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
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TRIANGLE PHARMACEUTICALS, INC.
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[LOGO OF TRIANGLE PHARMACEUTICALS]
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
April 12, 2002
To the Stockholders of
TRIANGLE PHARMACEUTICALS, INC.:
You are cordially invited to attend the Annual Meeting of the stockholders
of Triangle Pharmaceuticals, Inc., to be held at The University Club, 3100 Tower
Boulevard, Suite 1700, Durham, North Carolina 27707 on May 23, 2002 at 9:30 a.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement which you are urged to
read carefully.
If you do not plan to attend the Annual Meeting, please sign, date, and
return the enclosed proxy card promptly in the accompanying reply envelope. You
may also vote by phone by following the instructions on the proxy card. If you
decide to attend the 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.
/s/ Chris A. Rallis
Chris A. Rallis
PRESIDENT AND CHIEF OPERATING OFFICER
YOUR VOTE IS IMPORTANT
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE, TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE BY PHONE BY FOLLOWING
THE INSTRUCTIONS ON THE PROXY CARD.
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2002
------------------
To the Stockholders of
TRIANGLE PHARMACEUTICALS, INC.
The Annual Meeting of Stockholders of Triangle Pharmaceuticals, Inc.,
Triangle, will be held at The University Club, 3100 Tower Boulevard, Suite 1700,
Durham, North Carolina 27707 on May 23, 2002 at 9:30 a.m., the Annual Meeting,
to consider and vote upon the following matters:
1. To elect three directors to the class of directors whose term
expires in 2005. The Board of Directors has nominated the following
persons for re-election at the Annual Meeting: Anthony B. Evnin, Ph.D.,
James L. Tyree and Chris A. Rallis, J.D.;
2. To approve an amendment to the 1996 Stock Incentive Plan (i)
increasing the number of shares of common stock authorized for issuance
under the plan in 2002 by 1,962,329 shares and (ii) providing for
automatic annual increases during the term of the plan, beginning in 2003,
so that the number of authorized shares available for new grants under the
plan on each January 1 will equal the lesser of 4.5% of the total number
of shares of Triangle common stock outstanding on the preceding December
31st or 5,000,000 shares;
3. To approve an amendment to the Employee Stock Purchase Plan
increasing the number of shares of common stock authorized for issuance
under the plan by 250,000 shares;
4. To ratify the appointment of PricewaterhouseCoopers LLP as
Triangle's independent accountants for the fiscal year ending December 31,
2002; and
5. To transact any other business that properly comes before the
Annual Meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this Notice. All stockholders of record at the close of business on
March 28, 2002 will be entitled to vote at the Annual Meeting and at any
adjournment thereof. The transfer books will not be closed. A list of
stockholders entitled to vote at the Annual Meeting will be available for
inspection at Triangle's offices.
By Order of the Board of Directors
/s/ R. Andrew Finkle
R. Andrew Finkle, SECRETARY
April 12, 2002
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE. YOU MAY ALSO VOTE BY PHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY
CARD.
TRIANGLE PHARMACEUTICALS, INC.
4 UNIVERSITY PLACE, 4611 UNIVERSITY DRIVE
DURHAM, NORTH CAROLINA 27707
---------------------------------
PROXY STATEMENT
---------------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
MAY 23, 2002
The enclosed proxy is solicited on behalf of the Board of Directors of
Triangle Pharmaceuticals, Inc., Triangle, a Delaware corporation, for use at the
annual meeting of stockholders to be held on May 23, 2002, and at any
adjournment or postponement of the annual meeting. The annual meeting will be
held at 9:30 a.m. at The University Club, 3100 Tower Boulevard, Suite 1700,
Durham, North Carolina 27707. All stockholders of record on March 28, 2002, the
record date, will be entitled to notice of and to vote at the annual meeting. We
intend to mail this Proxy Statement and the accompanying proxy on or about April
12, 2002 to all stockholders of record at the close of business on the record
date.
The mailing address of the principal executive office of Triangle is 4611
University Drive, P.O. Box 50530, Durham, North Carolina 27717.
PURPOSE OF MEETING
The specific proposals to be considered and acted on at the annual meeting
are summarized in the accompanying Notice of Annual Meeting of Stockholders.
Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
VOTING
On March 28, 2002, the record date for determining stockholders entitled
to vote at the annual meeting, there were 76,850,837 shares of common stock
outstanding. Each holder of common stock as of the record date is entitled to
one vote per share on all matters brought before the annual meeting.
The holders of a majority of the stock issued and outstanding and entitled
to vote, 38,425,419 shares, present in person or by proxy, will constitute a
quorum at the annual meeting. If you sign your proxy and we receive it before
the annual meeting, your shares will be voted as specified on your proxy card.
If you do not specify a choice on a proposal, then your shares will be voted
affirmatively for the proposal. Abstentions and broker non-votes will be counted
for purposes of determining whether a quorum is present at the annual meeting
and abstentions will have the effect of negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy has the power to revoke it at any time before
its exercise. You may revoke your proxy by filing with the Secretary of Triangle
Pharmaceuticals, Inc. at our principal executive office, 4 University Place,
4611 University Drive, Durham, North Carolina 27707, a notice of revocation or
another signed proxy with a later date. You may also revoke your proxy by
attending the annual meeting and voting in person.
SOLICITATION
We will bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this proxy statement, the proxy and any
additional soliciting materials furnished to stockholders. We will provide
copies of solicitation materials to brokerage houses, fiduciaries and custodians
holding shares in their names that are beneficially owned by others so that they
may forward the solicitation materials to the beneficial owners. In addition, we
may reimburse these record holders for their costs of forwarding the
solicitation materials to beneficial owners. We may supplement this original
solicitation of proxies by mail, with solicitation by telephone, facsimile,
telegram or other means by some of our directors, officers, employees or agents.
No additional compensation will be paid to these individuals for these services.
Except as described above, we do not presently intend to solicit proxies other
than by mail.
