<PAGE> 1
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 Rule 14a-11(c) or Rule 14a-12
HYSEQ, INC.
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(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 of 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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
HYSEQ, INC.
670 ALMANOR AVENUE
SUNNYVALE, CA 94086
April 15, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Hyseq, Inc. (the "Company") to be held at 9:00 a.m. Pacific Daylight Time on
Monday, May 24, 1999, at the Company's facility at 675 Almanor Avenue,
Sunnyvale, California 94086 (telephone number: 408-524-8100) for the following
purposes:
(1) election of two Class III directors; and
(2) ratification of the selection of the Company's independent auditors.
Each proposal is described in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement. A proxy card on which to indicate your vote is
also enclosed, along with a postage-paid return envelope. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE FOR EACH OF THESE PROPOSALS.
We realize not all of you will be able to attend the meeting and vote in
person. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD NOW SO THAT YOUR SHARES WILL
BE REPRESENTED. If you later decide to attend the meeting, you can always revoke
your proxy at that time and vote your shares in person.
Remember, your vote is important no matter how many or how few shares you
own.
Sincerely,
ROBERT D. WEIST
Chairman of the Board
LEWIS S. GRUBER
President and Chief Executive Officer
<PAGE> 3
HYSEQ, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 1999
The Annual Meeting of Stockholders (the "Meeting") of Hyseq, Inc. (the
"Company") will be held on Monday, May 24, 1999, at 9:00 a.m. Pacific Daylight
Time, at the Company's facility at 675 Almanor Avenue, Sunnyvale, California
94086 for the following purposes:
1. to elect two Class III directors;
2. to ratify the Company's selection of Ernst & Young LLP as the
independent auditors for the Company for fiscal year 1999; and
3. to transact any other business appropriate to the Meeting.
Only stockholders of record at the close of business on March 31, 1999 are
entitled to receive notice of, and to vote at the Meeting. A complete list of
stockholders eligible to vote at the Meeting will be available for inspection at
the Company's offices for at least ten days prior to the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
James N. Fletcher
Secretary
April 15, 1999
670 Almanor Avenue
Sunnyvale, California 94086
YOUR VOTE IS IMPORTANT
STOCKHOLDERS ARE URGED TO DESIGNATE THEIR CHOICES ON EACH OF THE MATTERS TO
BE ACTED UPON AND TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED. YOUR PROMPT RETURN OF THE PROXY CARD WILL HELP
ASSURE THAT THERE ARE ENOUGH SHARES REPRESENTED TO HAVE A VALID MEETING AND
AVOID THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
<PAGE> 4
HYSEQ, INC.
670 ALMANOR AVENUE
SUNNYVALE, CA 94086
408-524-8100
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
Hyseq, Inc. (the "Company") has sent this Proxy Statement to you in
connection with the solicitation of proxies for the annual meeting of the
Company's stockholders (the "Meeting"). The Meeting will be held at 9:00 a.m.
Pacific Daylight Time on Monday, May 24, 1999.
RECORD DATE: The Company chose the close of business on March 31, 1999 as
the record date for the Meeting (the "Record Date"). All holders of record on
March 31, 1999 of the Company's common stock par value $.001 per share will be
entitled to vote at the Meeting. On the Record Date, there were 12,981,352
shares of common stock outstanding.
MAILING DATE: The date of this Proxy is April 15, 1999. This Proxy
Statement and proxy card are being mailed on or about April 16, 1999.
RETURNING YOUR PROXY: If you do not attend the Meeting you may still vote
your shares at the Meeting by signing and returning your proxy card. If you
specify a choice on your proxy card, your shares will be voted according to your
choice. If you sign and return your proxy card but do not mark any choices, then
your shares will be voted:
(1) FOR election of the two Class III directors; and
(2)FOR ratification of the Company's selection of Ernst & Young LLP as its
independent auditors.
Your signed proxy also gives the persons named on the proxy card, called
the proxies, the authority to vote your shares in the event that other matters
are properly brought up at the Meeting.
REVOKING YOUR PROXY: Even if you sign and return your proxy card, you can
always revoke it. By delivering a written notice of revocation or sending a
subsequent signed proxy card, you can terminate the original proxy you sent to
the Company, if the revocation or subsequent signed proxy is received by the
Company prior to the Meeting. If you sign and return your proxy card, but then
attend the Meeting, you can revoke your proxy by voting in person at the
Meeting.
QUORUM: A majority of the outstanding shares of the Company, represented in
person or by proxy, constitutes a quorum. A quorum is the number of represented
stockholders needed to have a valid meeting to transact business.
VOTING: A majority vote of the quorum is needed to approve or disapprove
each proposal. Shares represented by valid proxies, those proxies that have been
received in time for the Meeting and have not been revoked, will be voted at the
Meeting.
The Company shall tabulate the vote as follows:
(1) abstentions are treated as votes against a proposal;
(2) executed proxies are voted as indicated;
(3) executed proxies with no preferences are treated as votes for a
proposal; and
(4) broker non-votes have no effect on the vote on a given proposal. A
broker non-vote occurs when a broker votes some matters on the proxy
card but not others because the broker lacks authority.
<PAGE> 5
COST OF SOLICITATION: The Company bears the entire cost of the Meeting,
including the solicitation of proxies. The Company asks banks, brokers and other
institutions, nominees and fiduciaries to forward the proxy material to their
principals to obtain authority to execute proxies. The Company reimburses them
for expenses. In addition to the solicitation of proxies by mail, the Company's
directors, officers and/or employees may solicit proxies in person or by
telephone.
ANNUAL REPORTS: The Company is mailing the Annual Report to Stockholders
for the fiscal year 1998 along with this Proxy Statement. The Company's Annual
Report to Stockholders includes financial statements of the Company for the year
ended December 31, 1998. If you would like a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 that the Company filed
with the Securities and Exchange Commission (the "Commission"), the Company will
send you one without charge. Please write to:
Secretary
Hyseq, Inc.
