SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as
[X] Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
TRIANGLE PHARMACEUTICALS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
[LETTERHEAD OF TRIANGLE PHARMACEUTICALS]
August 28, 2002
To the Stockholders of TRIANGLE PHARMACEUTICALS, INC.:
You are cordially invited to attend a special meeting of the
stockholders of Triangle Pharmaceuticals, Inc., to be held at The University
Club, 3100 Tower Boulevard, Durham, North Carolina 27707 on September 20, 2002
at 10:00 a.m.
Details of the business to be conducted at the special meeting are
given in the attached Notice of Special Meeting and Proxy Statement which you
are urged to read carefully.
If you do not plan to attend the special meeting, please sign, date,
and return the enclosed proxy card promptly in the accompanying reply envelope.
You may also vote by phone by following the instructions on the proxy card. If
you decide to attend the special meeting and wish to change your proxy vote, you
may do so by voting in person at the special meeting.
We look forward to seeing you at the meeting.
/s/ Daniel G. Welch
Daniel G. Welch
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE BY PHONE BY FOLLOWING
THE INSTRUCTIONS ON THE PROXY CARD.
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 2002
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To the Stockholders of
TRIANGLE PHARMACEUTICALS, INC.:
A Special Meeting of Stockholders of Triangle Pharmaceuticals, Inc.,
Triangle, will be held at The University Club, 3100 Tower Boulevard, Durham,
North Carolina 27707 on September 20, 2002 at 10:00 a.m., to consider and vote
upon the following matters:
1. To approve an amendment to the 1996 Stock Incentive Plan
(i) increasing the number of shares of common stock available for
issuance under the plan by 3,000,000 shares, and (ii) increasing the
number of options, stock appreciation rights and stock issuances which
may be granted to any one person in the aggregate per calendar year to
1,500,000.
2. To transact any other business that properly comes
before the Special Meeting or any adjournment thereof.
These items of business are more fully described in the proxy statement
accompanying this Notice. All stockholders of record at the close of business on
August 5, 2002 will be entitled to vote at the Special Meeting and at any
adjournment thereof. The transfer books will not be closed. A list of
stockholders entitled to vote at the Special Meeting will be available for
inspection at Triangle's offices.
By Order of the Board of Directors
/s/ Andrew Finkle
R. Andrew Finkle, SECRETARY
August 28, 2002
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE. YOU MAY ALSO VOTE BY PHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY
CARD.
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
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PROXY STATEMENT
---------------------------------
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD
SEPTEMBER 20, 2002
The enclosed proxy is solicited on behalf of the Board of Directors of
Triangle Pharmaceuticals, Inc., Triangle, a Delaware corporation, for use at the
special meeting of stockholders to be held on September 20, 2002 and at any
adjournment or postponement of the special meeting. The meeting will be held at
10:00 a.m. at The University Club, 3100 Tower Boulevard, Durham, North Carolina
27707. All stockholders of record on August 5, 2002, the record date, will be
entitled to notice of and to vote at the special meeting. We intend to mail this
proxy statement and the accompanying proxy on or about August 28, 2002 to all
stockholders of record at the close of business on the record date.
The mailing address of the principal executive office of Triangle is
4611 University Drive, P.O. Box 50530, Durham, North Carolina 27717.
PURPOSE OF MEETING
The specific proposal to be considered and acted on at the special
meeting is summarized in the accompanying Notice of Special Meeting of
Stockholders and is described in more detail in this proxy statement.
VOTING RIGHTS AND SOLICITATION
VOTING
On August 5, 2002, the record date for determining stockholders
entitled to vote at the special meeting, there were 76,861,837 shares of common
stock outstanding. Each holder of common stock as of the record date is entitled
to one vote per share on all matters brought before the special meeting.
The holders of a majority of the stock issued and outstanding and
entitled to vote, 38,430,919 shares, present in person or by proxy will
constitute a quorum at the special meeting. If you sign your proxy and we
receive it before the special meeting, your shares will be voted as specified on
your proxy card. If you do not specify a choice on the proposal, then your
shares will be voted affirmatively for the proposal. Abstentions and broker
non-votes will be counted for
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purposes of determining whether a quorum is present at the special meeting and
abstentions will have the effect of negative votes.
Under Delaware law, dissenters' appraisal rights are not available to
stockholders with respect to the proposal.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before
its exercise. You may revoke your proxy by filing with the Secretary of Triangle
Pharmaceuticals, Inc. at our principal executive office, 4 University Place,
4611 University Drive, Durham, North Carolina 27707, a notice of revocation or
another signed proxy with a later date. You may also revoke your proxy by
attending the special meeting and voting in person.
SOLICITATION
We will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional soliciting materials furnished to stockholders. We will
provide copies of solicitation materials to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward the solicitation materials to the beneficial owners. In
addition, we may reimburse these record holders for their costs of forwarding
the solicitation materials to beneficial owners. We may supplement this original
solicitation of proxies by mail with solicitation by telephone, facsimile,
telegram or other means by some of our directors, officers, employees or agents.
No additional compensation will be paid to these individuals for these services.
Except as described above, we do not presently intend to solicit proxies other
than by mail.
RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR the approval
of Proposal 1.
PROPOSAL 1
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
You are being asked to approve an amendment to our 1996 Stock Incentive
Plan, the 1996 Incentive Plan, that will increase the number of shares of common
stock authorized for issuance under the 1996 Incentive Plan in 2002 by 3,000,000
shares and will increase the number of options, stock appreciation rights and
stock issuances that may be granted to any one person in the aggregate per
calendar year to 1,500,000.
The Board of Directors believes that the increase in the number of
shares available to be granted under the 1996 Incentive Plan is necessary in
order to assure that we will have a sufficient reserve of shares of common stock
available to grant options and issue stock under the plan to help us attract and
retain the services of individuals essential to our long-term success. In
addition, the Board of Directors believes the increase in the number of options
that may be granted to any one person in a calendar year is appropriate as our
stock has been subject to significant fluctuations in value and the
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Compensation Committee should have the flexibility to grant greater numbers of
options or other stock based compensation to new or existing employees.
The 1996 Incentive Plan became effective when it was adopted by the
Board of Directors on August 30, 1996 and was subsequently approved by our
stockholders. The 1996 Incentive Plan is the successor to our 1996 Stock
Option/Stock Issuance Plan, the Predecessor Plan, and all outstanding options
under the Predecessor Plan have been incorporated into the 1996 Incentive Plan.
The amendments to the 1996 Incentive Plan which are the subject of this Proposal
were adopted by the Board of Directors on August 2, 2002. The following is a
summary of the principal features of the 1996 Incentive Plan, as amended as
described in this Proposal. The summary is not a complete description of all the
provisions of the 1996 Incentive Plan. Any stockholder who wishes to obtain a
copy of the actual plan document may do so on written request to the Secretary
at our principal executive offices in Durham, North Carolina.
EQUITY INCENTIVE PROGRAMS
The 1996 Incentive Plan contains four separate equity incentive
programs:
o a Discretionary Option Grant Program,
o a Salary Investment Option Grant Program,
o a Stock Issuance Program, and
o an Automatic Option Grant Program.
The principal features of each program are described below. The
Compensation Committee has the exclusive authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to option
grants and stock issuances made to our executive officers and non-employee
members of the Board of Directors. With respect to all other participants, those
programs may be administered by either the Compensation Committee or a special
stock option committee, the Secondary Committee, comprised of two or more
directors appointed by the Board of Directors, or the Board of Directors may
retain the authority to administer those programs. The Compensation Committee
also has the exclusive authority to administer the Salary Investment Option
Grant Program. Express provisions of the Automatic Option Grant Program govern
option grants under that program, and none of the Compensation Committee, the
Secondary Committee or the Board of Directors will exercise any discretion with
respect to that program. We use the term Plan Administrator in this summary to
mean the Compensation Committee, the Secondary Committee or the Board of
Directors, to the extent the entity is acting within the scope of its authority
under the 1996 Incentive Plan.
SHARE RESERVE
Options to purchase 6,903,208 shares of common stock have been granted
and were outstanding as of August 1, 2002. As of August 1, 2002, without the
amendment which is part of this Proposal 1, we were able to grant options to
purchase an additional 1,271,554 shares of common stock during fiscal year 2002.