PROPOSAL 1
ELECTION OF DIRECTORS
Our Certificate of Incorporation provides for a classified Board of
Directors consisting of three classes of directors serving staggered three-year
terms, with each class consisting as nearly as possible of one-third of the
total number of directors. Our Bylaws provide for a Board of Directors
consisting of that number of directors as may be fixed from time to time by
resolution of two-thirds of the members of the Board of Directors or by
two-thirds of the stockholders at an annual meeting of stockholders. The Board
of Directors has set the number of directors at ten, with two classes consisting
of three directors and the third class consisting of four directors. There
currently is a vacancy in the class of directors whose term expires in 2003 for
the directorship previously held by Dr. David W. Barry. Three directors are to
be elected at this annual meeting for a term expiring at the 2005 annual meeting
of stockholders or when their successors have been duly elected and qualified.
The Board of Directors has nominated Anthony B. Evnin, Ph.D., James L.
Tyree and Chris A. Rallis, J.D. to stand for re-election to the class of
directors whose term expires at the 2005 annual meeting of stockholders or when
their successors are elected and have qualified. Each person nominated for
re-election has agreed to serve if elected, and management has no reason to
believe that any nominee will be unavailable to serve. In the event any of the
nominees is unable or declines to serve as a director at the time of the annual
meeting, the proxies will be voted for any nominee who may be designated by the
present Board of Directors to fill the vacancy. Unless otherwise instructed, the
proxyholders will vote the proxies received by them FOR the nominees named
below.
NOMINEES
The following table contains information regarding the nominees.
YEAR FIRST CLASS
ELECTED TERMINATION
NAME DIRECTOR AGE YEAR POSITION
------------------ ---------- --- ----------- --------
Anthony B. Evnin 1995 61 2005 Director
James L. Tyree 2001 49 2005 Director
Chris A. Rallis 2000 48 2005 Director
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BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2005
ANTHONY B. EVNIN, PH.D. has served as a director of Triangle
Pharmaceuticals, Inc. since November 1995 and as a member of the Compensation
Committee since June 1996. Since 1975, Dr. Evnin has been a general partner of
Venrock Associates, a venture capital firm. Dr. Evnin received an A.B. in
chemistry from Princeton University and a Ph.D. in chemistry from Massachusetts
Institute of Technology. Dr. Evnin is currently a director of eight
privately-held companies and the following publicly-held companies: Caliper
Technologies Corp., a diagnostics company, and Sonic Innovations, Inc., a
hearing aid company.
JAMES L. TYREE has served as a director of Triangle Pharmaceuticals, Inc.
since July 2001. Mr. Tyree has served in several management positions at Abbott
Laboratories since June 1997, and is currently Abbott's Corporate Vice President
Global Pharmaceutical Licensing and New Business Development. Mr. Tyree received
his B.A. in psychology and forensic studies and his M.A. in business
administration from Indiana University.
CHRIS A. RALLIS, J.D. has served as a director of Triangle
Pharmaceuticals, Inc., as a member of the Secondary Committee of the Board of
Directors and as President and Chief Operating Officer since March 2000, as
Executive Vice President, Business Development and General Counsel from August
1999 through February 2000, and as Vice President, Business Development, General
Counsel and Secretary from November 1995 through July 1999. Prior to joining
Triangle, Mr. Rallis served in the following positions with Burroughs Wellcome:
Vice President, Planning and Business Development; Director, Planning and
Business Development; and Assistant General Counsel. During Mr. Rallis' tenure
at Burroughs Wellcome, his department was responsible for finalizing licensing
agreements with Emory University and Vertex Pharmaceuticals Incorporated, and a
consumer healthcare joint venture with Warner-Lambert Company. Mr. Rallis
received his A.B. degree in economics from Harvard College and a J.D. from Duke
University.
BUSINESS EXPERIENCE OF CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2003 (AGE)
STEWART J. HEN (35) has served as a director of Triangle Pharmaceuticals,
Inc. since August 2001. Mr. Hen has been a Vice President of Warburg Pincus LLC,
a venture capital and private equity firm, since 2000. From 1996 to 2000, Mr.
Hen was a consultant in the Pharmaceutical and Medical Products Practice at
McKinsey & Company. Mr. Hen worked at Merck & Company from 1991 to 1994. Mr. Hen
received an M.B.A. from The Wharton School, an M.S. in biochemical engineering
from Massachusetts Institute of Technology, and a B.S. in chemical engineering
from the University of Delaware. Mr. Hen is currently a director of two
publicly-held companies: The Medicines Co. and Synaptic Pharmaceutical
Corporation.
GEORGE MCFADDEN (61) has served as a director of Triangle Pharmaceuticals,
Inc. since November 1995, as a member of the Compensation Committee since June
1996 and as a member of the Audit Committee since June 2000. Since 1979, Mr.
McFadden has served as a general partner of McFadden Brothers, an investment
company. Mr. McFadden received a B.A. in business from Vanderbilt University and
an M.B.A. from Columbia University. Mr. McFadden is currently a director of
three privately-held companies.
BUSINESS EXPERIENCE OF CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004 (AGE)
STANDISH M. FLEMING (54) has served as a director of Triangle
Pharmaceuticals, Inc. since July 1995 and as chairman of the Audit Committee
since June 1996. Since April 1993, Mr. Fleming has been a general partner of
Forward Ventures, a venture capital firm. Mr. Fleming also served in an advisory
position with Forward Ventures from February 1992 through April 1993. Prior to
that, Mr. Fleming joined Ventana, a venture capital firm, in 1986 and served as
a fund manager from January 1990 through January 1992. Mr. Fleming received a
B.A. in English from Amherst College and an M.B.A. from the University of
California, Los Angeles. Mr. Fleming currently serves as a director of seven
privately-held companies.