670 Almanor Avenue
Sunnyvale, California 94086
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of common stock as of March 31, 1999 (except as otherwise
indicated in the footnotes below) by: (a) each of the Company's directors; (b)
each executive officer named in the Summary Compensation Table; (c) all
directors and executive officers of the Company as a group; and (d) by each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding shares of common stock:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
-----------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS(2) SHARES %(3)
------------------- --------- ----------
<S> <C> <C>
Robert D. Weist(4).......................................... 227,835 1.8
Lewis S. Gruber(5).......................................... 870,227 6.6
Radoje T. Drmanac(6)........................................ 937,259 7.1
James N. Fletcher(7)........................................ 30,718 *
Raymond F. Baddour(8)....................................... 36,060 *
Greta E. Marshall(9)........................................ 40,400 *
Thomas N. McCarter III(10).................................. 101,340 *
Ernst Schweizer(11)......................................... 11,520 *
Janice M. LeCocq(12)........................................ 11,520 *
Radomir B. Crkvenjakov(13).................................. 631,901 4.9
Christopher R. Wolf(14)..................................... 452,112 3.5
Ryback Management Corporation(15)........................... 1,002,000 7.7
7711 Carondelet Ave.
Box 169000
St. Louis, MO 63105
Institute of Molecular Genetics and Genetic
Engineering(16)........................................... 708,480 5.5
Vojode Stepe 283
P. O. Box 794
11001 Belgrade Yugoslavia
PE Corporation(17).......................................... 766,921 5.9
761 Main Ave.
Norwalk, CT 06859
All directors and executive officers of the Company, as a
group (11 persons)(18).................................... 3,350,892 24.3
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1% of the common stock.
(1) Beneficial ownership is a technical term determined in accordance with the
rules of the Commission. Beneficial ownership generally means whether a
stockholder can vote or sell the stock either directly or indirectly.
Shares of common stock issuable pursuant to stock options currently
exercisable, or exercisable within 60 days after March 31, 1999, are deemed
outstanding for purposes of computing the percentage owned by the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person.
(2) Unless otherwise indicated, the persons named in the table above have the
sole voting and investment power with respect to all shares beneficially
owned by them. Unless otherwise indicated, the address of each beneficial
owner is: c/o Hyseq, Inc., 670 Almanor Avenue, Sunnyvale, California 94086.
(3) Applicable percentage ownership is based on 12,981,352 shares of common
stock outstanding as of March 31, 1999.
(4) Includes 20,160 shares issuable upon exercise of options. Also includes
207,675 shares held by the Weist Family Trust of which Mr. Weist is
trustee.
(5) Mr. Gruber holds shares individually, jointly with his wife and through a
corporation and a partnership that they control. Includes 292,669 shares
issuable upon exercise of options and 1,200 shares issuable upon the
exercise of warrants.
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<PAGE> 7
(6) Includes 147,043 shares issuable upon exercise of options and 1,200 shares
issuable upon the exercise of warrants. Also includes 80,536 shares
issuable upon exercise of options held individually by Dr. Radoje Drmanac's
spouse, Dr. Snezana Drmanac. Dr. Radoje Drmanac disclaims beneficial
ownership of any shares owned by, or issuable upon the exercise of options
held by, Dr. Snezana Drmanac. Also includes 100,000 shares held by each of
the Drmanac Family Irrevocable Trust A and the Drmanac Family Irrevocable
Trust B of which Dr. Radoje Drmanac and his wife are trustees.
(7) Includes 24,878 shares issuable upon exercise of options and 1,200 shares
issuable upon the exercise of warrants.
(8) Shares are issuable upon exercise of options.
(9) Includes 36,060 shares issuable upon exercise of options.
(10) Mr. McCarter owns 76,800 shares through a partnership which he controls.
Includes 24,540 shares issuable upon exercise of options.
(11) Shares are issuable upon exercise of options.
(12) Shares are issuable upon exercise of options.
(13) Includes 1,200 shares issuable upon the exercise of warrants. Also includes
34,000 shares held by a trust for the benefit of Dr. Crkvenjakov's son of
which Dr. Crkvenjakov is trustee.
(14) Includes 3,120 shares issuable upon exercise of warrants and 108,000 shares
issuable upon exercise of options, which options to purchase shares expired
on April 8, 1999. Does not include 76,800 shares owned by a partnership
controlled by Mr. McCarter and of which Mr. Wolf is a partner.
(15) Information based solely on a Schedule 13G/A filed with the Commission on
February 8, 1999, representing holdings as of December 31, 1998, which
schedule states that shares are held by the Lindner Growth Fund, a series
of the Lindner Investment Series Trust and by Ryback Management
Corporation, the financial advisor to the Lindner Investment Series Trust.
Ryback has sole power to vote all these shares.
(16) Information based solely on a Schedule 13G filed with the Commission on
February 17, 1998, representing stockholdings as of December 31, 1997. The
708,480 shares issued to the Institute of Molecular Genetics and Genetic
Engineering are being held by the First National Bank of Chicago and cannot
be voted or disposed of until certain restrictions imposed by the United
States Department of the Treasury are satisfied.
(17) Information based solely on a Schedule 13D filed with the Commission on
August 22, 1997.
(18) Includes 800,906 shares issuable upon exercise of options or warrants.
MANAGEMENT
DIRECTORS
The Company's Amended and Restated Articles of Incorporation, as amended,
and By-Laws, as amended, provide for the Company's business to be managed by or
under the direction of its Board of Directors (the "Board"). The Board is
divided into three classes, with the members of each class serving for a
staggered three-year term. The Board currently comprises:
- three Class I directors: Mr. Weist, Mr. Gruber and Dr. LeCocq;
- three Class II directors: Dr. Baddour, Ms. Marshall and Dr. Schweizer;
and
- two Class III directors: Dr. Drmanac and Mr. McCarter.
