SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TRIMERIS, 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. (14a-6(i)(2))
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee previously paid 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:
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(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>
TRIMERIS, INC.
4727 UNIVERSITY DRIVE, SUITE 100
DURHAM, NORTH CAROLINA 27707
MAY ___, 1999
To the Stockholders of TRIMERIS, INC.
You are cordially invited to attend the 1999 Annual Meeting of the Stockholders
of Trimeris, Inc., to be held at the North Carolina Biotechnology Center, 15
Alexander Drive, Research Triangle Park, North Carolina 27709, on June 23, 1999
at 2:00 p.m. (local time).
We have enclosed details of the business that we will conduct at the Annual
Meeting and other information about Trimeris, Inc. in the enclosed Notice of
Annual Meeting and Proxy Statement. We urge you to read the Notice of Annual
Meeting and Proxy Statement carefully.
If you do not plan to attend the Annual Meeting, please sign, date, and return
the enclosed proxy promptly in the accompanying reply envelope. If you decide to
attend the Annual Meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Dr. Dani P. Bolognesi
Chief Executive Officer
Matthew A. Megaro
President
<PAGE>
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES).
TRIMERIS, INC.
4727 UNIVERSITY DRIVE, SUITE 100
DURHAM, NORTH CAROLINA 27707
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 1999
The Annual Meeting of Stockholders of Trimeris, Inc. ("Trimeris" or the
"Company") will be held at the North Carolina Biotechnology Center, 15 Alexander
Drive, Research Triangle Park, North Carolina 27709, on June 23, 1999 at 2:00
p.m. (local time) (the "Annual Meeting") to consider and vote upon the following
matters, which are more fully described in the accompanying Proxy Statement:
1. To elect two members of the Board of Directors for the term of
office stated in the Proxy Statement. The Board has nominated the
following persons for election for the two Class II Director seats
at the Annual Meeting: Dr. Jesse I. Treu and Dr. Charles A.
Sanders.
2. To ratify the appointment of KPMG LLP as the Company's independent
accountants for the fiscal year ending December 31, 1999.
3. To consider and vote upon approval of an amendment to the
Company's Amended and Restated Stock Incentive Plan (the "Stock
Incentive Plan") to increase the number of authorized shares
issuable pursuant to such Plan by 1,000,000; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. All stockholders of record at the close of
business on May 3, 1999 will be entitled to vote at the Annual Meeting and at
any adjournments thereof. The transfer books will not be closed. For a period of
at least 10 days prior to the Annual Meeting, a list of stockholders entitled to
vote at the Annual Meeting will be available for inspection during ordinary
business hours at the offices of the Company.
By Order of the Board of Directors,
Matthew A. Megaro
Secretary
Durham, North Carolina
May __, 1999
ABSTENTIONS AND BROKER NONVOTES WILL BE COUNTED FOR PURPOSES OF DETERMINING
WHETHER A QUORUM IS PRESENT AT THE ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY REVOKE YOUR PROXY IN THE MANNER
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IF YOU ATTEND THE MEETING, YOU
MAY VOTE IN PERSON, IF YOU WISH TO DO SO, EVEN IF YOU HAVE PREVIOUSLY SENT IN
YOUR PROXY.
<PAGE>
TRIMERIS, INC.
4727 UNIVERSITY DRIVE, SUITE 100
DURHAM, NORTH CAROLINA 27707
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 23, 1999
The enclosed proxy is solicited on behalf of the Board of Directors of
Trimeris, Inc., a Delaware corporation ("Trimeris" or the "Company"), for use at
the annual meeting of stockholders to be held at 2:00 p.m. (local time) on June
23, 1999, and at any adjournment or postponement of the annual meeting (the
"Annual Meeting"). The Annual Meeting will be held at the North Carolina
Biotechnology Center, 15 Alexander Drive, Research Triangle Park, North Carolina
27709. All stockholders of record on May 3, 1999 will be entitled to notice of
and to vote at the Annual Meeting. This Proxy Statement and accompanying proxy
(the "Proxy") will be first mailed to stockholders on or about May 24, 1999.
The mailing address of the principal executive office of the Company is 4727
University Drive, Suite 100, Durham, North Carolina 27707.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders
(collectively, the "Proposals"). Each Proposal is described in more detail in
this Proxy Statement.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
VOTING
On May 3, 1999, the record date for determination of stockholders entitled
to vote at the Annual Meeting, there were ________ shares of common stock
outstanding. Each holder of common stock is entitled to one vote on all matters
brought before the Annual Meeting.
For the proposal to elect directors, the two nominees who receive the most
votes will be elected. If you withhold authority to vote for a nominee on your
proxy card, your vote will not count for or against the nominee. For the
proposal to ratify independent accountants and to amend the Stock Incentive
Plan, a majority of the votes cast for the proposals are required for approval
of those proposals.
Abstentions and broker nonvotes will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Abstentions will have no
effect on the Proposals. If you hold your shares with a broker and do not
instruct your broker how to vote, your broker has authority to vote on the
proposals to elect directors and to ratify the independent accountants, but does
not have authority to vote on the proposal to amend the Stock Incentive Plan.
Broker non-votes will have no effect on the proposal to amend the Stock
Incentive Plan.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information we know with respect to the
beneficial ownership of our common stock as of March 31, 1999, for each person
or group of affiliated persons, who we know to beneficially own more than 5% of
our common stock. The table also sets forth such information for our directors
and executive officers, individually and as a group.
Beneficial ownership is determined in accordance with the rules of the SEC.
Except as indicated by footnote, to our knowledge, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them. Options to purchase shares of common
stock that are exercisable within 60 days of March 31, 1999 are deemed to be
beneficially owned by the person holding such options for the purpose of
computing ownership of such person, but are not treated as outstanding for the
purpose of computing the ownership of any other person. Applicable percentage of
beneficial ownership is based on 10,683,355 shares of common stock outstanding
as of March 31, 1999.
PERCENT OF TOTAL
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OWNED
- ---------------- ------------------ -----------
<S> <C> <C>
Four Partners (1)....................................... 725,700 6.8%
Putnam Investments, Inc. (2)............................ 620,300 5.8
Capital Guardian Trust Company (3)...................... 597,000 5.6
Dani P. Bolognesi (4)................................... 139,025 1.3
M. Ross Johnson (5)..................................... 234,277 2.2
Matthew A. Megaro (6)................................... 169,359 1.6
Jesse I. Treu (7)....................................... 472,234 4.4
Jeffrey M. Lipton....................................... 140,255 1.3
Brian H. Dovey (7)...................................... 472,234 4.4
Charles A. Sanders (8).................................. 30,123 *
J. Richard Crout........................................ -- *
All executive officers and directors as a group
(seven persons) (9)..................................... 966,412 8.9
</TABLE>
* Less than one percent.
(1)Based on Schedule 13G filed with the SEC on March 18, 1999, Four Partners
held sole voting power and sole dispositive power as to all of such shares.
Four Partners' address is c/o Thomas J. Tisch, 667 Madison Avenue, New York,
New York 10021.
(2)Based on Schedule 13G filed with the SEC on February 11, 1999, Putnam
Investments, Inc. held sole voting power and sole dispositive power as to all
of such shares. Putnam Investments, Inc.'s address is One Post Office Square,
Boston, Massachusetts 02109.
(3)Based on Schedule 13G filed with the SEC on February 12, 1999, Capital
Guardian Trust Company held sole voting power and sole dispositive power as
to all of such shares. Capital Guardian Trust Company's address is 11000
Santa Monica Boulevard, Los Angeles, California 90025-3384.
(4)Includes 49,283 shares that Dr. Bolognesi may acquire pursuant to stock
options exercisable within 60 days after March 31, 1999. Includes the
following shares as to which Dr. Bolognesi disclaims beneficial ownership:
11,765 shares beneficially owned by James C. Bolognesi Irrevocable Trust, for
which James C. Bolognesi, Dr. Bolognesi's son, is the sole beneficiary and
Sarah Bolognesi, Dr. Bolognesi's wife, is the sole trustee; 11,765 shares
beneficially owned by Michael P. Bolognesi Irrevocable Trust, for which
Michael P. Bolognesi, Dr. Bolognesi's son, is the sole beneficiary and Sarah
Bolognesi is the sole trustee; and 10,329 shares that Sarah Bolognesi may
acquire pursuant to certain stock options exercisable within 60 days after
March 31, 1999.
2
<PAGE>
(5)Does not include an aggregate of 85,518 shares beneficially owned by Michael
Johnson and Greg Johnson, Dr. Johnson's sons, who have sole voting and
investment power of such shares and as to which shares Dr. Johnson disclaims
beneficial ownership. Includes 39,375 shares that Dr. Johnson may acquire
pursuant to stock option exercisable within 60 days after March 31, 1999. See
"Certain Relationships and Related Transactions."
(6)Includes 47,755 shares subject to certain contractual restrictions, which
restrictions lapse with respect to 4,330 shares within 60 days after March
31, 1999, and an aggregate of 47,076 shares beneficially owned by Matthew A.
Megaro as custodian for Anthony Megaro and Arianna Megaro, Mr. Megaro's son
and daughter. Includes 20, 417 shares that Mr. Megaro may acquire pursuant to
stock option exercisable within 60 days after March 31, 1999.
(7)Consists of shares held by affiliated entities as follows: 90,971 shares
beneficially owned by Domain Partners III, L.P., whose general partner is One
Palmer Square Associates III, L.P.; 3,147 shares beneficially owned by DP III
Associates, L.P., whose general partner is One Palmer Square Associates III,
L.P.; 30,453 shares beneficially owned by One Palmer Square Associates III,
L.P.; and 332,246 shares beneficially owned by One Palmer Square Associates
II, L.P. Dr. Treu and Mr. Dovey are general partners of One Palmer Square
Associates II, L.P. and One Palmer Square Associates III, L.P. In such
capacities, Dr. Treu and Mr. Dovey may each be deemed to be the beneficial
owner of such shares, although each disclaims such beneficial ownership
except to the extent of his pecuniary interest, if any. Also includes 15,417
shares that Dr. Treu and 15,417 shares that Mr. Dovey may acquire pursuant to
stock options exercisable within 60 days after March 31, 1999. The address
for Domain Partners II, L.P., Domain Partners III, L.P., DP III Associates,
L.P., One Palmer Square Associates III, L.P., One Palmer Square Associates
II, L.P., Dr Treu and Mr. Dovey is One Palmer Square, Princeton, New Jersey
08542.