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DENNIS B. GILLINGS, PH.D. (57) has served as a director of Triangle
Pharmaceuticals, Inc. since May 1998. Dr. Gillings is Chairman of Quintiles
Transnational Corp., which he founded in 1982. Quintiles Transnational Corp. is
a provider of contract research, sales and marketing services to the
pharmaceutical, biotechnology and medical device industries. Dr. Gillings served
as a professor at the University of North Carolina at Chapel Hill from 1972 to
1988, and he currently serves on the University of North Carolina School of
Public Health Foundation Board. Dr. Gillings received a Diploma in mathematical
statistics from the University of Cambridge in 1967 and a Ph.D. in mathematics
from the University of Exeter, England, in 1972. Dr. Gillings is currently a
director of one privately-held company.
HENRY G. GRABOWSKI, PH.D. (61) has served as a director of Triangle
Pharmaceuticals, Inc. since May 1998 and as a member of the Audit Committee
since June 1998. Dr. Grabowski has served as a professor in the Economics
Department, Duke University, since 1976 and as the Director of the Program in
Pharmaceuticals and Health Economics, Duke University, since 1983. Dr. Grabowski
is considered a leader in the field of, and has authored and co-authored
numerous books, monographs and articles concerning pharmaceutical regulation and
innovation. Dr. Grabowski has served as an advisor to numerous private and
public organizations, including the Institute of Medicine, the National Science
Foundation and the General Accounting Office. Dr. Grabowski is an adjunct
scholar at the American Enterprise Institute and he currently serves as
Associate Editor of THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE and the
JOURNAL OF RESEARCH IN PHARMACEUTICAL ECONOMICS. Dr. Grabowski received a B.S.
in engineering physics from Lehigh University in 1962 and a Ph.D. in economics
from Princeton University in 1967.
JONATHAN S. LEFF (33) has served as a director of Triangle
Pharmaceuticals, Inc. since August 2001, as a member of the Compensation
Committee since August 2001 and as a member of the Secondary Committee since
February 2002. Mr. Leff joined Warburg Pincus in 1996 and is currently a
Managing Director. Mr. Leff received an A.B. in government from Harvard College
and an M.B.A. from Stanford University School of Business. Mr. Leff is currently
a director of the following publicly-held companies: Intermune, Inc., Synaptic
Pharmaceutical Corporation, Transkaryotic Therapies, Inc., Visible Genetics,
Inc. and Zymogenetics, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met a total of five times and acted by written
consent seven times during the year ended December 31, 2001. Each director
attended at least 75% of the aggregate of (i) the total meetings of the Board of
Directors and (ii) the total number of meetings held by all committees of the
Board of Directors on which he served, with respect to the Board of Directors
meetings and committee meetings, respectively, held in that portion of 2001
during which the director was serving as a member of the Board of Directors,
except Mr. McFadden, who attended 75% of the meetings of the Board of Directors,
but less than 75% of the meetings of the Audit Committee.
We have a Compensation Committee currently composed of Dr. Evnin, Mr.
McFadden and Mr. Leff. The Compensation Committee acted by written consent four
times in 2001. The Compensation Committee reviews and acts on matters relating
to compensation levels and benefit plans for 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. To assist the Compensation Committee in administering benefit plans for
non-executive employees, the Board of Directors has designated a Secondary
Committee, which is currently composed of Mr. Rallis and Mr. Leff. The Secondary
Committee acted by written consent 14 times in 2001.
We also have an Audit Committee currently composed of Mr. Fleming, Dr.
Grabowski and Mr. McFadden. The Audit Committee met five times in 2001. The
Audit Committee assists in selecting the independent accountants, designating
and monitoring the services they are to perform, maintaining effective
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communication with those accountants and monitoring and reviewing internal
accounting procedures and controls.
DIRECTOR COMPENSATION
We reimburse our directors for all reasonable and necessary travel and
other incidental expenses incurred in connection with their attendance at
meetings of the Board of Directors. In addition, our 1996 Stock Incentive Plan,
as amended, the 1996 Incentive Plan, provides that each eligible non-employee
director will automatically receive an option to purchase 7,500 shares of common
stock upon a director's initial election or appointment to the Board of
Directors and 7,500 shares of common stock for each full or partial year of the
director's term, measured from the date of each annual meeting of stockholders.
For eligible non-employee directors re-elected to the Board of Directors, the
1996 Incentive Plan provides for the automatic grant of an option to purchase
7,500 shares of common stock for each full or partial year of the term to which
the director is re-elected, measured from the date of each annual meeting of
stockholders. These options will have an exercise price equal to 100% of the
fair market value of our common stock on the grant date and will become
exercisable in annual installments after the completion of each full or partial
year of service following such grant.
Under this automatic option grant program, on May 18, 2001, the date of
our 2001 annual meeting of stockholders, Mr. Fleming, Dr. Gillings and Dr.
Grabowski, who were all non-employee directors re-elected to the Board of
Directors, each received an automatic option grant to purchase 22,500 shares.
The exercise price per share of each option is $5.00, the fair market value per
share of our common stock on the grant date. Provided that Mr. Fleming, Dr.
Gillings and Dr. Grabowski each continue to serve on the Board of Directors,
their 22,500 option shares become exercisable in successive increments of 7,500
shares on the day immediately preceding the date of each subsequent annual
meeting of stockholders until the automatic option becomes fully exercisable for
all of the option shares.
On July 17, 2001, the Board of Directors elected James L. Tyree to the
Board of Directors to replace Arthur Higgins as Abbott Laboratories' designee to
the Board of Directors. Mr. Tyree filled the vacancy on the Board of Directors
created by Mr. Higgins' resignation, and was elected for a term expiring at the
2002 annual meeting of stockholders. Under the automatic option grant program,
Mr. Tyree, as a newly-elected non-employee director, received an automatic
option grant to purchase 15,000 shares. The exercise price per share of each
option is $4.16, the fair market value per share of our common stock on the
grant date. Options to purchase 7,500 of the 15,000 shares were immediately
exercisable when granted. Provided that Mr. Tyree continues to serve on the
Board of Directors, the remaining 7,500 option shares become exercisable on the
day immediately preceding the date of the 2002 annual meeting of stockholders.