At each annual meeting of stockholders, the appropriate number of directors
will be elected for a three-year term to succeed the directors of the same class
whose terms are then expiring. The terms of the Class I directors and the Class
II directors expire in calendar years 2000 and 2001, respectively. Because the
terms of the Class III directors expire in 1999, the Class III directors will be
elected at the Meeting for three-year terms expiring in 2002. On March 10, 1999,
the Board was increased to nine directors, with Class I and
4
<PAGE> 8
Class II each being increased to three members and Class III being decreased to
three members. Dr. LeCocq was appointed to fill the vacancy created in Class I
and Dr. Schweizer was appointed to fill the vacancy created in Class II. On
March 12, 1999, Kenneth D. Noonan, who was a Class III director, resigned from
the Board creating a vacancy in Class III. The Board met nine times in 1998. No
director attended less than 75% of the Board meetings.
The following table sets forth the names, ages and positions of the
directors of the Company as of March 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert D. Weist(1)(2)............ 59 Chairman of the Board of
Directors
Lewis S. Gruber.................. 48 President, Chief Executive
Officer and Director
Radoje T. Drmanac, Ph.D. ........ 41 Chief Scientific Officer and
Director
Raymond F. Baddour, 74 Director
Ph.D.(1)(3)....................
Greta E. Marshall(2)............. 61 Director
Thomas N. McCarter III(3)........ 69 Director
Janice M. LeCocq, Ph.D. ......... 49 Director
Ernst Schweizer, Ph.D. .......... 64 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Nominating Committee.
(3) Member of the Audit Committee.
Robert D. Weist has served as Chairman of the Board of Directors of the
Company since March 1994 and served as the President and a director of the
Company from May 1993 until March 1994. Mr. Weist has also been President of
Weist Associates, a management consulting firm, since April 1992. Mr. Weist was
a consultant to and Senior Vice President, Administration, General Counsel and
Secretary of Amgen Inc., a biotechnology company ("Amgen"), from January 1986
through April 1992, and served as its Vice President, General Counsel and
Secretary from May 1982 to January 1986. Mr. Weist also serves as a director of
BioSource International Inc., a biological products supplier. Mr. Weist holds a
B.S. in chemical engineering from Purdue University, a J.D. from New York
University and an M.B.A. from the University of Chicago.
Lewis S. Gruber, a founder of the Company, has been the Chief Executive
Officer, President and a director since joining the Company in June 1994. From
January 1989 until June 1994, Mr. Gruber was a partner with the law firm of
Marshall, O'Toole, Gerstein, Murray & Borun, which has represented the Company
as one of its patent counsel since May 1992. Mr. Gruber holds a B.S. in
sociology, an M.S. in cell biology and genetics from the University of Arizona,
and a J.D. from Arizona State University.
Radoje T. Drmanac, Ph.D. joined the Company in August 1994 and serves as
Chief Scientific Officer and a director. Dr. Drmanac co-invented sequencing by
hybridization ("SBH") technology while at the Institute of Molecular Genetics
and Genetics Engineering in Belgrade, Yugoslavia, where he conducted research
from May 1986 until February 1991. Dr. Drmanac served as a Molecular Biologist
and Group Leader at Argonne National Laboratory from February 1991 until August
1994. Dr. Drmanac was a member of the Editorial Board of the International
Journal of Genome Research from 1992 to 1994, and has been a member of the Human
Genome Organization since 1992. Dr. Drmanac received his Ph.D. from Belgrade
University and conducted post-doctoral studies at the Imperial Cancer Research
Fund in London.
Raymond F. Baddour, Ph.D. has served as a director of the Company since
December 1993. Since July 1989, Dr. Baddour has served as the Lammot du Pont
Professor of Chemical Engineering, Emeritus, at the Massachusetts Institute of
Technology where he formerly served as the Lammot du Pont Professor of Chemical
Engineering from 1973 to 1989. Dr. Baddour also serves as a director of Ascent
Pediatrics, Inc., a pharmaceutical company, Scully Signal Co., an equipment
manufacturing company, and MatTek Corporation, a bio-materials company, and was
formerly a director of Amgen. Dr. Baddour holds a B.S. in chemical
5
<PAGE> 9
engineering from Notre Dame University and an M.S. and Sc.D. from the
Massachusetts Institute of Technology.
Greta E. Marshall has served as a director of the Company since July 1994.
Ms. Marshall is a principal of The Marshall Plan, an investment management
company, which she founded in 1989. From 1985 until 1989, Ms. Marshall was
Investment Manager of the California Public Employee's Retirement System, a
public pension organization. Ms. Marshall is also a director of EG&G Inc., a
technology and scientific instrument company. Ms. Marshall holds a B.A. in
english and an M.B.A. from the University of Louisville.
Thomas N. McCarter III has served as a director of the Company since
October 1996. Mr. McCarter currently serves as Chairman of the Ramapo Land
Company, a real estate company, and is a general partner of Miles Timber
Properties, a land company, positions he has held for more than five years. Mr.
McCarter is a director and was a former Chairman of Stillrock Management, Inc.,
an investment company, is a director of Parock Group, a diversified investment
company, and is a director of other closely-held companies. Mr. McCarter
attended Princeton University from 1948 to 1951 and has been a Certified
Investment Counselor since 1972.
Janice M. LeCocq, Ph.D. has served as a director of the Company since March
1999. Dr. LeCocq has been a managing partner of Collins, Mabry & Co., a
consulting firm, since December 1998. From December 1994 until December 1998,
Dr. LeCocq was the Chairman and Chief Executive Officer of Gryphon Sciences, a
privately held biotechnology company which is commercializing chemical protein
synthesis technology. Dr. LeCocq served as the Executive Vice President of
Finance and Administration and Chief Financial Officer of ICOS Corporation, a
biopharmaceutical company, from September 1990 to December 1994 and continues to
serve as a director of ICOS. Dr. LeCocq has also served as General Partner,
Corporate Finance and as a biotechnology analyst at Montgomery Securities. Dr.