(8)Includes 20,319 shares that Dr. Sanders may acquire pursuant to stock
options exercisable within 60 days after March 31, 1999.
(9) See notes (1) - (8).
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before its
exercise. It may be revoked by filing a notice of revocation or another signed
Proxy with a later date with the Secretary of the Company at our principal
executive office, 4727 University Drive, Suite 100, Durham, North Carolina
27707. You may also revoke your Proxy by attending the Annual Meeting and voting
in person.
PROXY SOLICITATION
We will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement, the Proxy and any
additional soliciting materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward the solicitation materials to such beneficial owners.
In addition, we may reimburse such persons for their costs of forwarding the
solicitation materials to such beneficial owners. The original solicitation of
proxies by mail may be supplemented by solicitation by telephone, telegram or
other means by our directors, officers, employees or agents. No additional
compensation will be paid to these individuals for any such services. Except as
described above, we do not presently intend to solicit proxies other than by
mail.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Our Board of Directors is currently composed of six members. In accordance
with the terms of our Third Amended and Restated Certificate of Incorporation,
our Board of Directors is divided into three classes, denominated Class I, Class
II and Class III, with members of each class holding office for staggered
three-year terms. At each annual stockholder meeting, the successors to the
Directors whose terms expire will be elected to serve from the time of their
election and qualification until the third annual meeting of stockholders
following their election or until a successor has been duly elected and
qualified. Each person nominated for election has agreed to serve if elected,
and management has no reason to believe that any nominee will be unavailable to
serve.
VOTE REQUIRED
The two candidates for the class of directors whose terms begin at the 1999
annual meeting of stockholders receiving the highest number of affirmative votes
of the stockholders entitled to vote at the Annual Meeting will be elected
directors of Trimeris. Unless otherwise instructed, the proxyholders will vote
each returned proxy for the nominees named below for election, or for as many
nominees of the Board of Directors as possible, such votes to be distributed
among such nominees in the manner as the proxyholders see fit.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the nominees listed
below.
NOMINEES
The following table sets forth information regarding the nominees:
<TABLE>
<CAPTION>
YEAR FIRST CLASS
ELECTED TERMINATION
NAME DIRECTOR AGE YEAR POSITION
- ---- ---------- --- ----------- --------
<S> <C> <C> <C> <C>
Jesse I. Treu, Ph.D. 1993 52 2002 Managing Member of Domain
Associates, LLC
Charles A. Sanders, M.D. 1996 67 2002 Self-Employed
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2002
JESSE I. TREU, PH.D. has been Chairman of the Board of Directors of the Company
since its inception. Dr. Treu will resign as Chairman in June 1999 at the annual
meeting of stockholders. Dr. Treu has been a managing member of Domain
Associates, LLC, a venture capital firm specializing in investments in life
sciences, since 1986. Dr. Treu serves on the Boards of Directors of Focal, Inc.
and GelTex Pharmaceuticals, Inc. Dr. Treu received his Ph.D. in Physics from
Princeton University.
CHARLES A. SANDERS, M.D. has been a Director of the Company since October 1996.
From 1989 to May 1995, Dr. Sanders was Chairman of the Board of Directors and
Chief Executive Officer of Glaxo Inc. and a member of the Board of Directors of
Glaxo plc. Prior to joining Glaxo, Dr. Sanders held a number of positions at
Squibb Corporation, a multinational pharmaceutical corporation, including Vice
Chairman, Chief Executive Officer of the Science and Technology Group and
Chairman of the Science and Technology Committee of the Board. Dr. Sanders
serves on the Boards of Directors of Magainin Pharmaceuticals, Inc., Vertex
Pharmaceuticals Incorporated, Kendle International Inc., Scios Inc.,
Pharmacopeia, Inc., and Staffmark, Inc. Dr. Sanders received an M.D. degree from
Southwestern Medical College of the University of Texas.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
Our Board of Directors met a total of seven times during the year ended
December 31, 1998. Each of the directors attended at least 75% of the aggregate
of (i) the total number of meetings of the Board and (ii) the total number of
meetings held by all committees of the Board on which he served.
The Board has a standing Compensation Committee currently composed of
Messrs. Lipton, Sanders and Dovey. The Compensation Committee met two times in
1998. The Compensation Committee reviews and acts on matters relating to
compensation levels and benefit plans for our executive officers and key
employees, including salary and stock options. The Compensation Committee is
also responsible for granting stock awards, stock options and stock appreciation
rights and other awards to be made under our existing incentive compensation
plans.
The Board also has a standing Audit Committee composed of Messrs. Crout,
Treu and Sanders. The Audit Committee met once in 1998. The Audit Committee
assists in selecting the independent accountants, designating the services they
are to perform and in maintaining effective communication with those
accountants.
The Company has no standing nominating committee.
DIRECTOR COMPENSATION
The Company reimburses its directors for all reasonable and necessary travel
and other incidental expenses incurred in connection with their attendance at
meetings of the Board. Directors do not receive additional compensation in
connection with their attendance at meeting. In addition, all eligible
non-employee directors automatically receive an option to purchase 10,000 shares
of Common Stock at each annual meeting. These options will have an exercise
price equal to 100% of the fair market value of the Company's Common Stock on
the grant date and will become exercisable after the completion of one year of
service following such grant. Newly-elected directors will be granted an option
to purchase 20,000 shares of Common Stock, with the options vesting ratably over
the director's three year term. These options have an exercise price equal to
100% of the fair market value of the Company's Common Stock on the grant date.
PROPOSAL 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
We are asking the stockholders to ratify the selection of KPMG LLP as our
independent accountants for the year ending December 31, 1999.
VOTE REQUIRED
The affirmative vote of a majority of the stockholders represented and
voting at the Annual Meeting will be required to ratify the selection of KPMG
LLP as our independent accountants for the year ending December 31, 1999.
Representatives of KPMG LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the ratification
and approval of the selection of KPMG LLP to serve as our independent
accountants for the year ending December 31, 1999.
5
<PAGE>
PROPOSAL 3
AMENDMENT TO THE TRIMERIS, INC. AMENDED AND RESTATED STOCK INCENTIVE PLAN
The Trimeris, Inc. Amended and Restated Stock Incentive Plan (the "Stock
Incentive Plan") was adopted by the Board and approved by the stockholders in
October 1997. A copy of the Stock Incentive Plan is attached to the Proxy as
Appendix A. You are being asked to vote on a proposal to approve an amendment to
the Stock Incentive Plan to increase the number of shares of common stock
available for issuance under the Stock Incentive Plan by 1,000,000 shares to a
total of 2,602,941 shares of common stock. The Board adopted the amendment on
April 21, 1999 subject to stockholder approval at the Annual Meeting. The Board
believes the amendment is necessary to provide the Company with a sufficient
reserve of common stock for future option grants needed to attract, employ, and
retain employees, directors, and consultants of outstanding ability.
DESCRIPTION OF THE STOCK INCENTIVE PLAN
Our Stock Incentive Plan provides for the grant of incentive stock options,
restricted stock or other stock based awards to our employees, including
directors who are employees, and for the grant of nonstatutory stock options,
restricted stock or other stock-based awards to our employees, officers,
directors, consultants and advisors. Our Stock Incentive Plan is administered by
our compensation committee. A maximum of 1,602,941 shares are authorized for
issuance under the Stock Incentive Plan. If the Stockholders approve Proposal
No. 3, a maximum of 2,602,941 shares of common stock will be authorized for
issuance under the Stock Incentive Plan. At March 31, 1999, there were
approximately 185,000 shares authorized and available for grant. The exercise
price of incentive stock options granted under our Stock Incentive Plan must be
at least equal to the fair market value of the common stock on the date of
grant.
In the event an optionee ceases to be employed for any reason other than death
or disability, each outstanding option held by the optionee will terminate and
cease to be exercisable no later than three months after the date the optionee
ceases to be employed by us. If an optionee dies, his or her options vest
immediately. The Stock Incentive Plan provides that any option granted to a
participant who is subject to the provisions of Section 16 of the Exchange Act
shall not become exercisable for a period of at least six months following the
date of grant.
In the event that:
o we merge with or consolidate into another corporation, which results in our
stockholders owning less than 60% of the voting power of the voting
securities of the surviving or successor corporation following the
transaction,
o we sell all or substantially all of our assets,
o we completely liquidate, or
o someone acquires 50% or more of the voting power of our outstanding
securities, except through a merger, consolidation or an acquisition of our
securities directly from us,
then all restricted stock awards shall become fully vested and free of all
restrictions and all other stock-based awards shall become fully vested,
exercisable or free of all restrictions, as the case may be.
6
<PAGE>
In the event of an acquisition of 50% or more of the voting power of our
outstanding securities, except through a merger, consolidation or an acquisition
of our securities directly from us, then all options and stock appreciation
rights become fully vested and exercisable. If we execute an agreement to:
o merge or consolidate and our stockholders before the transaction own less
than 60% of the voting power of the voting securities of the surviving or
successor corporation following the transaction,
o sell all or substantially all of our assets, or
o completely liquidate,
then all options and stock appreciation rights become fully vested and
exercisable and the Board of Directors may, in its discretion, terminate any
unexercised awards, or permit the acquiring or succeeding corporation to assume
or substitute equivalent options or stock appreciation rights for ours.
