the following persons be eligible to participate in
the Plan:
(a) Any Employee whose customary employment is twenty (20) hours or
less per week;
(b) Any Employee whose customary employment is for not more than five
(5) months in any calendar year; or
(c) Any Employee who, as of the beginning of an Offering Period, owns
(or under Section 423(b)(3) of the Code would be deemed to own) stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or a Subsidiary.
ARTICLE III
OFFERING OF COMMON STOCK
SECTION 3.1. RESERVATION OF COMMON STOCK. The Board of Directors shall
reserve 724,576 shares of Common Stock for issuance under the Plan after May 17,
2002, subject to adjustment in accordance with Section 3.4.
SECTION 3.2. OFFERING OF COMMON STOCK.
(a) GENERAL. Subject to Section 3.2(b), each Participant in the Plan
on an Offering Date shall be entitled to purchase shares of Common Stock on
the last day of the Offering Period beginning with such Offering Date with
the amounts deducted from such Participant's Compensation during such
Offering Period pursuant to Article IV, provided, however, that a
participant shall not participate in more than one Offering Period
simultaneously (except for the one day common to an Offering Period and the
subsequent Offering Period). The purchase price for such shares of Common
Stock shall be determined under Section 3.3.
(b) LIMITATIONS. Notwithstanding Section 3.2(a), no employee may
accrue rights to purchase shares of Common Stock attributable to an Offering
Period in excess of $25,000 of fair market value of such shares (measured as
of the relevant Offering Date) for each calendar year during which such
rights are outstanding. For any year, this limit shall be further reduced by
the fair market value of stock (measured as of the relevant Offering Date
for such stock) purchasable under any prior outstanding rights relating to
such calendar year under this Plan and all other Code section 423 employee
stock purchase plans of the Company or any Subsidiary. This paragraph is
intended to be consistent with the limitation of Code section 423(b)(8) and
shall be interpreted accordingly.
SECTION 3.3. DETERMINATION OF PURCHASE PRICE FOR OFFERED COMMON STOCK. The
purchase price per share of the shares of Common Stock offered to Participants
pursuant to an Offering shall be equal to eighty-five (85%) of the lesser of:
(a) the Fair Market Value of a share of Common Stock as of the first
day of the Offering Period for such Offering; or
(b) the Fair Market Value of a share of Common Stock as of the last day
of the Offering Period for such Offering;
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provided, however, in no event shall the purchase price be less than the par
value of a share of Common Stock.
SECTION 3.4. EFFECT OF CERTAIN TRANSACTIONS. The number of shares of
Common Stock reserved for the Plan pursuant to Section 3.1, the maximum number
of shares of Common Stock offered pursuant to Section 3.2(b), and the
determination under Section 3.3 of the purchase price per share of the shares of
Common Stock offered to Participants pursuant to an Offering shall be
appropriately adjusted to reflect any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, a consolidation of
shares, the payment of a stock dividend, or any other capital adjustment
affecting the number of issued shares of Common Stock. In the event that the
outstanding shares of Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or another corporation, whether through reorganization, recapitalization,
merger, consolidation, or otherwise, then there shall be substituted for each
share of Common Stock reserved for issuance under the Plan but not yet purchased
by Participants, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged.
ARTICLE IV
PAYROLL DEDUCTIONS
SECTION 4.1. PAYROLL DEDUCTION ELECTIONS. Any Employee eligible to
participate in the Plan may elect to have the Company deduct from the
Compensation payable to such Employee during each Offering Period any amount
between one percent (1%) and fifteen percent (15%) of such Participant's
Compensation, in whole multiples of one percent (1%), provided that the maximum
amount that any Employee may elect to have deducted may be amended to be any
whole percentage between ten percent (10%) and twenty percent (20%) of
Compensation, by action of the Board of Directors of the Company, without
shareholder approval. Such election shall be made by delivering to the Company
during the thirty day period preceding such Offering Period a written direction
to make such deductions. Such election shall become effective as of the first
day of such Participant's first pay period that begins on or after the first day
of such Offering Period and shall remain effective for each successive pay
period and for each subsequent Offering until changed or terminated pursuant to
this Article IV. The percentage deduction specified by the Participant will be
deducted from each payment of compensation made to the Participant.
