SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TREGA BIOSCIENCES, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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<PAGE>
[GRAPHIC OMITTED]
9880 Campus Point Drive
San Diego, California 92121
(858) 410-6500
May 9, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Trega Biosciences, Inc. which will be held on Friday, June 9, 2000, at 9:00
a.m., Pacific Daylight Time, at the Company's headquarters located at 9880
Campus Point Drive, San Diego, California.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return, at
your earliest convenience, the enclosed proxy in the enclosed prepaid envelope
to ensure that your shares will be represented. YOUR SHARES CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING
IN PERSON.
A copy of the 1999 Annual Report to Stockholders is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely yours,
/s/ Michael G. Grey
Michael G. Grey
President and Chief Executive Officer
<PAGE>
TREGA BIOSCIENCES, INC.
--------------
Notice of Annual Meeting of Stockholders
to be held June 9, 2000
--------------
To the Stockholders of Trega Biosciences, Inc.:
The Annual Meeting of Stockholders of Trega Biosciences, Inc., a Delaware
corporation (the "Company"), will be held at the Company's headquarters located
at 9880 Campus Point Drive, San Diego, California, on Tuesday, June 9, 2000, at
9:00 a.m., Pacific Daylight Time, for the following purposes:
1. To elect two Directors (two Class III Directors);
2. To consider and vote upon a proposal to increase the number of shares of
the Company's Common Stock available for issuance under the Company's 1996
Stock Incentive Plan (from 4,960,465 to 7,460,465) and to approve such
plan as amended and restated;
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
Stockholders of record as of the close of business on April 17, 2000, are
entitled to notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof. A complete list of stockholders entitled to vote at the
Annual Meeting will be available for the ten days immediately preceding the
Annual Meeting at the Office of the Secretary, Trega Biosciences, Inc., 9880
Campus Point Drive, San Diego, California 92121.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU WILL PROMPTLY
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHT
TO ATTEND OR VOTE AT THE ANNUAL MEETING.
By Order of the Board of Directors,
/s/ Edward C.Y. Yip
Edward C.Y. Yip
Secretary
May 9, 2000
<PAGE>
TREGA BIOSCIENCES, INC.
9880 Campus Point Drive
San Diego, California 92121
--------------
PROXY STATEMENT
--------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Trega Biosciences, Inc., a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders of the Company to be held at the Company's headquarters located
at 9880 Campus Point Drive, San Diego, California, on Friday, June 9, 2000, at
9:00 a.m., Pacific Daylight Time, and any adjournment or postponement thereof
(the "Annual Meeting").
Shares represented by proxies received in response to this solicitation
and not revoked will be voted at the Annual Meeting. A stockholder who has given
a proxy may revoke it at any time before it is exercised by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date or by voting in person at the Annual Meeting; however, attendance at
the Annual Meeting will not in and of itself constitute revocation of a proxy.
On the matters coming before the Annual Meeting for which a choice has been
specified by a stockholder by means of the ballot on the proxy, the
stockholder's shares will be voted accordingly. If no choice is specified, the
stockholder's shares will be voted (i) "FOR" the election of the two nominees
for director listed in this Proxy Statement (two Class III Directors), (ii)
"FOR" approval of the proposal to increase the number of shares of the Company's
Common Stock available for issuance under the Company's 1996 Stock Incentive
Plan and to approve such plan as amended and restated, and (iii) "FOR"
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors. In the event that any other matters properly come before
the Annual Meeting, the holders of proxies solicited by the Board of Directors
will vote on those matters in accordance with their judgment, and discretionary
authority to do so is included in the proxy.
Stockholders of record at the close of business on April 17, 2000 (the
"Record Date") are entitled to vote at the Annual Meeting. As of the close of
business on such date, the Company had 23,271,045 shares of its Common Stock
("Common Stock") outstanding. Each holder of Common Stock is entitled to one
vote for each share held as of the Record Date.
The presence in person or by proxy of the holders of a majority of the
issued and outstanding shares of Common Stock constitutes a quorum for the
transaction of business at the Annual Meeting. Directors are elected by a
plurality vote. The other matters submitted for stockholder approval at the
Annual Meeting will be decided by the affirmative vote of a majority of the
shares of Common Stock represented in person or by proxy and entitled to vote on
each such matter. Abstentions with respect to any matter are treated as shares
present or represented and entitled to vote on that matter and thus have the
same effect as negative votes. If a broker who is the record holder of certain
shares indicates on a proxy that he or she does not have discretionary authority
to vote on a particular matter as to such shares, or if shares are not voted in
other circumstances in which proxy authority is defective or has been withheld
with respect to any matter, these non-voted shares will be counted for quorum
purposes but are not deemed to be present or represented for purposes of
determining whether stockholder approval of a particular matter has been
obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain Directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of Common Stock.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders on or about May 9, 2000.
IMPORTANT
Please mark, sign and date the enclosed proxy and return it at your earliest
convenience in the enclosed postage prepaid return envelope so that, whether you
intend to be present at the Annual Meeting or not, your shares can be voted.
This will not limit your rights to attend or vote at the Annual Meeting.
<PAGE>
ITEM 1 - ELECTION OF DIRECTORS
The Company has three classes of Directors (designated Class I, Class II
and Class III) serving staggered three-year terms. Presently, three Directors
comprise each of Class I and Class II and two Directors comprise Class III.
Accordingly, two Class III Directors are to be elected at the Annual Meeting.
Such Class III Directors will have terms expiring at the time of the Annual
Meeting of Stockholders to be held in 2003, or until each such Director's
successor shall have been elected and qualified. Class I and Class II Directors
will continue in office for their existing terms (which expire at the Annual
Meetings of Stockholders to be held in 2001and 2002, respectively, or until each
such Director's successor shall have been elected and qualified).
Unless authority to vote for Directors is withheld, it is intended that
the shares represented by the enclosed proxy will be voted "FOR" the election of
Dr. Blair and Dr. Tuttle as Class III Directors. In the event that either
nominee becomes unable or unwilling to accept nomination or election, the shares
represented by the enclosed proxy will be voted for the election of the
remaining Director named and such other person as the Board of Directors may
select. The Board of Directors has no reason to believe that the nominees will
be unable or unwilling to serve.
Set forth below is information regarding the nominees for Class III
Directors, as well as information regarding the continuing Class I and Class II
Directors, including information furnished by the nominees and the continuing
Directors as to their principal occupations at present and for the past five
years, certain directorships held by each and their ages as of April 17, 2000.
Name Age
CLASS III
James C. Blair, Ph.D. ....................................................... 60
Dr. Blair has served as Chairman of the Board of Directors of the Company
from September 1992 through January 1998, and as a Director since May
1992. Dr. Blair has been a general partner of Domain Associates L.L.C, a
venture capital management company, since 1985. Domain Associates manages
Domain Partners, L.P., Domain Partners II, L.P., Domain Partners III, L.P.
and DP III Associates, L.P.. Dr. Blair is on the Boards of Directors of
Amylin Pharmaceuticals, Inc., Aurora Biosciences, Inc., Dura
Pharmaceuticals, Inc. and Vista Medical Technologies, Inc. Dr. Blair
received a B.S.E. from Princeton University and an M.S.E. and Ph.D. from
the University of Pennsylvania, all in electrical engineering.
Ronald R. Tuttle, Ph.D. ..................................................... 63
Dr. Tuttle has served as a Director of the Company since May 1992. He
served as the Company's Executive Vice President, Research and
Development, from January 1992 to January 1996 and as Chief Scientific
Officer from January 1996 to December 1996. Dr. Tuttle received his Ph.D.
in Pharmacology from the University of Manitoba, Canada.
CLASS I
Michael G. Grey ............................................................. 47
Mr. Grey has served as a Director of the Company since December 1998. As
of January 1999, Mr. Grey also became the President and Chief Executive
Officer of the Company. Prior to joining the Company, Mr. Grey was the
President of BioChem Therapeutic, Inc., the pharmaceutical operating
division of BioChem Pharma Inc. from November 1994 to August 1998. In that
role, he was responsible for all company operations including research,
development, sales and marketing, finance and human resources. During
1994, Mr. Grey was the President and Chief Operating Officer for Ansan,
Inc. From 1974 to 1993, Mr. Grey served in various roles with Glaxo Inc.
and Glaxo Holdings, p.l.c., culminating in his position as Vice President,
Corporate Development. Mr. Grey serves on the Board of Directors of Cortex
Pharmaceuticals, Inc., Epimmune Inc. and ChemNavigator.com(TM), Inc. Mr.
Grey received a B.Sc. in Chemistry from the University of Nottingham,
England.
2
<PAGE>
Harvey S. Sadow, Ph.D. ...................................................... 77
Dr. Sadow has served as a Director of the Company since October 1992. From
January 1988 through December 1990, Dr. Sadow served as Chairman of the
Board of Boehringer Ingelheim Corporation and Boehringer Ingelheim
Pharmaceuticals, Inc. Dr. Sadow served as the President and Chief
Executive Officer of Boehringer Ingelheim Corporation until his retirement
in January 1988. Dr. Sadow serves as the Chairman of the Board of
Cholestech Corp., and is a Director of Anika Therapeutics, Inc. . Dr.
Sadow received a B.S. from the Virginia Military Institute, an MS from the
University of Kansas and a Ph.D. from the University of Connecticut.
Robert S. Whitehead ......................................................... 49
Mr. Whitehead has served as Chairman of the Board of Directors of the
Company since February 1998 and as a Director since August 1993. From
August 1993 to December 1998, Mr. Whitehead served as President and Chief
Executive Officer of the Company and from February 1998 to December 1998
as Acting Chief Financial Officer. Since July 1, 1998, Mr. Whitehead has
been President of Dura Pharmaceuticals, Inc. Prior to joining the Company
in 1993, Mr. Whitehead was Senior Vice President, Commercial Operations,
Solvay Pharmaceuticals from February 1992 to April 1993. Mr. Whitehead
graduated from Temple University with a degree in pre-medicine.