On August 2, 2002, the Board of Directors and the Compensation Committee
approved the granting as of August 5, 2002 to employees of Triangle of options
to purchase 1,075,000 shares of common stock under the 1996 Incentive Plan. At
the same time, the Board of Directors approved, subject to approval of the
amendment to the 1996 Incentive Plan which is part of this Proposal 1, the
granting as of August 5, 2002 to employees of Triangle of
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options to purchase 750,000 shares of common stock. The grants which are subject
to the approval of the amendment were made to the following officers in the
following amounts:
OFFICER OPTIONS
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Robert F. Amundsen, Jr. 150,000
Paul A. Dreyer 150,000
R. Andrew Finkle 150,000
Anne F. McKay 150,000
Franck S. Rousseau 150,000
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TOTAL 750,000
The shares of common stock issuable under the 1996 Incentive Plan will
be drawn from shares of our authorized but unissued common stock or from shares
of common stock we reacquire. Shares subject to any outstanding options under
the 1996 Incentive Plan, including options incorporated from the Predecessor
Plan, which expire, are cancelled or otherwise terminate prior to exercise will
be available for subsequent issuance. Unvested shares issued under the 1996
Incentive Plan that we subsequently repurchase, at the option exercise or direct
issue price paid per share, will be added back to the share reserve and will be
available for reissuance. However, shares subject to any option surrendered in
accordance with the stock appreciation rights provisions of the 1996 Incentive
Plan will not be available for subsequent issuance. In addition, shares of
common stock withheld to pay the exercise price of an option or in satisfaction
of withholding taxes incurred on the exercise or the vesting of a stock issuance
will not be available for subsequent issuance under the 1996 Incentive Plan.
ELIGIBILITY
Our employees, non-employee members of the Board of Directors,
consultants and other independent advisors are eligible to participate in the
Discretionary Option Grant and Stock Issuance Programs. Executive officers and
other highly compensated employees are also eligible to participate in the
Salary Investment Option Grant Program, and non-employee members of the Board of
Directors automatically participate in the Automatic Option Grant Program.
No persons may receive options, separately exercisable stock
appreciation rights and direct stock issuances for more than 1,500,000 shares of
common stock in the aggregate for any calendar year.
As of August 1, 2002, executive officers, non-employee members of the
Board of Directors and approximately 115 other employees were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs, 14
employees were eligible to participate in the Salary Investment Option Grant
Program, and the seven non-employee Board members participate in the Automatic
Option Grant Program.
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VALUATION
The fair market value per share of common stock on any relevant date
under the 1996 Incentive Plan is the closing selling price per share on that
date on the Nasdaq National Market. However, if there is no closing selling
price per share on the date in question, the fair market value will be the
closing selling price for the last preceding date for which a quotation exists.
On August 21, 2002, the closing selling price per share on the Nasdaq National
Market was $3.25.
DISCRETIONARY OPTION GRANT PROGRAM
GRANTS
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals will receive option
grants, when grants will be made, the number of shares subject to each grant,
the status of any granted option as either an incentive stock option or a
non-statutory option under the federal tax laws, the vesting schedule, if any,
to be in effect for the option grant and the maximum term for which any granted
option is to remain outstanding. We pay all expenses incurred in administering
the 1996 Incentive Plan.
PRICE AND EXERCISABILITY
Each option will have an exercise price per share not less than 85% of
the fair market value per share of common stock on the option grant date. No
option may have a term in excess of ten years. Options generally become
exercisable in a series of installments over the optionee's period of service
with us, although other exercisability schedules are permitted.
Holders of options may pay the exercise price in cash or in shares of
common stock. We have also established a same-day sale program in which a
designated brokerage firm will effect an immediate sale of the shares purchased
under the option and pay over to us, out of the sale proceeds available on the
settlement date, sufficient funds to cover the exercise price for the purchased
shares plus all applicable withholding taxes.
When an optionee's period of service ends, the optionee usually will
have a three-month period of time in which to exercise any vested portion of
outstanding options. The Plan Administrator has complete discretion to extend
the period following the optionee's cessation of service during which he or she
may exercise outstanding options and/or to accelerate the exercisability or
vesting of those options. The Plan Administrator may accelerate vesting or
extend an exercise period at any time while the options remain outstanding,
whether before or after the optionee's actual cessation of service.
STOCK APPRECIATION RIGHTS
The Plan Administrator may grant tandem stock appreciation rights under
the Discretionary Option Grant Program that provide the holders with the right
to surrender their options for an appreciation distribution in amount equal to
the excess of (a) the fair market value of the vested shares of common stock
subject to the surrendered option over (b) the aggregate exercise price payable
for
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those shares. The appreciation distribution may, at the discretion of the Plan
Administrator, be made in cash or in shares of common stock.
In addition, we may grant officers and non-employee members of the
Board of Directors limited stock appreciation rights in tandem with their
outstanding options. These grants must comply with the short-swing profit
restriction of the Federal securities laws. Any option with a limited stock
appreciation right may be surrendered to us on the occurrence of a hostile
tender offer for more than 50% of our outstanding shares, and the optionee will
in return be entitled to a cash distribution from us in an amount per
surrendered option share equal to the excess of (i) the highest reported price
per share of common stock paid in the tender offer over (ii) the option exercise
price payable per share.
CANCELLATION/REGRANT PROGRAM
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of our common stock
and to issue replacement options with an exercise price based on the market
price of our common stock at the time of the new grant.
SALARY INVESTMENT OPTION GRANT PROGRAM
GRANTS
The Plan Administrator has discretion in implementing the Salary
Investment Option Grant Program and in selecting the executive officers and
other highly compensated individuals eligible to participate in the program. As
a condition to participation, each selected individual must, prior to the start
of the calendar year of participation, file with the Plan Administrator an
irrevocable authorization directing us to reduce his or her base salary for the
upcoming calendar year by an amount not less than $10,000 nor more than $50,000.
Each individual whose salary reduction authorization is approved by the Plan
Administrator will be granted an option under the Salary Investment Option Grant
Program as soon as possible after the start of the calendar year for which the
salary reduction is to be in effect.
TERMS
Each option is subject to substantially the same terms and conditions
applicable to option grants made under the Discretionary Option Grant Program,
except for the following differences:
o Each option is a non-statutory option.
o The exercise price per share will be equal to not less than 33
1/3% nor more than 66 2/3% of the fair market value of our
common stock on the option grant date, with the exact
percentage fixed by the Plan Administrator. The number of
option shares will be determined by dividing the total dollar
amount of the reduction in the optionee's base salary by the
amount by which the fair market value per share of common
stock on the option grant date exceeds the option exercise
price. As a result, the total spread on the option (the fair
market value of the option shares on the grant date less the
aggregate exercise price payable
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for those shares) will be equal to the dollar amount of the
reduction to the optionee's base salary that will be in effect
for the year for which the option grant is made.
o The option will become exercisable for the option shares in a
series of 12 successive equal monthly installments on the
optionee's completion of each calendar month of service in the
calendar year for which the salary reduction is in effect.
o Each option is exercisable after it becomes vested until the
earlier of (i) the expiration of the ten-year option term or
(ii) the expiration of three years after the optionee's
service terminates.
Under the Salary Investment Option Grant Program, the Compensation
Committee granted options for an aggregate of 75,756 shares on January 14, 2002
at an exercise price of $2.63 per share, which was equal to two-thirds of the
fair market value per share on that date.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price not less
than 100% of their fair market value, payable in cash or through a promissory
note. Shares may also be issued as a bonus for past services with no cash outlay
required of the participant.
Shares issued as a bonus for past services will be fully vested upon
issuance. All other shares issued under the program will be subject to a vesting
schedule tied to the performance of service or the attainment of performance
goals. The Plan Administrator has the discretionary authority at any time to
accelerate the vesting of any unvested shares outstanding under the Stock
Issuance Program.
AUTOMATIC OPTION GRANT PROGRAM
GRANTS
On the date that each non-employee member of the Board of Directors is
first elected or appointed as a non-employee Board member, we will make an
automatic option grant to that Board member, and on the date that each
non-employee Board member is re-elected to the Board of Directors, we will make
an additional option grant to that non-employee Board member. Each automatic
option grant will be a Non-Statutory Option. Each non-employee Board member will
receive an option upon his or her initial election or appointment as a
non-employee Board member for 7,500 shares plus an additional 7,500 shares for
each full or partial year of the term for which he or she was elected or
appointed. On each re-election, each non-employee Board member will receive an
additional option to purchase 7,500 shares for each full or partial year of the
term for which the non-employee Board member is re-elected to the Board of
Directors. There is no limit on the number of automatic option grants any one
director may receive over his or her period of service on the Board of
Directors, and non-employee Board members who have previously been in our employ
or who have otherwise received a stock option grant from us are eligible to
receive one or more annual option grants over their period of continued service
on the Board of Directors.
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TERMS
Each option under the Automatic Option Grant Program will have an
exercise price per share equal to 100% of the fair market value per share of
common stock on the option grant date and a maximum term of ten years measured
from that grant date.