SECTION 4.2. ELECTION TO INCREASE OR DECREASE PAYROLL DEDUCTIONS. Subject
to Section 4.4, a Participant who has a payroll deduction election in effect
under Section 4.1 may prospectively increase or decrease during an Offering
Period the percentage amount of the deductions being made by the Company from
such Participant's Compensation (including a decrease to zero) by delivering to
the Company written direction to make such change. Such change shall become
effective as soon as practicable after the Company's receipt of such written
direction and shall remain in effect until changed or terminated pursuant to
this Article IV. A Participant shall be permitted to increase or decrease the
percentage amount of the deductions being made from such Participant's
Compensation only once during an Offering Period; provided, however, a
Participant may terminate the deductions being made from such Participant's
Compensation at any time deductions during such Offering Period. If a
Participant terminates deductions, such Participant cannot resume deductions
during that Offering Period.
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SECTION 4.3. TERMINATION OF ELECTION UPON TERMINATION OF EMPLOYMENT. The
termination of employment of a Participant for any reason shall automatically
terminate the election of such Participant to have amounts deducted from such
Participant's Compensation pursuant to this Article IV that is then in effect.
Such termination shall be effective immediately following the pay period during
which such termination of employment occurs, but shall not affect the deduction
from Compensation for that pay period.
SECTION 4.4. FORM OF ELECTIONS. Any written direction by any Participant
with respect to any deductions from Compensation pursuant to this Article IV
shall be on a form furnished by the Company for such purpose and shall be made
by having such Participant complete, sign, and file such form with the Company
in the manner prescribed from time to time by the Company.
ARTICLE V
STOCK PURCHASE ACCOUNTS AND PURCHASE OF COMMON STOCK
SECTION 5.1. STOCK PURCHASE ACCOUNTS. A Stock Purchase Account shall be
established and maintained on the books and records of the Company for each
Participant. Amounts deducted from a Participant's Compensation pursuant to
Article IV shall be credited to such Participant's Stock Purchase Account. No
interest or other increment shall accrue or be payable to any Participant with
respect to any amounts credited to such Stock Purchase Accounts. All amounts
credited to such Stock Purchase Accounts shall be withdrawn, paid, or applied
toward the purchase of Common stock pursuant to the provisions of this
Article V.
SECTION 5.2. PURCHASE OF COMMON STOCK.
(a) GENERAL. As of the last day of each Offering Period, the amount to
the credit of a Participant in such Participant's Stock Purchase Account
shall be used to purchase from the Company on such Participant's behalf the
largest number of whole shares of Common Stock which can be purchased at the
price determined under Section 3.3 with the amount then credited to such
Participant's Stock Purchase Account, subject to the limitations set forth
in Article III on the maximum number of shares of Common Stock such
Participant may purchase. As of such date, such Participant's Stock Purchase
Account shall be charged with the aggregate purchase price of the shares of
Common Stock purchased on such Participant's behalf. No brokerage or other
fees are to be charged upon a purchase. Stock transfer taxes, if any, shall
be paid by the Company. The remaining balance, if any, credited to such
Participant's Stock Purchase Account shall be carried forward and used to
purchase shares of Common Stock in the next succeeding Offering Period;
provided that any excess balance remaining in a Participant's Stock Purchase
Account after the application of the limitations in Section 3.2 shall be
refunded to the Participant.
(b) ISSUANCE OF COMMON STOCK. The shares of Common Stock purchased for
a Participant on the last day of an Offering Period shall be deemed to have
been issued by the Company for all purposes as of the close of business on
such date. Prior to such date, none of the rights and privileges of a
shareholder of the Company shall exist with respect to such shares of Common
Stock. As soon as practicable after the end of an Offering Period the
Company shall issue and deliver, or shall cause its stock transfer agent to
issue and deliver, a certificate for the number of shares of Common Stock
purchased for a Participant, which certificate shall be issued in the
Participant's name or, if so specified by the Participant, in the name of
the Participant and such other person as the Participant
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shall designate as joint tenants with right of survivorship. In lieu of
issuing a certificate, the Company may elect to deliver to the Participant a
statement which shall indicate the number of shares of Common Stock
purchased for such Participant on the last day of such Offering Period and
the aggregate number of shares of Common Stock held on behalf of such
Participant under the Plan.