CLASS II
Bruce L.A. Carter, Ph.D. .................................................... 56
Dr. Carter has been a Director of the Company since March 2000. He
currently is serving as the Corporate Executive Vice President and Chief
Scientific Officer for Novo Nordisk A/S. From 1986 to 1994, Dr. Carter
served in various executive positions with ZymoGenetics, Inc. culminating
in his position as President. Dr. Carter serves on the Board of Directors
of AVI BioPharma and SkeleTech, Inc. Dr. Carter received his Ph.D. in
Microbiology from the University of London.
Lawrence D. Muschek, Ph.D. .................................................. 56
Dr. Muschek served as President, Research and Development of the Company,
until his retirement in December 1999, and as a Director of the Company
since October 1997. Prior to joining the Company, Dr. Muschek worked for
Solvay as Senior Vice President, Research and Development worldwide from
April 1994 to September 1997 and Senior Vice President, Research &
Development, United States from March 1990 to April 1994. Before joining
Solvay, Dr. Muschek worked as the Vice President, Research for Ayerst
Laboratories Research, Inc. and spent 18 years at McNeil Pharmaceuticals,
Inc., a Johnson & Johnson affiliate company, where he held positions of
increasing responsibility in pharmaceutical research and development. Dr.
Muschek received a B.S. in Chemistry from the Philadelphia College of
Pharmacy and Science and a Ph.D. in Biochemistry from Michigan State
University.
Myra N. Williams, Ph.D. ..................................................... 58
Dr. Williams has been a director of the Company since December 1999. From
April 1997 to April 1999, Dr. Williams was the President and Chief
Executive Officer of Molecular Applications Group. Prior to the merger
between Glaxo plc and Wellcome Inc., Dr. Williams served as the Chief
Information Officer for Glaxo Inc. Following the merger, Dr. Williams was
appointed Vice President and Worldwide Director of Research and
Development Information Resources. Dr. Williams received a B.S. in physics
and math from Southern Methodist University and a Ph.D. in molecular
biophysics from Yale University.
Recommendation of the Board of Directors
3
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF EACH OF THE NOMINEES
FOR A CLASS III DIRECTORSHIP AS SET FORTH ABOVE.
Board Meetings and Committees
The Board of Directors held eight meetings during the year ended December
31, 1999. Each Director attended at least 75% of all meetings of (i) the Board
of Directors during the period in 1999 in which such person served as a
Director, with the exception of Dr. Jeremy Levin (resigned from Board service as
of May, 1999), and (ii) all committees of the Board of Directors during the
period in 1999 during which such person served on such committees.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee. It does not have a Nominating Committee or any committee performing a
similar function.
The members of the Compensation Committee were Dr. Blair and Mr.
Whitehead. The Compensation Committee held eight meetings during 1999. The
Compensation Committee administers the Company's 1996 Stock Incentive Plan, the
Company's 1996 Employee Stock Purchase Plan and the Officer and Associate Bonus
Plan, determines compensation for the Company's executive officers and makes
decisions concerning salaries and incentive compensation for employees and
consultants of the Company.
The members of the Audit Committee were Dr. Harvey Sadow, Dr. Ronald
Tuttle and Dr. Myra Williams . The Audit Committee held one meeting during 1999.
The Audit Committee makes recommendations to the Board of Directors regarding
the selection of independent auditors, reviews the results and scope of the
audit and other services provided by the Company's independent auditors, and
reviews and evaluates the Company's audit and control functions.
Dr. Myra Williams and Dr. Bruce Carter were elected to fill the Class II
vacancies created by the resignations of Dr. Jeremy Levin and Mr. Anders
Wiklund, which resignations were effective in May and December, 1999,
respectively. Mr. Harry Lambert resigned his position as a Class III Director in
August, 1999.
Compensation of Directors
Directors who are employees of the Company do not receive any fees for
service on the Board of Directors. Each non-employee Director of the Company
receives a per meeting fee of $1,000 for every Board meeting at which such
director is in attendance in person and $500 for every Board meeting at which
such director is in attendance by telephone (plus $500 for each committee
meeting attended by committee members in person and $250 by telephone). In
addition, each non-employee Director of the Company receives an initial grant of
a non-qualified option to purchase 15,000 shares of Common Stock (an "Initial
Option") and a yearly grant (following each Annual Meeting of Stockholders) of a
non-qualified option to purchase 5,000 shares of Common Stock (an "Annual
Option"). The exercise price for each Initial Option and Annual Option is equal
to the fair market value of Common Stock on the date of grant. Initial Options
become exercisable in 12 equal installments at three-month intervals over the
36-month period commencing on the date of grant. Annual Options vest in full on
the earlier of the first anniversary of the date of grant or the date of the
next Annual Meeting of Stockholders. Directors may also be reimbursed for
certain expenses in connection with attendance at meetings of the Company's
Board of Directors and its committees.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 2000 as
to shares of Common Stock beneficially owned by: (i) each person who is known by
the Company to own beneficially more than 5% of the issued and outstanding
Common Stock; (ii) each of the Company's Directors and the nominees for
Director, as well as certain affiliated entities; (iii) each of the individuals
named in "Executive Compensation--Summary Compensation Table" below; and (iv)
all directors and executive officers of the Company as a group. Ownership
information is based upon information furnished by the respective individuals or
entities, as the case may be.
<TABLE>
<CAPTION>
Directors, Nominees, Named Executive Shares Percent
Officers, 5% Stockholders, and Directors Beneficially Beneficially
And Executive Officers as a Group Owned (1)(2) Owned (1)(2)
- --------------------------------- ------------ ------------
<S> <C> <C>
3i Bioscience Investment Trust PLC ........................ 1,436,831 7.3
91 Waterloo Road
London SE1 8XP
ChemNavigator.com, Inc. ................................... 1,000,000 5.1
6166 Nancy Ridge Drive
San Diego, CA 92121
Domain Partners II, L.P. .................................. 962,724 4.9
One Palmer Square
Princeton, New Jersey 08542
Domain Partners III, L.P. ................................. 891,133 4.5
One Palmer Square
Princeton, New Jersey 08542
DP III Associates, L.P. ................................... 30,936 *
One Palmer Square
Princeton, New Jersey 08542
Domain Associates ......................................... 6,966 *
One Palmer Square
Princeton, New Jersey 08542
One Palmer Square Associates II, L.P. ..................... 100,124 *
One Palmer Square
Princeton, New Jersey 08542
One Palmer Square Associates III, L.P. .................... 19,209 *
One Palmer Square
Princeton, New Jersey 08542
Novartis Pharma AG ........................................ 1,866,667 9.5
Lichstrasse 35
Basel, CH-4002, Switzerland
James C. Blair (3) ........................................ 2,063,450 10.5
Bruce L.A. Carter (4) ..................................... 1,250 *
Michael G. Grey (5) ....................................... 205,499 1.0
Lawrence D. Muschek (6) ................................... 166,800 *
Harvey S. Sadow (7) ....................................... 36,301 *
Ronald R. Tuttle (8) ...................................... 321,268 1.6
Robert S. Whitehead (9) ................................... 237,557 1.2
Myra N. Williams (10) ..................................... 2,395 *
George M. Grass (11) ...................................... 1,467,605 7.5
Michael J. Green (12) ..................................... 100,491 *
Gerard A. Wills (13) ...................................... 54,124 *
All directors and executive officers as a
group (13 persons)(14) .................................... 4,814,646 24.6
</TABLE>
- ----------
* Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
5
<PAGE>
(2) The number of shares of Common Stock beneficially owned includes the
shares issuable pursuant to stock options that may be exercised within 60
days after March 31, 2000. Shares issuable pursuant to such options are
deemed outstanding for purposes of computing the percentage ownership of
the person holding such options but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
(3) Includes 22,358 shares issuable upon exercise of options held by Dr. Blair
that are exercisable within the 60-day period following March 31, 2000.
Also includes 962,724 shares beneficially owned by Domain Partners II,
L.P., 891,133 shares beneficially owned by Domain Partners III, L.P.,
30,936 shares beneficially owned by DP III Associates, L.P., 6,966 shares
beneficially owned by Domain Associates, L.L.C., 100,124 shares
beneficially owned by One Palmer Square Associates II, L.P. and 19,209
shares beneficially owned by One Palmer Square Associates III, L.P. Dr.
Blair is a general partner of One Palmer Square Associates, II, L.P.,
which is the general partner of Domain Partners II, L.P., and he is also a
general partner of One Palmer Square Associates, III, L.P., the general
partner of Domain Partners III, L.P. and DP III Associates, L.P. Dr. Blair
is a managing member of Domain Associates, L.L.C. Dr. Blair disclaims
beneficial ownership of shares held by One Palmer Square Associates, II,
L.P. and One Palmer Square Associates, III, L.P. which are not actually
distributed to him.
(4) Includes 1,250 shares issuable upon exercise of options held by Dr. Carter
that are exercisable within the 60-day period following March 31, 2000.
(5) Includes 182,499 shares issuable upon exercise of options held by Mr. Grey
that are exercisable within the 60-day period following March 31, 2000.
(6) Includes 165,800 shares issuable upon exercise of options held by Dr.
Muschek that are exercisable within the 60-day period following March 31,
2000.
(7) Includes 24,841 shares issuable upon exercise of options held by Dr. Sadow
that are exercisable within the 60-day period following March 31, 2000.
(8) Includes 60,010 shares issuable upon exercise of options held by Dr.
Tuttle that are exercisable within the 60-day period following March 31,
2000.
(9) Includes 237,557 shares issuable upon exercise of options held by Mr.
Whitehead that are exercisable within the 60-day period following March
31, 2000.
(10) Includes 2,395 shares issuable upon exercise of options held by Dr.
Williams that are exercisable within the 60-day period following March 31,
2000.