The Board of Directors may terminate or amend the Stock Incentive Plan
at any time. Our stockholders must approve any increase in the total number of
shares available under the Stock Incentive Plan. No awards may be made under the
Stock Incentive Plan after September 2007.
As of March 31, 1999, we had outstanding 3,531 nonqualified stock
options under our previous stock option plan, the Trimeris, Inc. Stock Option
Plan, at a weighted average exercise price of $0.425 per share. The Board of
Directors has determined not to grant additional options under this plan.
New Plan Benefits and Option Grant Table
Because the Stock Incentive Plan is discretionary, benefits to be received
by individual optionees are not determinable. However, each of the Directors
serving at the Annual Meeting will receive an automatic option grant to purchase
10,000 shares on the date of the Annual Meeting with an exercise price per share
equal to the closing price per share of common stock on the date of the Annual
Meeting. The table below shows, as to each of the Named Executive Officers (as
defined in the Summary Compensation Table on page 14) named in the Summary
Compensation Table and the various indicated groups, (i) the number of shares of
common stock for which options have been granted under the Stock Incentive Plan
for the one-year period ending December 31, 1998 plus the period through March
31, 1999 and (ii) the weighted average exercise price per share.
<TABLE>
<CAPTION>
Weighted Average
Number of Exercise Price of
Name and Position Option Shares Granted Options
- ------------------ ------------- -----------------
<S> <C> <C>
Dani P. Bolognesi
Chief Executive Officer and
Chief Scientific Officer 54,500 $ 7.98
Matthew A. Megaro
President, Chief Financial Officer,
and Secretary 70,000 8.00
M. Ross Johnson
Former President, Chief Executive Officer and
Chief Scientific Officer 135,000 8.00
All current executive officers as a group (2 persons) 122,000 8.00
All current directors (other than executive officers) as a
group (5 persons) 102,500 7.81
All employees, including current officers who are not
executive officers as a group (36 persons) 284,100 7.89
</TABLE>
7
<PAGE>
Tax Effects of Stock Incentive Plan Participation
The following discussion of the federal income tax consequences of awards
granted under the Stock Incentive Plan is intended only as a summary of the
federal income tax treatment of stock options (Incentive Stock Options "ISOs"
and Non-Qualified Stock Options "NQSOs"), and other stock awards under the Stock
Incentive Plan as of the date of this Proxy Statement. The federal income tax
laws pertaining to the Stock Incentive Plan are highly technical and such laws
are subject to change at any time. Some variations on the federal income tax
effects of Stock Incentive Plan participation described below may occur with
respect to participation by persons subject to Section 16(b) of the Exchange
Act. This discussion also does not address applicable tax withholding
requirements which apply to substantially all awards under the Stock Incentive
Plan.
INCENTIVE STOCK OPTIONS. Although the Company has obtained neither a letter
ruling from the Internal Revenue Service (the "IRS") nor an opinion of counsel
stating that the ISO provisions of the Stock Incentive Plan constitute an
incentive stock option under the applicable federal income tax laws, it is
expected that the options granted under the ISO provisions of the Stock
Incentive Plan will qualify as ISOs for federal income tax purposes subject to
disqualification as provided by the federal income tax laws.
In general, no taxable income will be realized by an optionee, and no
federal income tax deduction will be allowed to the Company, upon the grant or
exercise of an ISO. The federal income tax consequences of a disposition of
common stock received pursuant to the exercise of an ISO will depend upon
whether the optionee has held the shares for the requisite holding period. If
the optionee disposes of such shares after the later to occur of (1) two years
from the date of the grant of the ISO, or (2) one year after the date of the
transfer of the shares to him (the "Holding Period"), then the optionee will be
taxed according to the rules of sales and exchanges generally. The amount
subject to tax will be the difference between the amount realized and the
optionee's cost basis in the shares of common stock, which difference will be
capital gain if the shares are held as a capital asset. In such event, the
Company will not be entitled to a tax deduction by reason of the disposition.
For purposes of this discussion, "disposition" means a lifetime transfer of
legal title, such as by sale, exchange or gift, but does not include a transfer
that is triggered by death, such as one by bequest or inheritance or one made by
a decedent to his estate.
The Holding Period will not apply to an ISO that is exercised after the
optionee's death by his estate or by a person who acquired the right to exercise
it by bequest or inheritance or otherwise by reason of the optionee's death. The
Holding Period will apply if the optionee dies after he exercises his ISO. In
that case, his estate, or any other person holding the shares acquired pursuant
to the ISO, must either hold the shares for the applicable Holding Period or
suffer the tax consequences discussed below for a "disqualifying disposition."
A "disqualifying disposition" takes place if the optionee makes a
disposition of the shares of common stock acquired through the exercise of an
ISO before satisfying the Holding Period. If a "disqualifying disposition"
occurs, the optionee must include as ordinary income the gain realized on that
disposition to the extent of the lesser of (1) the fair market value of the
common stock on the date of exercise of the ISO minus the option price, or (2)
the amount realized on the disposition minus the option price. Upon the
occurrence of a "disqualifying disposition," the Company will be entitled to
deduct, as a compensation expense, the amount so included as ordinary income by
the optionee.
Under the Stock Incentive Plan, an optionee who exercises an option may be
allowed to pay for his shares with cash or with shares of Stock of the Company,
including shares acquired in a prior ISO exercise.
In order for an ISO granted under the Stock Incentive Plan to be governed by
the general rules pertaining to ISOs, the optionee must be an employee of the
Company for the entire time from the date the ISO is granted until three months
before its exercise. An optionee who is disabled has twelve months rather than
three months after leaving employment to exercise his ISOs. These employment
requirements do not apply if the optionee dies before exercising an ISO, but in
such circumstances the employment requirement must have been met by the employee
at his death.
8
<PAGE>
The federal alternative minimum tax consequences of the exercise of an ISO
under the Stock Incentive Plan may differ from the federal income tax
consequences of such exercise. The alternative minimum tax consequences of the
disposition of shares acquired upon the exercise of an ISO may also differ from
the regular income tax consequences of such disposition. The difference between
the option price and the fair market value of the shares upon exercise will be
an item of adjustment subject to the federal alternative minimum tax. For
purposes of the individual alternative minimum tax, the income tax rules
governing the transfer of property in connection with the performance of
services apply, not the income tax rules applicable only to ISOs. For example,
if an optionee acquires shares pursuant to the exercise of an ISO under the
Stock Incentive Plan and disposes of the shares in the same taxable year, tax
treatment under the regular income tax and the alternative minimum tax will be
the same. If, however, the shares are disposed of in a disqualifying disposition
in a later taxable year, the difference between the option price and the fair
market value of the shares will be included in alternative minimum taxable
income in the year of exercise; such amount would be included in regular taxable
income, but not in alternative minimum taxable income, in the year of the
disposition. Similarly, if an optionee acquires shares pursuant to the exercise
of an ISO under the Stock Incentive Plan and disposes of the shares after the
Holding Period is satisfied, the difference between the option price and the
fair market value of the stock at the time of exercise will be included in
alternative minimum taxable income, but not in regular taxable income, in the
year of exercise, and for alternative minimum tax purposes the cost basis of the
shares will be the sum of the option price and the amount of income included in
alternative minimum taxable income in the year of exercise.
NONSTATUTORY (OR NON-QUALIFIED) STOCK OPTIONS. Holders of NQSOs will not be
entitled to the special tax treatment afforded by Sections 421 and 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
Under the Code, an optionee granted a NQSO will realize no taxable income
upon grant of the NQSO, but will be deemed to have realized ordinary taxable
income equal to the excess of the fair market value of the common stock acquired
at the time of the exercise of the NQSO over the option price paid, unless at
the time of exercise the common stock remains subject to a "substantial risk of
forfeiture" as defined in Section 83 of the Code. Whether an optionee who
exercises a NQSO under the Stock Incentive Plan will acquire the common stock
subject to a substantial risk of forfeiture will depend upon the terms of the
NQSO award as determined by the Committee. For a complete discussion of the
income tax treatment when a participant acquires the Company's common stock
subject to a "substantial risk of forfeiture," see "Restricted Stock" below. The
Company is required for federal income tax purposes to withhold tax on the
amount of income realized by the optionee in the transaction. The Company will
be entitled to a deduction for federal income tax purposes in the year the
optionee must report the income in an amount equal to the ordinary income
realized by the optionee as a result of exercise of his NQSO.
An optionee's tax basis in shares acquired upon the exercise of a NQSO will
be the fair market value of such shares used to determine the amount of ordinary
taxable income reported by the optionee with respect to the exercise of the
NQSO. Upon any sale of such shares of common stock, the optionee's gain or loss
will therefore equal the difference between the sale price and such tax basis.
Any such gain or loss will be short-term or long-term capital gain or loss,
depending on whether the shares have been held for more than the long-term
capital gain holding period. In general, when a NQSO is exercised by the
exchange of previously acquired common stock, the optionee receives a tax-free
exchange and basis carryover from the old shares to an equivalent number of new
shares. The basis for any additional shares will equal the sum of the amount
included in gross income by reason of the exercise of the NQSO, plus the amount
of cash paid by the optionee upon the exercise of the NQSO.
RESTRICTED STOCK. A recipient of restricted stock, or any other stock award
under the Stock Incentive Plan that is subject to a "substantial risk of
forfeiture", generally will be subject to federal income tax at ordinary income
rates on the excess of the fair market value of the restricted stock at such
time that the stock is no longer subject to forfeiture and restrictions on
transfer for purposes of Section 83 of the Code ("restrictions") over the
purchase price, if any, of such restricted stock.