LeCocq received her Ph.D. from Stanford University.
Ernst Schweizer, Ph.D. has served as a director of the Company since March
1999. Dr. Schweizer is currently the President of Medarex Europe and Managing
Director of Medarex, Inc. Prior to joining Medarex, a biopharmaceutical company
focused on the development of antibodies, in January 1999, Dr. Schweizer served
as the Deputy Head of Business Development & Licensing at Novartis, a
pharmaceutical company, and was the Chief Scientific and Technical Officer in
Business Development & Licensing at CIBA-Geigy, before its consolidation into
Novartis, during a 36-year tenure with that company. Dr. Schweizer received his
Ph.D. from the University of Stuttgart and holds numerous patents.
BOARD COMMITTEES
Compensation Committee
In April 1994, the Board established a Compensation Committee. The
Compensation Committee reviews, and makes recommendations to the Board, on the
Company's compensation policies, practices and procedures designed to contribute
to the success of the Company. The Compensation Committee administers the 1995
Employee Stock Option Plan (the "1995 Plan") and the Non-Employee Director Stock
Option Plan (the "Directors Plan"). No member of the Compensation Committee was
at any time during the past three fiscal years an officer or employee of the
Company or any subsidiary of the Company. Mr. Weist, however, serves without
compensation, other than as a director, as the Chairman of the Company's Board.
Dr. Baddour, as the Chairperson, and Mr. Weist presently serve on the
Compensation Committee, which met two times during 1998.
Audit Committee
In March 1997, the Board established an Audit Committee. The Audit
Committee reviews the Company's annual audit and meets with the Company's
independent auditors to review the Company's internal controls and financial
management practices. Mr. McCarter, as the Chairperson, and Dr. Baddour
presently serve on the Audit Committee, which met five times during 1998. Dr.
Noonan, who resigned from the Board on March 12, 1999, was also a member of the
Audit Committee.
6
<PAGE> 10
Nominating Committee
In October 1996, the Board established a Nominating Committee. The
Nominating Committee considers and recommends individuals for Board membership
and senior management positions. Ms. Marshall, as the Chairperson, and Mr. Weist
presently serve on the Nominating Committee, which met once during 1998. The
Nominating Committee will consider stockholders' nominations for directors only
if notice is received at the principal office of the Company not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting of the stockholders.
DIRECTOR COMPENSATION
The Company pays all non-employee directors a fee of $2,500 for each Board
meeting attended in person or by telephone, subject to an overall cap of $10,000
per year. Each non-employee director earned $10,000 in 1998. Employees of the
Company who are also directors do not receive any director fees. All directors
are reimbursed for reasonable expenses incurred in attending Board meetings.
Directors also receive fees of $1,000 for each Committee meeting attended in
person, which Committee fees are not subject to the $10,000 cap.
In October 1996, the stockholders approved the Directors' Plan. Under the
Directors' Plan, each new non-employee director receives a one-time grant of
options to purchase 23,040 shares of common stock, of which 11,520 shares become
exercisable immediately, with the balance becoming exercisable in two equal
allotments on the first and second anniversaries of joining the Board. The
Directors' Plan also provides that all non-employee directors automatically
receive options to purchase up to 5,760 shares each year (such that the amount
received under the Directors' Plan when added to all other options granted to a
director which become exercisable in that year total 5,760) on the date of each
annual meeting of the stockholders. In accordance with the Directors' Plan, Mr.
Weist, Dr. Baddour and Ms. Marshall each received options to purchase 960 shares
immediately following the annual meeting of the stockholders in 1998. All
non-employee directors will receive options to purchase 5,760 shares immediately
following the Meeting. Dr. Baddour and Ms. Marshall also each received options
to purchase 2,460 shares, and Mr. McCarter received options to purchase 1,500
shares in 1998 in recognition of their services as chairpersons of Board
committees, as a result of which the options to purchase 960 shares granted in
May 1998 to each of Dr. Baddour and Ms. Marshall under the Directors' Plan were
canceled. A total of 138,240 shares of common stock have been reserved and are
available for purchase upon the exercise of options granted under the Directors'
Plan, of which options to purchase 49,920 shares were issued and outstanding at
December 31, 1998.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The names of, and certain information regarding, executive officers and key
employees of the Company who are not also directors, are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark E. Gitter......... 45 Chief Financial Officer
James N. Fletcher...... 46 Senior Vice President of Administration,
General Counsel and Secretary
Snezana Drmanac, 37 Vice President of SBH Biochemistry
M.D. ................
Nandini Tandon, 36 Vice President of Corporate Development
Ph.D. ............... and Corporate Communications
David M. Rosen, 44 Vice President of Operations
Ph.D. ...............
</TABLE>
Mark E. Gitter served as the Company's Director of Finance and Controller
from July 1998 until March 1999 when he was promoted to Chief Financial Officer.
Prior to joining the Company in 1998, Mr. Gitter was at Syntex Corporation, a
pharmaceutical company, for more than 13 years in various finance positions.
Prior to joining Syntex, he worked at Intel Corporation and Deloitte & Touche.
Mr. Gitter is a CPA and received his MBA in accounting and health care fiscal
management and a B.S. in biochemistry from the University of Wisconsin.
7
<PAGE> 11
James N. Fletcher served as the Company's Vice President of Administration
from September 1994 until March 1998, and has served as its Secretary since
April 1996 and as its General Counsel and Senior Vice President of
Administration since March 1998. Mr. Fletcher was an independent consultant to
the Company from April 1994 until September 1994. Mr. Fletcher served as General
Counsel and a consultant to National Business Funding, a development-stage
financial services company, from July 1993 until May 1994, as Assistant General
Counsel of ComputerLand Corporation, a computer reseller, from November 1990
until December 1992 and served as a consultant from December 1992 until May
1993. Mr. Fletcher holds a B.S. in political science from Arizona State
University and a J.D. from the University of Arizona.
