<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THERAPEUTIC DISCOVERY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pur-
suant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
THERAPEUTIC DISCOVERY CORPORATION
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 8, 1997 AT 11:00 AM
To the Stockholders of Therapeutic Discovery Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Therapeutic Discovery Corporation ("TDC") will be held at 950 Page Mill Road,
Palo Alto, California, on Thursday, May 8, 1997 at 11:00 am, for the following
purposes:
1. To elect one Class I director to hold office for a term ending in
2000 and until his successor is elected; and
2. To transact such other business as may properly be presented at the
meeting and at any adjournments or postponements thereof.
Only stockholders of record at the close of business on March 17, 1997 are
entitled to notice of, and to vote at, the meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors,
DAVID R. HOFFMANN
SECRETARY
Palo Alto, California
March 27, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN THE
ACCOMPANYING PROXY CARD AND RETURN IT AS SOON AS POSSIBLE IN THE ACCOMPANYING
POSTPAID ENVELOPE. YOUR DOING SO MAY SAVE TDC THE EXPENSE OF A SECOND MAILING.
<PAGE>
THERAPEUTIC DISCOVERY CORPORATION
PROXY STATEMENT
---------------------
To the Stockholders of Therapeutic Discovery Corporation:
The accompanying proxy is solicited on behalf of the Board of Directors (the
"Board") of Therapeutic Discovery Corporation ("TDC"), a Delaware corporation,
for use at TDC's 1997 Annual Meeting of Stockholders (the "Annual Meeting") to
be held at 11:00 am on Thursday, May 8, 1997 at 950 Page Mill Road, Palo Alto,
California 94304; telephone number (415) 496-8200.
Holders of record of TDC's Class A Common Stock and Class B Common Stock as
of the close of business on March 17, 1997 are entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof. At
the close of business on that date, TDC had outstanding 7,734,424 shares of its
Class A Common Stock, par value $.01 per share, and 100 shares of its Class B
Common Stock, par value $.01 per share. Holders of Class A Common Stock and
Class B Common Stock vote together as a class as to the matters to be presented
at the meeting and are entitled to one vote for each share of Class A or Class B
Common Stock held. TDC Class A Common Stock trades on the Nasdaq Stock Market.
Any stockholder giving a proxy in the form accompanying this Proxy Statement
has the power to revoke the proxy prior to its use. A proxy can be revoked (i)
by an instrument of revocation delivered prior to the Annual Meeting to the
Secretary of TDC, (ii) by a duly executed proxy bearing a later date or time
than the date or time of the proxy being revoked, or (iii) at the Annual Meeting
if the stockholder is present and elects to vote in person. Mere attendance at
the Annual Meeting will not serve to revoke a proxy.
Broker non-votes and shares held by stockholders present in person or by
proxy at the meeting but abstaining on a vote will be counted in determining
whether a quorum is present at the Annual Meeting. However, abstentions by
stockholders present in person or by proxy at the meeting are counted as votes
against a proposal for purposes of determining whether or not a proposal has
been approved, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
This Proxy Statement and the accompanying proxy card are being mailed to TDC
stockholders on or about March 27, 1997. Directors, officers and agents of TDC
may solicit proxies by personal interview, telephone or facsimile, without
special compensation. Any costs of such solicitation will be borne by TDC.
ELECTION OF DIRECTORS
TDC's Restated Certificate of Incorporation provides for three classes of
directors: Class I, Class II and Class III. Only one class of directors is
elected at each annual meeting of stockholders, each director to serve for a
three-year term. In accordance with the Restated Certificate of Incorporation,
Class I directors are to be elected at the 1997 annual meeting, Class II
directors are to be elected at the 1998 annual meeting and Class I directors are
to be elected at the 1999 annual meeting.
NOMINEES
One Class I director is to be elected to the Board at the Annual Meeting, to
serve until the annual meeting of stockholders to be held in 2000 and until his
successor has been elected and qualified, or until his earlier death,
resignation or removal. The nominee for election at the Annual Meeting is Gary
L. Neil, PhD. Dr. Neil is presently the President and Chief Executive Officer
and a director of TDC and has been a director since 1993. He has extensive
experience in fields critical to TDC's success, and has indicated his
willingness to continue to serve as a director of TDC.