Despite the general tax treatment of restricted stock described above, a
recipient who so elects under Code Section 83(b) within 30 days of the date of
transfer of the shares will have ordinary taxable income on the date of transfer
of the shares equal to the excess of the fair market value of such shares on the
transfer date, determined without regard to the restrictions, over the purchase
price, if any, of such restricted stock or other stock award. No additional
ordinary taxable income will then be recognized when the restrictions expire,
although any gain on disposition of the stock will be subject to tax as
discussed below. If the shares subject to such election are forfeited, the
recipient will only be entitled to a deduction, refund or loss for tax purposes
equal to the purchase price, if any, of the forfeited shares, regardless of
whether the recipient made an election under Code Section 83(b).
9
<PAGE>
Upon the sale of any stock following the expiration of the forfeiture period
for restricted stock or upon the sale of stock for which a timely election under
Code Section 83(b) was made, the participant will realize capital gain or loss
equal to the difference between the amount realized on the sale and the
participant's basis in such stock. The holding period to determine whether the
participant has long-term or short-term capital gain will generally begin when
the restrictions expire, and the tax basis for such shares will generally be
based on the fair market value of such shares on such date. However, if the
participant timely elects to be taxed as of the date of transfer of the shares,
the holding period will commence on such date, and the tax basis will be equal
to the fair market value of the shares on such date, determined without regard
to the restrictions.
The Company will be entitled to a deduction for federal income tax purposes
in the year the income is taxable to the participant in an amount equal to the
ordinary income realized by the participant as a result of the restricted stock
or other stock award.
STOCK AWARDS. Unrestricted awards of stock will be taxable to the
participant and deductible by the Company at the time of the award in an amount
equal to the fair market value of the shares at that time. If the shares are
subject to forfeitability and nontransferability restrictions, the participant
may either elect immediate taxation in an amount equal to the fair market value
of the shares at the time of the award, less any payment therefor, or delay the
recognition of taxable income in an amount equal to the fair market value of the
shares, less the purchase price, if any, when the restrictions lapse. See
"Restricted Stock" above. Upon a sale of shares received as a stock award, the
participant will realize capital gain or loss in an amount equal to the
difference between the amount realized and the participant's tax basis, which is
generally the amount of ordinary income previously recognized plus any cash
payment. The Company will be entitled to a deduction for federal income tax
purposes in the year the income is taxable to the participant in an amount equal
to the ordinary income realized by the participant as a result of the stock
award.
PAYMENTS UPON CHANGE IN CONTROL. The Stock Incentive Plan provides for the
acceleration of payment of awards and related shares of common stock in the
event of certain acquisition events or other change in control of the Company,
as defined in the Stock Incentive Plan. Such acceleration of payment may cause
part or all of the consideration involved to be treated as a "parachute payment"
under the Code, which may subject the recipient thereof to a 20% excise tax and
which may not be deductible by the Company for federal income tax purposes.
VOTE REQUIRED
The affirmative vote of a majority of the stockholders represented and voting
at the Annual Meeting will be required to approve the amendment to the Stock
Incentive Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the ratification
and approval of the amendment to the Company's Amended and Restated Stock
Incentive Plan to increase the number of shares available for grant by
1,000,000.
10
<PAGE>
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth the name, age and position of our executive
officers, directors and key employees as of March 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dani P. Bolognesi, Ph.D............. 57 Chief Executive Officer, Chief Scientific Officer and Director
Matthew A. Megaro................... 41 President, Chief Financial Officer and Secretary
Samuel Hopkins, Ph.D................ 40 Vice President of Medical Affairs
Dennis M. Lambert, Ph.D............. 51 Vice President of Biological and Molecular Sciences
M.C. Kang, Ph.D..................... 47 Vice President of Development
Michael A. Recny, Ph.D.............. 43 Vice President of Corporate Development
Timothy J. Creech................... 38 Director of Finance and Administration
Jesse I. Treu, Ph.D.(1)............. 52 Chairman of the Board of Directors
Jeffrey M. Lipton(2)................ 56 Vice Chairman of the Board of Directors
Brian H. Dovey(2)................... 57 Director
Charles A. Sanders, M.D.(1)(2)...... 67 Director
J. Richard Crout, M.D.(1)........... 69 Director
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
DANI P. BOLOGNESI, PH.D. is a founder of Trimeris, has been a director since its
inception and was named Chief Executive Officer and Chief Scientific Officer in
March 1999. Dr. Bolognesi held a number of positions at Duke University since
1971, and served as James B. Duke Professor of Surgery, Professor of
Microbiology/Immunology, Vice Chairman of the Department of Surgery for Research
and Development and Director of the Duke University Center for AIDS Research
from 1989 to March 1999. From 1988 to March 1999, Dr. Bolognesi was the Director
of the Central Laboratory Network that supports all HIV vaccine clinical trials
sponsored by the National Institutes of Health. Dr. Bolognesi received his Ph.D.
degree in Virology from Duke University.
MATTHEW A. MEGARO joined Trimeris as Chief Financial Officer and Vice President
of Business Development in March 1995, was named Chief Operating Officer,
Executive Vice President and Secretary of Trimeris in June 1997 and was named
President of Trimeris in March 1999. Prior to joining Trimeris, Mr. Megaro was
Chief Operating Officer of Parnassus Pharmaceuticals, Inc., a biopharmaceutical
company, from January 1994 to October 1994. In October 1994, Parnassus filed for
protection under the United States Bankruptcy Code. From 1988 to January 1994,
Mr. Megaro was Chief Financial Officer and Vice President of Finance and
Administration of Athena Neurosciences, Inc., a biopharmaceutical company.
SAMUEL HOPKINS, PH.D. joined Trimeris as Director of Drug Development in April
1995 and was named Vice President of Medical Affairs in June 1997. From 1991 to
April 1995, Dr. Hopkins held various positions at Cato Research, Ltd., a
contract research organization, most recently serving as Director of Oncology
and Antiviral Drug Product Development and Senior Clinical Research Scientist.
From 1987 to 1991, Dr. Hopkins was a Senior Research Scientist in the Division
of Virology at Burroughs Wellcome Co., a multinational pharmaceutical company.
Dr. Hopkins received his Ph.D. degree in Biochemistry and Biophysics from the
Medical College of Virginia.
DENNIS M. LAMBERT, PH.D. joined Trimeris as Director of Virology in July 1993,
was named Senior Director of Virology and Molecular Biology in September 1995,
and was named Vice President of Biological Molecular Sciences in June 1997. From
1988 to July 1993, Dr. Lambert was Assistant Director, Department of Molecular
Virology and Host Defense, at SmithKline Beecham Corp., a pharmaceutical
company. Dr. Lambert received his Ph.D. degree in Microbiology/Virology from
Indiana State University at Terre Haute.
11
<PAGE>
M.C. KANG, PH.D. joined Trimeris as a consultant in October 1995 and was named
Director of Chemistry in August 1996 and Vice President of Development in
September 1998. Prior to joining Trimeris, Dr. Kang held various positions at
Glaxo plc from 1990 to October 1995, most recently serving as Director of
Chemical Development. From 1986 to 1990, Dr. Kang was a Development Chemist in
the Medical Products Division at E.I. DuPont de Nemours & Co., a chemical
company. Dr. Kang received his Ph.D. degree in Synthetic Organic Chemistry from
Oregon State University.
MICHAEL A. RECNY, PH.D. joined Trimeris as Director of Biochemical Sciences in
March 1995, was named Director of Business Development in November 1996 and Vice
President of Corporate Development in January 1999. Prior to joining Trimeris,
Dr. Recny was Senior Director of Biological Sciences at Parnassus from November
1993 to October 1994. From 1988 to November 1993, Dr. Recny was Director of
Protein Biochemistry at Procept, Inc., a biopharmaceutical company. Prior to
joining Procept, Inc., Dr. Recny was a Staff Scientist/Laboratory Head at
Genetics Institute Inc., a biopharmaceutical company. Dr. Recny received his
Ph.D. degree in Biochemistry from the University of Illinois at
Urbana-Champaign.
TIMOTHY J. CREECH, C.P.A. joined Trimeris as Director of Finance and
Administration in July 1997. From July 1996 to June 1997, prior to joining
Trimeris, Mr. Creech was Corporate Controller at Performance Awareness
Corporation, a software company. From December 1993 to July 1996, Mr. Creech was
Director of Finance at Avant! Corporation, a software company. From 1990 to
December 1993, Mr. Creech was a senior manager at KPMG LLP, independent auditors
for Trimeris.
JESSE I. TREU, PH.D. has been Chairman of the Board of Directors of Trimeris
since its inception. Dr. Treu will resign as Chairman of the Board of Directors
in June 1999 at the annual meeting of stockholders, but will seek re-election to
the Board at the annual meeting. Since 1986, Dr. Treu has been a Managing Member
of Domain Associates, LLC, a venture capital firm specializing in investments in
life sciences. Dr. Treu serves on the Boards of Directors of Focal, Inc. and
GelTex Pharmaceuticals, Inc. Dr. Treu received his Ph.D. degree in Physics from
Princeton University.
JEFFREY M. LIPTON has been a director of Trimeris since June 1998. Mr. Lipton
has been Vice Chairman of the Board since March 1999 and will be appointed
Chairman of the Board of Directors in June 1999 at the annual meeting of
stockholders. Since July 1998, Mr. Lipton has been President and Chief Executive
Officer of NOVA Chemicals Corporation, a chemicals company headquartered in
Calgary, Alberta, Canada. Mr. Lipton was President of NOVA Corporation, a
worldwide natural gas services and petrochemicals company from September 1994
until July 1998, a director from April 1996 until July 1998, Senior Vice
President from 1993 until February 1994 and Senior Vice President and Chief
Financial Officer until September 1994. Prior to NOVA, Mr. Lipton was with E.I.
Du Pont De Nemours & Co. for 29 years, holding a number of senior management
positions, including Vice President, Medical Products, Vice President, Polymer
Products, Vice President, Corporate Marketing and Continuous Improvement, and
Vice President, Corporate Plans. Mr. Lipton is a director of NOVA Chemical
Corporation, Chairman of the Board of Directors of Methanex Corporation and the
American Plastics Council, and a Director of Dynergy Corporation, Calgary
Laboratory Services, Public Policy Forum, and the Chemical Manufacturers'
Association.