Snezana Drmanac, M.D. joined the Company in August 1994 as a Senior
Scientist and became the Director of SBH Biochemistry Development in May 1997.
On January 1, 1999, Dr. Drmanac was appointed Vice-President of SBH
Biochemistry. Prior to joining the Company, Dr. Drmanac was a Junior Scientist
at Argonne National Laboratory from 1991 to 1994, leading the project of
developing and implementing SBH in DNA library screening. From 1989 to 1990, Dr.
Drmanac worked as a Scientific Officer in the Genome Analysis Department in the
Imperial Cancer Research Fund in London. Dr. Drmanac also served as a Research
Associate at the Genome Structure Unit Division in the Center of Genetic
Engineering in Belgrade. Dr. Drmanac earned her M.D. at the University of
Belgrade.
Nandini Tandon, Ph.D. served as the Company's Director and Senior Director
of Corporate Development from April 1998 until March 1999 when she was named as
the Company's Vice President of Corporate Development and Corporate
Communications. Prior to joining the Company, Dr. Tandon was at Chiron
Corporation, a biopharmaceutical company, where she served as a Commercial
Development Manager and Corporate Development and Technology Licensing Analyst
from May 1995 until April 1998. Prior to joining Chiron, Dr. Tandon was a
Medical Representative at Glaxo Inc., a pharmaceutical company, from 1993 to
1995 and was an Academic Marketing Specialist for the Center of Microelectronics
in Research Triangle Park from 1989 to 1992. Dr. Tandon received her Ph.D. in
inorganic biochemistry from Duke University.
David M. Rosen, Ph.D. joined the Company in March 1999 as Vice President of
Operations. Prior to joining the Company, Dr. Rosen was Senior Vice President,
Research and Development, in charge of clinical research and manufacturing
operations, at Celtrix Pharmaceuticals from May 1998 to October 1998. During his
seven years at Celtrix, and an additional nine years at Celtrix's parent
company, Collagen Corporation, Dr. Rosen served as Vice President of Research
and Development, Director of Research and was Project Manager for a variety of
biopharmaceutical projects in cell and molecular biology, bone and osteoporosis
research and growth factors. Dr. Rosen holds a Ph.D. and B.S. in biochemistry
from the University of California, Riverside.
8
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for the three fiscal
years ended December 31, 1998 by the Company's Chief Executive Officer and,
based on actual or annualized salaries, the four other most highly compensated
executive officers (the "Named Executive Officers"). No other executive
officer's compensation exceeded $100,000 for the fiscal year ended December 31,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD
----------------------------- ------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) COMPENSATION COMPENSATION($)
---------------------------- ------ --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Lewis S. Gruber(1)........................ 1998 237,500 50,000 30,000 56,299(1)
President and 1997 200,000 -0- -0- 49,651(1)
Chief Executive Officer 1996 200,000 -0- 42,240 -0-
Christopher R. Wolf(2).................... 1998 195,000 -0- -0- 62,257(2)
Executive Vice President and 1997 127,083 25,000 -0- 70,635(2)
Chief Financial Officer 1996 10,416 -0- 144,000 30,000(2)
Radoje T. Drmanac(3)...................... 1998 186,500 63,680 24,000 -0-
Chief Scientific Officer 1997 146,000 13,680 28,215 -0-
1996 146,000 13,680 35,476 46,200(3)
James N. Fletcher......................... 1998 143,750 -0- 11,000 -0-
Senior Vice President of 1997 104,167 -0- 29,354 -0-
Administration and 1996 93,167 -0- 11,852 -0-
General Counsel
Radomir B. Crkvenjakov(3)................. 1998 140,730 13,680 19,000 -0-
Co-Senior Vice President 1997 146,000 13,680 29,334 -0-
for Research 1996 146,000 13,680 35,476 46,200(3)
</TABLE>
- ---------------
(1) In December 1996, Mr. Gruber purchased 48,000 shares at $1.56 per share and
144,000 shares at $2.90 per share using the proceeds of a loan from the
Company in the amount of $492,000. In March 1997, Mr. Gruber purchased
179,712 shares at $6.51 per share using the proceeds of a loan from the
Company in the amount of $1,170,000. These shares vested over a period of
two years ending in March 1999. Each of Mr. Gruber's loans bears interest at
a rate of 3% per annum. The value representing the difference between the
applicable federal rates on the dates of the loans and the 3% interest rates
charged on each of the loans, is included as "Other Compensation."
(2) Mr. Wolf joined the Company in December 1996 and received compensation based
on an annual salary of $125,000. Also in December 1996, Mr. Wolf purchased
161,280 shares at $4.17 per share using the proceeds of a loan from the
Company in the amount of $672,000. These shares vested over a period of two
years ending in December 1998. In March 1997, Mr. Wolf purchased 179,712
shares at $6.51 per share using the proceeds of a loan from the Company in
the amount of $1,170,000. These shares vested over a period of two years
ending in March 1999. Each of Mr. Wolf's loans bears interest at a rate of
3% per annum. The value representing the difference between the applicable
federal rates on the dates of the loans and the 3% interest rates charged on
each of the loans, is included as "Other Compensation." Mr. Wolf received a
one-time reimbursement for relocation expenses of $30,000 in 1996, and
received $14,650 during 1997 toward mortgage payments on an out-of-state
property which was sold in conjunction with Mr. Wolf's move. Mr. Wolf
resigned in March 1999.
(3) Pursuant to the terms of employment agreements which were effective through
July 31, 1998, each of Drs. Drmanac and Crkvenjakov were entitled to annual
bonuses of $13,680 and were entitled to a one-time special bonus of $91,200
when the Company reached $8.5 million of funding. Although the funding level
was reached in 1995, the special bonuses were not paid until January 1996.