If the nominee is unable or unwilling to serve as a director, proxies may be
voted for a substitute nominee designated by the present Board. The Board has no
reason to believe that the nominee will be unable or unwilling to serve as a
director if elected. Proxies received will be voted "FOR" the election of
1
<PAGE>
the nominee unless marked to the contrary. Pursuant to applicable Delaware
corporation law, assuming the presence of a quorum, one director will be elected
from among those persons duly nominated for such position by a plurality of the
votes actually cast by stockholders entitled to vote at the meeting who are
present in person or by proxy. Thus, the nominee who receives the highest number
of votes in favor of election will be elected, regardless of the number of
abstentions or broker non-votes.
The following table provides the name of the nominee for election as
director and the names of each other director who will be serving as a director
after the Annual Meeting and indicates the periods during which such persons
have served as directors of TDC.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITIONS WITH CONTINUOUSLY
TDC IN ADDITION TO DIRECTOR SINCE
- ---------------------------------------------------------------------------------------------------- ---------------
<S> <C>
NOMINEE (CLASS I DIRECTOR)
Gary L. Neil, PhD................................................................................... 1993
President and Chief Executive Officer
INCUMBENTS
CLASS II DIRECTORS
Terrence F. Blaschke, MD............................................................................ 1993
Paul D. Lairson, MD................................................................................. 1993
CLASS III DIRECTORS
Allen M. Phipps..................................................................................... 1993
Chairman of the Board
William P. Sommers, PhD............................................................................. 1993
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
NOMINEE (CLASS I DIRECTOR)
Gary L. Neil, PhD, 56, is the President and Chief Executive Officer of TDC.
Prior to joining TDC, from 1990 to 1993, Dr. Neil served as Executive Vice
President of the Wyeth-Ayerst Research division of Wyeth Laboratories, Inc., a
subsidiary of American Home Products Corporation, a large pharmaceutical
company, and, from 1990 to 1992, was responsible for Wyeth-Ayerst Research's
worldwide research and development activities. From 1989 to 1990, Dr. Neil
served as a Senior Vice President of Wyeth-Ayerst Research. Prior to that time,
Dr. Neil served for 23 years in various scientific and management positions with
the Upjohn Company. Dr. Neil currently serves as a member of the Board of
Directors of Allergan Ligand Retinoid Therapeutics, Inc., a drug development
company.
INCUMBENTS
CLASS II DIRECTORS
Terrence F. Blaschke, MD, 54, has served on the faculty of Stanford
University for 20 years and is currently Professor of Medicine and Molecular
Pharmacology and Chief of the Division of Clinical Pharmacology at the Stanford
University School of Medicine. Dr. Blaschke also serves as an independent
consultant working with pharmaceutical and biotechnology companies. He is a
consultant to and the former chair of the Generic Drugs Advisory Committee for
the U.S. Food and Drug Administration.
Paul D. Lairson, MD, 65, has been an independent consultant working with
medical groups, large employers and hospitals on issues related to managed care
since 1992. From 1984 to 1992, Dr. Lairson served as Director of the Permanente
Medical Groups Interregional Services, a position that coordinates the national
activities of over 9,000 physicians and supplies support services to the twelve
Permanente Medical Groups. Dr. Lairson currently serves as chairman of the
Garfield Fund, a research fund that distributes approximately $1.8 million
annually for projects aimed at improving the quality of care and at reducing
costs of medical care.
2
<PAGE>
CLASS III DIRECTORS
Allen M. Phipps, 58, is the Chairman of the Board of TDC. Since January
1996, Mr. Phipps has been President and Chief Executive Officer of SRI
Consulting, a subsidiary of SRI International. In 1995, Mr. Phipps was a Senior
Vice President of SRI International, a nonprofit research organization, and,
from 1992 to 1994, he was a Managing Director (President) and founding partner
of Business Engineering, Inc., a business development firm. From 1987 to 1992,
Mr. Phipps was an independent management consultant, and during that time he
also served as Chief Executive Officer of Bio-Electro Systems, Inc., a company
acquired by ALZA Corporation ("ALZA") in 1992. Mr. Phipps served as Executive
Vice President of the technology marketing firm of Regis McKenna Inc. from 1985
to 1987 and as the Chief Executive Officer of Sellectek, Inc. from 1984 to 1985.
From 1969 to 1984, Mr. Phipps served as Vice President and director of The
Boston Consulting Group.