BRIAN H. DOVEY has been a director of Trimeris since its inception. Since 1988,
Mr. Dovey has been a Managing Member of Domain Associates, LLC, a venture
capital firm specializing in investments in life sciences. Mr. Dovey is Chairman
of the National Venture Capital Association and is a member of the Boards of
Trustees of the Coriell Institute, the Wistar Institute, and the University of
Pennsylvania School of Nursing. Mr. Dovey is Chairman of the Board of Directors
of Creative BioMolecules, Inc. and also serves on the Boards of Directors of
Connetics Corporation, NABI, Inc., U.S. Bioscience, Inc. and Vivus, Inc.
CHARLES A. SANDERS, M.D. has been a director of Trimeris since October 1996.
From 1989 to May 1995, Dr. Sanders was Chairman of the Board of Directors and
Chief Executive Officer of Glaxo and a member of the Board of Directors of
Glaxo. Prior to joining Glaxo, Dr. Sanders held a number of positions at Squibb
Corporation, a multi-national pharmaceutical corporation, including Vice
Chairman, Chief Executive Officer of the Science and Technology Group and
Chairman of the Science and Technology Committee of the Board. Dr. Sanders
serves on the Boards of Directors of Magainin Pharmaceuticals, Inc., Vertex
Pharmaceuticals Incorporated, Kendle International Inc., Scios Inc.,
Pharmacopeia, Inc., and Staffmark, Inc. Dr. Sanders received an M.D. degree from
Southwestern Medical College of the University of Texas.
12
<PAGE>
J. RICHARD CROUT, M.D. has been a director of Trimeris since November 1998.
Since 1994, Dr. Crout has been President of Crout Consulting, a firm that
provides consulting advice to pharmaceutical and biotechnology companies on the
development of new products. From 1984 to 1993, Dr. Crout was Vice President,
Medical and Scientific Affairs with Boehringer Mannheim Pharmaceuticals Corp.
From 1973 to 1982, Dr. Crout was Director of the Bureau of Drugs, now known as
the Center for Drug Evaluation and Research at the U.S. Food and Drug
Administration. Dr. Crout serves on the Boards of Directors of Genelabs
Technologies, Inc., and GelTex Corporation. Dr. Crout received an M.D. degree
from Northwestern University Medical School.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation paid by the Company during the fiscal years
ended December 31, 1998, 1997 and 1996 to the Company's President and Chief
Executive Officer and to the Company's other most highly compensated executive
officers who were serving as executive officers and whose 1998 compensation
exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------
RESTRICTED SECURITIES
NAME AND ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) OPTIONS(#) COMPENSATION
- ------------------ ---- ------ ----- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dani P. Bolognesi (1) 1998 $ $ -- $ -- -- $ --
Chief Executive Officer and 1997 -- -- -- -- --
Chief Scientific Officer 1996 -- -- -- -- --
Matthew A. Megaro 1998 186,000 --(7) -- 70,000 --(6)
President, Chief 1997 177,950 117,000 -- -- --
Financial Officer, 1996 160,300 34,000 -- 51,765(4) --
and Secretary
M. Ross Johnson (2) 1998 260,004 65,000(8) -- 135,000 --(6)
Former President, Chief Executive 1997 249,300 200,000 -- -- --
Officer and Chief Scientific Officer 1996 238,800 50,000 -- 117,648(5) --
</TABLE>
(1) Dr. Bolognesi was named Chief Executive Officer and Chief Scientific Officer
in March 1999. From September through December 1998, Dr. Bolognesi was a
temporary employee and was compensated at an annual rate of $240,000. Prior
to September 1998, Dr. Bolognesi was paid $65,154 for his services as a
consultant, a director and a member of the Scientific Advisory Board.
(2) Dr. Johnson was named President and Chief Executive Officer in March 1996,
and resigned as President, Chief Executive Officer and Chief Scientific
Officer in March 1999.
(3) Restricted stock awards of 127,060 and 76,470 shares were granted to Dr.
Johnson and Mr. Megaro, respectively, at their fair market value on the date
of grant in consideration for full recourse secured promissory notes payable
to the Company which bear interest at eight percent per annum. These shares
are subject to the Company's right of repurchase and certain other
restrictions which lapse ratably over a 48-month period. Aggregate holdings
of restricted stock at December 31, 1998 were 103,706 and 54,250 shares for
Dr. Johnson and Mr. Megaro, respectively. The market value of these shares
based on the closing price of the Company's common stock on December 31,
1998 of $11.75, was $1,218,545 and $637,438 for Dr. Johnson and Mr. Megaro,
respectively.
(4) In October 1996, the Board of Directors granted options to purchase 23,530
shares, 23,530 shares and 4,705 shares which were scheduled to vest ratably
over a 48-month period which commenced in March 1995, July 1995 and March
1996, respectively. In May 1997, the Board of Directors accelerated the
vesting of these options subject to certain restrictions on the underlying
shares of common stock which lapse over the same period of time over which
the options were to vest.
14
<PAGE>
(5) In October 1996, the Board of Directors granted options to purchase 35,295
shares, 35,295 shares and 47,058 shares which were scheduled to vest ratably
over a 48-month period which commenced in January 1995, July 1995 and March
1996, respectively. In May 1997, the Board of Directors accelerated the
vesting of these options subject to certain restrictions on the underlying
shares of common stock which lapse over the same period of time over which
the options were to vest.
(6) Beginning in 1998, we matched 100% of a participant's contributions to the
Trimeris Employee 401(k) Plan with common stock, provided the participant
was employed on the last day of the year. The number of shares issued is
based on the contributions to be matched divided by the closing price of the
common stock on the last trading day of the year, which was $11.75 on
December 31, 1998. Dr. Johnson received 851 shares of stock and is vested in
those shares. Mr. Megaro received 851 shares and is vested in 638 of those
shares.
(7) During 1998, we accrued approximately $600,000 for the payment of bonuses to
our executive officers and employees. The bonuses will be payable upon the
completion of certain financing or collaborative transactions. Accordingly,
Mr. Megaro may be eligible to receive a bonus for 1998.
(8) Pursuant to his severance agreement, Dr. Johnson will be paid a bonus of
$65,000 for 1998.
STOCK OPTION INFORMATION
The following table contains information concerning stock options granted
during the fiscal year ended December 31, 1998 to our Chief Executive Officer
and to each of our most highly compensated executive officers, whose salary and
bonus for 1998 exceeded $100,000. We have never granted any stock appreciation
rights.
OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
--------------------------------------------------- OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED(#)(1) 1998 SHARE DATE 5% 10%
- ---- ------------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Dani P. Bolognesi 52,000 --%(3) $ 8.00 04/03/2008 $ 262,000 $ 663,000
2,500 --%(3) 7.56 06/17/2008 12,000 30,000
Matthew A. Megaro 70,000 14 8.00 04/03/2008 352,000 892,000
M. Ross Johnson 135,000 26 8.00 04/03/2008 679,000 1,721,000
</TABLE>
(1) Each option represents the right to purchase one share of common stock. The
options shown in this column were all granted pursuant to our Stock
Incentive Plan. The options shown in this table become exercisable ratably
on a monthly basis over four years from the date of grant. Upon the
occurrence of certain events that result in a change of control, all
outstanding options granted to all employees, including executive officers,
will vest fully.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by the rules of the SEC and do not represent an estimate or projection of
our future common stock prices. These amounts represent certain assumed
rates of appreciation in the value of our common stock from the fair market
value on the date of grant. Actual gains, if any, on stock option exercises
are dependent on the future performance of the common stock and overall
stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
15
<PAGE>
(3) During 1998, Dr. Bolognesi was granted non-qualified stock options to
purchase an aggregate of 54,500 shares of common stock in his capacity as a
member of the Board of Directors and the Scientific Advisory Board and as
consultant to Trimeris. The options have exercise prices equal to the fair
market values on the date of grant, generally vest over a period of four
years and have a term of ten years.
YEAR-END OPTION TABLE
The following table contains information regarding stock options held by our
Chief Executive Officer and each of our most highly compensated executive
officers whose salary and bonus for 1998 exceeded $100,000, and the number of
and value of any in-the-money options as of December 31, 1998. No options were
exercised by any of these executive officers during 1998. The value of
unexercised in-the-money options at December 31, 1998 is based on a value of
$11.75 per share, the fair market value of our common stock as reflected by the
closing price on the Nasdaq National Market on December 31, 1998, less the per
share exercise price, multiplied by the number of shares issuable upon exercise
of the option.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF
UNEXERCISED OPTIONS AS OF IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 (#) DECEMBER 31, 1998 (1)
SHARES ACQUIRED --------------------- ---------------------
NAME ON EXERCISE (#) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dani P. Bolognesi -- 50,691 41,451 $ 427,099 $ 207,871
Matthew A. Megaro -- 13,125 56,875 49,219 213,281
M. Ross Johnson -- 25,313 109,687 94,924 411,326
</TABLE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
In April 1999, the Company entered into an employment arrangement with Dr.
Bolognesi, its Chief Executive Officer and Chief Scientific Officer. Under this
arrangement, Dr. Bolognesi is entitled to receive minimum annual compensation of
$285,000, an annual bonus based upon the achievement of certain milestones and
all health insurance and other benefits generally made available to the
Company's employees. He will also receive a one-time payment of $40,000 for
replacement of lost income. The agreement also provides for a grant of options
to purchase 200,000 shares of common stock at the fair market value of such
stock on the date of approval by the Compensation Committee. In the event that
Dr. Bolognesi's employment is terminated for any reason other than for cause,
Dr. Bolognesi's employment arrangement provides that he is entitled to his base
salary and benefits for two years from the date of such termination.