On August 24, 2001, the Board of Directors elected Jonathan S. Leff and
Stewart J. Hen to the Board of Directors. Mr. Leff was elected for a term
expiring at the 2004 annual meeting of stockholders and Mr. Hen was elected for
a term expiring at the 2003 annual meeting of stockholders. Under the automatic
option grant program, Mr. Leff and Mr. Hen, as newly-elected non-employee
directors, received automatic option grants to purchase 30,000 and 22,500
shares, respectively. The exercise price per share of each option is $3.22, the
fair market value per share of our common stock on the grant date. Options to
purchase 7,500 of the 30,000 shares granted to Mr. Leff were immediately
exercisable when granted. Provided that Mr. Leff continues to serve on the Board
of Directors, the remaining 22,500 option shares become exercisable in
successive increments of 7,500 shares on the day immediately preceding the date
of each subsequent annual meeting of stockholders until the automatic option
becomes fully exercisable for all of the option shares. Options to purchase
7,500 of the 22,500 shares granted to Mr. Hen were immediately exercisable when
granted. Provided that Mr. Hen continues to serve on the Board of Directors, the
remaining 15,000 option shares become exercisable in successive increments of
7,500 shares on the day immediately preceding the date of each subsequent annual
meeting of stockholders until the automatic option becomes fully exercisable for
all of the option shares.
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VOTE REQUIRED
The three candidates for the class of directors whose terms expire at the
2005 annual meeting of stockholders receiving the highest number of affirmative
votes of the stockholders entitled to vote at the annual meeting will be
re-elected directors of Triangle. Unless otherwise instructed, the proxyholders
will vote each returned proxy FOR the nominees named above, or for as many
nominees of the Board of Directors as possible. The proxyholders will distribute
these votes among the 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 above.
PROPOSAL 2
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
You are being asked to approve an amendment to our 1996 Stock Incentive
Plan, the 1996 Incentive Plan, that will increase the number of shares of common
stock authorized for issuance under the 1996 Incentive Plan in 2002 by 1,962,329
shares effective on approval by the stockholders, and will provide for automatic
annual increases during the term of the plan, beginning in 2003, so that the
number of authorized shares available for new grants under the plan on each
January 1 will equal the lesser of 4.5% of the total number of shares of
Triangle common stock outstanding on the preceding December 31st or 5,000,000
shares.
The Board of Directors believes that these share increases are necessary
in order to assure that we will have a sufficient reserve of shares of common
stock available in the future to grant options and issue stock to attract and
retain the services of individuals essential to our long-term success.
The 1996 Incentive Plan became effective when it was adopted by the Board
of Directors on August 30, 1996 and was subsequently approved by our
stockholders. The 1996 Incentive Plan serves as the successor to our 1996 Stock
Option/Stock Issuance Plan, the Predecessor Plan, and all outstanding options
under the Predecessor Plan have been incorporated into the 1996 Incentive Plan.
The amendments to the 1996 Incentive Plan which are the subject of this proposal
were adopted by the Board of Directors on February 27, 2002. The following is a
summary of the principal features of the 1996 Incentive Plan, as amended as
described in this Proposal 2. The summary is not a complete description of all
the provisions of the 1996 Incentive Plan. Any stockholder who wishes to obtain
a copy of the actual plan document may do so upon written request to the
Secretary at our principal executive offices in Durham, North Carolina.
EQUITY INCENTIVE PROGRAMS
The 1996 Incentive Plan contains four separate equity incentive programs:
o a Discretionary Option Grant Program,
o a Salary Investment Option Grant Program,
o a Stock Issuance Program, and
o an Automatic Option Grant Program.
The principal features of each program are described below. The
Compensation Committee has the exclusive authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to option
grants and stock issuances made to our executive officers and non-employee
members of the Board of Directors. With respect to all other participants, those
programs may be administered by either the Compensation Committee or a special
stock option committee, the Secondary Committee, comprised of two or
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more directors appointed by the Board of Directors, or the Board of Directors
may retain the authority to administer those programs. The Compensation
Committee also has the exclusive authority to administer the Salary Investment
Option Grant Program. However, express provisions of the Automatic Option Grant
Program govern option grants under that program, and neither the Compensation
Committee, the Secondary Committee nor the Board of Directors will exercise any
administrative discretion with respect to that program. The term Plan
Administrator, as used in this summary, will mean the Compensation Committee,
the Secondary Committee or the Board of Directors, to the extent that entity is
acting within the scope of its administrative authority under the 1996 Incentive
Plan.
SHARE RESERVE
Options to purchase 4,685,762 shares of common stock have been granted and
are outstanding as of February 26, 2002. As of February 26, 2002, without the
amendment which is part of this Proposal 2, (i) we would be able to grant new
options to purchase 1,537,671 shares of common stock during fiscal year 2002 and
(ii) the number of shares of common stock authorized for issuance under the plan
would increase by 1,500,000 shares on January 1, 2003.
The shares of common stock issuable under the 1996 Incentive Plan will be
drawn from shares of our authorized but unissued common stock or from shares of
common stock we reacquire. Shares subject to any outstanding options under the
1996 Incentive Plan, including options incorporated from the Predecessor Plan,
which expire, are cancelled or otherwise terminate prior to exercise will be
available for subsequent issuance. Unvested shares issued under the 1996
Incentive Plan that we subsequently repurchase, at the option exercise or direct
issue price paid per share, will be added back to the share reserve and will be
available for reissuance. However, shares subject to any option surrendered in
accordance with the stock appreciation rights provisions of the 1996 Incentive
Plan will not be available for subsequent issuance. In addition, shares of
common stock withheld to pay the exercise price of an option or in satisfaction
of withholding taxes incurred on the exercise or the vesting of a stock issuance
will not be available for subsequent issuance under the 1996 Incentive Plan.
ELIGIBILITY
Our employees, non-employee members of the Board of Directors, consultants
and other independent advisors are eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs. Executive officers and other highly
compensated employees are also eligible to participate in the Salary Investment
Option Grant Program, and non-employee members of the Board of Directors
automatically participate in the Automatic Option Grant Program.