Provided the optionee continues to serve as a member of the Board of
Directors, the initial automatic option grant will vest and become exercisable
with respect to 7,500 shares on the day the non-employee Board member is first
elected or appointed to the Board of Directors and with respect to an additional
7,500 shares on the day immediately preceding the date of each subsequent annual
stockholders meeting until the automatic option grant is fully vested and
exercisable. Each subsequent automatic option grant will vest and become
exercisable with respect to 7,500 shares on the day immediately preceding the
date of each subsequent annual stockholders meeting until the automatic option
grant is fully vested and exercisable. No portion of any automatic option grant
will vest after the optionee has ceased to be a member of the Board of
Directors.
Each outstanding automatic option will become immediately exercisable
for all the shares subject to the option should any of the following events
occur while the optionee continues on the Board of Directors: (i) the optionee's
death or permanent disability, (ii) an acquisition of Triangle by merger or
asset sale or (iii) a hostile take-over, whether effected through a successful
tender offer for more than 50% of our outstanding voting stock or through a
change in the majority of the Board of Directors as a result of one or more
contested elections. An optionee will have a 12-month period after he or she is
no longer on the Board of Directors to exercise his or her outstanding automatic
option grants for any or all of the option shares for which those options are
exercisable at the time the person ceases being on the Board of Directors.
All options granted under the Automatic Option Grant Program include a
limited stock appreciation right which entitles the holder to surrender his or
her outstanding automatic options for a cash distribution in the event of a
hostile tender offer for more than 50% of our outstanding shares. The cash
distribution will be in an amount per surrendered option share equal to the
excess of (i) the highest reported price per share of common stock paid in the
tender offer over (ii) the option exercise price payable per share. No
additional approval of the Plan Administrator or the Board of Directors will be
required at the time of the actual option surrender or cash distribution.
STOCK AWARDS
As of August 1, 2002, 16,235 shares of common stock were granted as
direct stock issuances under the 1996 Incentive Plan and the Predecessor Plan,
6,903,208 shares of common stock were subject to outstanding options granted
under the 1996 Incentive Plan and the Predecessor Plan and 1,271,554 shares
remained available for future issuance, excluding the increase which is part of
this Proposal 1. Through August 1, 2002, 971,161 shares of common stock have
been issued on the exercise of options granted under the 1996 Incentive Plan and
the Predecessor Plan.
The following table shows, as to each of the Named Executive Officers
in the Summary Compensation Table and the indicated individuals and groups, the
aggregate number of options that
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have been granted and are outstanding under the 1996 Incentive Plan and the
Predecessor Plan through August 1, 2002, together with the weighted average
exercise price payable per share.
OPTIONS OUTSTANDING
AS OF
AUGUST 1, 2002 WEIGHTED AVERAGE
NAME AND POSITION (NUMBER OF SHARES) EXERCISE PRICE($)(1)
- ------------------------------------------------------------ ------------------ --------------------
Daniel G. Welch (2)......................................... 0 ---
Chairman of the Board of Directors and
Chief Executive Officer
Chris A. Rallis, J.D........................................ 526,470 (3) 7.78
President, Chief Operating Officer and Director
Robert F. Amundsen, Jr...................................... 305,000 (4) 6.45
Executive Vice President and Chief Financial Officer
Anne F. McKay............................................... 341,643 (5) 7.68
Executive Vice President, Drug Regulatory Affairs
George R. Painter, III, Ph.D................................ 337,905 9.03
Executive Vice President, Research and Development
Franck S. Rousseau, M.D..................................... 457,643 (6) 9.05
Executive Vice President, Medical Affairs and
Chief Medical Officer
- -------------------------------------------------------------------------------------------------------------
All executive officers as a group (8 persons)............... 2,586,617 (7) 7.74
- -------------------------------------------------------------------------------------------------------------
All non-employee directors as a group (7 persons)........... 184,501 6.72
- -------------------------------------------------------------------------------------------------------------
All employees and other individuals (excluding executive
officers) as a group (115 persons).......................... 4,132,090 7.55
- -------------------------------------------------------------------------------------------------------------
(1) Weighted average exercise price does not reflect options which are
subject to approval of this amendment.
(2) Mr. Welch was appointed Chairman and Chief Executive Officer on August
5, 2002. As an inducement to employment, Mr. Welch was granted options
to purchase 2,300,000 shares of common stock at an exercise price of
$2.92 per share. These options were not granted under the 1996
Incentive Plan.
(3) On August 5, 2002, Mr. Rallis was granted options to purchase 75,000
shares of common stock at $2.92 per share under the 1996 Incentive
Plan.
(4) On August 5, 2002, Mr. Amundsen was granted options to purchase 100,000
shares of common stock at $2.92 per share under the 1996 Incentive Plan
and, subject to approval of the amendment to the plan that is the
subject of Proposal 1, options to purchase 150,000 shares of common
stock.
(5) On August 5, 2002, Ms. McKay was granted options to purchase 100,000
shares of common stock at $2.92 per share under the 1996 Incentive Plan
and, subject to approval of the amendment to the plan that is the
subject of Proposal 1, options to purchase 150,000 shares of common
stock.
(6) On August 5, 2002, Dr. Rousseau was granted options to purchase 100,000
shares of common stock at $2.92 per share under the 1996 Incentive Plan
and, subject to approval of the amendment to the plan that is the
subject of Proposal 1, options to purchase 150,000 shares of common
stock.
(7) An aggregate of 750,000 options to purchase shares of common stock have
been granted to executive officers at an exercise price of $2.92 per
share, subject to approval of this amendment.
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GENERAL PLAN PROVISIONS
ACCELERATION
In the event that we are acquired by merger or asset sale, generally
each outstanding option under the Discretionary Option Grant Program which is
not to be assumed or replaced by the successor entity will automatically
accelerate in full and terminate following closing of the transaction, and
generally all unvested shares under the Stock Issuance Program will immediately
vest, except to the extent our repurchase rights with respect to those shares
are transferred to the successor entity. In the event of a change of control
other than a merger or asset sale, the Plan Administrator may provide for
automatic acceleration of outstanding options on the termination of an
optionee's service within a designated period after the change of control. The
Plan Administrator will have complete discretion to grant one or more options
under the Discretionary Option Grant Program which will become fully exercisable
for all option shares in the event those options are assumed in the acquisition
and the optionee's service with us or the acquiring entity is subsequently
terminated within a designated period following an acquisition or hostile
take-over. The Plan Administrator may also provide for the automatic vesting of
any outstanding shares under the Stock Issuance Program upon similar terms and
conditions.
Each option outstanding under the Salary Investment Option Grant
Program will automatically accelerate in the event of an acquisition or change
in control. Each outstanding option under the Salary Investment Option Grant
Program that is not exercised prior to a change in control will also be subject
to repurchase by us at a price equal to the amount by which the optionee's
salary was reduced in connection with the grant of that option.
The acceleration of vesting in the event of a change in the ownership
or control may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of Triangle.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of common
stock by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate structure
effected without our receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
1996 Incentive Plan, (ii) the number and/or class of securities for which any
one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the 1996 Incentive Plan per
calendar year, (iii) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee members of the Board of Directors and (iv) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option under the 1996 Incentive Plan, including options granted
under the Predecessor Plan, in order to prevent the dilution or enlargement of
benefits.
10
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or
more participants in financing the exercise of outstanding options granted under
the Discretionary Option Grant Program or the purchase of shares issued under
the Stock Issuance Program. The Plan Administrator will determine the terms of
any loan program. The maximum amount of financing provided to any participant
may not exceed the cash consideration payable for the issued shares plus all
applicable taxes incurred in connection with the acquisition of the shares. To
date no loans have been extended under these programs.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have Triangle withhold a portion of the shares
otherwise issuable in satisfaction of the tax liability incurred by those
holders in connection with the exercise of those options or the vesting of those
shares. Alternatively, the Plan Administrator may allow holders to deliver
previously acquired shares of common stock in payment of the tax liability.
AMENDMENT AND TERMINATION
The Board of Directors may amend or modify the 1996 Incentive Plan in
any or all respects whatsoever, subject to any required stockholder approval
under applicable law or regulation. However, no amendment or modification may
adversely affect an outstanding award under the 1996 Incentive Plan without the
consent of the affected award recipient. The Board of Directors may terminate
the 1996 Incentive Plan at any time, and the 1996 Incentive Plan will terminate
automatically on August 30, 2006.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1996 Incentive Plan may be either incentive
stock options which are intended to satisfy the requirements of Section 422 of
the Internal Revenue Code or non-statutory options which are not intended to
meet those requirements. The Federal income tax treatment for the two types of
options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the
optionee at the time of the option grant, and no taxable income is generally
recognized at the time the option is exercised. However, holders of options may
be subject to alternative minimum tax obligations as a result of the exercise of
their options. The optionee will, however, recognize taxable income in the year
in which the purchased shares are sold or otherwise made the subject of
disposition. For Federal income tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
11
On a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee and we and the optionee will be required to
satisfy the tax withholding requirements applicable to the income. The optionee
will recognize any additional gain or loss on the disposition as a capital gain
or loss.