As a condition of payment for the special bonuses, Drs. Drmanac and
Crkvenjakov forfeited options to purchase 57,600 shares and 48,000 shares
respectively, at an exercise price of $1.56 per share and their two-year
9
<PAGE> 13
employment agreements were automatically extended to terms of four years
(expiring on July 31, 1998 as indicated above). The amounts paid were offset
against loans made in August 1994 by the Company to each of Drs. Drmanac and
Crkvenjakov in the amount of $45,000, such that each of Drs. Drmanac and
Crkvenjakov received a net payment of $46,200 in January 1996. Dr.
Crkvenjakov retired in October 1998, but still serves as a consultant to the
Company on a part-time basis and is a member of its Scientific Advisory
Board.
OPTION GRANTS IN 1998
The following table sets forth the Company's grant of options to purchase
common stock during 1998 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OPTION TERM(2)($)
OPTIONS TO EMPLOYEES PRICE($) EXPIRATION ---------------------
NAME GRANTED(1) IN 1998 (PER SHARE) DATE 5% 10%
---- ---------- ------------ ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lewis S. Gruber.................. 30,000 7.3 4.75 10/29/08 89,617 227,108
Christopher R. Wolf(3)........... -0- -0- N/A N/A N/A N/A
Radoje T. Drmanac................ 24,000 5.8 4.75 10/29/08 71,694 181,687
James N. Fletcher................ 11,000 2.7 4.75 10/29/08 32,860 83,273
Radomir B. Crkvenjakov(4)........ -0- -0- N/A N/A N/A N/A
</TABLE>
- ---------------
(1) All options were granted pursuant to the 1995 Plan and become exercisable in
four equal annual installments commencing one year after the date of grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent upon the future
market performance of the Company's common stock and the date on which the
options are exercised. The amounts represented in this table may not
necessarily be achieved.
(3) Mr. Wolf resigned in March 1999.
(4) Dr. Crkvenjakov retired in October 1998.
The following table sets forth for each of the Named Executive Officers
whether they exercised any options to purchase common stock during the year
ended December 31, 1998, and the number of shares subject to both exercisable
and unexercisable stock options as of December 31, 1998.
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1998 DECEMBER 31, 1998(2)($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lewis S. Gruber............. 2,034 7,680 292,669 54,700 996,786 41,676
Christopher R. Wolf......... -0- -0- 108,000 36,000 116,640 38,880
Radoje T. Drmanac........... -0- -0- 139,990 62,900 444,244 31,157
James N. Fletcher........... -0- -0- 17,540 40,368 11,018 13,440
Radomir B. Crkvenjakov(3)... 17,738 12,505 105,600 -0- 389,664 -0-
</TABLE>
- ---------------
(1) Based on the fair market value at the date of exercise minus the exercise
price as determined by the Board prior to the Company's initial public
offering.
(2) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Company's common stock of $5.25, the closing sale
price per share of the Company's common stock as reported by the Nasdaq
National Market on December 31, 1998.
10
<PAGE> 14
(3) Dr. Crkvenjakov retired in October 1998; nonqualified options granted in
1994 and vested as of his retirement date remained exercisable through
January 15, 1999 at which time he completed a cashless exercise of options
with the Company to purchase 105,600 shares.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board comprises Dr. Baddour, the
Compensation Committee's Chairperson, and Mr. Weist. The Compensation
Committee's responsibilities include recommending to the Board the compensation
for the Company's executive officers, grants of stock options to employees of
the Company, and administering the Company's stock option plans. The
Compensation Committee bases its decisions on the Company's executive
compensation philosophy, which seeks to relate salaries, bonuses and stock
option awards to the Company's success in meeting annual and long-term
performance goals, to reward individual achievement and to attract and retain
qualified executives.
The Company sets its executive officers' salaries in the mid-range compared
to those with similar management positions in peer companies consisting
primarily of other genomics and biotechnology companies. The level of salaries
paid to executive officers of the Company also takes into account the
technological achievements of the Company during the year, its success in
entering into significant technology agreements with collaborators, as well as
an evaluation of the individual performance and contribution of each executive
to the Company's performance for the year. Particular emphasis is placed on the
individual officer's level of responsibility for and role in meeting the
Company's strategic, technological and financial objectives. Because of the
Company's stage of development, the Committee has not used either the
profitability of the Company or the market value of its stock as a significant
factor in consideration for setting executive officer salaries.
BONUSES
The Company awards bonuses for accomplishments achieved during the past
year. The Compensation Committee determines the amount of the bonus, with advice
from Company management. The Compensation Committee decides the amount based
upon an assessment of the individual's contributions during the year, compared
to (but not restricted to) a list of goals previously approved by management and
the Compensation Committee. The Compensation Committee also considers general
factors relating to the Company in setting the size of the bonus pool and
adjusts bonuses based on those factors as well. In determining bonuses for the
fiscal year ended December 31, 1998, the Compensation Committee considered,
among other accomplishments:
- the establishment of new collaborations with the Pharmaceutical Division
of the Kirin Brewery Company, Ltd. and with the University of California
at San Francisco;
- commencement of production of the Company's HyChip chips;
- continued growth of the Company's HyGenomics(TM)database of partial human
gene sequences, which the Company believes to be the largest such
database in the world;
- announcements of potential therapeutic product candidates; and
- filing of patent applications on numerous gene discoveries, apparatus and
processes.
STOCK OPTIONS
Stock options awards are intended to align the interests of executives with
the interests of the stockholders in the long-term performance of the Company.
The Compensation Committee developed guidelines for executive stock option
awards, in consultation with management of the Company. The guidelines are based
upon:
- analysis of long-term incentive awards based on each individual
executive's position;
- responsibilities, performance and contribution to the achievement of the
Company's long-term goals; and
11
<PAGE> 15
- competitive stock option data from other genomics and biotechnology
companies.