No persons may receive options, separately exercisable stock appreciation
rights and direct stock issuances for more than 500,000 shares of common stock
in the aggregate for any calendar year.
As of February 28, 2002, executive officers, non-employee members of the
Board of Directors and approximately 110 other employees were eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs, 15
employees were eligible to participate in the Salary Investment Option Grant
Program, and the eight non-employee Board members participate in the Automatic
Option Grant Program.
VALUATION
The fair market value per share of common stock on any relevant date under
the 1996 Incentive Plan is the closing selling price per share on that date on
the Nasdaq National Market. However, if there is no closing selling price per
share on the date in question, the fair market value will be the closing selling
price for the last preceding date for which a quotation exists. On March 28,
2002, the closing selling price per share on the Nasdaq National Market was
$5.10.
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DISCRETIONARY OPTION GRANT PROGRAM
GRANTS
The Plan Administrator has complete discretion under the Discretionary
Option Grant Program to determine which eligible individuals will receive option
grants, when grants will be made, the number of shares subject to each grant,
the status of any granted option as either an incentive stock option or a
non-statutory option under the federal tax laws, the vesting schedule, if any,
to be in effect for the option grant and the maximum term for which any granted
option is to remain outstanding. We pay all expenses incurred in administering
the 1996 Incentive Plan.
PRICE AND EXERCISABILITY
Each option will have an exercise price per share not less than 85% of the
fair market value per share of common stock on the option grant date. No option
may have a term in excess of ten years. Options generally become exercisable in
a series of installments over the optionee's period of service with us, although
other exercisability schedules are permitted.
Holders of options may pay the exercise price in cash or in shares of
common stock. We have also established a same-day sale program in which a
designated brokerage firm will effect an immediate sale of the shares purchased
under the option and pay over to us, out of the sale proceeds available on the
settlement date, sufficient funds to cover the exercise price for the purchased
shares plus all applicable withholding taxes.
When an optionee's period of service ends, the optionee usually will have
a three-month period of time in which to exercise any vested portion of
outstanding options. The Plan Administrator has complete discretion to extend
the period following the optionee's cessation of service during which he or she
may exercise outstanding options and/or to accelerate the exercisability or
vesting of those options. The Plan Administrator may accelerate vesting or
extend an exercise period at any time while the options remain outstanding,
whether before or after the optionee's actual cessation of service.
STOCK APPRECIATION RIGHTS
The Plan Administrator may grant tandem stock appreciation rights under
the Discretionary Option Grant Program that provide the holders with the right
to surrender their options for an appreciation distribution in amount equal to
the excess of (a) the fair market value of the vested shares of common stock
subject to the surrendered option over (b) the aggregate exercise price payable
for those shares. The appreciation distribution may, at the discretion of the
Plan Administrator, be made in cash or in shares of common stock.
In addition, we may grant officers and non-employee members of the Board
of Directors limited stock appreciation rights in tandem with their outstanding
options. These grants must comply with the short-swing profit restriction of the
Federal securities laws. Any option with a limited stock appreciation right may
be surrendered to us on the occurrence of a hostile tender offer for more than
50% of our outstanding shares, and the optionee will in return be entitled to a
cash distribution from us in an amount per surrendered option share equal to the
excess of (i) the highest reported price per share of common stock paid in the
tender offer over (ii) the option exercise price payable per share.
CANCELLATION/REGRANT PROGRAM
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program which have
exercise prices in excess of the then current market price of our common stock
and to issue replacement options with an exercise price based on the market
price of our common stock at the time of the new grant.
-8-
SALARY INVESTMENT OPTION GRANT PROGRAM
GRANTS
The Plan Administrator has discretion in implementing the Salary
Investment Option Grant Program and in selecting the executive officers and
other highly compensated individuals eligible to participate in the program. As
a condition to participation, each selected individual must, prior to the start
of the calendar year of participation, file with the Plan Administrator an
irrevocable authorization directing us to reduce his or her base salary for the
upcoming calendar year by an amount not less than $10,000 nor more than $50,000.
Each individual whose salary reduction authorization is approved by the Plan
Administrator will be granted an option under the Salary Investment Option Grant
Program as soon as possible after the start of the calendar year for which the
salary reduction is to be in effect.
TERMS
Each option is subject to substantially the same terms and conditions
applicable to option grants made under the Discretionary Option Grant Program,
except for the following differences:
o Each option is a non-statutory option.
o The exercise price per share will be equal to not less than 33
1/3% nor more than 66 2/3% of the fair market value of our
common stock on the option grant date, with the exact
percentage fixed by the Plan Administrator. The number of
option shares will be determined by dividing the total dollar
amount of the reduction in the optionee's base salary by the
amount by which the fair market value per share of common
stock on the option grant date exceeds the option exercise
price. As a result, the total spread on the option (the fair
market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be
equal to the dollar amount of the reduction to the optionee's
base salary that will be in effect for the year for which the
option grant is made.
o The option will become exercisable for the option shares in a
series of 12 successive equal monthly installments on the
optionee's completion of each calendar month of service in the
calendar year for which the salary reduction is in effect.
o Each option is exercisable after it becomes vested until the
earlier of (i) the expiration of the ten-year option term or
(ii) the expiration of three years after the optionee's
service terminates.
Under the Salary Investment Option Grant Program, the Compensation
Committee granted options for an aggregate of 75,756 shares on January 14, 2002
at an exercise price of $2.63 per share, which was equal to two-thirds of the
fair market value per share on that date.
STOCK ISSUANCE PROGRAM
Shares may be sold under the Stock Issuance Program at a price not less
than 100% of their fair market value, payable in cash or through a promissory
note. Shares may also be issued as a bonus for past services with no cash outlay
required of the participant.
Shares issued as a bonus for past services will be fully vested upon
issuance. All other shares issued under the program will be subject to a vesting
schedule tied to the performance of service or the attainment of performance
goals. The Plan Administrator has the discretionary authority at any time to
accelerate the vesting of any unvested shares outstanding under the Stock
Issuance Program.