If the optionee makes a disqualifying disposition of the purchased
shares, then we will be entitled to an income tax deduction, for the taxable
year in which the disposition occurs, equal to the excess of (i) the fair market
value of the shares on the option exercise date over (ii) the exercise price
paid for the shares. In no other instance will we be allowed a deduction with
respect to the optionee's disposition of the purchased shares.
NON-STATUTORY STOCK OPTIONS. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares, and we and the optionee will
be required to satisfy the tax withholding requirements applicable to the
income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by us in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee
generally will not recognize any taxable income at the time of exercise but will
recognize ordinary income, as and when our repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for the shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
We will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year in which the optionee recognizes the ordinary income.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. We will be entitled to an income tax deduction equal to the
appreciation distribution for the taxable year in which the optionee recognizes
ordinary income.
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the 1996
Incentive Plan will be substantially the same as those summarized above for the
exercise of non-statutory option grants.
12
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
We anticipate that any compensation deemed paid by us in connection
with disqualifying dispositions of incentive stock option shares or exercises of
non-statutory options granted with exercise prices equal to the fair market
value of the option shares on the grant date or direct stock issuances will
qualify as performance-based compensation for purposes of Code Section 162(m)
and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to some of our executive officers. Accordingly, we anticipate that all
compensation deemed paid with respect to those options will remain deductible by
us without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances to employees and/or directors with
exercise or issue prices less than the fair market value of the shares on the
grant or issue date will result in a direct compensation expense to our earnings
generally equal to the difference between the exercise or issue price and the
fair market value of the shares on the grant or issue date. We will recognize
the compensation expense over the period that the option shares or issued shares
are to vest. Option grants or stock issuances at 100% of fair market value or
above generally will not result in any direct charge to our earnings. However,
we must disclose in our financial statements and related notes, the fair value
of those options and the impact those options would have on our reported
earnings were the value of those options at the time of grant treated as
compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining our diluted earnings per
common share. Should one or more optionees be granted stock appreciation rights
which have no conditions on exercisability other than a service or employment
requirement, then those rights will result in a compensation expense to our
earnings. Option grants or stock issuances that provide for vesting on
attainment of performance objectives may result in additional compensation
expense.
VOTE REQUIRED
The affirmative vote of a majority of the votes entitled to be cast by
holders of shares present or represented and voting at the special meeting is
required for approval of the amendments to the 1996 Incentive Plan. Stockholders
of Triangle holding in the aggregate approximately 52% of the outstanding common
stock as of August 5, 2002 entered into Voting Agreements with Triangle under
which they agreed to vote in favor of this proposal. Instructions on how you may
obtain a copy of the form of Voting Agreement are described below under
"Documents Incorporated by Reference."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that stockholders vote
FOR the approval of the amendment to the 1996 Incentive Plan.
13
The following table gives information as of December 31, 2001 about all
of our equity compensation plans previously approved by stockholders. We had no
compensation plans that were not approved by stockholders as of December 31,
2001.
Number of securities
Number of Weighted- remaining available for
Securities to be average exercise future issuance under
issued on the price of equity compensation
exercise of outstanding plans (excluding shares
outstanding options options reflected in column (a))
PLAN (A) (B) (C)
------------------- ------------------- ------------------
1996 Incentive Plan............ 4,583,687 $9.04 139,746 (1)
Employee Stock Purchase Plan... 16,382 $2.72 95,687 (2)
(1) The number of shares reserved for issuance under the 1996 Incentive
Plan increased by 1,500,000 shares on January 1, 2002 and was increased
again on May 23, 2002 by 1,962,329 shares. The 1996 Incentive Plan
incorporates a formula by which the number of shares reserved for
issuance increases on each January 1, beginning January 1, 2003, so
that the number of authorized shares available for new grants under the
plan on each January 1 will equal the lesser of 4.5% of the total
number of shares of Triangle common stock outstanding on the preceding
December 31st or 5,000,000 shares.
(2) The number of shares available for issuance under the Employee Stock
Purchase Plan will increase on January 1, 2003 by 250,000 shares as a
result of the amendment to the Purchase Plan approved by our
stockholders on May 23, 2002. These amounts were calculated based on
payroll deductions as of December 31, 2001, and assuming the exercise
price provided for under the Employee Stock Purchase Plan was
determined as of December 31, 2001.
PRINCIPAL STOCKHOLDERS
The following table contains information regarding the beneficial
ownership of our common stock as of August 5, 2002 by:
o each person known by us to beneficially own more than five percent
of our common stock,
o each of our directors,
o our Chief Executive Officer and the four additional most highly
compensated executive officers and
o all directors and executive officers as a group.
14
Except as otherwise indicated:
o the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws,
where applicable and
o the address of all stockholders listed in the table is:
4 University Place, 4611 University Drive, Durham, North
Carolina 27707.
Beneficial ownership is calculated pursuant to Rule 13d-3(d)(1) under
the Securities Exchange Act of 1934, as amended. On August 5, 2002, 76,861,837
shares of common stock were issued and outstanding.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
----------------------------------------------------- -------- -------
Warburg Pincus Private Equity VIII, L.P. ............ 23,384,887 30.4%
466 Lexington Avenue
New York, NY 10017
Abbott Laboratories (1) ............................. 7,953,244 10.3%
100 Abbott Park Road
Abbott Park, IL 60064-3500
Orbimed Advisors, Inc. (2) .......................... 4,782,500 6.2%
767 Third Avenue
New York, NY 10010
Wellington Management Company, LLP (3) .............. 4,142,460 5.4%
75 State Street
Boston, MA 02109
T. Rowe Price Associates, Inc. (4) .................. 3,910,926 5.1%
100 East Pratt Street
Baltimore, MD 21202
Anthony B. Evnin, Ph.D. (5) ......................... 1,025,974 1.3%
30 Rockefeller Plaza
New York, NY 10112
Standish M. Fleming (6) ............................. 2,214,393 2.9%
9255 Towne Centre Drive
Suite 300
San Diego, CA 92121
Dennis B. Gillings, Ph.D. (7) ....................... 3,810,500 5.0%
4709 Creekstone Drive
Durham, NC 27703
Henry G. Grabowski, Ph.D. (8) ....................... 25,500 *
Duke University,
305 Social Sciences, Box 90097
15
Durham, NC 27708
Stewart J. Hen (9) .................................. 15,000 *
466 Lexington Avenue
New York, NY 10017
Jonathan S. Leff (10) ............................... 23,399,887 30.4%
466 Lexington Avenue
New York, NY 10017
George McFadden (11) ................................ 1,171,000 1.5%
745 Fifth Avenue
New York, NY 10151
Anne F. McKay (12) .................................. 145,954 *
George R. Painter, III, Ph.D. (13) .................. 238,086 *
Chris A. Rallis, J.D. (14) .......................... 415,967 *
Franck S. Rousseau, M.D. (15) ....................... 207,529 *
Daniel G. Welch (16) ................................ 76,667 *
All directors and executive officers
as a group (15 persons) (5)-(16) ................ 32,954,424 42.3%
------------ ---------
- -----------------------------
* Less than 1%.
(1) Includes 15,000 shares of common stock issuable upon the exercise of
options beneficially owned by James L. Tyree. Mr. Tyree, a former
director of Triangle, is a Vice President of Abbott Laboratories.
(2) Includes shares of common stock held by the following entities that are
advised by Orbimed Advisors, Inc. (i) Caduceus Capital II, L.P., (ii)
PW Eucalyptus Fund, L.L.C., (iii) PW Eucalyptus Fund, Ltd., and (iv)
Winchester Global Trust Company Limited as Trustee for Caduceus Capital
Trust.
(3) These securities are owned by clients for whom Wellington Management
Company, LLP serves as investment advisor with shared power to vote the
securities.
(4) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc., Price Associates,
serves as investment advisor with power to direct investments and/or
sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates
is deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial
owner of such securities.
(5) Includes 8,667 shares of common stock issuable upon the exercise of
options. Also includes 647,651 shares of common stock beneficially
owned by Venrock Associates and 324,902 shares owned by Venrock
Associates II, L.P.. Dr. Evnin is a general partner of Venrock
Associates and Venrock Associates II, L.P. and consequently shares
voting and investment power with respect to all these shares. Dr. Evnin
disclaims beneficial ownership of these shares other than to the extent
of his individual partnership interest.