(11) Includes 69,374 shares issuable upon exercise of options held by Dr. Grass
that are exercisable within the 60-day period following March 31, 2000.
(12) Includes 98,032 shares issuable upon exercise of options held by Dr. Green
that are exercisable within the 60-day period following March 31, 2000.
Dr. Green resigned from his position as Vice President, Drug Discovery and
became a consultant to the Company, effective March 1, 2000.
(13) Includes 54,124 shares issuable upon exercisable of options held by Mr.
Wills that are exercisable within the 60-day period following March 31,
2000.
(14) Includes 1,049,448 shares issuable upon exercise of options that are
exercisable within the 60-day period following March 31, 2000. Includes
962,724 shares held by Domain Partners II, L.P., 891,133 shares held by
Domain Partners III, L.P., 30,936 shares held by DP III Associates, L.P.,
6,966 shares held by Domain Associates, 100,124 shares held by One Palmer
Square Associates II, L.P. and 19,209 shares held by One Palmer Square
Associates III, L.P. See footnote (3).
6
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's Directors,
executive officers and any persons holding more than 10% of the issued and
outstanding Common Stock of the Company are required to report their initial
ownership of Common Stock, any subsequent changes in that ownership and, in
certain instances, an annual statement of changes in ownership to the Securities
and Exchange Commission. Specific due dates for these reports have been
established and the Company is required to identify those persons who failed to
file these reports in a timely manner. In making this disclosure the Company has
relied solely upon the written representations of its Directors and executive
officers and copies of the reports that have been filed with the SEC. Based upon
the Company's review of such representations and reports, the Company believes
that all such reports were filed on a timely basis for the year ended December
31, 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes all compensation paid in the fiscal years
ended December 31, 1999, 1998 and 1997 to (i) the Company's Chief Executive
Officer and (ii) certain of the Company's other most highly compensated
executive officers during 1999.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------
Annual Compensation Number of
------------------------------------ Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary (1) Bonus Compensation Options Compensation (2)
- --------------------------- ---- ---------- -------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Grey 1999 $ 283,077 $ 25,000 $ 28,125 (3) 450,000 $ 33,614
President and Chief Executive Officer 1998 -- -- -- 50,000 (4) --
1997 -- -- -- -- --
Lawrence D. Muschek (5) 1999 266,448 -- 40,000 3,450
President, Research and Development 1998 250,000 25,100 -- 50,000
1997 52,083 -- -- 200,000 20,841
George M. Grass 1999 200,000 -- -- 225,000 1,194
President, NaviCyte Inc. 1998 8,333 -- -- -- --
1997 -- -- -- -- --
Michael J. Green (6) 1999 202,258 -- -- 90,000 2,000
Vice President, Drug Discovery 1998 186,875 15,100 -- 50,000 2,000
1997 175,000 96,837 -- 25,000 13,820
Gerard A. Wills 1999 187,179 -- -- 175,000 --
Vice President, Finance and 1998 -- -- -- -- --
Chief Financial Officer 1997 -- -- -- -- --
</TABLE>
- ----------
(1) Includes amounts deferred pursuant to the Company's 401(k) Plan.
(2) Includes reimbursement for relocation expenses paid to Mr. Grey ($31,614
in 1999), Dr. Muschek ($3,450 in 1999 and $20,841 in 1997), Dr. Grass
($1,194 in 1999) and Dr. Green ($11,820 in 1997). The balance of these
amounts reflect the Company's matching contributions pursuant to the
Company's 401(k) plan.
(3) In 1999, the Company loaned Mr. Grey $150,000, which was evidenced by a
promissory note secured by a pledge of Company securities. The interest
rate on the loan is 4.44% per annum, with interest payable quarterly. The
original principal amount of the loan is forgiven in equal quarterly
installments of $9,375 until either the loan is forgiven in full or the
total amount of the forgiveness and principal paid in lawful money equals
the original principal amount of the note.
(4) In December 1998, pursuant to an Executive Employment Agreement between
the Company and Mr. Grey, the Company granted Mr. Grey an option to
acquire 50,000 shares of common stock at $2.50 per share.
(5) Dr. Muschek retired from his position with the Company on December 31,
1999.
(6) Dr. Green resigned from his position as Vice President, Drug Discovery and
became a consultant to the Company, effective March 1, 2000.
8
<PAGE>
Stock Options
The following tables set forth certain information as of December 31, 1999
and for the fiscal year then ended with respect to options to acquire Common
Stock granted to and exercised by the individuals named in the Summary
Compensation Table above. No stock appreciation rights have been granted to
date.
Option Grants in 1999
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percentage of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise For Option Term (6)
Options Employees in Price Expiration ------------------
Name Granted (#) Fiscal Year ($/Sh) (4) Date (5) 5%($) 10%($)
---- ----------- ----------- ---------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Grey 450,000 (1) 16.2 2.50 1/07/2009 432,630 1,355,266
Lawrence D. Muschek 40,000 (2) 1.4 1.88 6/01/2009 47,167 11,951
George M. Grass 150,000 (1) 5.4 2.50 1/20/2009 235,835 597,653
75,000 (3) 2.7 1.44 12/07/2009 67,826 171,885
Michael J. Green 90,000 (2) 3.2 1.88 6/01/2009 106,126 268,944
Gerard A. Wills 150,000 (1) 5.4 2.50 1/20/2009 235,835 597,653
25,000 (3) 0.9 1.44 12/07/2009 22,609 57,295
</TABLE>
- ----------
(1) The options granted to Mr. Grey, Dr. Grass and Mr. Wills, are subject to
the following vesting schedule: (i) 10% of the shares subject to the
option vest at the end of the first quarter following the grant date and
(ii) 6% of the shares subject to the option vest at the end of each
successive three-month period following the date of the grant (thus
permitting 100% vesting over the course of 48 months); provided that these
options, subject to certain conditions, immediately vest upon a merger,
reorganization or other change in control of the Company.
(2) The options granted to Dr. Muschek and Dr. Green are subject to the
following vesting schedule: (i) 4% of the shares subject to the option
immediately vested upon grant and (ii) 6% of the shares subject to the
option vest at the end of each successive three-month period following the
date of the grant (thus permitting 100% vesting over the course of 48
months); provided that these options, subject to certain conditions,
immediately vest upon a merger, reorganization or other change in control
of the Company.
(3) The options granted to Dr. Grass and Mr. Wills are subject to the
following vesting schedule: eight equal installments of 12.5% of the
shares subject to the option vest quarterly following the date of grant
(thus permitting 100% vesting over the course of 24 months); provided that
these options, subject to certain conditions, immediately vest upon a
merger, reorganization or other change in control of the Company.
(4) The exercise price on the date of grant was equal to 100% of the per share
fair market value of Common Stock on the date of grant with the exception
of the grant of 450,000 options granted to Mr. Grey. The exercise price of
Mr. Grey's grant represents a per share premium of 18% of the fair market
value of Common Stock on the date of grant.
(5) The options have a term of 10 years, subject to earlier termination in
certain events related to termination of employment.
(6) The 5% and 10% assumed annual rates of compounded stock price appreciation
are suggested by rules of the Securities and Exchange Commission and do
not represent the Company's estimates or projections regarding the future
price of Common Stock. There can be no assurance provided to any executive
officer or any other holder of the Company's securities that actual stock
price movement over the 10-year option term will be at the assumed 5% and
10% levels of appreciation, or any other defined level.
9
<PAGE>
Aggregated Option Exercises in 1999 and 1999
Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Shares Unexercised Options in-the-Money Options
Acquired At December 31, 1999 At December 31, 1999(1)
on Value ------------------------------ --------------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael G. Grey -- $ -- 109,999 390,001 $ -- $ --
Lawrence D. Muschek -- -- 133,399 156,601 3,002 15,758
George M. Grass -- -- 42,000 183,000 -- 67,950
Michael J. Green -- -- 81,818 113,414 12,267 35,808
Gerard A. Wills -- -- 33,000 142,000 -- 22,650
</TABLE>
- ----------
(1) Calculated on the basis of (i) the fair market value of Common Stock at
December 31, 1999 ($2.344 per share) minus (ii) the exercise price.
Executive Employment Agreements and Termination of Employment and Change in
Control Arrangements
Pursuant to the terms of an Executive Employment Agreement dated November
6, 1998 between the Company and Michael G. Grey, the Company agreed to retain
Mr. Grey as President and Chief Executive Officer of the Company at an annual
salary of $300,000. In December 1999, this amount was increased to $310,000 per
year. The Agreement also provides that if Mr. Grey is terminated without cause,
he is entitled to continuation of his salary for a period of twelve months. In
connection with the Agreement, Mr. Grey was granted, in December 1998, options
to acquire 50,000 shares of Common Stock at $2.50 per share (vesting over four
years). In addition, in January 1999, Mr. Grey was granted options to acquire
450,000 shares of Common Stock at $2.50 per share (vesting over four years).
In January 1999, the Company loaned Mr. Grey $150,000, which was evidenced
by a promissory note secured by a pledge of Company securities. The interest
rate on the loan is 4.44% per annum, with interest payable quarterly. The
original principal amount of the loan is forgiven in equal quarterly
installments of $9,375 until either the loan is forgiven in full or the total
amount of the forgiveness and principal paid in lawful money equals the original
principal amount of the note.
Pursuant to the terms of an Executive Employment Agreement dated October
11, 1998 between the Company and George M. Grass, the Company agreed to retain
Dr. Grass as President of NaviCyte at an annual salary of $200,000. The
Agreement also provides that if Dr. Grass is terminated without cause, he is
entitled to the balance of his base salary during the period from the date of
termination through October 11, 2000. In connection with the Agreement, Dr.
Grass was granted options to acquire 150,000 shares of Common Stock at $2.50 per
share (vesting over four years).
Options granted to officers and directors of the Company vest fully in the
event the Company is subject to a change in control (as defined in the
respective stock option plans under which such options are granted).