-9-
AUTOMATIC OPTION GRANT PROGRAM
GRANTS
On the date that each non-employee member of the Board of Directors is
first elected or appointed as a non-employee Board member, we will make an
automatic option grant to that Board member, and on the date that each
non-employee Board member is re-elected to the Board of Directors, we will make
an additional option grant to that non-employee Board member. Each automatic
option grant will be a Non-Statutory Option. Each non-employee Board member will
receive an option upon his or her initial election or appointment as a
non-employee Board member for 7,500 shares plus an additional 7,500 shares for
each full or partial year of the term for which he or she was elected or
appointed. On each re-election, each non-employee Board member will receive an
additional option to purchase 7,500 shares for each full or partial year of the
term for which the non-employee Board member is re-elected to the Board of
Directors. There is no limit on the number of automatic option grants any one
director may receive over his or her period of service on the Board of
Directors, and non-employee Board members who have previously been in our employ
or who have otherwise received a stock option grant from us are eligible to
receive one or more annual option grants over their period of continued service
on the Board of Directors.
TERMS
Each option under the Automatic Option Grant Program will have an exercise
price per share equal to 100% of the fair market value per share of common stock
on the option grant date and a maximum term of ten years measured from that
grant date.
Provided the optionee continues to serve as a member of the Board of
Directors, the initial automatic option grant will vest and become exercisable
with respect to 7,500 shares on the day the non-employee Board member is first
elected or appointed to the Board of Directors and with respect to an additional
7,500 shares on the day immediately preceding the date of each subsequent annual
stockholders meeting until the automatic option grant is fully vested and
exercisable. Each subsequent automatic option grant will vest and become
exercisable with respect to 7,500 shares on the day immediately preceding the
date of each subsequent annual stockholders meeting until the automatic option
grant is fully vested and exercisable. No portion of any automatic option grant
will vest after the optionee has ceased to be a member of the Board of
Directors.
Each outstanding automatic option will become immediately exercisable for
all the shares subject to the option should any of the following events occur
while the optionee continues on the Board of Directors: (i) the optionee's death
or permanent disability, (ii) an acquisition of Triangle Pharmaceuticals by
merger or asset sale or (iii) a hostile take-over, whether effected through a
successful tender offer for more than 50% of our outstanding voting stock or
through a change in the majority of the Board of Directors as a result of one or
more contested elections. An optionee will have a 12-month period after he or
she is no longer on the Board of Directors to exercise his or her outstanding
automatic option grants for any or all of the option shares for which those
options are exercisable at the time the person ceases being on the Board of
Directors.
All options granted under the Automatic Option Grant Program include a
limited stock appreciation right which entitles the holder to surrender his or
her outstanding automatic options for a cash distribution in the event of a
hostile tender offer for more than 50% of our outstanding shares. The cash
distribution will be in an amount per surrendered option share equal to the
excess of (i) the highest reported price per share of common stock paid in the
tender offer over (ii) the option exercise price payable per share. No
additional approval of the Plan Administrator or the Board of Directors will be
required at the time of the actual option surrender or cash distribution.
-10-
STOCK AWARDS
As of February 26, 2002, 16,235 shares of common stock were granted as
direct stock issuance under the 1996 Incentive Plan and the Predecessor Plan,
4,685,762 shares of common stock were subject to outstanding options granted
under the 1996 Incentive Plan and the Predecessor Plan and 1,537,671 shares
remained available for future issuance, excluding the increase which is part of
this Proposal 2. Through February 26, 2002, 960,161 shares of common stock have
been issued on the exercise of options granted under the 1996 Incentive Plan and
the Predecessor Plan.
The following table shows, as to each of the Named Executive Officers in
the Summary Compensation Table and the indicated individuals and groups, the
aggregate number of options that have been granted and are outstanding under the
1996 Incentive Plan and the Predecessor Plan through February 28, 2002, together
with the weighted average exercise price payable per share.
OPTIONS OUTSTANDING
AS OF
FEBRUARY 28, 2002 WEIGHTED AVERAGE
NAME AND POSITION (NUMBER OF SHARES)(1) EXERCISE PRICE($)(2)
----------------------------------------------------------------------------------------------------------------------------
Chris A. Rallis, J.D ..................................................... 526,470 10.16
President, Chief Operating Officer and Director
Robert F. Amundsen, Jr ................................................... 305,000 7.72
Executive Vice President and Chief Financial Officer
Anne F. McKay ............................................................ 341,643 9.67
Executive Vice President, Drug Regulatory Affairs
George R. Painter, III, Ph.D ............................................. 337,905 12.14
Executive Vice President, Research and Development
Franck S. Rousseau, M.D .................................................. 457,643 11.47
Executive Vice President, Medical Affairs and
Chief Medical Officer
David W. Barry, M.D ...................................................... 255,381 13.16
Former Chief Executive Officer
---------------------------------------------------------------------------------------------------------------------------
All executive officers as a group (7 persons) ............................ 2,586,617 9.91
---------------------------------------------------------------------------------------------------------------------------
All non-employee directors as a group (8 persons) ........................ 183,001 7.52
---------------------------------------------------------------------------------------------------------------------------
All employees (excluding executive officers) as a group (110 persons) .... 3,829,563 7.95
---------------------------------------------------------------------------------------------------------------------------
(1) An aggregate of 1,175,000 options to purchase shares of common stock have
been granted to executive officers and an aggregate of 1,000,000 options to
purchase shares of common stock have been granted to non-executive employees at
an exercise price of $5.14 per share, subject to approval of this amendment.
(2) Weighted average exercise price does not reflect options which are subject
to approval of this amendment.
GENERAL PLAN PROVISIONS
ACCELERATION
In the event that we are acquired by merger or asset sale, generally each
outstanding option under the Discretionary Option Grant Program which is not to
be assumed or replaced by the successor entity will automatically accelerate in
full and terminate following closing of the transaction, and generally all
unvested shares under the Stock Issuance Program will immediately vest, except
to the extent our repurchase rights with
-11-
respect to those shares are transferred to the successor entity. In the event of
a change of control other than a merger or asset sale, the Plan Administrator
may provide for automatic acceleration of outstanding options on the termination
of an optionee's service within a designated period after the change of control.