William P. Sommers, PhD, 63, is the President and Chief Executive Officer
and a director of SRI International, a nonprofit research organization. From
1992 to 1993, Dr. Sommers served as Executive Vice President of Iameter, Inc., a
medical information and quality improvement services firm. Prior to joining
Iameter, from 1963 to 1992, Dr. Sommers held various positions with Booz-Allen &
Hamilton, an international management and technology consulting firm. Dr.
Sommers currently serves as a member of the Boards of Directors of Litton
Industries and Rohr, Inc. and as a trustee of the Zurich-Kemper Financial
Services Mutual Funds.
MEETINGS AND COMMITTEES OF THE BOARD
There were eleven meetings of the full Board during the 1996 fiscal year.
Each director attended at least 75% of the meetings of the full Board and the
committees of the Board on which he served. The Board has a Compensation
Committee and an Audit Committee. The members of the Compensation Committee are
Mr. Phipps and Drs. Lairson and Sommers, none of whom is an employee of TDC. The
Compensation Committee, which did not meet during 1996 but met late in 1995 and
early in 1997, approves TDC's compensation arrangements with its Chief Executive
Officer and the awarding of options under TDC's Amended and Restated 1993 Stock
Option Plan, although options have on occasion been awarded by the full Board.
The members of the Audit Committee are Mr. Phipps and Drs. Lairson and Blaschke,
none of whom is an employee of TDC. The Audit Committee was established to
consult with TDC's independent auditors concerning their auditing plan, the
results of their audit, the appropriateness of accounting principles used by TDC
and the adequacy of TDC's general accounting controls. The Audit Committee met
once during 1996.
TDC has no standing nominating committee. TDC's Bylaws provide that
stockholders may nominate candidates for election as directors by delivery of
written notice to TDC's Secretary at least sixty days in advance of the
stockholders' meeting or ten days after notice of the meeting is first given to
stockholders, whichever is later. Any such notice must set forth the name and
address of the nominating stockholder and the nominee, and such information
concerning both such persons as would be required by the rules and regulations
of the Securities and Exchange Commission to be included in a proxy statement
soliciting proxies for the election of the nominee. The notice must be
accompanied by the written consent of the nominee to serve as a director, if
elected.
Each director who is not an employee of TDC receives an annual retainer fee
of $20,000 and fees of $1,000 for each meeting day of the Board; the Chairman of
the Board receives an annual retainer fee of $30,000 and fees of $1,500 for each
meeting day of the Board. Pursuant to the automatic grant provision of TDC's
Amended and Restated 1993 Stock Option Plan, each of TDC's non-employee
directors received options to purchase 40,000 shares of Class A Common Stock
(60,000 shares in the case of the Chairman of the Board) when he joined the TDC
Board. All outstanding options that have been granted to non-employee directors
are exercisable at a price of $1.00 per share and vest in four equal annual
installments commencing on June 11, 1996, unless the exercise date is
automatically accelerated in the event of the liquidation, dissolution, merger,
consolidation or sale of TDC or upon the exercise of the Purchase Option
(described under "Certain Transactions") held by ALZA.
3
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, with respect to TDC's Chief Executive
Officer, certain information relating to compensation paid or accrued for
services in all capacities during the fiscal years ended December 31, 1996,
December 31, 1995 and December 31, 1994. All other officers of TDC are employees
of ALZA and do not receive any compensation from TDC.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY(1) BONUS(1) COMPENSATION(2)
- ----------------------------------------------------------------- --------- ---------- --------- -----------------
<S> <C> <C> <C> <C>
Gary L. Neil, PhD 1996 $ 275,000 $ 96,250 $ 5,724
President and Chief Executive Officer 1995 260,000 91,000 --
1994 250,000 87,500 --
</TABLE>
- ------------------------
(1) Amounts shown include all compensation earned and/or received by the Chief
Executive Officer and amounts earned but deferred at his election under
TDC's Executive Deferral Plan and under the Tax Deferral Investment Plan of
ALZA ("TDIP"), in which employees of TDC are entitled to participate.
(2) Amount shown for the fiscal year ended December 31, 1996 consists of: (i)
$4,724 representing interest in excess of 120% of the applicable federal
long-term rate on amounts deferred at the election of Dr. Neil under TDC's
Executive Deferral Plan, and (ii) $1,000 contributed by TDC to Dr. Neil's
account under the TDIP.
1996 OPTION GRANTS
No options were granted to TDC officers in 1996.