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
This Report shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement (or any specific
statement incorporating by reference any other portion of this Proxy
Statement) into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this Report by reference, and this Report shall
not otherwise be deemed filed under such Acts.
This report on executive compensation is provided by the Compensation
Committee of the Board of Directors (the ""Compensation Committee") to assist
stockholders in understanding the Compensation Committee's objectives and
procedures in establishing the compensation of the Company's executive officers
and describes the basis on which 1999 compensation determinations were made by
the Compensation Committee. The Compensation Committee was comprised of two
non-employee Directors (Dr. Blair and Mr. Whitehead). In making its
determinations, the Compensation Committee relied, in part, on independent
surveys and public disclosures of compensation of management of companies in the
biotechnology and biopharmaceutical industries.
Compensation Philosophy and Objectives
The Compensation Committee believes the compensation of the Company's
executive officers should:
o Encourage creation of stockholder value and achievement of strategic
corporate objectives.
o Integrate compensation with the Company's annual and long-term
objectives and strategy, and focus executive behavior on the
fulfillment of those objectives.
o Enable the Company to attract and retain, on a long-term basis, high
caliber personnel by providing a total compensation opportunity that
is competitive with companies in the biopharmaceutical and
biotechnology industries, taking into account relative company size,
performance and geographic location, as well as individual
responsibilities and performance.
o Align the interests of management and stockholders by providing
management with longer term incentives through equity ownership.
Key Elements of Executive Compensation
The compensation of the Company's executive officers is based, in
substantial part, on the Company's achievement of key corporate objectives
including the closing of equity financings, the execution of collaborative
agreements, the development or acquisition of drug discovery technologies and
development progress of compounds proprietary to the Company, as well as the
achievement of individual business objectives by each executive officer. The
Company's existing compensation structure for executive officers includes a
combination of salary and stock options and may include cash bonuses for
performance determined to be deserving by the Compensation Committee.
Salary. Salary levels are largely determined through comparisons with
companies of similar headcount and market capitalization and/or complexity in
the biopharmaceutical and biotechnology industries. Actual salaries are based on
individual performance contributions within a competitive salary range for each
position that is established through evaluation of responsibilities and market
comparisons. The Compensation Committee, on the basis of its knowledge of
executive compensation in the industry, believes that the Company's salaries for
its executive officers are at levels that the Compensation Committee, at the
time such salary determinations were made, considered to be reasonable and
appropriate given the Company's financial resources and the stage of its
development.
Stock Options. The Compensation Committee believes that by providing those
persons who have substantial responsibility for the management and growth of the
Company with an opportunity to increase their ownership of Company stock, the
best interests of stockholders and executive officers will be closely aligned.
Therefore, executive officers are eligible to receive stock options when the
Compensation Committee performs its annual salary review; although the
Compensation Committee, at its discretion, may grant options at other times in
recognition of exceptional achievements. The number of shares underlying stock
options granted to executive
11
<PAGE>
officers is based on competitive practices in the industry as determined by
independent surveys and the Compensation Committee's knowledge of industry
practice. The Company's 1996 Stock Incentive Plan is administered by the
Compensation Committee.
Cash Bonuses. The Compensation Committee may, at its discretion, award
cash bonuses in recognition of performance deemed to be deserving by the
Compensation Committee. Any such bonuses will be determined by the Compensation
Committee to be in amounts that the Compensation Committee, at the time such
determinations are made, considers to be reasonable given the Company's
financial resources and stage of development as well as achievement of
Company-wide and individual goals.
Chief Executive Officer Compensation
Michael G. Grey is the Company's President and Chief Executive Officer.
Mr. Grey also serves as a member of the board of directors. Effective January 1,
2000, Mr. Grey's annual salary increased from $300,000 to $310,000. Mr. Grey
also received bonuses totaling $25,000 in 1999. Factors that the Compensation
Committee considered in establishing this annual salary and in paying such
bonus, included the following Company achievements for 1999: the Company's
increased financial stability through increased revenues each quarter and
decreased cash burn each quarter , the completed development of
IDEA(TM)predictive model for absorption and the establishment of a relationship
with ChemNavigator.com, Inc.
Compensation Committee
James C. Blair, Ph.D.
Robert S. Whitehead
Compensation Committee Interlocks and Insider Participation
During 1999, the Compensation Committee consisted of Dr. Blair, Mr.
Whitehead and Mr. Wiklund (until December 1999), each of whom is an outside
Director of the Company. None of the members of the Compensation Committee had
any "interlock" relationship to report during the Company's fiscal year ended
December 31, 1999.
12
<PAGE>
CERTAIN TRANSACTIONS
Other Arrangements
In February 1996, the Company entered into an agreement with Dura
Pharmaceuticals, Inc. ("Dura") which requires, among other things, the Company
to pay Dura $6.0 million over four years for product development (the "Dura
Agreement"). As of December 31, 1999, $5.1 million had been funded under the
Dura Agreement. As of July 1, 1998, Robert S. Whitehead, Chairman of the Board
of Directors and former Chief Executive Officer of the Company, became President
of Dura. James C. Blair, a member of the Board of Directors of Dura, is a member
of the Board of Directors of the Company. In connection with the Dura Agreement,
Dura invested $5.0 million in the Company's stock (originally shares of Series G
Preferred Stock which converted into 775,193 shares of Common Stock upon the
consummation of the Company's initial public offering).
On January 7, 1999, the Company advanced to its Chief Executive Officer,
Michael G. Grey, a forgivable loan in the amount of $150,000 due on or before
January 8, 2003 and secured by a pledge of Company options and the underlying
securities. The interest rate on the loan is 4.44% and is payable quarterly,
with the principal balance to be forgiven in equal quarterly installments of
$9,375 until either the loan is forgiven in full or the total amount of the
forgiveness and principal paid in lawful money equals the original principal
amount of the note. The note, to the extent unpaid or unforgiven, becomes due
and payable upon the termination of Mr. Grey's employment.
In December 1998, Robert S. Whitehead resigned from his position as Chief
Executive Officer, President and Acting Chief Financial Officer of the Company.
In recognition of his continued service as a Director, the Board of Directors
amended the August 23, 1993 Stock Option Agreement between Mr. Whitehead and the
Company. As a result, the expiration date of his outstanding options subject to
that grant will now be the earliest of either (i) 10 years following August 23,
1993, (ii) the date 90 days after the termination of his service as a Director
for any reason other than total and permanent disability, or (iii) the date 12
months after the termination of Mr. Whitehead's service as a Director by reason
of total and permanent disability.
On February 1, 1999, the Company advanced to its Sr. Director, Legal
Affairs and Corporate Secretary, John E. Wehrli, a loan in the amount of
$120,000, which was secured by a pledge of Company securities. Interest
accumulated on the outstanding principal balance at the rate of 4.64%, and all
unpaid principal and interest was due and payable on the earlier of February 1,
2001 or the termination of Mr. Wehrli's employment. The loan was repaid in full
by Mr. Wehrli in February, 2000 after his resignation as an employee of the
Company.
On August 20, 1999, the Company entered into a Supplier Agreement with
ChemNavigator.com, Inc. ("CNC"), a private company that has developed an
Internet website for the sale of chemicals and related information to the
pharmaceutical, biotechnology and agricultural industries and to academia. The
website is designed to enable scientists to conduct structural searches among
listed compounds and purchase compounds meeting self-selected search criteria.
The Company has agreed to list for sale certain of its compounds on the CNC
site. As part of the transaction, the Company acquired 1,176,666 shares of
Series B Convertible Preferred Stock of CNC in exchange for $1.0 million in cash
and 1.0 million shares of the Company's common stock, valued at $1.5 million. As
a result, the Company owns approximately 20% of the outstanding equity
securities of CNC. In addition, as part of the foregoing transaction, the
parties each acquired a warrant to acquire additional securities of the other.
Under these warrants, the Company has the right to acquire an additional 294,167
shares of CNC Series B Convertible Preferred Stock at a price of $5.00 per share
and CNC has a right to acquire an additional 294,167 shares of the Company's
common stock at a price of $5.00 per share. The Chief Executive Officer of the
Company, Michael G. Grey, is a Director of CNC.
In May 1998, the Company entered into a Research, Development and License
Agreement with Novartis Pharma AG ("Novartis") pursuant to which the companies
are focused on the identification and development of orally-active small
molecules for the treatment of certain diseases believed to be mediated by the
melanocortin-4 receptor pathway, including obesity, Type II diabetes and
Syndrome X. The Agreement provides for (i) an equity investment at the Company's
option, which the Company exercised in November 1998 and received $7.0 million
in exchange for approximately 1.9 million shares of the Company's Common Stock,
(ii) an additional $12.0 million in committed funding (consisting of $2.0
million received upon the execution of the Agreement for past research
activities and $10.0 million over a three-year period), and (iii) potential
milestone payments and royalties from the successful development and
commercialization of products (for which Novartis has worldwide rights).
13
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
This Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement (or any specific
statement incorporating by reference any other portion of this Proxy
Statement) into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this Graph by reference, and this Graph shall
not otherwise be deemed filed under such Acts.
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of (a) the
Company's Common Stock with (b) each of (i) the Center for Research in Security
Prices ("CRSP") Total Return Index for The Nasdaq Stock Market (U.S.) and (ii)
the CRSP Total Return Index for Nasdaq Pharmaceutical Stocks (the ""Nasdaq
Pharmaceutical Index"), assuming an investment of $100 in each on April 1, 1996
(the first date of trading in the Company's Common Stock following the Company's
initial public offering). The comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of the possible future performance of an investment in the Company's
Common Stock.