(6) Includes 14,834 shares of common stock issuable upon the exercise of
options. Also includes a total of 2,093,477 shares of common stock
beneficially owned by each of the following persons in the amounts
indicated: (i) 1,229,130 shares owned by Forward Ventures IV, L.P.,
(ii) 520,000 shares owned by Forward Ventures II, L.P., (iii) 233,663
shares owned by Forward Ventures III, L.P., (iv) 104,200 shares owned
by Forward Ventures IV B, L.P., (v) 4,122 shares owned by Forward II
Associates, L.P., and (vi) 2,362 shares owned by two family trusts. Mr.
Fleming is a general partner of Forward II Associates, L.P., which is
the general partner of Forward Ventures II, L.P., and a managing member
of Forward III Associates, L.L.C., which is the general partner of
Forward Ventures III, L.P., and a managing member of Forward IV
Associates, L.L.C., which is the general partner of Forward Ventures
IV, L.P. and Forward Ventures IV B, L.P., and consequently shares
voting and investment power with respect to all these shares. Mr.
Fleming disclaims beneficial ownership of these shares other than to
the extent of his individual partnership and member interests.
16
(7) Includes 15,500 shares of common stock issuable upon the exercise of
options and 3,775,000 shares of common stock beneficially owned by
QFinance, Inc., a subsidiary of Quintiles Transnational Corp. Dr.
Gillings is Chairman and a significant shareholder of Quintiles
Transnational Corp. Dr. Gillings disclaims beneficial ownership of
shares beneficially owned by QFinance, Inc.
(8) Includes 15,500 shares of common stock issuable upon the exercise of
options and 10,000 shares of common stock held in a pension fund.
(9) Includes 15,000 shares of common stock issuable upon the exercise of
options.
(10) Includes 15,000 shares of common stock issuable upon the exercise of
options and 23,384,887 shares of common stock beneficially owned by
Warburg Pincus Private Equity VIII, L.P. Warburg Pincus & Co. is the
sole general partner of Warburg Pincus Private Equity VIII, L.P. which
is managed by Warburg Pincus LLC. Lionel I. Pincus is the managing
partner of Warburg Pincus & Co. and the managing member of Warburg
Pincus LLC and may be deemed to control both entities. Mr. Leff, a
director of Triangle, is a Managing Director of Warburg Pincus LLC, the
manager of Warburg Pincus Private Equity VIII, L.P., and disclaims
beneficial ownership of the shares beneficially owned by Warburg Pincus
Private Equity VIII, L.P.
(11) Includes 8,000 shares of common stock issuable upon the exercise of
options. Also includes a total of 885,000 shares of common stock
beneficially owned by each of the following persons in the amounts
indicated: (i) 515,000 shares owned by a family trust under the will of
Alexander B. McFadden, (ii) 210,000 shares owned by three family trusts
for the benefit of Mr. McFadden's children, (iii) 85,000 shares owned
by Mr. McFadden's wife, and (iv) 75,000 shares owned by a former family
member as custodian for one of Mr. McFadden's children. Mr. McFadden
exercises shared voting and investment power with respect to all such
shares. Mr. McFadden disclaims beneficial ownership of these shares
other than to the extent of his pecuniary interest in the shares
beneficially owned by the family trust under the will of Alexander B.
McFadden.
(12) Includes 141,588 shares of common stock issuable upon the exercise of
options.
(13) Includes 149,272 shares of common stock issuable upon the exercise of
options. Also includes 8,500 shares held separately by Dr. Painter's
wife. Dr. Painter resigned effective September 1, 2002.
(14) Includes 210,397 shares of common stock issuable upon the exercise of
options. Also includes 500 shares held separately by Mr. Rallis' wife,
1,500 shares held by Mr. Rallis' wife as custodian for their children
under the Uniform Gift to Minors Act and 15,800 shares held by The
Rallis Richner Foundation, Inc., a charitable North Carolina
corporation of which Mr. Rallis serves as President. Mr. Rallis
disclaims beneficial ownership of the shares beneficially owned by The
Rallis Richner Foundation, Inc.
(15) Includes 203,729 shares of common stock issuable upon the exercise of
options.
(16) Includes 76,667 shares of common stock issuable upon the exercise of
options.
17
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table contains information concerning the aggregate
compensation we paid to Daniel G. Welch, our Chief Executive Officer, David W.
Barry, our former Chief Executive Officer, Chris A. Rallis, our President and
Chief Operating Officer, the four additional most highly compensated executive
officers (collectively referred to as the Named Executive Officers) and Carolyn
Underwood, a former officer of Triangle, for services rendered in all capacities
to Triangle for the years ended December 31, 1999, 2000 and 2001. The aggregate
amount of perquisites and other personal benefits, if any, did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for each
Named Executive Officer and has therefore been omitted.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------ -------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
------- ------- --------- ----------- ------------
Daniel G. Welch ................. 2001(2) -- -- -- --
Chairman of the 2000(2) -- -- -- --
Board of Directors and 1999(2) -- -- -- --
Chief Executive Officer
Chris A. Rallis, J.D. ........... 2001 308,196 -- 50,000 3,700
President, Chief Operating 2000 255,919 76,775 97,500 3,530
Officer and Director 1999 209,405 282,524 (3) 30,000 3,375
Robert F. Amundsen, Jr. ......... 2001 210,000 -- 45,000 2,000
Executive Vice President and 2000(4) 91,797 45,000 110,000 2,417(5)
Chief Financial Officer 1999(4) -- -- -- --
Anne F. McKay.................... 2001 210,000 -- 30,000 3,024
Executive Vice President, Drug 2000 172,301(6) 54,690 57,304 (6) 3,281
Regulatory Affairs 1999 158,000(7) 92,400 29,862 (7) 1,750
George R. Painter, III, Ph.D. ... 2001 252,396 -- 30,000 2,822
Executive Vice President, 2000 213,813 64,145 35,000 3,005
Research & Development 1999 161,620(8) 105,150 38,416 (8) 2,086
Franck S. Rousseau, M.D. ........ 2001 267,036 -- 70,000 3,394
Executive Vice President, 2000 226,215 67,865 35,000 3,742
Medical Affairs and 1999 187,470(9) 111,775 35,223 (9) 2,000
Chief Medical Officer
David W. Barry, M.D. ............ 2001 320,004 -- 10,000 30,609(10)
former Chairman and Chief 2000 263,500 100,000 60,000 28,289(10)
Executive Officer 1999 250,950 170,000 50,000 26,111(10)
Carolyn S. Underwood (11)........ 2001 -- -- -- 217,100(12)
former Executive Vice 2000 183,283 90,055 20,000 36,710(12)
President, Commercial 1999 194,215 108,988 32,937 105
Operations
18
- ----------------------
(1) Represents the amounts paid 2001, 2000 and 1999 in the form of premiums
for individual life insurance policies for the benefit of the Named
Executive Officers and as matching 401(k) contributions in the
following amounts for the following Named Executive Officers: Mr.
Rallis, $2,000, $2,000 and $2,000; Mr. Amundsen, $2,000 and $417; Ms.
McKay, $2,000, $2,000 and $1,750; Dr. Painter, $2,000, $1,773 and
$1,881; Dr. Rousseau, $2,000, $2,000 and $2,000 and Dr. Barry, $2,000,
$1,956 and $1,863.
(2) Mr. Welch was not employed by Triangle prior to August 5, 2002.
(3) Includes 6,235 shares of common stock granted to Mr. Rallis on June 25,
1999 under our Stock Issuance Program under the 1996 Incentive Plan.
The fair market value per share on June 25, 1999 was $16.25.
(4) Mr. Amundsen was not employed by Triangle prior to July 17, 2000.
(5) Includes amounts paid by Triangle for income tax liabilities related to
life insurance premiums.
(6) Excludes an aggregate of $10,000 of Ms. McKay's salary earned in 2000
allocated toward the acquisition of options to purchase 2,304 shares of
common stock under our Salary Investment Option Grant Program for $4.34
per underlying share. The options were granted on January 4, 2000, were
fully vested as of December 31, 2000, and are exercisable at a price of
$8.66 per share.
(7) Excludes an aggregate of $10,000 of Ms. McKay's salary earned in 1999
allocated toward the acquisition of options to purchase 2,237 shares of
common stock under our Salary Investment Option Grant Program for
$4.468 per underlying share. The options were granted on January 29,
1999, were fully vested as of December 31, 1999, and are exercisable at
a price of $8.938 per share.