1996 AGGREGATED OPTION EXERCISES AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information relating to fiscal
year-end option values with respect to TDC's Chief Executive Officer. All other
officers of TDC are employees of ALZA and have not been granted any options to
purchase TDC shares. Dr. Neil did not exercise any options during fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END(1)
---------------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------- --------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary L. Neil, PhD 40,000 120,000 $ 405,000 $ 1,215,000
</TABLE>
- ------------------------
(1) Market value of underlying securities at fiscal year-end based on the
closing sales price on the Nasdaq Stock Market on December 31, 1996
($11.125) minus the exercise price of "in-the-money" options. At March 3,
1997, the closing sales price of TDC Class A Common Stock was $10.75.
4
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board is generally
responsible for decisions concerning the compensation to be paid to TDC's
executive officers. The Committee consists of Allen M. Phipps (Chairman), Dr.
Paul D. Lairson and Dr. William P. Sommers, each of whom is a non-employee
director of TDC. Currently, the President and Chief Executive Officer is the
only executive officer compensated by TDC.
The compensation of TDC's President and Chief Executive Officer, Dr. Gary L.
Neil, in fiscal 1993 was determined by ALZA prior to the appointment to the
Board of the current members of the Committee. ALZA advised TDC that, in
determining the compensation to be paid to Dr. Neil in 1993, ALZA's goal was to
provide compensation that would align Dr. Neil's compensation with TDC's
business and financial objectives and to reward Dr. Neil for strategic
management and the achievement of company objectives. The Committee decided to
continue in the same manner in determining Dr. Neil's fiscal 1994, 1995 and 1996
compensation. Such compensation consisted of (i) salary, which was based on such
factors as Dr. Neil's primary responsibility for meeting TDC's business and
financial objectives and a comparison to similar positions of responsibility at
comparable development-stage companies; and (ii) a year-end cash bonus award,
which was based on Dr. Neil's performance and the performance of TDC, measured
in terms of attainment of TDC's financial and business objectives. Dr. Neil
received a salary increase in 1996 (from 1995) of 5.45% to provide a cost of
living adjustment. Dr. Neil's cash bonus for 1996 was in recognition of the
substantial contributions of Dr. Neil during TDC's third critical full year of
operations. The bonus was intended to reflect the high level of performance by
Dr. Neil during 1996.
To the extent ascertainable, the Committee will consider the anticipated tax
treatment to TDC and to its executives of various payments but may not in all
cases limit executive compensation to that deductible by TDC under Section
162(m) of the Internal Revenue Code. The Committee will consider various
alternatives to preserving the deductibility of compensation payments to the
extent reasonably practicable and to the extent consistent with its other
compensation policies and objectives.
COMPENSATION COMMITTEE
Allen M. Phipps, Chairman
Paul D. Lairson
William P. Sommers
5
<PAGE>
ANNUAL COMPARISON OF CUMULATIVE TOTAL RETURN AMONG TDC,
THE NASDAQ STOCK MARKET AND THE NASDAQ PHARMACEUTICAL INDEX
The rules of the Securities and Exchange Commission require that TDC include
in this Proxy Statement a line-graph presentation comparing cumulative
stockholder returns on an indexed basis with a broad-based equity index and
either a nationally recognized industry standard index or an index of peer
companies selected by TDC. This comparison must cover the period beginning on
May 19, 1993 (which is the date on which the Class A Common Stock of TDC was
registered under Section 12 of the Securities Exchange Act of 1934) through
December 31, 1996. TDC's Class A Common Stock traded on the Nasdaq Stock Market
as part of Units, each Unit consisting of one share of Class A Common Stock of
TDC and one warrant to purchase one-eighth of one share of Common Stock of ALZA,
until June 11, 1996, when the TDC Class A Common Stock began to trade separately
from the ALZA warrants. Set forth below is a line graph illustrating the
performance of the Units beginning on May 21, 1993 (which is the date trading of
Units commenced on the Nasdaq Stock Market on a when-issued basis) through June
10, 1996 and the TDC Class A Common Stock beginning on June 11, 1996, as
compared with the performance of the Nasdaq Stock Market and the Nasdaq
Pharmaceutical Index. There can be no assurance that the performance of the TDC
Class A Common Stock will continue into the future with the same or similar
trends depicted in the graph below.