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
4/1/96 12/31/96 12/31/97 12/31/98 12/31/99
------ -------- -------- -------- --------
Trega Biosciences, Inc. .. $ 100.00 65.63 42.97 26.56 29.30
Nasdaq Stock Market ...... 100.00 116.95 143.30 201.93 364.81
Nasdaq Pharmaceutical Index 100.00 96.05 99.18 126.17 235.76
The Nasdaq Pharmaceutical Index includes all companies listed on The
Nasdaq Stock Market within SIC Code 283. A list of the companies included in the
Nasdaq Pharmaceutical Index may be obtained upon request to Office of the
Secretary, Trega Biosciences, Inc., 9880 Campus Point Drive, San Diego,
California 92121 (or call (858) 410-6500).
14
<PAGE>
ITEM 2 - PROPOSAL TO INCREASE THE NUMBER OF SHARES AVAILABLE
UNDER THE 1996 STOCK INCENTIVE PLAN AND TO APPROVE
SUCH PLAN AS AMENDED AND RESTATED
The Company has adopted, and presently utilizes, a 1996 Stock Incentive
Plan ("The 1996 Stock Plan") under which 4,960,465 shares of Common Stock have
been reserved for issuance, either by direct sale or upon exercise of options
granted to employees, Directors, consultants and advisors of the Company and its
subsidiary. As of March 7, 2000, the Board of Directors amended the 1996 Stock
Plan to reserve an additional 2,500,000 shares of Common Stock for issuance
thereunder, subject to the approval of the Company's stockholders at the Annual
Meeting. A copy of the 1996 Stock Plan is attached hereto as Appendix A.
1996 Stock Plan
The 1996 Stock Plan was originally adopted by the Board of Directors on
February 7, 1996 and approved by the Company's stockholders in March 1996,
becoming effective upon the consummation of the Company's initial public
offering in April 1996. With respect to the amendment to reserve an additional
2,500,000 shares of Common Stock for issuance under the 1996 Stock Plan, the
Board of Directors has determined that such increase is necessary in order for
the Company to continue to attract and retain key employees essential to the
long-term success of the Company.
Approval by the Company's stockholders of this proposal shall be deemed to
be (i) approval of the increase by 2,500,000 in the number of shares of Common
Stock available for issuance under the 1996 Stock Plan, and (ii) ratification
and approval of the 1996 Stock Plan as amended and restated (in the form
attached hereto as Appendix A).
The 1996 Stock Plan replaced the Company's 1992 Stock Plan and the 1995
Stock Plan (collectively, the "Predecessor Plans""), although awards made under
the Predecessor Plans continue to be administered in accordance with the
Predecessor Plans. The outstanding options under the Predecessor Plans contain
substantially the same terms and conditions specified below for option grants
under the 1996 Stock Plan.
The 1996 Stock Plan is administered by the Compensation Committee of the
Board of Directors. Employees, Directors, consultants and advisors of the
Company (or any subsidiary of the Company) are eligible to participate in the
1996 Plan, although incentive stock options may be granted only to employees. As
of March 31, 2000, there were 137 employees, officers and outside Directors of
the Company and its subsidiary (NaviCyte, Inc.). The participation of the
outside Directors of the Company is limited to automatic initial and annual
grants of nonstatutory stock options (the "Initial and Annual Options"
referenced above - see "Item 1 - Election of Directors --Compensation of
Directors"). The Initial and Annual Options are further described below. The
Compensation Committee selects the employees of the Company who will receive
awards, determines the size of any award and establishes any vesting or other
conditions. Therefore, the benefits and amounts that will be received by each of
the named executive officers (those officers identified in the "Summary
Compensation Table" above -- see "Executive Compensation - Summary Compensation
Table"), the executive officers as a group and all other key employees are not
presently identifiable. However, in 1999, aside from options granted to the
"named" executive officers (identified above in "Executive Compensation --
Summary Compensation Table," "-- Option Grants in 1999" and "-- Aggregated
Option Exercises in 1999 and 1999 Year-End Option Values") and Annual Options
granted to each of the six outside Directors (see "Item 1 -- Election of
Directors -- Compensation of Directors"), 138 persons received options to
acquire Common Stock under the 1996 Stock Plan. Except for one "named" executive
officer (identified above in "Executive Compensation -- Summary Compensation
Table," "-- Option Grants in 1999" and "-- Aggregated Option Exercises in 1999
and 1999 Year-End Option Values"), no one person received one or more options to
acquire more than 5% of the shares of Common Stock for which options were
granted in 1999.
The 1996 Stock Plan provides for awards in the form of restricted shares,
stock units, options or SARs, or any combination thereof. No payment is required
upon receipt of an award, except that a recipient of newly issued restricted
shares must pay at least the par value of such restricted shares to the Company.
Restricted shares are shares of Common Stock that are subject to
forfeiture in the event that the applicable vesting conditions are not
satisfied, and such shares are nontransferable prior to vesting (except for
certain transfers to a trustee). Restricted shares have the same voting and
dividend rights as other shares of Common Stock.
15
<PAGE>
A stock unit is an unfunded bookkeeping entry representing the equivalent
of one share of Common Stock, and it is nontransferable prior to the holder's
death. A holder of stock units has no voting rights or other privileges as a
stockholder, but may be entitled to receive dividend equivalents equal to the
amount of dividends paid on the same number of shares of Common Stock. Dividend
equivalents may be converted into additional stock units or settled in the form
of cash, Common Stock or a combination of both. Stock units, when vested, may be
settled by distributing shares of Common Stock or by a cash payment
corresponding to the fair market value of an equivalent number of shares of
Common Stock, or a combination of both. Vested stock units will be settled at
the time determined by the Compensation Committee. If the time of settlement is
deferred, interest or additional dividend equivalents may be credited on the
deferred payment.
The recipient of restricted shares or stock units may pay all withholding
taxes relating to the award with Common Stock rather than cash.
Options may include nonstatutory stock options ("NSOs") as well as
incentive stock options ("ISOs") intended to qualify for special tax treatment.
The term of an ISO cannot exceed 10 years, and the exercise price of an ISO must
be equal to or greater than the fair market value of Common Stock on the date of
grant. The exercise price of an NSO must be equal to or greater than the par
value of the Common Stock on the date of grant.
The exercise price of an option may be paid in any lawful form permitted
by the Compensation Committee, including, without limitation, the surrender of
shares of Common Stock or restricted shares already owned by the optionee. The
Compensation Committee may likewise permit optionees to satisfy their
withholding tax obligation upon exercise of an NSO by surrendering a portion of
their option shares to the Company. The 1996 Stock Plan also allows the optionee
to pay the exercise price of an option by giving "exercise/sale" or
"exercise/pledge" directions. If exercise/sale directions are given, a number of
option shares sufficient to pay the exercise price and any withholding taxes is
issued directly to a securities broker selected by the Company who, in turn,
sells these shares in the open market. The broker remits to the Company the
proceeds from the sale of these shares, and the optionee receives the remaining
option shares. If exercise/pledge directions are given, the option shares are
issued directly to a securities broker or other lender selected by the Company.
The broker or other lender will hold the shares as security and will extend
credit for up to a portion of their market value. The loan proceeds will be paid
to the Company to the extent necessary to pay the exercise price and any
withholding taxes. Any excess loan proceeds may be paid to the optionee. If the
loan proceeds are insufficient to cover the exercise price and withholding
taxes, the optionee will be required to pay the deficiency to the Company at the
time of exercise.
The amount payable on exercise of an SAR is measured by the difference
between the market value of the underlying stock at exercise and the exercise
price. SARs may, but need not, be granted in conjunction with options. An SAR
permits the participant to receive any appreciation in the value of the
underlying stock from the Company, either in shares of Common Stock, in cash or
in a combination of the two, with the Compensation Committee having the
discretion to determine the form in which such payment will be made. Upon
exercise of an SAR granted in tandem with an option, the corresponding portion
of the related option must be surrendered and cannot thereafter be exercised.
Conversely, upon exercise of an option to which an SAR is attached, the SAR may
no longer be exercised to the extent that the corresponding option has been
exercised. All options and SARs are nontransferable prior to the optionee's
death.
As noted above, the Compensation Committee determines the number or size
of restricted shares, stock units, options or SARs to be included in any award
as well as vesting and other conditions. Vesting conditions may be based on an
employee's service, his or her individual performance, the Company's performance
or other appropriate criteria. Usually, vesting conditions will be based on an
employee's service after the date of grant. Vesting may be accelerated in the
event of the employee's death, disability or retirement or in the event of a
"change in control" with respect to the Company.
For purposes of the 1996 Stock Plan, the term "change in control" means
that (i) any person is or becomes the beneficial owner, directly or indirectly,
of at least 50% of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote in an election of Directors, (ii)
the stockholders of the Company approve a merger, consolidation or other
corporate reorganization and either the Company is not the surviving entity or,
if the Company is the surviving entity, more than 50% of the combined voting
power of the Company immediately after the merger, consolidation or
reorganization is owned by persons who were not stockholders of the Company
immediately before the merger, consolidation or reorganization, or (iii) a
greater than
16
<PAGE>
50% change in the composition of the Board of Directors occurs over a period of
24 months, if such change was not approved by a majority of the existing
Directors.
Awards under the 1996 Stock Plan may provide that if any payment (or
transfer) by the Company to a recipient would be nondeductible by the Company
for federal income tax purposes, then the aggregate present value of all such
payments (or transfers) will be reduced to an amount which maximizes such value
without causing any such payment (or transfer) to be nondeductible.
The Compensation Committee is authorized, within the provisions of the
1996 Stock Plan, to amend the terms of outstanding restricted shares or stock
units, to modify or extend outstanding options or SARs or to exchange new
options for outstanding options, including outstanding options with a higher
exercise price than the new options.