(8) Excludes an aggregate of $25,000 of Dr. Painter's salary earned in 1999
allocated toward the acquisition of options to purchase 5,594 shares of
common stock under our Salary Investment Option Grant Program for
$4.468 per underlying share. The options were granted on January 29,
1999, were fully vested as of December 31, 1999, and are exercisable at
a price of $8.938 per share.
(9) Excludes an aggregate of $10,000 of Dr. Rousseau's salary earned in
1999 allocated toward the acquisition of options to purchase 2,237
shares of common stock under our Salary Investment Option Grant Program
for $4.468 per underlying share. The options were granted on January
29, 1999, were fully vested as of December 31, 1999, and are
exercisable at a price of $8.938 per share.
(10) Includes amounts paid by Triangle for income tax liabilities related to
life insurance premiums.
(11) Ms. Underwood's employment ended October 31, 2000.
(12) Includes payments made under an agreement between Triangle and Ms.
Underwood. Under the terms of this agreement, we agreed to make
payments to Ms. Underwood through April 2002.
STOCK OPTIONS
The following table contains information concerning stock option grants
made to each of the Named Executive Officers during the year ended December 31,
2001. We granted options to acquire an aggregate of 1,395,455 shares of common
stock to our officers and employees in 2001. We did not grant any stock
appreciation rights to the Named Executive Officers during the year ended
December 31, 2001.
All options were granted under the 1996 Incentive Plan. Unless
otherwise indicated, each option vests and becomes exercisable as follows: 25%
after 12 months of service from the date of the grant, indicated by footnote for
each grant, and the remaining 75% thereafter in a series of 36-equal-monthly
installments. Unless otherwise indicated, the shares subject to each option will
immediately vest in the event we are acquired by a merger or asset sale, unless
the options are assumed by the acquiring entity. The options further provide
that the shares subject to each option will immediately vest even if options are
assumed by the acquiring entity if the Named Executive
19
Officer's employment is terminated involuntarily, which includes a reduction in
the responsibilities of the Named Executive Officer, at any time within 12
months after the merger or asset sale.
Unless otherwise indicated, the exercise price per share of options
granted represented the fair market value of the underlying shares of common
stock on the dates the options were granted as determined by the Compensation
Committee of the Board of Directors. Option holders may pay the exercise price
in cash or in shares of common stock valued at fair market value on the exercise
date or a combination of cash and shares or any other form of consideration
approved by the Board of Directors or the Compensation Committee. The fair
market value of shares of common stock is determined in accordance with
provisions of the 1996 Incentive Plan based on the closing selling price of a
share of common stock on the date in question on the Nasdaq National Market.
We provide no assurance to any Named Executive Officer or any other
holder of our securities that the actual stock price appreciation over the
10-year option term will be at the assumed 0%, 5% or 10% levels or at any other
defined level. Unless the market price of the common stock does in fact
appreciate over the option term, no value will be realized from the option
grants made to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS/ ASSUMED ANNUAL RATES OF STOCK
SECURITIES SARS GRANTED PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME GRANTED YEAR (%) ($/SH) DATE 0%($) 5%($) 10%($)
- ------------------------------ ------------ ----------- ----------- ---------- ----- ----- ------
Daniel G. Welch .............. -- -- -- -- -- -- --
Chris A. Rallis, J.D. ........ 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
30,000(2) 2.1 3.60 12/16/11 0 67,921 172,124
Robert F. Amundsen, Jr. ...... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
25,000(2) 1.8 3.60 12/16/11 0 56,601 143,437
Anne F. McKay................. 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
10,000(2) 0.7 3.60 12/16/11 0 22,640 57,375
George R. Painter, III, Ph.D.. 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
10,000(2) 0.7 3.60 12/16/11 0 22,640 57,375
Franck S. Rousseau, M.D. ..... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
50,000(2) 3.6 3.60 12/16/11 0 113,201 286,874
David W. Barry, M.D. ......... 10,000(2)(3) 0.7 3.60 12/16/11 0 22,640 57,375
- -----------------------------
(1) Represents options granted on August 13, 2001 pursuant to our
Discretionary Option Grant Program. Each option vests and becomes
exercisable as follows: 50% after 12 months of service measured from
the date of the option grant and 50% after 24 months of service
measured from the date of the option grant. If applications for
marketing approval in the United States or Europe are approved before
August 13, 2003, the vesting of these options will be accelerated and
the options will become fully exercisable.
(2) Represents options granted on December 17, 2001 pursuant to our
Discretionary Option Grant Program.
20
(3) On the death of Dr. Barry on January 28, 2002, the vesting of these
options was accelerated so that all of the options were fully vested as
of January 28, 2002.
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning option exercises
during the year ended December 31, 2001 by the Named Executive Officers and Ms.
Underwood and the value of unexercised options held by each of the Named
Executive Officers as of December 31, 2001. No stock appreciation rights were
exercised during the year ended December 31, 2001. Value of unexercised
in-the-money options is defined as the fair market price of our common stock at
December 31, 2001 less the exercise price of the option. On December 31, 2001,
the closing selling price of a share of our common stock on the Nasdaq National
Market was $4.01.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FY-END (#) DECEMBER 31, 2001
ACQUIRED ON VALUE ---------------------------- --------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
Daniel G. Welch................ -- -- -- -- -- --
Chris A. Rallis, J.D. ........ -- -- 150,699 125,771 $68,497 $41,500
Robert F. Amundsen, Jr......... -- -- 37,917 117,083 0 $39,450
Anne F. McKay.................. -- -- 108,847 82,796 0 $33,300
George R. Painter, III, Ph.D. . -- -- 117,431 70,474 0 $33,300
Franck S. Rousseau, M.D. ...... -- -- 171,252 111,391 0 $49,700
David W. Barry, M.D. .......... -- -- 175,798 79,583 0 $4,100
Carolyn S. Underwood........... 111,035 $418,571 -- -- -- --
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
We entered into an employment agreement with Daniel G. Welch, our
Chairman and Chief Executive Officer, as of August 5, 2002. The employment
agreement continues unless terminated as provided in the agreement. We employed
Mr. Welch at a base salary of $425,000 per year, subject to increase by our
Board of Directors, and paid Mr. Welch a $50,000 signing bonus. In addition, Mr.
Welch was granted options to purchase 2,300,000 shares of common stock at an
exercise price of $2.92 per share. These options were not granted under the 1996
Incentive Plan. We will pay Mr. Welch's reasonable and customary relocation
expense up to $300,000. Mr. Welch is eligible for a bonus each year based on
objectives agreed to by the Board of Directors and Mr. Welch. We have also
agreed to provide to Mr. Welch any other benefits that are provided to our other
executive officers. Mr. Welch's employment is terminable by either us or Mr.
Welch. In the event we terminate Mr. Welch's employment without "cause," as
defined in the agreement, or Mr. Welch resigns for "good reason," as defined in
the agreement, we have agreed to continue to pay Mr. Welch's then-current base
salary for a period of eighteen months as well as a pro-rated annual
21
bonus based on the number of days worked during the year assuming 100%
achievement of targeted annual bonus. Mr. Welch has agreed that during the
twelve-month period following termination of employment he will not engage in
any business activities related to the anti-viral segment of the pharmaceutical
industry or any other major segment of the pharmaceutical industry in which
Triangle is engaged or decided to become engaged during Mr. Welch's employment
by Triangle. In addition, Mr. Welch agreed that for the two-year period
following termination of his employment he will not solicit any person who had
been employed by or engaged to perform services by Triangle within the previous
twelve months.
We have also entered into employment agreements with each of our
officers, including each Named Executive Officer. These employment agreements
automatically renew from year to year, unless otherwise terminated. Each officer
is also eligible to participate in our retirement and welfare benefit plans. The
officer's employment is terminable at will by either us or the officer. In the
event we terminate the officer's employment without cause or we elect not to
renew the officer's term, we have agreed to continue to pay the officer's
then-current base salary for a period of eighteen months and to accelerate by 12
months the vesting of unvested stock and/or options, subject to the officer's
agreement during the eighteen-month period not to engage in the same or similar
function area in any for-profit pharmaceutical business that competes with us in
the field of HIV/hepatitis B within North America. In addition, in the event
that, within 12 months following a change in control, we terminate the officer's
employment without cause, the officer resigns for good reason, or we elect not
to renew the officer's term, we have agreed to continue to pay the officer's
then-current base salary for a period of two years and to accelerate totally the
vesting of any unvested stock and/or options.
All of the options awarded to the Named Executive Officers during the
year ended December 31, 2001 provide that the shares subject to each option will
immediately vest in the event we are acquired by a merger or asset sale, unless
the options are assumed by the acquiring entity. The options also provide that
the shares subject to each option will immediately vest even if the options are
assumed by the acquiring entity if the Named Executive Officer's employment is
terminated involuntarily, which includes a reduction in the responsibilities of
the Named Executive Officer, at any time within twelve months after the merger
or asset sale.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented at our annual
meeting of stockholders to be held in 2003 must be received by us no later than
December 13, 2002, in order to be included in the proxy statement and related
proxy materials.