(c) INSUFFICIENT COMMON STOCK AVAILABLE. If, as of the last day of any
Offering Period, the aggregate Stock Purchase Accounts available for the
purchase of shares of Common Stock pursuant to Section 5.2(a) would purchase
a number of shares of Common Stock in excess of the number of shares of
Common Stock then available for purchase under the Plan, (i) the number of
shares of Common Stock which would otherwise be purchased for each
Participant on such date shall be reduced proportionately to the extent
necessary to eliminate such excess, (ii) the remaining balance to the credit
of each Participant in each such Participant's Stock Purchase Accounts shall
be distributed to each such Participant, and (iii) the Plan shall terminate
automatically upon the distribution of the remaining balance in such Stock
Purchase Accounts.
SECTION 5.3. WITHDRAWAL FROM PLAN PRIOR TO PURCHASE OF COMMON STOCK. In
the event (i) a Participant elects in writing for any reason to withdraw from
the Plan during an Offering Period or (ii) a Participant's employment with the
Company terminates for any reason within three months prior to the end of an
Offering Period, and such Participant (or, if such Participant is deceased, such
Participant's Beneficiary) elects in writing to withdraw from the Plan, then the
entire amount to the credit of Such Participant in such Participant's Stock
Purchase Account shall be distributed to such Participant (or, if such
Participant is deceased, to such Participant's Beneficiary) as soon as
administratively practicable after such termination of employment or withdrawal
(as the case may be). If a Participant (or, if such Participant is deceased,
such Participant's Beneficiary) with the right to do so does not elect in
writing to withdraw from the Plan, the amount to the credit of such Participant
in such Participant's Stock Purchase Account shall be used to purchase shares of
Common Stock for such Participant as of the last day of such Offering Period to
the extent provided in Section 5.2(a), and the remaining balance in such
Participant's Stock Purchase Account shall be distributed to such Participant as
soon as administratively practicable.
ARTICLE VI
COMMITTEE
SECTION 6.1. POWERS OF THE COMMITTEE. The Committee shall administer the
Plan. The Committee shall have all powers necessary to enable it to carry out
its duties under the Plan properly. Not in limitation of the foregoing, the
Committee shall have the power to construe and interpret the Plan and to
determine all questions that shall arise thereunder. The decision of the
Committee upon all matters within the scope of its authority shall be final and
conclusive on all persons, except to the extent otherwise provided by law.
SECTION 6.2. INDEMNIFICATION OF THE COMMITTEE. The Company agrees to
indemnify and hold harmless the members of the Committee against any
liabilities, loss, costs, or damage that they may incur in acting as such
members and to assume the defense of any and allocations, suits, or proceedings
against the members of the Committee, to the extent permitted by applicable law.
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ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1. AMENDMENT OF THE PLAN. The Company expressly reserves the
right, at any time and from time to time, to amend in whole or in part any of
the terms and provisions of the Plan; provided, however, no amendment may
without the approval of the shareholders of the Company increase the number of
shares of Common Stock reserved under the Plan.
SECTION 7.2. TERMINATION OF PLAN. The Company expressly reserves the
right, at any time and for whatever reason it may deem appropriate, to terminate
the Plan. If not sooner terminated (i) pursuant to the preceding sentence or
(ii) pursuant to Section 5.2(c), the Plan shall continue in effect through
October 1, 2007. Upon any termination of the Plan, the entire amount credited to
the Stock Purchase Account of each Participant shall be distributed to each such
Participant.