Members of the Company's Board of Directors who are not employees of the
Company at the time of grant are not eligible for any awards under the 1996
Stock Plan other than an annual grant of an NSO to acquire 5,000 shares of
Common Stock (subject to antidilution adjustments) (referred to herein as an
"Annual Option" - see "Item 1 -- Election of Directors -- Compensation of
Directors" above). Grants of Annual Options are made at the conclusion of each
regular annual meeting of the Company's stockholders to non-employee Directors
who will continue to serve on the Board of Directors thereafter. In addition,
all new Directors receive a one-time grant of an NSO to acquire 15,000 shares of
Common Stock on the date they take office (subject to antidilution adjustments)
(referred to herein as an "Initial Option" - see "Item 1 -- Election of
Directors -- Compensation of Directors" above). No Director may receive an
Annual Option in the same calendar year in which he or she receives an Initial
Option. The exercise price of all options granted to non-employee Directors
under the 1996 Stock Plan is equal to the fair market value of Common Stock on
the date of grant. Annual Options become exercisable one year after the grant
(or the date of the next annual meeting of stockholders, if earlier), while
Initial Options are exercisable in 12 equal quarterly installments over a
three-year period commencing on the date of grant. In addition, all options
granted to non-employee Directors (i) vest in the event of the Director's death,
total and permanent disability or retirement after age 65, or in the event of a
change in control of the Company, and (ii) expire ten years after the date of
grant, 12 months after the termination of the Director's service due to
disability or death or three months after the termination of the Director's
service for any other reason.
As of April 1, 2000, options to acquire 6,301,763 shares had been issued
under the 1996 Stock Plan and the Predecessor Plans to approximately 406 former
and current executives, Directors, employees, consultants and advisors of the
Company. Assuming approval of this proposal, the total number of shares of
Common Stock reserved for issuance under the 1996 Stock Plan (as amended) and
the Predecessor Plans (shares reserved under such plans were incorporated into
the 1996 Stock Plan) would be 7,460,465 (subject to anti-dilution provisions),
reduced by the number of shares issued or subject to options outstanding under
the 1996 Stock Plan and the Predecessor Plans (which numbers were 802,630 shares
and options to acquire 3,855,465 shares, respectively, on April 1, 2000, thus
making available 2,802,370 shares, units, shares underlying options and/or SARs
under the 1996 Stock Plan as of April 1, 2000 if the 1996 Stock Plan is amended
as provided herein). If any restricted shares, stock units, options or SARs are
forfeited, or if options or SARs terminate for any other reason prior to
exercise (other than the exercise of a related SAR or option, and including any
forfeiture or termination under the Predecessor Plans), then shares underlying
such awards again become available for use under the 1996 Stock Plan (for
example, as of April 1, 2000, options to acquire 1,643,668 shares had been
canceled without exercise).
The 1996 Stock Plan may be amended by the Board of Directors. Stockholder
approval is only required in those instances where mandated by applicable laws,
rules and regulations. Registration Statements on Form S-8 have been filed with
respect to an aggregate of 4,960,465 shares of Common Stock available for
issuance under the 1996 Stock Plan. The Company anticipates filing an additional
Registration Statement on Form S-8 with respect to the additional 2,500,000
shares which are the subject of the proposed increase promptly following
approval by the stockholders of this proposal.
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Federal Income Tax Consequences
The following discussion of certain of the federal income tax consequences
of the 1996 Stock Plan, as it relates to NSOs, ISOs and share awards, is
intended to be a summary of applicable federal law. State and local tax
consequences may differ.
Options
ISOs and NSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of Section 422 of the Internal
Revenue Code of 1986 (the "Code"). NSOs need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an ISO. The
difference between the exercise price and the fair market value of the shares on
the exercise date will, however, be a preference item for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon exercise
of an ISO for at least two years following grant and at least one year following
exercise, the optionee's gain, if any, upon a subsequent disposition of such
shares is long-term capital gain. The measure of the gain is the difference
between the proceeds received on disposition and the optionee's basis in the
shares (which generally equals the exercise price). If an optionee disposes of
stock acquired pursuant to exercise of an ISO before satisfying the one and
two-year holding periods described above, the optionee will recognize both
ordinary income and capital gain in the year of disposition. The amount of the
ordinary income will be the lesser of (i) the amount realized on disposition
less the optionee's adjusted basis in the stock (usually the exercise price) or
(ii) the difference between the fair market value of the stock on the exercise
date and the exercise price. The balance of the consideration received on such a
disposition would presently be taxed at a long-term capital gain rate if the
stock had been held for at least one year following exercise of the ISO. The
Company is not entitled to an income tax deduction on the grant or exercise of
an ISO or on the optionee's disposition of the underlying shares after
satisfying the holding period requirement described above. If the holding
periods are not satisfied, the Company will be entitled to a deduction in the
year the optionee disposes of the shares in an amount equal to the ordinary
income recognized by the optionee.
An optionee is not taxed on the grant of an NSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the exercise
price and the fair market value of the underlying shares on the date of
exercise. The Company is entitled to an income tax deduction in the year of
exercise in the amount recognized by the optionee as ordinary income. The
Company is responsible for wage withholding on the income recognized and will
not transfer the shares on exercise until appropriate arrangements are made with
the participant to satisfy the Company's withholding obligations. Any gain on
subsequent disposition of the shares would be taxed at a long-term capital gain
rate if the shares are held for at least one year. The Company does not receive
a deduction for this gain.
Share Awards
If a participant is awarded or purchases shares, the amount by which the
fair market value of the shares on the date of award or purchase exceeds the
amount paid for the shares will be taxed to the participant as ordinary income.
The Company is entitled to a corresponding deduction. Also, the Company is
responsible for wage withholding on the income recognized and will not transfer
shares until appropriate arrangements are made with the participant to satisfy
the Company's withholding obligations. The participant's tax basis in the shares
acquired is equal to the fair market value of the shares on the date of
acquisition. Upon a subsequent sale of any shares, the participant will realize
capital gain or loss (long-term or short-term, depending on how long the shares
have been held"" ) in an amount equal to the difference between his or her basis
in the shares and the sale price.
If a participant is awarded or purchases shares that are subject to a
vesting schedule, the participant is deemed to receive an amount of ordinary
income equal to the excess of the fair market value of the shares at the time
they vest over the amount (if any) paid for such shares by the participant. The
Company is entitled to a deduction equal to the amount of the income recognized
by the participant. However, Code Section 83(b) permits a participant to elect,
within 30 days after the transfer to him or her of any shares subject to a
vesting schedule, to be taxed at ordinary income rates on the excess of the fair
market value of the shares at the time of the transfer over the amount (if any)
paid by the participant for such shares. If the participant makes a Section
83(b) election, any later appreciation in the value of the shares is not taxed
as ordinary income, but instead is taxed as capital gain when the shares are
sold or transferred . Once again, the participant must make suitable
arrangements with the Company so that
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the Company may meet its wage withholding obligations at the time the
participant recognizes ordinary income (whether because of the Section 83(b)
election or the satisfaction of vesting requirements).
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE COMPANY'S 1996
STOCK PLAN AND TO APPROVE SUCH PLAN AS AMENDED AND RESTATED.
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ITEM 3 - RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 2000,
subject to ratification by the stockholders. Ernst & Young LLP has audited the
Company's financial statements since the Company's inception. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting. Such
representatives will have an opportunity to make a statement, if they desire to
do so, and are expected to be available to respond to appropriate questions.
In the event ratification is not provided, the Board of Directors will
review its future selection of the Company's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the proxy statement for presentation at
the Annual Meeting of Stockholders to be held in 2001 a stockholder proposal
must be received at the offices of the Company no later than January 7, 2001.
If a stockholder wishes to have a proposal considered at the Annual
Meeting of Stockholders to be held in 2001, but does not seek to have the
proposal included in the Company's Proxy Statement and form of Proxy for that
meeting, and if the stockholder does not notify the Company of the proposal no
less than 50 days nor more than 75 days prior to the date of the Annual Meeting
of Stockholders to be held in 2001, then the persons appointed as proxies by
management may use their discretionary voting authority to vote on the proposal
when the proposal is considered at the Annual Meeting of Stockholders to be held
in 2001, even though there is no discussion of the proposal in the Proxy
Statement for that meeting; provided, however, that if less than 65 days' notice
or prior public disclosure of the date of the Annual Meeting is given or made to
stockholders, a stockholder will have until the 15th day following the day on
which such notice of the date of the Annual Meeting was mailed or public
disclosure of the meeting date was given to notify the Company of the proposal
before the persons appointed as proxies may use their discretionary voting
authority to vote on such proposal. It is recommended that stockholders
submitting proposals or notices of proposals direct them to the Secretary of the
Company and utilize certified mail-return receipt requested. Stockholders'
proposals should be submitted to the Company's office at 9880 Campus Point
Drive, San Diego, CA 92121.
ANNUAL REPORT AND AVAILABILITY OF FORM 10-K
The Company's 1999 Annual Report to Stockholders accompanies this Proxy
Statement. The Company's Annual Report on Form 10-K for 1999, which has been
filed with the Securities and Exchange Commission, will be provided to
stockholders of the Company, without charge, upon written request to Edward Yip,
Office of the Secretary, Trega Biosciences, Inc., 9880 Campus Point Drive, San
Diego, California 92121.
OTHER MATTERS
The Company knows of no other business that will be presented at the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
accordance with the judgment of the persons voting the proxies.
Whether you intend to be present at the Annual Meeting or not, we urge you
to return your signed proxy promptly.
By order of the Board of Directors,
/s/ Michael G. Grey
Michael G. Grey
President and Chief Executive Officer
May 9, 2000
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APPENDIX A
1996 STOCK INCENTIVE PLAN OF
TREGA BIOSCIENCES, INC.
ARTICLE 1. INTRODUCTION.
The Plan was adopted by the Board on February 7, 1996, and subsequently
approved by the Company's stockholders in March 1996. An increase by 2,500,000
in the number of Common Shares available under the Plan was approved by the
Board of Directors as of March 7, 2000. The Plan is effective as of the date of
the Company's initial public offering. The Plan replaces the 1992 Stock Plan of
Houghten Pharmaceuticals, Inc. and the 1995 Stock Plan of Houghten
Pharmaceuticals, Inc.