The Plan Administrator will have complete discretion to grant one or more
options under the Discretionary Option Grant Program which will become fully
exercisable for all option shares in the event those options are assumed in the
acquisition and the optionee's service with us or the acquiring entity is
subsequently terminated within a designated period following an acquisition or
hostile take-over. The Plan Administrator may also provide for the automatic
vesting of any outstanding shares under the Stock Issuance Program upon similar
terms and conditions.
Each option outstanding under the Salary Investment Option Grant Program
will automatically accelerate in the event of an acquisition or change in
control. Each outstanding option under the Salary Investment Option Grant
Program that is not exercised prior to a change in control will also be subject
to repurchase by us at a price equal to the amount by which the optionee's
salary was reduced in connection with the grant of that option.
The acceleration of vesting in the event of a change in the ownership or
control may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of Triangle.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of common stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without our receipt of consideration, appropriate adjustments will be made to
(i) the maximum number and/or class of securities issuable under the 1996
Incentive Plan, (ii) the number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under the 1996 Incentive Plan per calendar
year, (iii) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee members of the Board of Directors and (iv) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option under the 1996 Incentive Plan, including options granted
under the Predecessor Plan, in order to prevent the dilution or enlargement of
benefits.
FINANCIAL ASSISTANCE
The Plan Administrator may institute a loan program to assist one or more
participants in financing the exercise of outstanding options granted under the
Discretionary Option Grant Program or the purchase of shares issued under the
Stock Issuance Program. The Plan Administrator will determine the terms of any
loan program. The maximum amount of financing provided to any participant may
not exceed the cash consideration payable for the issued shares plus all
applicable taxes incurred in connection with the acquisition of the shares.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have Triangle Pharmaceuticals withhold a
portion of the shares otherwise issuable in satisfaction of the tax liability
incurred by those holders in connection with the exercise of those options or
the vesting of those shares. Alternatively, the Plan Administrator may allow
holders to deliver previously acquired shares of common stock in payment of the
tax liability.
-12-
AMENDMENT AND TERMINATION
The Board of Directors may amend or modify the 1996 Incentive Plan in any
or all respects whatsoever, subject to any required stockholder approval under
applicable law or regulation. However, no amendment or modification may
adversely affect an outstanding award under the 1996 Incentive Plan without the
consent of the affected award recipient. The Board of Directors may terminate
the 1996 Incentive Plan at any time, and the 1996 Incentive Plan will terminate
automatically on August 30, 2006.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 1996 Incentive Plan may be either incentive
stock options which are intended to satisfy the requirements of Section 422 of
the Internal Revenue Code or non-statutory options which are not intended to
meet those requirements. The Federal income tax treatment for the two types of
options differs as follows:
INCENTIVE STOCK OPTIONS. No taxable income is recognized by the optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. However, holders of options may be subject
to alternative minimum tax obligations as a result of the exercise of their
options. The optionee will, however, recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of
disposition. For Federal income tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. A qualifying disposition occurs if the
sale or other disposition is made after the optionee has held the shares for
more than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
On a qualifying disposition, the optionee will recognize long-term capital
gain in an amount equal to the excess of (i) the amount realized upon the sale
or other disposition of the purchased shares over (ii) the exercise price paid
for the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of those shares on the exercise date over
(ii) the exercise price paid for the shares will be taxable as ordinary income
to the optionee and we and the optionee will be required to satisfy the tax
withholding requirements applicable to the income. The optionee will recognize
any additional gain or loss on the disposition as a capital gain or loss.
If the optionee makes a disqualifying disposition of the purchased shares,
then we will be entitled to an income tax deduction, for the taxable year in
which the disposition occurs, equal to the excess of (i) the fair market value
of the shares on the option exercise date over (ii) the exercise price paid for
the shares. In no other instance will we be allowed a deduction with respect to
the optionee's disposition of the purchased shares.
NON-STATUTORY STOCK OPTIONS. No taxable income is recognized by an
optionee upon the grant of a non-statutory option. The optionee will in general
recognize ordinary income, in the year in which the option is exercised, equal
to the excess of the fair market value of the purchased shares on the exercise
date over the exercise price paid for the shares, and we and the optionee will
be required to satisfy the tax withholding requirements applicable to the
income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by us in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee
generally will not recognize any taxable income at the time of exercise but will
recognize ordinary income, as and when our repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date
-13-
over (ii) the exercise price paid for the shares. If the Section 83(b) election
is made, the optionee will not recognize any additional income as and when the
repurchase right lapses.
We will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year in which the optionee recognizes the ordinary income.
STOCK APPRECIATION RIGHTS
An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. We will be entitled to an income tax deduction equal to the
appreciation distribution for the taxable year in which the optionee recognizes
ordinary income.
DIRECT STOCK ISSUANCE
The tax principles applicable to direct stock issuances under the 1996
Incentive Plan will be substantially the same as those summarized above for the
exercise of non-statutory option grants.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
We anticipate that any compensation deemed paid by us in connection with
disqualifying dispositions of incentive stock option shares or exercises of
non-statutory options granted with exercise prices equal to the fair market
value of the option shares on the grant date or direct stock issuances will
qualify as performance-based compensation for purposes of Code Section 162(m)
and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to some of our executive officers. Accordingly, we anticipate that all
compensation deemed paid with respect to those options will remain deductible by
us without limitation under Code Section 162(m).