In addition, the Committee reviews the equity position of all executive
officers on an annual basis and awards stock options to executive officers
periodically.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The 1998 compensation of Mr. Lewis S. Gruber, the Company's Chief Executive
Officer and President, took into account the above policies and specific
milestones achieved by the Company during the prior year. The Committee believes
that Mr. Gruber's salary of $237,500 for 1998 (plus a bonus of $50,000 paid in
March 1998 in recognition of accomplishments in 1997) was in the low to middle
range compared to CEOs in peer companies consisting primarily of other genomics
and biotechnology companies. Mr. Gruber also received options to purchase 30,000
shares in 1998.
COMPENSATION COMMITTEE
Raymond F. Baddour, Ph.D., Chairman
Robert D. Weist
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the Company's
cumulative total stockholder return on its common stock, for the period from
August 7, 1997 (the date of the Company's initial public offering) through
December 31, 1998, with the comparable return of two indexes: The Nasdaq Market
Index and the Hambrecht & Quist Biotechnology Index. The Company has not paid
any dividends on its common stock, and no dividends are included in the
representation of the Company's performance. The graph assumes you invested $100
in the Company's common stock and in each of the indices on August 8, 1997. The
stock price performance on the graph below is not necessarily indicative of
future price performance.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
HYSEQ INC. BIOTECHNOLOGY INDEX NASDAQ MARKET INDEX
---------- ------------------- -------------------
<S> <C> <C> <C>
'8/08/97' 100.00 100.00 100.00
'12/31/97' 64.71 98.21 98.95
'12/31/98' 35.29 149.55 139.56
</TABLE>
At December 31, 1998, the closing price of the Company's common stock was
$5.25 per share.
12
<PAGE> 16
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers and persons who beneficially own more than 10% of the
Company's common stock to file with the Commission initial reports of beneficial
ownership and reports of changes in beneficial ownership of the common stock and
other equity securities of the Company. Officers, directors and greater than 10%
beneficial owners are required by Commission regulation to furnish the Company
with copies of all Section 16(a) forms they file. Specific due dates for these
reports have been established by the Commission and the Company is required to
disclose in this Proxy Statement any failure to file by such due dates during
fiscal 1998.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.
CERTAIN TRANSACTIONS
In December 1993, Lewis S. Gruber, a director and executive officer of the
Company, received a warrant to purchase 144,000 shares of common stock at $2.90
per share in exchange for the assignment of all right, title and interest in and
to certain patent rights relating to diagnostic applications owned by him. In
connection with Mr. Gruber's employment by the Company in June 1994, Mr. Gruber
was granted a 10-year option to purchase 345,600 shares of common stock at an
exercise price of $1.56 per share. In December 1996, Mr. Gruber used the
proceeds of a loan from the Company to exercise the warrant to purchase 144,000
shares of common stock at $2.90 per share and to exercise options to purchase
48,000 shares of common stock at an exercise price of $1.56 per share. The loan,
in the principal amount of $492,000, is evidenced by a promissory note dated
December 9, 1996, that bears interest at 3% per annum and is due on December 8,
2001. The loan is secured by, and with recourse only to, 118,080 shares of Mr.
Gruber's common stock. In March 1997, Mr. Gruber purchased 179,712 shares at
$6.51 per share using the proceeds of an additional $1,170,000 loan, as
evidenced by a promissory note dated March 12, 1997 on the same terms as his
prior loan. As of March 31, 1999, the amounts outstanding under such loans were
$492,000 and $1,170,000, respectively. As a condition of the purchase, Mr.
Gruber did not receive any options under the 1995 Plan during 1997.
Until joining the Company, Mr. Gruber was a member of Marshall, O'Toole,
Gerstein, Murray & Borun. The law firm has served as one of the Company's patent
counsel since the Company's inception in 1992. He also is the spouse of Misty S.
Gruber, who was a director of the Company from its inception to June 1994 and is
a member of Sachnoff & Weaver, Ltd., a law firm which has served as general
corporate counsel to the Company since June 1996. Ms. Gruber formerly was a
member of Shefsky & Froelich Ltd. which law firm served as general corporate
counsel to the Company from the Company's inception to June 1996. Sachnoff &
Weaver, Ltd. and certain members and related persons in addition to Ms. Gruber
and certain partners and related persons of Marshall, O'Toole, Gerstein, Murray
& Borun are stockholders of the Company.
In January 1997, Sachnoff & Weaver, Ltd. purchased 76,800 shares of common
stock at $6.51 per share. Sachnoff & Weaver, Ltd. paid $102,415 in cash and
delivered a promissory note to the Company for the balance in the amount of
$397,585 secured by 61,069 shares of common stock. The note bore interest at
8.25% per annum and was paid in full during 1998. Sachnoff & Weaver, Ltd.
received approximately $940,722 for legal services performed in 1998.
In December 1996, Mr. Wolf borrowed $672,000 from the Company, as evidenced
by a promissory note dated December 9, 1996, which bears interest at 3% per
annum and is due on December 8, 2001. Mr. Wolf used the proceeds of the loan to
purchase 161,280 shares of common stock at $4.17 per share in December 1996. In
March 1997, Mr. Wolf purchased 179,712 shares at $6.51 per share using the
proceeds of a $1,170,000 Company loan on the same terms as the loan to Mr.
Gruber in March 1997. As of September 30, 1997, the amounts outstanding under
such loans were $672,000 and $1,170,000, respectively. As a condition of the
purchase, Mr. Wolf did not receive any options under the 1995 Plan during 1997.
The loans are secured by, and with recourse only to, the shares purchased by Mr.
Wolf using proceeds of Company loans. Mr. Wolf
13
<PAGE> 17
also is a partner in Blue Hill Partners, a partnership controlled by Thomas N.
McCarter III, a director of the Company. Blue Hill Partners purchased 76,800
shares of common stock at $4.17 per share in September 1996. Mr. Wolf resigned
from the Company in March 1999.