The purpose of the Plan is to promote the long-term success of the Company
and the creation of stockholder value by (a) encouraging Key Employees to focus
on critical long-range objectives, (b) encouraging the attraction and retention
of Key Employees with exceptional qualifications and (c) linking Key Employees
directly to stockholder interests through increased stock ownership. The Plan
seeks to achieve this purpose by providing for Awards in the form of Restricted
Shares, Stock Units, Options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights.
The Plan shall be governed by, and construed in accordance with, the laws
of the State of Delaware (except their choice-of-law provisions).
ARTICLE 2. ADMINISTRATION.
2.1 Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of directors of the Company,
who shall be appointed by the Board. In addition, the composition of the
Committee shall satisfy:
(a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and
(b) Such requirements as the Internal Revenue Service may establish
for outside directors acting under plans intended to qualify for exemption
under section 162(m)(4)(C) of the Code.
The Board may also appoint one or more separate committees of the Board, each
composed of one or more directors of the Company who need not satisfy the
foregoing requirements, who may administer the Plan with respect to Key
Employees who are not considered officers or directors of the Company under
section 16 of the Exchange Act, may grant Awards under the Plan to such Key
Employees and may determine all terms of such Awards.
2.2 Committee Responsibilities. The Committee shall (a) select the Key
Employees who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan and (d) make all other decisions relating to the
operation of the Plan. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under
the Plan shall be final and binding on all persons.
ARTICLE 3. SHARES AVAILABLE FOR GRANTS.
3.1 Basic Limitation. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Restricted Shares, Stock Units, Options and SARs awarded under the Plan shall
not exceed 7,460,465 minus the number of Common Shares that have been issued or
are subject to options under the 1992 Stock Plan of Houghten Pharmaceuticals,
Inc. or the 1995 Stock Plan of
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Houghten Pharmaceuticals, Inc. The limitation of this Section 3.1 shall be
subject to adjustment pursuant to Article 10.
3.2 Additional Shares. If Stock Units, Options or SARs are forfeited or if
Options or SARs terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Restricted Shares are forfeited before any dividends have been paid
with respect to such Shares, then such Shares shall again become available for
Awards under the Plan. If Stock Units are settled, then only the number of
Common Shares (if any) actually issued in settlement of such Stock Units shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan.
3.3 Dividend Equivalents. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Restricted Shares, Stock Units,
Options or SARs available for Awards, whether or not such dividend equivalents
are converted into Stock Units.
ARTICLE 4. ELIGIBILITY.
4.1 General Rules. Only Key Employees (including, without limitation,
independent contractors who are not members of the Board) shall be eligible for
designation as Participants by the Committee. Key Employees who are Outside
Directors shall only be eligible for the grant of the NSOs described in Section
4.2 and for making an election described in Article 12.
4.2 Outside Directors. Any other provision of the Plan notwithstanding,
the participation of Outside Directors in the Plan shall be subject to the
following conditions:
(a) Outside Directors shall receive no Awards except as described in
this Section 4.2 and Article 12.
(b) Each Outside Director who first becomes a member of the Board
after the date of the Company's initial public offering shall receive a
one-time grant of an NSO covering 15,000 Common Shares (subject to
adjustment under Article 10). Such NSO shall be granted on the date when
such Outside Director first joins the Board and shall become exercisable
in 12 equal installments at three-month intervals over the 36-month period
commencing on the date of grant.
(c) Upon the conclusion of each regular annual meeting of the
Company's stockholders held in the year 1998 or thereafter, each Outside
Director who will continue serving as a member of the Board thereafter
shall receive an NSO covering 5,000 Shares (subject to adjustment under
Article 10), except that such NSO shall not be granted in the calendar
year in which the same Outside Director received the NSO described in
Subsection (b) above. NSOs granted under the first sentence of this
Subsection (c) shall become exercisable in full on the first anniversary
of the date of grant.
(d) All NSOs granted to an Outside Director under this Section 4.2
shall also become exercisable in full in the event of (i) the termination
of such Outside Director's service because of death, total and permanent
disability or retirement at or after age 65 or (ii) a Change in Control
with respect to the Company.
(e) The Exercise Price under all NSOs granted to an Outside Director
under this Section 4.2 shall be equal to 100% of the Fair Market Value of
a Common Share on the date of grant, payable in one of the forms described
in Sections 6.1, 6.2, 6.3 and 6.4.
(f) All NSOs granted to an Outside Director under this Section 4.2
shall terminate on the earliest of (i) the 10th anniversary of the date of
grant, (ii) the date three months after the termination of such Outside
Director's service for any reason other than death or total and permanent
disability or (iii) the date 12 months after the termination of such
Outside Director's service because of death or total and permanent
disability.
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The Committee may provide that the NSOs that otherwise would be granted to an
Outside Director under this Section 4.2 shall instead be granted to an affiliate
of such Outside Director. Such affiliate shall then be deemed to be an Outside
Director for purposes of the Plan, provided that the service-related vesting and
termination provisions pertaining to the NSOs shall be applied with regard to
the service of the Outside Director.
4.3 Incentive Stock Options. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(6) of the Code are
satisfied.
ARTICLE 5. OPTIONS.
5.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The Stock
Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a cash payment
or in consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that a new Option will be granted automatically to
the Optionee when he or she exercises a prior Option and pays the Exercise Price
in the form described in Section 6.2.
5.2 Number of Shares. Each Stock Option Agreement shall specify the number
of Common Shares subject to the Option and shall provide for the adjustment of
such number in accordance with Article 10. Options granted to any Optionee in a
single calendar year shall in no event cover more than 450,000 Common Shares,
subject to adjustment in accordance with Article 10 .
5.3 Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price; provided that the Exercise Price under an ISO shall in no event be less
than 100% of the Fair Market Value of a Common Share on the date of grant and
the Exercise Price under an NSO shall in no event be less than the par value of
the Common Shares subject to such NSO. In the case of an NSO, a Stock Option
Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding.
5.4 Exercisability and Term. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant. A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. Options may be awarded in combination
with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. NSOs may also be awarded in
combination with Restricted Shares or Stock Units, and such an Award may provide
that the NSOs will not be exercisable unless the related Restricted Shares or
Stock Units are forfeited.
5.5 Effect of Change in Control. The Committee may determine, at the time
of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company.
5.6 Modification or Assumption of Options. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
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6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash at the time when such Common Shares
are purchased, except as follows:
(a) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment may
be made in any form(s) described in this Article 6.
(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
6.2 Surrender of Stock. To the extent that this Section 6.2 is applicable,
payment for all or any part of the Exercise Price may be made with Common Shares
which have already been owned by the Optionee for more than six months. Such
Common Shares shall be valued at their Fair Market Value on the date when the
new Common Shares are purchased under the Plan.
6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.
6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Common Shares to a securities broker or lender
approved by the Company, as security for a loan, and to deliver all or part of
the loan proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.
6.5 Promissory Note. To the extent that this Section 6.5 is applicable,
payment may be made with a full-recourse promissory note; provided that the par
value of the Common Shares shall be paid in cash.
6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
ARTICLE 7. STOCK APPRECIATION RIGHTS.
7.1 SAR Agreement. Each grant of an SAR under the Plan shall be evidenced
by an SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
7.2 Number of Shares. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 10. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 450,000 Common
Shares, subject to adjustment in accordance with Article 10 .
7.3 Exercise Price. Each SAR Agreement shall specify the Exercise Price.
An SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
7.4 Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may
also be awarded in combination with Options, Restricted Shares or Stock Units,
and such an Award may provide that the SARs will not be exercisable unless the
related Options, Restricted Shares or Stock Units are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
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7.5 Effect of Change in Control. The Committee may determine, at the time
of granting an SAR or thereafter, that such SAR shall become fully exercisable
as to all Common Shares subject to such SAR in the event that a Change in
Control occurs with respect to the Company.
7.6 Exercise of SARs. The exercise of an SAR shall be subject to the
restrictions imposed by Rule 16b-3 (or its successor) under the Exchange Act, if
applicable. If, on the date when an SAR expires, the Exercise Price under such
SAR is less than the Fair Market Value on such date but any portion of such SAR
has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion. Upon
exercise of an SAR, the Optionee (or any person having the right to exercise the
SAR after his or her death) shall receive from the Company (a) Common Shares,
(b) cash or (c) a combination of Common Shares and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of Common Shares
received upon exercise of SARs shall, in the aggregate, be equal to the amount
by which the Fair Market Value (on the date of surrender) of the Common Shares
subject to the SARs exceeds the Exercise Price.
7.7 Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.
8.1 Time, Amount and Form of Awards. Awards under the Plan may be granted
in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. Restricted Shares or Stock Units may also be awarded in
combination with NSOs or SARs, and such an Award may provide that the Restricted
Shares or Stock Units will be forfeited in the event that the related NSOs or
SARs are exercised.
8.2 Payment for Awards. To the extent that an Award is granted in the form
of newly issued Restricted Shares, the Award recipient, as a condition to the
grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award is
granted in the form of Restricted Shares from the Company's treasury or in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
8.3 Vesting Conditions. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Stock Award Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of making an Award or thereafter, that such Award shall become fully vested
in the event that a Change in Control occurs with respect to the Company.
8.4 Form and Time of Settlement of Stock Units. Settlement of vested Stock
Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 10.
8.5 Death of Recipient. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
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8.6 Creditors' Rights. A holder of Stock Units shall have no rights other
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.
ARTICLE 9. VOTING AND DIVIDEND RIGHTS.
9.1 Restricted Shares. The holders of Restricted Shares awarded under the
Plan shall have the same voting, dividend and other rights as the Company's
other stockholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Common Shares available under Article 3.