In March 1999, Dr. Johnson resigned as an officer and director of Trimeris and
entered into a severance agreement with us. Dr. Johnson will receive salary and
benefits until March 2000 based on his annual salary of $271,704 at the time of
his resignation. Dr. Johnson will also receive a bonus payment of $65,000 for
1998 and additional compensation of $1,000. In addition, we have agreed to
terminate our right of repurchase and other restrictions with respect to
approximately 94,414 shares of common stock held by Dr. Johnson. We also
accelerated vesting on stock options to purchase approximately 67,500 shares of
common stock. Dr. Johnson has agreed not to compete with us for a period of two
years from March 12, 1999.
In February 1995, we entered into an employment arrangement with Mr. Megaro,
our President, Chief Financial Officer, and Secretary. Pursuant to this
arrangement, if Mr. Megaro's employment is terminated for any reason other than
for cause, Mr. Megaro is entitled to receive his base salary and all health
insurance and other benefits generally made available to employees for up to six
months from the date of such termination.
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Effective April 10, 1997, the Board of Directors established a Compensation
Committee which is responsible for determining the salaries and incentive
compensation of the executive officers and providing recommendations for the
salaries and incentive compensation of all other employees and consultants. The
Compensation Committee also administers our benefit plans, including the Stock
Incentive Plan. Mr. Dovey serves as the Chairman of the Compensation Committee
and the other members of the committee are Dr. Sanders and Mr. Lipton. None of
Mr. Dovey, Mr. Lipton or Dr. Sanders has served as an officer or employee of
Trimeris. Dr. Bolognesi was a member of the Compensation Committee until March
1999. From September through December 1998, he served as a temporary employee of
Trimeris and was compensated at an annual rate of $240,000 which was approved by
other members of the Compensation Committee. Prior to 1998, Dr. Bolognesi was
not an employee or officer of Trimeris.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors offers this report
regarding compensation for the Company's executive officers and Chief Executive
Officer. The Compensation Committee is composed entirely of outside directors
and is responsible for developing and making recommendations to the Board with
respect to the Company's executive compensation policies and practices,
including the establishment of the annual total compensation for the Chief
Executive Officer and all executive officers.
GENERAL COMPENSATION POLICY
Our primary objective is to maximize the value of our shares over time. The
Compensation Committee, with this objective in mind, authorizes compensation
packages for our executive officers designed to retain and attract top quality
management and to encourage them to contribute to the achievement of our
business objectives. In addition, the Committee attempts to establish
compensation packages that are comparable to the packages received by executives
of similar companies.
We compensate our executive officers with a combination of salary and
incentives designed to encourage efforts to achieve both our short-term and
long-term goals. The compensation structure attempts to reward both individual
contributions as well as our overall performance. Traditional measures of
corporate performance, such as earnings per share or sales growth, are not
applicable to the performance of development stage biopharmaceutical companies
like Trimeris. As a result, in making executive compensation decisions, the
Committee evaluates other indications of performance, such as achieving
milestones in the development of its drug candidates and raising the capital
needed for its operations.
The basic components of our compensation packages for our executive officers
include the following:
- Base Salary
- Bonuses
- Long-term Incentives
- Benefits
Each executive officer's compensation package contains a mix of these
components and is designed to provide a level of compensation competitive with
the compensation paid to comparable officers of similar biopharmaceutical
companies. The Committee favors a compensation structure that aligns the
long-term interests of its executive officers with the interests of its
stockholders, and as a result places significant weight upon long-term
incentives in the form of stock options.
BASE SALARY and increases in base salary are determined by both individual
and Company performance and the salary levels in effect for similar
biopharmaceutical companies. During 1998, the Committee attempted to keep the
base salaries of our officers at a level around the median range of the salaries
of officers in similar biopharmaceutical companies. In addition, the Committee
considered the following factors in setting the base salaries for executive
officers during 1998: our initiation of a Phase II clinical trial for T-20,
progress made in the development of a manufacturing process, and any special
expertise of a particular executive.
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BONUSES are awarded by the Committee based upon its evaluation of the
performance of each executive officer and the achievement of Company goals
during the year. In 1998, no annual bonuses were awarded to the Named Executive
Officers, however a bonus pool of approximately $600,000 was accrued for payment
of bonuses to our executive officers and employees. The bonuses will be payable
upon the completion of certain financing or collaborative transactions.
LONG-TERM INCENTIVE compensation in the form of stock options is expected to
be the largest element of total compensation over time in order to conserve our
cash resources, to align the long-term interests of each officer with the
interests of our stockholders and to provide long-term incentives for the
individual officer to remain with the Company. Under our stock option plan,
grants are generally priced at the fair market value on the date of grant, vest
over a period of four years and have a term of ten years. Grants are made to all
employees on their date of hire based on salary level and position. All
employees, including executive officers, are eligible for subsequent
discretionary grants which are generally based on either individual or corporate
performance. The size of the option grant to each officer is based on the
officer's current position and expected future contributions to our business.
Awards of stock options are designed to have an expected aggregate exercise
value over time equal to a multiple of salary which will create a significant
opportunity for stock ownership.
BENEFITS offered to our executive officers serve as a safety net of
protection against the financial catastrophes that can result from illness,
disability or death. Benefits offered to our executive officers are
substantially the same as those offered to all our regular employees.
CEO COMPENSATION
Dr. Johnson's 1998 base salary of $260,000 represented an increase on an
annualized basis of approximately 4% over his annualized base salary during
1997. Dr. Johnson received no cash bonuses during 1998.
The Committee expected that the stock options granted to Dr. Johnson would
represent the largest element of his compensation and provide a direct link
between Dr. Johnson's compensation and the Company's performance. During 1998,
Dr. Johnson received an option grant to purchase 135,000 shares of the Company's
common stock at a price of $8.00 per share, the fair market value of the common
stock on the date of grant. These options were to vest over a four year period
as long as Dr. Johnson continues to remain employed by the Company. As with the
other Named Executive Officers, the options granted to Dr. Johnson were awarded
based on the significant milestones achieved by the Company during 1998. The
Committee believes that the option grant was within the median range of the
grants to chief executive officers in comparable companies.
Dr. Bolognesi's 1999 base salary of $285,000 and his bonus plan were arrived
at using various surveys regarding executive compensation at similar
biopharmaceutical companies. The Committee attempted to keep Dr. Bolognesi's
base salary at a level around the median range of the salaries of officers with
similar responsibilities in similar biopharmaceutical companies.
The Committee expects that the stock options granted to Dr. Bolognesi will
represent the largest element of his compensation and provide a direct link
between Dr. Bolognesi's compensation and the Company's performance. Dr.
Bolognesi received an initial option grant to purchase 200,000 shares of the
Company's common stock at the fair market value of the common stock on the date
of grant. These options vest over a four year period as long as Dr. Bolognesi
continues to remain employed by the Company. The Committee believes that the
option grant was within the median range of the grants to chief executive
officers in comparable companies. It is the Committee's judgment that Dr.
Bolognesi's scientific and management leadership is extremely important to the
Company, and it is therefore essential to provide Dr. Bolognesi with a
significant unvested stock ownership position in the Company.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Brian H. Dovey, Chairman
Dr. Charles Sanders, M.D.
Jeffrey M. Lipton
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PERFORMANCE GRAPH
The following graph compares total stockholder returns since we became a
reporting company under the Exchange Act to the Nasdaq CRSP Total Return Index
("Nasdaq Broad Index") for the Nasdaq Stock Market (U.S. Companies) and the
Nasdaq CRSP Pharmaceutical Index ("Nasdaq Pharmaceutical Index"). The total
return assumes the investment of $100 on October 7, 1997 in each of (i) our
common stock, (ii) the Nasdaq Broad Index and (iii) the Nasdaq Pharmaceutical
Index, and the reinvestment of dividends, although dividends have not been
declared on our common stock. The Nasdaq Pharmaceutical Index is made up of all
companies with the standard industrial classification (SIC) Code 283 (category
description "Drugs"). The stockholder return shown on the graph below is not
necessarily indicative of future performance and we will not make or endorse any
predictions as to future stockholder returns.
We completed our initial public offering on October 7, 1997 at a per share
price of $12.00. The closing price of Common Stock on October 8, 1997, its first
day of public trading, was $12.25 per share. The graph above commences with the
first trading day closing price of $12.25 per share.
COMPARATIVE TOTAL RETURNS OCTOBER 8, 1997 THROUGH DECEMBR 31, 1998
[GRAPH PLOTTED TO POINTS LISTED BELOW]
CUMULATIVE TOTAL RETURN
10/8/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
TRIMERIS, INC. 100 106 61 60 41 96
NASDAQ STOCK MARKET-US 100 91 106 109 99 127
NASDAQ PHARMACEUTICALS 100 87 95 88 83 111
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NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF OUR PREVIOUS OR
FUTURE FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE THIS PROXY STATEMENT OR
FUTURE FILINGS MADE BY THE COMPANY UNDER THOSE STATUTES, THE COMPENSATION
COMMITTEE REPORT AND STOCK PERFORMANCE GRAPH ARE NOT DEEMED FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE INTO ANY OF THOSE PRIOR FILINGS OR INTO ANY FUTURE FILINGS MADE BY US
UNDER THOSE STATUTES.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since February 1995, we have issued an aggregate of 274,514 shares of common
stock to Dr. Johnson, our former President, Chief Executive Officer and Chief
Scientific Officer, at an aggregate purchase price of $123,300. In June 1997, we
issued to Dr. Johnson an aggregate of 127,060 shares of common stock at an
aggregate purchase price of $54,000 in consideration for a full recourse secured
promissory note payable to Trimeris, which bears interest at 8% per annum and is
due in June 1999. In May 1997, we issued to Dr. Johnson an aggregate of 117,648
shares of common stock upon the exercise of stock options granted to Dr. Johnson
at an aggregate exercise price of $40,000 in consideration for a full recourse
secured promissory note payable to Trimeris, which bears interest at 8% per
annum and is due in May 1999. In April 1997, we issued to Dr. Johnson an
aggregate of 33,333 shares of Series C preferred stock which converted into a
total of 3,922 shares of common stock upon the completion of our initial public
offering at an aggregate purchase price of $20,000. In February 1995 and October
1996, we issued to Dr. Johnson an aggregate of 25,884 shares of common stock at
an aggregate purchase price of $9,300.