ANNUAL COMPARISON OF CUMULATIVE TOTAL RETURN AMONG TDC,
THE NASDAQ STOCK MARKET AND THE NASDAQ PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
5/21/93 12/31/93 12/30/94 12/29/95 12/31/96
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
TDC 100 110 113 145 223
PHARM INDEX 100 118 88 162 162
NASDAQ 100 112 110 155 191
</TABLE>
6
<PAGE>
BENEFICIAL STOCK OWNERSHIP
The following table sets forth beneficial ownership of TDC's voting
securities as of March 1, 1997 (except as otherwise indicated) (i) by each
person, entity or "group" of persons or entities known by TDC to be beneficial
owners of more than 5% of any class of TDC voting securities, (ii) by each
director, including nominees, and the Chief Executive Officer, and (iii) by all
executive officers and directors as a group. Except as described below, each
person has sole investment and voting power with respect to the securities
described in the table.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OWNERSHIP(1) CLASS(2)
- ----------------- -------------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C>
Class A Common
Stock J.P. Morgan & Co. Incorporated and its subsidiaries................. 911,839 11.8%
23 Wall Street
New York, NY(3)
Funds managed by Farallon Capital Management, Inc................... 869,600 11.2
One Maritime Plaza, Suite 1250
San Francisco, CA(4)
John D. Weil and related entities................................... 793,822 10.3
509 Olive Street, Suite 705
St. Louis, MO(5)
Merrill Lynch & Co., Inc. and
Merrill Lynch, Pierce Fenner & Smith
Incorporated...................................................... 463,795 6.0
World Financial Center
North Tower
250 Vesey Street
New York, NY(6)
Gary L. Neil, PhD................................................... 52,000 --
President and Chief Executive Officer
Terrence F. Blaschke, MD............................................ 20,700 --
Paul D. Lairson, MD................................................. 10,000 --
Allen M. Phipps..................................................... 25,000 --
William P. Sommers, PhD............................................. 12,919 --
All executive officers and directors of TDC
as a group (7 persons)............................................ 129,159 1.7
Class B Common ALZA Corporation
Stock 950 Page Mill Road
Palo Alto, CA(7).................................................... 100 100%
</TABLE>
- ------------------------
(1) Includes outstanding stock options, exercisable on or before April 30, 1997,
to purchase the number of shares of TDC Class A Common Stock set forth
below: 40,000 for Dr. Neil; 10,000 for Dr. Blaschke; 10,000 for Dr. Lairson;
15,000 for Mr. Phipps; 10,000 for Dr. Sommers; and 85,000 for all executive
officers and directors as a group.
(2) Percentages are not shown if holdings total less than 1% of total
outstanding shares.
(3) Information is as of December 31, 1996 as provided by the holders in
Amendment No. 1 to their Schedule 13G filed with the Securities and Exchange
Commission. As to such shares, the holders have
7
<PAGE>
provided the following information: sole voting power--726,280 shares;
shared voting power--150 shares; sole dispositive power--911,689 shares; and
shared dispositive power--150 shares.
(4) Information is as of December 12, 1996 as provided by the holders in
Amendment No. 4 to their Schedule 13D filed with the Securities and Exchange
Commission. The holders have shared voting and dispositive power with
respect to such shares.
(5) Information is as of March 7, 1997 as provided by the holder in Amendment
No. 2 to its Schedule 13D filed with the Securities and Exchange Commission.
The holder disclaims beneficial ownership of 37,500 of the total number of
shares reported as beneficially owned. The holder has sole voting and
dispositive power with respect to the remaining shares.
(6) Information is as of December 31, 1996 as provided by the holders in
Amendment No. 2 to their Schedule 13G filed with the Securities and Exchange
Commission. The holders have shared voting and dispositive power with
respect to such shares.
(7) ALZA holds beneficially and of record all outstanding shares of Class B
Common Stock of TDC. ALZA is also deemed, under the rules and regulations of
the Securities and Exchange Commission, to be the beneficial owner of all
outstanding shares of Class A Common Stock of TDC by virtue of the Purchase
Option described under "Certain Transactions."