In addition, if we have not received notice prior to February 26, 2003,
of any matter a stockholder intends to propose for a vote at the annual meeting
of stockholders to be held in 2003, then a proxy solicited by the Board of
Directors may be voted on that matter in the discretion of the proxyholder.
OTHER BUSINESS
22
The Board of Directors knows of no other business that will be
presented for consideration at the special meeting. If other matters are
properly brought before the special meeting, however, it is the intention of the
persons named in the accompanying proxy to vote the shares represented on any
additional matters in accordance with their best judgment.
DOCUMENTS INCORPORATED BY REFERENCE
The Form of Stock Voting Agreement dated August 2, 2002 between
Triangle and each Stockholder who is a party thereto is incorporated by
reference into this proxy statement and filed as an exhibit to our Current
Report on Form 8-K filed with the Securities and Exchange Commission on August
28, 2002.
You may obtain copies of this document without charge on written or
oral request to R. Andrew Finkle, Executive Vice President, General Counsel and
Secretary, 4611 University Drive, P.O. Box 50530, Durham, North Carolina 27717,
telephone number (919) 493-5980.
Dated: August 28, 2002 Order of the Board of Directors
/s/ Andrew Finkle
R. Andrew Finkle, SECRETARY
23
APPENDIX A
TRIANGLE PHARMACEUTICALS, INC.
1996 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH AUGUST 2, 2002)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Incentive Plan is intended to promote the interests of
Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
- the Discretionary Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock,
- the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special option grants,
- the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible non-employee
Board members shall automatically receive option grants at periodic intervals to
purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders and shall have sole and exclusive authority to
administer the Salary Investment Option Grant Program with respect to all
1
eligible individuals.
B. Administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in those
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons. The members of the Secondary
Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors
of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
2.
B. Only Employees who are Section 16 Insiders and other highly
compensated Employees shall be eligible to participate in the Salary Investment
Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals eligible to participate in the Automatic Option
Grant Program shall be determined in accordance with the provisions of Article
Five.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. Effective August 2, 2002, the number of shares
of Common Stock reserved for issuance under the Plan shall be 12,162,158 shares.
On January 1 of each year, beginning January 1, 2003, the number of shares of
Common Stock reserved for issuance under the Plan shall automatically increase
so that the number of authorized shares available for new grants under the plan
on each January 1 will equal the lesser of 4.5% of the total number of shares of
Triangle Common Stock outstanding on the preceding December 31st or 5,000,000
shares. For example, if on any such December 31, there are 200,000 shares that
remain available for future grants under the Plan, and 70,000,000 shares of
Common Stock are outstanding, then the number of shares issuable under the Plan
shall be increased by 2,950,000 additional shares, so that 3,150,000 shares
(70,000,000 x 4.5%) are available for issuance under the Plan as of the
following January 1.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 1,500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) those
options are cancelled in accordance with the cancellation/regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be
3.
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, should the exercise price of an option
under the Plan be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which the share
reserve under the Plan is to be increased each year pursuant to the automatic
annual increase provisions of Section V.A of this Article One, (iii) the number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under this Plan per calendar year, (iv) the number and/or class of
securities for which grants are subsequently to be made under the Automatic
Option Grant Program to new and continuing non-employee Board members, (v) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan and (vi) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
4.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Six and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise
Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to
(a) a Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to
cover the aggregate exercise price payable for the purchased shares
plus all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of such
exercise and (b) the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
5.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any outstanding option held by the Optionee at the time of
death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution.
(iii) Should the Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service, terminate
and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of
vested shares of Common Stock for which such option is exercisable at
the time of the Optionee's cessation of Service but also with respect
to one or more additional installments in which the Optionee would have
vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
6.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during the Optionee's lifetime. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately prior
to the effective date of the Corporate Transaction, become fully exercisable
with respect to the total number of shares of Common Stock at the time subject
to such option and may be exercised for any or all of those shares as
fully-vested
7.
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall terminate automatically, and
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent:
(i) those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the EARLIER of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more of
the Corporation's outstanding repurchase rights with respect to shares held by
the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
F. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control. Each option
so
8.
accelerated shall remain exercisable for fully-vested shares until the EARLIER
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right, exercisable
upon such terms as the Plan Administrator may establish, to elect
between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (a) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in
cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
9.
(iii) If the surrender of an option is not approved by the Plan
Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the LATER of (a) five (5) business days after the
receipt of the rejection notice or (b) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each individual
holding one or more options with such a limited stock appreciation
right shall have the unconditional right (exercisable for a thirty
(30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from
the Corporation in an amount equal to the excess of (A) the Take-Over
Price of the shares of Common Stock which are at the time vested under
each surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) The Plan Administrator shall pre-approve, at the time the
limited stock appreciation right is granted, the subsequent exercise of
that right in accordance with the terms of the grant and the provisions
of this Section V.C. No additional approval of the Plan Administrator
or the Board shall be required at the time of the actual option
surrender and cash distribution.
(iv) The balance of the option (if any) shall remaining
outstanding and exercisable in accordance with the documents evidencing
such option.
10.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program as soon as possible after the start of the
calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Primary Committee.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be equal to the excess of (i) the
Fair Market Value per share of Common Stock on the option grant date over (ii)
the amount of the approved Salary Reduction divided by the number of shares
subject to the Option.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x C), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year,
B is the Fair Market Value per share of Common Stock on the
option grant date, and
11.
C is a percentage not less than 33 1/3% nor more than 66 2/3%
fixed by the Plan Administrator, in its sole discretion, for
purposes of the option grants to be made under the Salary
Investment Option Grant Program for a particular calendar year
for which that program is to be in effect.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in
a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service
for any reason while holding one or more options under this Article Three, then
each such option shall remain exercisable, for any or all of the shares for
which the option is exercisable at the time of such cessation of Service, until
the EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. Such right of
exercise shall lapse, and the option shall terminate, upon the EARLIER of (i)
the expiration of the ten (10)-year option term or (ii) the three (3)-year
period measured from the date of the Optionee's cessation of Service. However,
the option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Any option not exercised prior to the Change in Control may be repurchased by
the Corporation at the time of the Change in Control at a repurchase price equal
to the amount by which the Optionee's salary was reduced in connection with the
grant of that option. Any option which is neither exercised nor repurchased
shall remain exercisable for fully-vested shares until the EARLIER or (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service.
12.
C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
13.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Six, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance Program may,
in the discretion of the Plan Administrator, be fully and immediately vested
upon issuance or may vest in one or more installments over the Participant's
period of Service or upon attainment of specified performance objectives. The
elements of the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or the
performance objectives to be attained,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
14.
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock issued under the Stock Issuance Program
or should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation rights
under the Stock Issuance Program shall terminate automatically, and all the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent (i)
those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall
15.
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
16.
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Effective with the 2001 Annual Meeting, (i) on the date
that each non-employee Board member is first elected or appointed to the Board,
option grants shall be made to such non-employee Board member and (ii) on the
date that each non-employee Board member is re-elected to the Board, option
grants shall be made to such non-employee Board member. Each automatic option
grant shall be a Non-Statutory Option. For each individual who is first elected
or appointed as a non-employee Board member, the number of shares of Common
Stock subject to the option shall be equal to 7,500 shares. Each non-employee
Board member so elected shall, during any partial year and for each full year of
the term for which the non-employee Board member is elected or appointed, also
receive an option to purchase an additional 7,500 shares of Common Stock. Each
non-employee Board member who is re-elected to the Board at any time after his
or her initial term will receive, during any partial year and for each full year
of the term for which the non-employee Board member is re-elected to the Board,
an automatic grant of an option to purchase an additional 7,500 shares of Common
Stock. There shall be no limit on the number of such automatic grants any one
Eligible Director may receive over his or her period of Board service, and
non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received a stock
option grant from the Corporation prior to becoming a non-employee Board member
shall be eligible to receive one or more such annual option grants over their
period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be exercisable
only with respect to option shares with respect to which the automatic option
grant has become vested. Provided the optionee continues to serve as a Board
member, the automatic option grant shall vest with respect to 7,500 shares on
the day the non-employee Board member is first elected or appointed to the Board
and with respect to an additional 7,500 shares on the day immediately preceding
the date of each subsequent Annual Meeting following the date of the automatic
option grant until the automatic option grant has become fully vested and
exercisable for all the option shares. No portion of the automatic option grant
shall vest after the optionee has ceased to be a member of the Board.