In March 1999, Dr. Johnson resigned as an officer and director of Trimeris and
entered into a severance agreement with us. See "Employment and Severance
Agreements".
Since March 1995, we have issued an aggregate of 146,080 shares of common
stock to Mr. Megaro, our President and Chief Financial Officer, at an aggregate
purchase price of $80,000. In June 1997, we issued to Mr. Megaro an aggregate of
76,470 shares of common stock at an aggregate purchase price of $32,500, in
consideration for a full recourse secured promissory note payable to us, which
bears interest at 8% per annum and is due in June 1999. In May 1997, we issued
to Mr. Megaro an aggregate of 51,766 shares of common stock upon the exercise of
certain options granted to Mr. Megaro at an aggregate exercise price of $17,600,
in consideration for a full recourse secured promissory note payable to us,
which bears interest at 8% per annum and is due in May 1999. In April 1997, we
issued to Mr. Megaro an aggregate of 41,667 shares of Series C preferred stock,
which converted into a total of 4,902 shares of common stock at the time of our
initial public offering at an aggregate purchase price of $25,000. In March 1995
and October 1996, we issued to Mr. Megaro an aggregate of 12,942 shares of
common stock at an aggregate purchase price of $4,900. Certain shares of common
stock purchased by Mr. Megaro are subject to our right of repurchase and certain
other restrictions which lapse over a period of time.
Between January and April 1997, we sold an aggregate of 5,000,001 shares of
Series C preferred stock to Domain Partners II, L.P., Domain Partners III, L.P.,
DP III Associates and Biotechnology Investments Limited at an aggregate purchase
price of approximately $3,000,000. Dr. Treu and Mr. Dovey, who are members of
our Board of Directors, are general partners of the general partners of Domain
Partners II, L.P., Domain Partners III, L.P. and DP III Associates, L.P. Domain
Associates, of which Dr. Treu and Mr. Dovey are general partners, is the U.S.
venture capital advisor to Biotechnology Investments Limited. All of these
shares of preferred stock that were issued and outstanding prior to our initial
public offering were converted into an aggregate of 588,235 shares of common
stock upon the completion of that offering.
For information regarding employment agreements with our executive officers,
see "Employment and Severance Agreements." For information regarding
compensation of directors, see "Election of Directors - Directors'
Compensation." For information regarding stock options, see " Stock Option
Information."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC
and the Nasdaq National Market ("Nasdaq"). Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish Trimeris with copies
of all reports they file pursuant to Section 16(a).
Based solely on a review of the copies of such reports furnished to us, or
written representations that no Form 5s were required, we believe that, during
the year ended December 31, 1998, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% stockholders were
satisfied.
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STOCKHOLDER PROPOSALS FOR PROXY STATEMENT FOR 2000 ANNUAL
MEETING OF STOCKHOLDERS
Stockholder proposals that are intended to be presented at our annual
meeting of stockholders to be held in 2000 must be received by us no later than
January 20, 2000, in order to be included in the proxy statement and related
proxy materials. Proposals must comply with all of the requirements of Rule
14a-8 of the Exchange Act, as well as the requirements of our Charter and
Bylaws. Under Rule 14a-4 of the Exchange Act, we will be able to use proxies
given to us for next year's meeting to vote for or against any stockholder
proposal that is submitted other than pursuant to Rule 14a-8 at our discretion,
unless the proposal is submitted to us not less than 60 days nor more than 90
days prior to next year's meeting or, if less than 70 days notice or prior
public disclosure of the date of the meeting is given or made, not less than 10
days following the date on which notice of the meeting was given or public
disclosure was made, whichever occurs first.
FORM 10-K
WE WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF OUR ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF
EXHIBITS. REQUESTS SHOULD BE SENT TO THE ATTENTION OF INVESTOR RELATIONS AT OUR
EXECUTIVE OFFICES WHICH ARE LOCATED AT 4727 UNIVERSITY DRIVE, DURHAM, NORTH
CAROLINA 27707.
OTHER BUSINESS
The Board of Directors knows of no other business that will be presented for
consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, however, it is the intention of the persons named in
the accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
Dated: May __, 1999
By Order of the Board of Directors,
Matthew A. Megaro, Secretary
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APPENDIX A
TRIMERIS, INC.
AMENDED AND RESTATED STOCK INCENTIVE PLAN
(formerly, the Trimeris, Inc. New Stock Option Plan)
1. Purpose
The Trimeris, Inc. Amended and Restated Stock Incentive Plan (formerly,
the Trimeris, Inc. New Stock Option Plan) (the "Plan") is established to advance
the interests of the Company's stockholders by creating an incentive for, and
enhancing the Company's ability to attract, retain and motivate, key employees,
directors and consultants or advisors of Trimeris, Inc. and any successor
corporations thereto (collectively, the "Company") or future parent and/or
subsidiary corporations of such corporation (as defined in Sections 424(e) and
424(f) of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder (the "Code")) (all of whom, along with the Company,
sometimes being individually referred to as a "Participating Company" and
collectively referred to as the "Participating Company Group") by providing such
persons with equity ownership opportunities and performance-based incentives and
thereby better aligning the interests of such persons with those of the
Company's stockholders.
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant." The Board of
Directors of the Company (the "Board"), in its sole discretion, shall determine
which persons shall be granted Awards under the Plan. A director of the Company
shall be eligible to be granted an Incentive Stock Option (as hereinafter
defined) only if the director is also an employee of the Company. A consultant
or advisor to the Company or a non-employee director of the Company shall be
eligible to be granted only Awards other than Incentive Stock Options.
Participants may, if otherwise eligible, be granted additional Awards.
3. Administration; Delegation
(a) ADMINISTRATION BY BOARD. The Plan shall be administered by the
Board. The Board shall have authority to grant Awards and to adopt, amend and
repeal such administrative rules, guidelines and practices relating to the Plan
as it shall deem advisable from time to time. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or any Award in
the manner and to the extent it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. No member of
the Board shall be liable for any action or determination relating to the Plan.
All decisions by the Board shall be made in the Board's sole discretion and
shall be final and binding on all persons having or claiming any interest in the
Plan or in any Award. No director or person acting pursuant to the authority
delegated by the Board shall be liable for any action or determination under the
Plan made in good faith.
(b) DELEGATION TO EXECUTIVE OFFICERS. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.
(c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (each, a "Committee"). For so long
as the common stock, $.001 par value per share (the "Common Stock"), of the
Company is registered under the Securities Exchange Act of 1934 (the "Exchange
Act"), the Board shall appoint one such Committee of not less than two members,
each member of which shall be a "non-employee director" as defined in Rule 16b-3
promulgated under the Exchange Act. All references in the Plan to the "Board"
shall mean a Committee or the Board or the executive officer referred to in
Section 3(b) to the extent that the Board's powers or authority under the Plan
have been delegated to such Committee or executive officer.
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4. Stock Available For Awards
(a) NUMBER OF SHARES. Subject to adjustment under Section 4(b), Awards
may be made under the Plan for up to a maximum of One Million Six Hundred and
Two Thousand Nine Hundred Forty-One (1,602,941) shares of Common Stock. If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options, to any limitation required under the Code.
Shares issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) ADJUSTMENTS TO COMMON STOCK. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option (as defined below), (iii) the
repurchase price per security subject to each outstanding Restricted Stock Award
(as defined below), and (iv) the terms of each other outstanding stock-based
Award, if any, shall be appropriately adjusted by the Company (or substituted
Awards may be made, if applicable) to the extent the Board shall determine, in
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 4(b) applies and Section 9(a) also applies to any
event, Section 9(a) shall be applicable to such event, and this Section 4(b)
shall not be applicable.
5. Stock Options
(a) GENERAL. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. Any Option granted to a Participant who is subject to
the provisions of Section 16 of the Exchange Act shall not become exercisable
for a period of at least six (6) months following the date of grant. An Option
which is not intended to be an Incentive Stock Option shall be designated a
"Nonstatutory Stock Option."
(b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and construed consistently with the requirements of Section 422 of
the Code. The Company shall have no liability to a Participant who has been
awarded an Option (an "Optionee"), or any other party, if an Option (or any part
thereof) which is intended to be an Incentive Stock Option is not an Incentive
Stock Option.
(c) EXERCISE PRICE. The Board shall establish, in its sole discretion,
the exercise price at the time each Option is granted and specify it in the
applicable option agreement; provided, however, that (i) the exercise price per
share for an Incentive Stock Option shall be not less than the fair market value
of a share of Common Stock on the date of grant of such Incentive Stock Option,
as determined by the Board in good faith (the "Fair Market Value"), and (ii) the
exercise price per share of an Incentive Stock Option granted to an Optionee who
at the time the Incentive Stock Option is granted owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code (a "Ten Percent Owner Optionee") shall be not less than one hundred ten
percent (110%) of the Fair Market Value. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted by the Board in its discretion with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code. Nothing hereinabove shall require that
any such assumption or modification result in the Option having the same
characteristics, attributes or tax treatment as the Option for which it is
substituted.
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(d) $100,000 LIMITATION. The aggregate fair market value, determined as
of the date on which an Incentive Stock Option is granted, of the shares of
Common Stock with respect to which Incentive Stock Options (determined without
regard to this subsection) are first exercisable during any calendar year (under
this Plan or under any other plan of the Participating Company Group) by any
Optionee shall not exceed $100,000. If such limitation would be exceeded with
respect to an Optionee for a calendar year, the Incentive Stock Option shall be
deemed a Nonstatutory Stock Option to the extent of such excess.