9.2 Stock Units. The holders of Stock Units shall have no voting rights.
Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at
the Committee's discretion, carry with it a right to dividend equivalents. Such
right entitles the holder to be credited with an amount equal to all cash
dividends paid on one Common Share while the Stock Unit is outstanding. Dividend
equivalents may be converted into additional Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Common Shares, or in
a combination of both. Prior to distribution, any dividend equivalents which are
not paid shall be subject to the same conditions and restrictions as the Stock
Units to which they attach.
ARTICLE 10. PROTECTION AGAINST DILUTION.
10.1 Adjustments. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spinoff or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of (a) the number of Options, SARs, Restricted Shares
and Stock Units available for future Awards under Article 3, (b) the limitations
set forth in Sections 5.2 and 7.2, (c) the number of NSOs to be granted to
Outside Directors under Section 4.2, (d) the number of Stock Units included in
any prior Award which has not yet been settled, (e) the number of Common Shares
covered by each outstanding Option and SAR or (f) the Exercise Price under each
outstanding Option and SAR. Except as provided in this Article 10, a Participant
shall have no rights by reason of any issue by the Company of stock of any class
or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
10.2 Reorganizations. In the event that the Company is a party to a merger
or other reorganization, outstanding Options, SARs, Restricted Shares and Stock
Units shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for the assumption of outstanding
Awards by the surviving corporation or its parent, for their continuation by the
Company (if the Company is a surviving corporation), for accelerated vesting and
accelerated expiration, or for settlement in cash.
ARTICLE 11. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.
ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
12.1 Effective Date. No provision of this Article 12 shall be effective
unless and until the Board has determined to implement such provision.
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12.2 Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 12 shall be filed with the Company on the prescribed form.
12.3 Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
ARTICLE 13. LIMITATION ON RIGHTS.
13.1 Retention Rights. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an employee,
consultant or director of the Company, a Parent or a Subsidiary. The Company and
its Parents and Subsidiaries reserve the right to terminate the service of any
employee, consultant or director at any time, with or without cause, subject to
applicable laws, the Company's certificate of incorporation and by-laws and a
written employment agreement (if any).
13.2 Stockholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the issuance of a stock certificate for
such Common Shares. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date when such certificate is
issued, except as expressly provided in Articles 8, 9 and 10.
13.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
ARTICLE 14. LIMITATION ON PAYMENTS.
14.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the time of
making an Award under this Plan or at any time thereafter, may specify in
writing that such Award shall not be so reduced and shall not be subject to this
Article 14. For purposes of this Article 14, the "Reduced Amount" shall be the
amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of section 280G of the Code.
14.2 Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 14, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 14 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the
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Participant such amounts as are then due to him or her under the Plan and shall
promptly pay or transfer to or for the benefit of the Participant in the future
such amounts as become due to him or her under the Plan.
14.3 Overpayments and Underpayments. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.
14.4 Related Corporations. For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.
ARTICLE 15. WITHHOLDING TAXES.
15.1 General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
15.2 Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
Any payment of taxes by assigning Common Shares to the Company may be subject to
restrictions, including any restrictions required by rules of the Securities and
Exchange Commission.
ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS.
16.1 General. Except as provided in Article 15, an Award granted under the
Plan shall not be anticipated, assigned, attached, garnished, optioned,
transferred or made subject to any creditor's process, whether voluntarily,
involuntarily or by operation of law. An Option or SAR may be exercised during
the lifetime of the Optionee only by him or her or by his or her guardian or
legal representative. Any act in violation of this Article 16 shall be void.
However, this Article 16 shall not preclude a Participant from designating a
beneficiary who will receive any outstanding Awards in the event of the
Participant's death, nor shall it preclude a transfer of Awards by will or by
the laws of descent and distribution.
16.2 Trusts. Neither this Article 16 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved in advance by the Committee in writing. A transfer or assignment of
Restricted Shares from such trustee to any person other than such Participant
shall be permitted only to the extent approved in advance by the Committee in
writing, and Restricted Shares held by such trustee shall be subject to all of
the conditions and restrictions set forth in the Plan and in the applicable
Stock Award Agreement, as if such trustee were a party to such Agreement.
ARTICLE 17. FUTURE OF THE PLAN.
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17.1 Term of the Plan. The Plan, as set forth herein, was originally
adopted on February 7, 1996, and became effective on the date of the Company's
initial public offering. The Plan shall remain in effect until it is terminated
under Section 17.2, except that no ISOs shall be granted after February 6, 2006.
17.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan, including the provisions of Section 4.2
relating to the amount, price and timing of Option grants to Outside Directors.
An amendment of the Plan shall be subject to the approval of the Company's
stockholders only to the extent required by applicable laws, regulations or
rules. No Awards shall be granted under the Plan after the termination thereof.
The termination of the Plan, or any amendment thereof, shall not affect any
Award previously granted under the Plan.
ARTICLE 18. DEFINITIONS.
18.1 "Award" means any award of an Option, an SAR, a Restricted Share or a
Stock Unit under the Plan.
18.2 "Board" means the Company's Board of Directors, as constituted from
time to time.
18.3 "Change in Control" shall mean the occurrence of any of the following
events:
(a) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization;
(b) A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either:
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the directors who
had been directors of the Company 24 months prior to such change and
who were still in office at the time of the election or nomination;
or
(c) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any change
in the relative beneficial ownership of the Company's securities by any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter in
such person's ownership of securities, shall be disregarded until such
person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company.
The term "Change in Control" shall not include a transaction, the sole purpose
of which is to change the state of the Company's incorporation.
18.4 "Code" means the Internal Revenue Code of 1986, as amended.
18.5 "Committee" means a committee of the Board, as described in Article
2.
18.6 "Common Share" means one share of the common stock of the Company.
18.7 "Company" means Trega Biosciences, Inc., a Delaware corporation.
18.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
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18.9 "Exercise Price," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
18.10 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:
(a) If the Common Shares were traded over-the-counter on the date in
question but was not traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted for
such date by the principal automated inter-dealer quotation system on
which the Common Shares are quoted or, if the Common Shares are not quoted
on any such system, by the "Pink Sheets" published by the National
Quotation Bureau, Inc.;
(b) If the Common Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by the Nasdaq system or the
Nasdaq National Market System;
(c) If the Common Shares were traded on a stock exchange on the date
in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for such
date; and
(d) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of The Wall Street
Journal. Such determination shall be conclusive and binding on all persons.
18.11 "ISO" means an incentive stock option described in section 422(b) of
the Code.
18.12 "Key Employee" means (a) a common-law employee of the Company, a
Parent or a Subsidiary, (b) an Outside Director and (c) a consultant or advisor
who provides services to the Company, a Parent or a Subsidiary as an independent
contractor. Service as an Outside Director or as an independent contractor shall
be considered employment for all purposes of the Plan, except as provided in
Sections 4.2 and 4.3.
18.13 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
18.14 "Option" means an ISO or NSO granted under the Plan and entitling
the holder to purchase one Common Share.
18.15 "Optionee" means an individual or estate who holds an Option or SAR.
18.16 "Outside Director" shall mean a member of the Board who is not a
common-law employee of the Company, a Parent or a Subsidiary.
18.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
18.18 "Participant" means an individual or estate who holds an Award.
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18.19 "Plan" means this 1996 Stock Incentive Plan of Trega Biosciences,
Inc., as amended from time to time.
18.20 "Restricted Share" means a Common Share awarded under the Plan.
18.21 "SAR" means a stock appreciation right granted under the Plan.
18.22 "SAR Agreement" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
18.23 "Stock Award Agreement" means the agreement between the Company and
the recipient of a Restricted Share or Stock Unit which contains the terms,
conditions and restrictions pertaining to such Restricted Share or Stock Unit.
18.24 "Stock Option Agreement" means the agreement between the Company and
an Optionee which contains the terms, conditions and restrictions pertaining to
his or her Option.
18.25 "Stock Unit" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.
18.26 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 19. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to affix the corporate name and seal hereto.
TREGA BIOSCIENCES, INC.
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TREGA BIOSCIENCES,INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For Annual Meeting - June 9, 2000
MICHAEL G. GREY, GERARD A. WILLS and EDWARD C.Y. YIP, or any of them, each with
the power of substitution, are hereby authorized to represent as proxies and
vote all shares of stock of Trega Biosciences, Inc. (the "Company") that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Company's headquarters located at 9880 Campus Point
Drive, San Diego, California, on Friday, June 9, 2000, at 9:00 a.m., Pacific
Daylight Time or at any postponement or adjournment thereof, and the undersigned
instructs said proxies to vote as follows (with reference to the Proxy Statement
of the Company dated May 9, 2000):
(continued and to be signed on reverse side)
FOLD AND DETACH HERE
<PAGE>
The Board of Directors recommends a vote FOR the election of all nominees
indicated below and FOR Items 2 and 3.
Please mark your votes as indicated in this example |X|
1. Election of Directors
|_| FOR all Class III listed (except as indicated to contrary)
|_| WITHHOLD AUTHORITY to vote for all nominees listed
Nominees: James C. Blair and Ronald R. Tuttle
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve the proposal to increase the number of shares of the Company's
Common Stock available for issuance under the Company's 1996 Stock Incentive
Plan and to approve such plan as amended and restated:
|_| FOR |_| AGAINST |_| ABSTAIN
3. To ratify the appointment of Ernst & Young LLP as the Company's independent
auditors:
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, upon such other business as may properly come before the
Annual Meeting.
Shares represented by this proxy will be voted as directed by the stockholder.
If no such directions are indicated, the proxies will have authority to vote FOR
the election of all nominees and FOR Items 2 and 3.
Dated: _________________, 2000
- --------------------------------------------------------------------------------
Signature of Stockholder
- --------------------------------------------------------------------------------
Signature of Stockholder
Please sign exactly as your name or names appear on the proxy. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If shares are held jointly, each holder should sign. By your signature
you acknowledge receipt of the Company's Proxy Statement dated May 9, 2000 and
the related Notice of Annual Meeting.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
FOLD AND DETACH HERE