SECTION 7.3. PROCEDURE FOR AMENDMENT OR TERMINATION. Any amendment to the
Plan or termination of the Plan may be retroactive to the extent not prohibited
by applicable law. Any amendment to the Plan or termination of the Plan shall be
made by the Company by resolution of the Board of Directors (subject to
Section 7.1) and shall not require the approval or consent of any Participant or
Beneficiary in order to be effective.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. ADOPTION BY A SUBSIDIARY. A Subsidiary may, with the approval
of the Board of Directors and the board of directors of such Subsidiary, elect
to adopt the Plan as of a date mutually agreeable to the Board of Directors and
the board of directors of such Subsidiary. Any such adoption of the Plan by a
Subsidiary shall be evidenced by an appropriate instrument of adoption executed
by such Subsidiary.
SECTION 8.2. AUTHORIZATION AND DELEGATION TO THE BOARD OF DIRECTORS. Each
Subsidiary which is or hereafter adopts the Plan authorizes and employers the
Board of Directors (i) to amend or terminate the Plan without further action by
said Subsidiary as provided in Article VII and (ii) to perform such other acts
and to do such other things as the Board of Directors is expressly directed,
authorized, or permitted to perform or do as provided herein.
SECTION 8.3. TRANSFERABILITY OF RIGHTS. Rights under the Plan are not
transferable by a Participant other than by will or the laws of descent and
distribution and are exercisable during a Participant's lifetime only by the
Participant.
SECTION 8.4. NO EMPLOYMENT RIGHTS. Participation in the Plan shall not
give any employee of the Company or any Subsidiary any right to remain employed
or, upon termination of employment, any right or interest in the Plan, except as
expressly provided herein.
SECTION 8.5. COMPLIANCE WITH LAW. No shares of Common Stock shall be
issued under the Plan prior to compliance by the Company to the satisfaction of
its counsel with any applicable laws.
SECTION 8.6. APPROVAL OF PLAN. The effectiveness of this Plan is subject
to its approval and ratification on or before December 31, 1992 by the
stockholders of the Company. In the event that the
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Plan is not so approved, all amounts deducted from the Compensation of
Participants and credited to each Participant's Stock Purchase Account shall be
refunded to each such Participant without interest as soon as administratively
practicable.
SECTION 8.7. CONSTRUCTION. Article, Section, and paragraph headings have
been inserted in the Plan for convenience of reference only and are to be
ignored in any construction of the provisions hereof. If any provision of the
Plan shall be invalid or unenforceable, the remaining provisions shall
nevertheless be valid, enforceable, and fully effective. It is the intent that
the Plan shall at all times constitute an "employee stock purchase plan" within
the meaning of Section 423(b) of the Code, and the Plan shall be construed, and
interpreted to remain such. The Plan shall be construed, administered,
regulated, and governed by the laws of the United States to the extent
applicable, and to the extent such laws are not applicable, by the laws of the
Commonwealth of Massachusetts. Without limiting the foregoing, all Participants
for an Offering Period shall have the same rights and privileges with respect to
their rights to acquire Common Stock under the Plan for such period, subject to
the express terms hereof.
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DETACH HERE
PROXY
VERTEX PHARMACEUTICALS INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS - MAY 17, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby constitute and appoint Joshua S. Boger, Vicki L.
Sato and Valerie L. Andrews, or any 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 Friday, May 17, 2002 at 9:30
A.M. and at any adjournments 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.
SEE REVERSE SEE REVERSE
SIDE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SIDE
VERTEX PHARMACEUTICALS
INCORPORATED
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
1. Election of three (3) directors to the class of directors whose
term expires in 2005.
NOMINEES: (01) Roger W. Brimblecombe, (02) Donald R.
Conklin, and (03) Stuart J.M. Collinson.
FOR WITHHELD
/ / ALL / / FROM ALL
NOMINEES NOMINEES
FOR AGAINST ABSTAIN
2. Approval of the amendments to the Vertex
Pharmaceuticals Incorporated Employee / / / / / /
Stock Purchase Plan.
/ /
----------------------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. / /
MARK HERE IF YOU PLAN 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:
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