(e) TIME FOR GRANTING INCENTIVE STOCK OPTIONS. All Incentive Stock
Options must be granted, if at all, within ten (10) years from the earlier of
the date the Plan is adopted by the Board or the date the Plan is duly approved
by the stockholders of the Company.
(f) DURATION OF OPTIONS. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that (i) no Incentive Stock
Option shall be exercisable after the expiration of ten (10) years after the
date such Incentive Stock Option is granted, (ii) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the date such Incentive Stock Option is
granted and (iii) no Incentive Stock Option shall be exercisable after the date
the Optionee's employment with the Participating Company Group is terminated for
cause (as determined in the sole discretion of the Board); and provided,
further, that an Option shall terminate and cease to be exercisable no later
than three (3) months after the date on which the Optionee terminates employment
with the Participating Company Group, unless Optionee's employment with the
Participating Company Group shall have terminated as a result of the Optionee's
death or disability (within the meaning of Section 22(e)(3) of the Code). In the
event the Optionee's employment with the Participating Company Group shall have
terminated due to Optionee's disability (within the meaning of Section 22(e)(3)
of the Code), the Option shall terminate and cease to be exercisable no later
than twelve (12) months from the date on which the Optionee's employment
terminated. In the event the Optionee's employment with the Participating
Company Group shall have terminated due to Optionee's death, the Option shall
become immediately vested and exercisable and remain exercisable until the
Option shall terminate no later than twelve (12) months from the date on which
the Optionee's employment terminated.
(g) EXERCISE OF OPTIONS. Options may be exercised only by delivery to
the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.
(h) PAYMENT UPON EXERCISE. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an option
agreement, by delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or delivery by the Optionee to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price;
(3) to the extent permitted by the Board and expressly provided
in an option agreement, (i) by delivery of shares of Common Stock owned by the
Optionee valued at their Fair Market Value, which Common Stock was owned by the
Optionee at least six (6) months prior to such delivery, (ii) to the extent
permitted by applicable law, by delivery of a promissory note of the Optionee to
the Company secured by valuable collateral acceptable to the Board and on other
terms determined by the Board, or (iii) by payment of such other lawful
consideration as the Board may determine; or
(4) any combination of the above permitted forms of payment.
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6. Restricted Stock
(a) GRANTS. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award, and subject to such other terms and
conditions as the Board shall determine (each, a "Restricted Stock Award").
(b) TERMS AND CONDITIONS. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the duration of
restrictions, conditions for repurchase (or forfeiture) and the issue price, if
any; provided, however, that any Restricted Stock Award granted to a Participant
who is subject to the provisions of Section 16 of the Exchange Act shall
restrict the release of shares under the Restricted Stock Award for a period of
at least six (6) months from the date of grant. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and held in escrow by the Company, together with a stock power
endorsed in blank, with the Company (or its designee). At the expiration of the
applicable restriction periods, the Company (or such designee) shall deliver the
certificates no longer subject to such restrictions to the Participant or if the
Participant has died, to the beneficiary designated, in a manner determined by
the Board, by a Participant to receive amounts due or exercise rights of the
Participant in the event of the Participant's death (the "Designated
Beneficiary"). In the absence of an effective designation by a Participant,
Designated Beneficiary shall mean the Participant's estate.
7. Other Stock-based Awards
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including the grant of shares based upon certain conditions, the grant of
securities convertible into Common Stock and the grant of stock appreciation
rights.
8. General Provisions Applicable to Awards
(a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, to the
extent relevant in the context, shall include references to authorized
transferees.
(b) DOCUMENTATION. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.
(c) BOARD DISCRETION. Except as otherwise provided by the Plan, each
type of Award may be made alone or in addition or in relation to any other type
of Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.
(d) TERMINATION OF STATUS. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e) WITHHOLDING. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.
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(f) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same of a different type, changing the date or exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) CONDITIONS ON DELIVERY OF STOCK. The Company shall not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
9. Acquisition Events
(a) CONSEQUENCES OF ACQUISITION EVENTS. Except to the extent otherwise
provided in the instrument evidencing the Award or in any other agreement
between the Participant and the Company:
(i) Upon the occurrence of an Acquisition Event (as
hereinafter defined),
(A) all Restricted Stock Awards then outstanding shall
become fully vested and immediately free of all restrictions; and
(B) all other stock-based Awards other than Options and
stock appreciation rights shall become immediately exercisable, realizable or
vested in full, or shall be immediately free of all restrictions or conditions,
as the case may be.
(ii) Upon the execution by the Company of an agreement to
effect an Acquisition Event other than a Change of Control Event (as hereinafter
defined), all Options and stock appreciation rights then outstanding shall
become fully vested and immediately exercisable in full upon the occurrence of
the Acquisition Event or such earlier date as may be specified by the Board by
written notice to the Participants, and the Board may take one or both of the
following additional actions with respect to then outstanding Options and stock
appreciation rights: (A) provide that such Options and stock appreciation rights
shall be assumed, or equivalent Options or stock appreciation rights be
substituted by the acquiring or succeeding corporation (or an affiliate
thereof), or (B) upon written notice to the Participants, provide that all then
unexercised Options and stock appreciation rights will terminate to the extent
not exercised by the Participants prior to the consummation of such Acquisition
Event or such earlier date as may be specified by the Board by written notice to
Participants.
(iii) Upon the occurrence of a Change of Control Event,
all Options and stock appreciation rights then outstanding shall become fully
vested and immediately exercisable in full.
As used herein, an "Acquisition Event" shall mean: (a) any merger or
consolidation which results in the voting securities of the Company outstanding
immediately prior thereto representing (either by remaining outstanding or by
being converted into voting securities of the surviving or acquiring entity)
less than 60% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; (c) the complete liquidation of the Company; or (d) the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities (other than
through a merger or consolidation or an acquisition of securities directly from
the Company) by any "person," as such term is used in Section 13(d) and 14(d) of
the Exchange Act, other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any corporation
owned directly or indirectly by the stockholders of the Company (an event
specified in this clause (d) being referred to as a "Change of Control Event").
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(b) ASSUMPTION OF OPTIONS UPON CERTAIN EVENTS. The Board may grant
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.
10. Miscellaneous
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any right
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
(c) STATUS OF RIGHTS TO PAYMENTS UNDER PLAN. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall, except as otherwise provided by the Board, be no greater than
the right of an unsecured general creditor of the Company. All payments to be
made hereunder shall be paid from the general funds of the Company, and no
special or separate fund shall be established and no segregation of assets shall
be made to assure payment of such amounts, except as otherwise provided by the
Committee. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Optionee any rights that
are greater than those of a general creditor of the Company.
(d) SUBJECT TO LAW. The Plan and the grant of Awards hereunder shall be
subject to all applicable federal and state laws, rules, and regulations and to
such approvals by any United States government or regulatory agency as may be
required.
(e) SEVERABILITY. If any provision of this Plan or an option agreement
is or becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any agreement evidencing an Award
under any law deemed applicable by the Board, such provision shall be construed
or deemed amended to conform to applicable laws or, if it cannot be construed or
deemed amended without, in the determination of the Board, materially altering
the intent of the Plan or the agreement, it shall be stricken and the remainder
of the Plan or the agreement shall remain in full force and effect.
(f) EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective on
the date on which it is adopted by the Board, but no Incentive Stock Option
granted to an Optionee shall be effective unless and until the Plan has been
approved by the Company's stockholders. No Awards shall be granted under the
Plan after the completion of ten years from the earlier of (i) the date on which
the Plan was adopted by the Board or (ii) the date the Plan was approved by the
Company's stockholders, but Awards previously granted may extend beyond that
date.
(g) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no increase in the total
number of shares available for Awards under the Plan (except by operation of the
provisions of Section 4(b) above) or for grants of Incentive Stock Options under
the Plan may be made, unless and until such amendment shall have been approved
by the Company's stockholders.
(h) STOCKHOLDER APPROVAL. For purposes of this Plan, stockholder
approval shall mean approval by a vote of the stockholders in accordance with
the requirements of Section 422 of the Code.
(i) GOVERNING LAW. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors
On October 1, 1997.
Approved by the stockholders of the
Company on October 1, 1997
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TRIMERIS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. Dani P. Bolognesi and Matthew A. Megaro,
jointly and severally, as proxies, with full power of substitution and
resubstitution, to vote all shares of common stock which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of Trimeris, Inc. to be
held on Wednesday, June 23, 1999, or at any postponements or adjournments
thereof, as specified on the reverse, and to vote in his discretion on such
other business as may properly come before the Meeting and any adjournments
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
PLEASE SIGN AND DATE ON REVERSE SIDE AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
TRIMERIS, INC. ANNUAL MEETING OF STOCKHOLDERS
JUNE 23, 1999
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Election of Directors:
[ ] Vote FOR all nominees at right (except as withheld in the space below)
NOMINEES:
Jesse I. Treu, Ph.D.
Charles A. Sanders, M.D.
[ ] Vote WITHHELD ____________________
name of nominee
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CHECK THE
BOX "VOTE WITHHELD" AND WRITE THE NOMINEE'S NAME ON THE LINE ABOVE.
2. Ratification of Accountants: Ratification and approval of the selection of
KPMG LLP as independent accountants for the fiscal year ending December 31,
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of an amendment to the Company's Amended and Restated Stock
Incentive Plan to increase the number of shares available for grant by
1,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR DISCRETION
AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY ADJOURNMENTS
THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST
SIGN BELOW, NO BOXES NEED BE CHECKED.
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
- ------------------------- ---------------------------
SIGNATURE OF STOCKHOLDER PRINTED NAME OF STOCKHOLDER
- ---------------------------- Dated: ________, 1999
TITLE (IF APPROPRIATE)
Note: Please sign exactly as name appears hereon. If signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such, and, if signing for a corporation, give your title. When shares are
in the names of more than one person, each should sign.