E. TERMINATION OF BOARD SERVICE. The following provisions shall govern
the exercise of any options held by the Optionee at the time the Optionee ceases
to serve as a Board member:
17.
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution) shall
have a twelve (12)-month period following the date of such cessation of
Board service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the option
may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at
the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation
of Board service, be exercised for all or any portion of those shares
as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have
a thirty (30)-day period in which to surrender to the Corporation each of his or
her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following
18.
the surrender of the option to the Corporation. Stockholder approval of this
March 27, 1998 amendment of the Plan shall constitute pre-approval of each
option subsequently granted under this Article Five with such a surrender
provision and the subsequent surrender of that option in accordance with the
terms of this Section II.C. No additional approval of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
19.
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at the time
the Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective immediately upon the Plan Effective Date.
However, the Salary Investment Option Grant Program shall not be implemented
until such time as the Primary Committee may deem appropriate.
B. The Plan shall serve as the successor to the Predecessor Plan, and
no further option grants or direct stock issuances shall be made under the
Predecessor Plan. All options outstanding under the Predecessor Plan on the
Section 12 Registration Date have been incorporated into the Plan and shall be
20.
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without limitation)
the option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plan which do not otherwise contain such provisions.
D. On the Plan Effective Date, 2,200,000 shares of Common Stock were
available for issuance over the term of the Plan. Such authorized share reserve
was comprised of the number of shares which remained available for issuance, as
of the Plan Effective Date, under the Predecessor Plan as last approved by the
Corporation's stockholders, including the shares subject to the outstanding
options incorporated into the Plan and the additional shares which were
otherwise available for future grant, plus an additional increase of 500,000
shares authorized by the Board and subsequently approved by the stockholders
prior to the Section 12 Registration Date.
On December 4, 1997, the Board adopted an amendment to the Plan (the
"1997 Amendment") to effect the following changes: (i) increase the maximum
number of shares of Common Stock available for issuance over the term of the
Plan by an additional 1,000,000 shares, and (ii) implement an automatic share
increase feature pursuant to which the number of shares of Common Stock
available for issuance under the Plan automatically increased on January 1 of
each of the calendar years 1999, 2000 and 2001 by an amount equal to four
percent (4%) of the total number of shares of Common Stock issued and
outstanding on December 31st of the immediately preceding calendar year;
provided, however, that in no event did any such annual increase exceed the
difference between (x) 1,000,000 shares and (y) the number of shares of Common
Stock available for future option grants under the Plan on such December 31 (net
of all outstanding options and unvested stock issuances). The increase under
this provision was 629,723 shares effective January 1, 1999, 905,791 shares
effective January 1, 2000, and 964,315 shares effective January 1, 2001, for an
aggregate of 2,499,829 over this three year period.
On March 27, 1998, the Board adopted an amendment to the Plan (the
"1998 Amendment") to effect the following change: under the Automatic Option
Grant Program, effective with the 1998 Annual Meeting (A) automatically grant to
each individual who is first appointed or elected as a non-employee Board member
an option to purchase shares of Common Stock in an amount equal to 2,000 shares
of Common Stock plus 2,000 shares for any partial year and for each full year of
the term for which the non-employee Board member is first appointed or elected,
and (B) automatically grant to each individual who is re-elected to serve as a
non-employee Board member an option to purchase 2,000 shares of Common Stock for
each full year of the term for which the non-employee Board member is re-elected
to the Board. The 1997 Amendment and the 1998 Amendment were approved by the
stockholders of the Corporation at the 1998 Annual Meeting.
On March 6, 2001, the Board unanimously adopted an amendment to the
Plan (the "2001 Amendment") to (i) increase the maximum number of shares of
Common Stock available for issuance over the term of the Plan by an additional
1,500,000 shares effective January 1, 2002, (ii) increase the maximum number of
shares of Common Stock available for issuance over the term of the Plan by an
additional 1,500,000 shares effective January 1, 2003 and (iii) under the
Automatic Option Grant Program, effective with the 2001 Annual Meeting (A)
automatically grant to each individual who is first appointed or elected as a
non-employee Board member an option to purchase 7,500 shares of Common Stock (B)
during any
21.
partial year and for each full year of the term for which the non-employee Board
member is first appointed or elected, automatically grant an option to purchase
7,500 shares of Common Stock, and (C) during each full year of the term for
which the non-employee Board member is re-elected to the Board, automatically
grant to each individual who is re-elected to serve as a non-employee Board
member an option to purchase 7,500 shares of Common Stock. The 2001 Amendment
was approved by the stockholders of the Corporation at the 2001 Annual Meeting.
Effective February 27, 2002, the Board unanimously adopted an amendment
to the Plan (the "2002 Amendment"), subject to approval by the stockholders of
the Corporation to (i) increase the number of shares of Common Stock authorized
for issuance under the Plan by an additional 1,962,329 shares and (ii) increase
the number of shares of Common Stock available for issuance under the Plan
effective January 1 of each year beginning January 1, 2003 so that the number of
authorized shares available for new grants under the plan on each January 1 will
equal the lesser of 4.5% of the total number of shares of Triangle Common Stock
outstanding on the preceding December 31st or 5,000,000 shares. The 2002
Amendment was approved by the stockholders of the Corporation at the 2002 Annual
Meeting.
On August 2, 2002, the Board unanimously adopted an amendment to the
Plan (the "August 2002 Amendment"), subject to approval by the stockholders of
the Corporation to (i) increase the number of shares of common stock available
for issuance under the Plan by 3,000,000 shares, and (ii) increase the number of
options, stock appreciation rights and stock issuances which may be granted to
any one person in the aggregate per calendar year to 1,500,000.
E. The Plan shall terminate upon the EARLIEST of (i) August 30, 2006,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
if so determined by the Board or pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained any required approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
22.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
23.
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and its successors.
A-1.
H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as such price is reported on the Nasdaq National
Market. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
L. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction
in his or her level of compensation (including base salary, fringe
benefits and participation in any corporate-performance based bonus or
incentive
A-2.
programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
R. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant or the Automatic
Option Grant Program.
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
Program, Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as a Board
member by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of twelve (12)
months or more.
V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
forth in this document.
W. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
X. PLAN EFFECTIVE DATE shall mean, August 30, 1996, the date on which
the Plan was adopted by the Board.
A-3.
Y. PREDECESSOR PLAN shall mean the Corporation's pre-existing 1996
Stock Option/Stock Issuance Plan in effect immediately prior to the Plan
Effective Date hereunder.
Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
AA. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.
BB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
CC. SECTION 12 REGISTRATION DATE shall mean the date on which the
Common Stock was first registered under Section 12 of the 1934 Act.
DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. SERVICE shall mean the performance of services for the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
FF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
II. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
JJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
KK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
A-4.
LL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-5.
PROXY CARD
TRIANGLE PHARMACEUTICALS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel G. Welch and R. Andrew Finkle
jointly and severally, as proxies, with full power of substitution and
resubstitution, to vote all shares of stock which the undersigned is entitled to
vote at the special meeting of stockholders of Triangle Pharmaceuticals, Inc. to
be held on Friday, September 20, 2002, or at any postponements or adjournments
of the special meeting, as specified on the reverse, and to vote in their
discretion on any other business as may properly come before the special meeting
and any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION AS TO ANY
OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY ADJOURNMENTS THEREOF. TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST SIGN BELOW,
NO BOXES NEED BE CHECKED.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
SPECIAL MEETING OF STOCKHOLDERS
TRIANGLE PHARMACEUTICALS, INC.
SEPTEMBER 20, 2002
PROXY VOTING INSTRUCTIONS
SELECT ONE OF THE FOLLOWING:
VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
YOUR CONTROL NUMBER IS ________________
DO NOT RETURN YOUR PROXY CARD
IF YOU VOTE BY TELEPHONE
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Amendment of Stock Option Plan: To approve an amendment to the 1996 Stock
Incentive Plan (i) increasing the number of shares of common stock available for
issuance under the plan by 3,000,000 shares, and (ii) increasing the number of
options, stock appreciation rights and stock issuances which may be granted to
any one person in the aggregate per calendar year to 1,500,000.
/ / FOR / / AGAINST / / ABSTAIN
- ------------------------------ ---------------------------------
SIGNATURE OF STOCKHOLDER PRINTED NAME OF STOCKHOLDER
_________________________ Dated: ______________, 2002
TITLE (IF APPROPRIATE)
Note: Please sign exactly as name appears on this proxy. If signing as attorney,
executor, administrator, trustee or guardian, please give full title as such,
and, if signing for a corporation, give your title. When shares are in the names
of more than one person, each should sign.