MATTERS TO BE CONSIDERED BY THE STOCKHOLDERS
ELECTION OF CLASS III DIRECTORS (NOTICE ITEM 1)
The Company has three classes of directors serving staggered, three-year
terms. The 2000 ("Class I") and 2001 ("Class II") classes each currently have
three members and the 1999 ("Class III") class has two members. The Class III
directors are to be elected at the Meeting for three-year terms expiring on the
date of the annual meeting of the stockholders in 2002 or until each such
director's successor shall have been duly elected or appointed. The Board has
nominated Dr. Radoje T. Drmanac, and Mr. Thomas N. McCarter III for re-election
as Class III directors. A stockholder using the enclosed proxy card can vote for
either or both of the two nominees to the Board or withhold his or her vote from
either or both of such nominees. IF THE PROXY CARD IS PROPERLY EXECUTED BUT
UNMARKED, IT WILL BE VOTED FOR ALL OF THE NOMINEES. Each of the nominees has
agreed to serve as a director if elected; however, should any nominee become
unable or unwilling to accept nomination or election, the proxies will exercise
their voting power in favor of such other person or persons as the Board may
recommend.
The affirmative vote of a majority of the votes cast by stockholders
present, in person or by proxy, and eligible to vote at the Meeting, provided a
quorum exists, is required to elect each of Dr. Drmanac and Mr. McCarter.
RECOMMENDATION OF THE BOARD: The Board recommends a vote FOR election of
Dr. Drmanac and Mr. McCarter.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (NOTICE ITEM 2)
The selection by the Board of the firm of Ernst & Young LLP ("Ernst &
Young") as the independent auditors for the Company for the year ending December
31, 1999, is to be submitted for ratification by the stockholders at the
Meeting. The firm of Ernst & Young has served as independent auditors for the
Company since 1993. The independent auditors have advised the Company that they
have no direct or material indirect financial interest in the Company.
Representatives of the firm of Ernst & Young are not expected to be present at
the Meeting.
The affirmative vote of a majority of the votes cast by stockholders
present, in person or by proxy, and eligible to vote at the Meeting, provided a
quorum exists, is required for ratification of the selection of the independent
auditors. IF THE PROXY CARD IS PROPERLY EXECUTED BUT UNMARKED, IT WILL BE VOTED
FOR THE PROPOSAL.
Stockholder ratification of the selection of Ernst & Young as the Company's
independent auditors is not required by the By-Laws of the Company or otherwise.
The Board has elected to seek such ratification as a matter of good corporate
practice. Should the stockholders fail to ratify the selection of Ernst & Young
as independent auditors, the Board will consider whether to retain that firm for
the year ending December 31, 1999.
RECOMMENDATION OF THE BOARD: The Board recommends that the stockholders
vote FOR ratification of the Board's selection of Ernst & Young as independent
auditors for the Company for fiscal year 1999.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company knows of
no other business which may come before the Meeting. However, if any additional
matters are properly presented at the Meeting, it is intended that the persons
named in the enclosed proxy, or their substitutes, will vote such proxy in
accordance with their judgment on such matters.
14
<PAGE> 18
GENERAL INFORMATION
As of March 31, 1999, there were 12,981,352 shares of common stock
outstanding, each entitled to cast one vote at the Meeting. There were options
to purchase 1,583,558 shares of common stock at varying exercise prices between
$.78 and $14.25 and warrants to purchase an additional 520,184 shares of common
stock outstanding at varying exercise prices between $3.42 and $5.21 per share
(the weighted average exercise price was $4.03 per share for options, $4.11 per
share for warrants and $4.05 per share overall).
STOCKHOLDER PROPOSALS
No stockholder proposals were received by the Company for inclusion in this
year's proxy statement. If a stockholder wishes to present a proposal to be
included in the proxy statement for the next annual meeting of stockholders, and
assuming such annual meeting of stockholders is held on or about May 15, 2000,
such proposal must be submitted in writing and received by the Company's
Secretary at its facility in Sunnyvale not earlier than February 15, 2000, and
not later than March 16, 2000.
Whether or not you intend to be present at the Meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest convenience.
By order of the Board of Directors:
James N. Fletcher
Secretary
April 15, 1999
15
<PAGE> 19
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
HYSEQ, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Robert D. Weist and Lewis S. Gruber as
proxies, with the power to act without the other and with power of substitution,
and hereby authorizes them to represent and vote all the shares of stock of
Hyseq, Inc., a Nevada corporation (the "Company"), standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Stockholders of the Company to be held May 24, 1999 at
9:00 am Pacific Daylight Time and at any adjournment or adjournments thereof, as
fully and with the same force and effect as the undersigned might or could so
act if personally present thereat, as follows:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO SELECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
[ ] I PLAN TO ATTEND THE MEETING
ITEM 1: Election of Class III Directors
Nominees: Dr. Radoje T. Drmanac and Mr. Thomas N. McCarter III
(To withhold authority to vote for any individual nominee, strike
a line through the nominee's name in the list above.)
VOTE FOR [ ] WITHHOLD AUTHORITY [ ]
all nominees listed to vote for all nominees
(except as marked to the contrary)
ITEM 2: Ratification of Selection of Ernst & Young LLP as auditors for
fiscal year 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
ITEM 3: The proxies are authorized to vote, in their discretion, upon
such other business as may properly come before the meeting or
any adjournment thereof.
<PAGE> 20
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOU HAVE ANY QUESTIONS, CALL THE COMPANY AT 408-524-8100.
------------------------
Number of Shares
------------------------
Signature of
Stockholder Date
------------------------
Signature of
Stockholder Date
Please sign exactly as
name appears hereon.
When shares are held by
joint tenants, both
should sign. When
signing as attorney,
executor, administrator,
trustee or guardian,
please give full title
as such. If a
corporation, please sign
in full corporate name
by President or other
authorized officer. If a
partnership, please sign
in full partnership name
by authorized person.