CERTAIN TRANSACTIONS
ALZA has an option, exercisable in ALZA's sole discretion, to purchase all
(but not less than all) of the outstanding shares of TDC Class A Common Stock
(the "Purchase Option"). The Purchase Option is exercisable at any time until
December 31, 1999 (which exercise period may be shortened or lengthened in
certain circumstances). If the Purchase Option is exercised, the exercise price
will be the greatest of:
(a) $100 million;
(b) the greater of (i) 25 times the worldwide royalties and sublicensing
fees paid by ALZA to TDC during four specified calendar quarters or (ii)
100 times such royalties and sublicensing fees during a specified
calendar quarter, but in each case less any amounts previously paid by
ALZA to exercise any buy-out option with respect to any product;
(c) the fair market value of one million shares of ALZA Common Stock; or
(d) $325 million less all amounts paid by TDC under its development
agreement with ALZA (described below).
ALZA and TDC have a development agreement pursuant to which ALZA conducts
research and development activities on behalf of TDC. For activities conducted
by ALZA under the development agreement during fiscal 1996, TDC incurred
research and development expenses of approximately $100 million. ALZA also
performs certain administrative services for TDC under a services agreement
which is terminable at the option of TDC on 60 days' notice. Expenses incurred
by TDC for services rendered under the services agreement during fiscal 1996
were approximately $152,000.
In 1993, TDC made a loan in the amount of $300,000 to Dr. Gary L. Neil,
President and Chief Executive Officer of TDC, in connection with the purchase of
his California residence. The loan bears interest at the rate of 5.32% per annum
and is payable in full on or before September 8, 2002. Accrued interest is
payable by June 30 and December 31 of each year. In 1996, Dr. Neil paid $16,004
of accrued interest on the loan. Repayment of the loan is secured by a first
deed of trust on Dr. Neil's residence.
INDEPENDENT AUDITORS
Ernst & Young LLP has acted as TDC's auditor since TDC's inception and has
been selected as TDC's auditor for the fiscal year ending December 31, 1997. A
representative of Ernst & Young LLP will be present at the Annual Meeting, will
have an opportunity to make a statement if he or she desires to do so, and will
be available to respond to appropriate questions.
8
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS
TDC's Annual Report to Stockholders for the year ended December 31, 1996,
containing the audited balance sheets as of December 31, 1996 and 1995 and the
related statements of operations, stockholders' equity and cash flows since
inception, is a combined annual report to stockholders and report on Form 10-K
and is being mailed with this Proxy Statement to stockholders entitled to notice
of the Annual Meeting.
STOCKHOLDER PROPOSALS
TDC will, in future proxy statements of the Board, include stockholder
proposals complying with the applicable rules of the Securities and Exchange
Commission and the procedures set forth in TDC's Bylaws. In order for a proposal
by a stockholder to be included in the proxy statement of the Board relating to
the annual meeting of stockholders to be held in the spring of 1998, that
proposal must be received in writing by the Secretary of TDC no later than
November 27, 1997.
OTHER MATTERS
The Board knows of no other matters that will be presented at the Annual
Meeting. If, however, any matter is properly presented at the Annual Meeting,
the proxy solicited hereby will be voted in accordance with the judgment of the
proxyholders.
By Order of the Board of Directors,
DAVID R. HOFFMANN
SECRETARY
Palo Alto, California
March 27, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD AS SOON AS POSSIBLE IN THE ACCOMPANYING POSTPAID
ENVELOPE. YOUR DOING SO MAY SAVE TDC THE EXPENSE OF A SECOND MAILING.
9
<PAGE>
PROXY
THERAPEUTIC DISCOVERY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) ALLEN M. PHIPPS and DAVID R. HOFFMAN,
or either of them, each with full power of substitution, the lawful attorneys
and proxies of the undersigned to vote, as designated on the reverse side of
this proxy card, all of the shares of THERAPEUTIC DISCOVERY CORPORATION which
the undersigned shall be entitled to vote at the Annual Meeting of
Stockholders to be held on May 8, 1997 and at any adjournments and
postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). THIS PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO THE TIME IT IS VOTED BY ANY MEANS DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT.
----------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
----------------
<PAGE>
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS OF THERAPEUTIC DISCOVERY CORPORATION UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
1. To elect as Class I Director:
NOMINEE: Gary L. Neil, Ph.D.
FOR WITHHELD
/ / / /
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
WHEN NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED "FOR" THE ABOVE PROPOSAL.
Please date and sign exactly as name(s) appear(s) herein. If shares
are held jointly, each holder should sign. Please give full title and
capacity in which signing if not signing as an individual stockholder.
Signature:______________ Date:______ Signature:_____________ Date:_______