ACCOUNTING TREATMENT
Option grants or stock issuances to employees and/or directors with
exercise or issue prices less than the fair market value of the shares on the
grant or issue date will result in a direct compensation expense to our earnings
generally equal to the difference between the exercise or issue price and the
fair market value of the shares on the grant or issue date. We will recognize
the compensation expense over the period that the option shares or issued shares
are to vest. Option grants or stock issuances at 100% of fair market value or
above generally will not result in any direct charge to our earnings. However,
we must disclose in our financial statements and related notes, the fair value
of those options and the impact those options would have upon our reported
earnings were the value of those options at the time of grant treated as
compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining our diluted earnings per
common share. Should one or more optionees be granted stock appreciation rights
which have no conditions upon exercisability other than a service or employment
requirement, then those rights will result in a compensation expense to our
earnings. Option grants or stock issuances that provide for vesting upon
attainment of performance objectives may result in additional compensation
expense.
VOTE REQUIRED
The affirmative vote of a majority of the votes entitled to be cast by
holders of shares present or represented and voting at the annual meeting is
required for approval of the amendments to the 1996 Incentive Plan. Should
stockholder approval not be obtained, then neither the increase in 2002 nor the
annual automatic increases discussed under this proposal will be implemented,
and no options will be granted on the basis of these amendments.
-14-
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that stockholders vote FOR
the approval of the amendment to the 1996 Incentive Plan.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN
You are being asked to approve an amendment to our Employee Stock Purchase
Plan, the Purchase Plan, that will increase the number of shares of common stock
reserved for issuance under the Purchase Plan by an additional 250,000 shares
effective as of January 1, 2003.
The Board of Directors believes that this share increase is necessary in
order to assure that we will have a sufficient reserve of shares of common stock
available in the future to issue stock under the Purchase Plan to attract and
retain the services of employees essential to our long-term success.
The Purchase Plan was adopted by the Board of Directors on August 30, 1996
and was subsequently approved by our stockholders. The amendment to the Purchase
Plan which is the subject of this proposal was adopted by the Board of Directors
on February 27, 2002. The following is a summary of the principal features of
the Purchase Plan. The summary is not a complete description of all the
provisions of the Purchase Plan. Any stockholder who wishes to obtain a copy of
the actual plan document may do so upon written request to the Secretary at our
principal executive offices in Durham, North Carolina.
The Purchase Plan is designed to allow eligible Triangle employees to
purchase shares of common stock at semi-annual intervals through periodic
payroll deductions. A reserve of 300,000 shares of common stock was initially
established for this purpose. The amendment which forms this Proposal 3 would
increase the reserve to 550,000 shares.
The Purchase Plan is implemented in a series of successive offering
periods, each with a maximum duration of 24 months. Individuals who are eligible
employees on the start date of any offering period may participate in the
Purchase Plan on that start date or on any subsequent semi-annual entry date.
Individuals who become eligible employees after the start date of the offering
period may join the Purchase Plan on any subsequent semi-annual entry date
within that period.
Payroll deductions may not exceed 10% of the participant's base salary for
each semi-annual period of participation, and the accumulated payroll deductions
will be applied to the purchase of shares on the participant's behalf on each
semi-annual purchase date (the last business day of February and August each
year) at a purchase price per share not less than 85% of the lower of (i) the
fair market value of Triangle's common stock on the participant's entry date
into the offering period or (ii) the fair market value of the common stock on
the semi-annual purchase date. Should the fair market value of the common stock
on any semi-annual purchase date be less than the fair market value of the
common stock on the first day of the offering period, then the current offering
period will automatically end and a new 24-month offering period will begin,
based on the lower fair market value.
As of February 28, 2002, 209,914 shares of common stock had been issued
under the Purchase Plan, and 90,086 shares remained available for future
issuance under the Purchase Plan, excluding the 250,000 share increase which is
part of this Proposal 3.
-15-
VOTE REQUIRED
The affirmative vote of a majority of the votes entitled to be cast by
holders of shares present or represented and voting at the annual meeting is
required for approval of the amendment to the Purchase Plan. Should stockholder
approval not be obtained, then the 250,000 share increase will not be
implemented.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that stockholders vote FOR
the approval of the amendment to the Employee Stock Purchase Plan.
PROPOSAL 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
We are asking stockholders to ratify the selection of
PricewaterhouseCoopers LLP as our independent accountants for the year ending
December 31, 2002. On the recommendation of the Audit Committee, the Board of
Directors has appointed PricewaterhouseCoopers LLP as independent accountants
for Triangle for the year 2002. The services PricewaterhouseCoopers LLP will
provide for the 2002 fiscal year include the examination of Triangle's
consolidated financial statements, reviews of quarterly reports, services
related to filings with the Securities and Exchange Commission and consultation
regarding tax returns. PricewaterhouseCoopers LLP has served as our independent
accountants since our inception and is qualified to continue to perform these
services.
VOTE REQUIRED
The affirmative vote of a majority of the votes entitled to be cast by
holders of shares present or represented and voting at the annual meeting is
required to ratify the selection of PricewaterhouseCoopers LLP. In the event the
stockholders fail to ratify the appointment, the Board of Directors will
reconsider its selection. Even if the selection is ratified, the Board of
Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors believes that the change would be in Triangle's and its stockholders'
best interests.
Representatives of PricewaterhouseCoopers LLP will be present at the
annual meeting, will have the opportunity to make a statement 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 PricewaterhouseCoopers LLP to serve as our
independent accountants for the year ending December 31, 2002.
-16-
PRINCIPAL STOCKHOLDERS
The following table contains information regarding the beneficial
ownership of our common stock as of January 31, 2002 by:
o each person known by us to beneficially own more than five percent
of our common stock,
o each of our directors and nominees for director,
o our Chief Operating Officer, the four additional most highly
compensated executive officers and two former executive officers and
o all directors and executive officers as a group.
Except as otherwise indicated:
o the persons named in the table have sole voting and investment power
with respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws, where applicable
and
o the address of all stockholders listed in the table is: 4 University
Place, 4611 University Drive, Durham, North Carolina 27707.
Beneficial ownership is calculated pursuant to Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended. On January 31, 2002, 76,828,854
shares of common stock were issued and outstanding.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
--------------------------
COMMON STOCK
--------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------------------ ---------- -------
Warburg Pincus Private Equity VIII, L.P. ..... 23,384,887 30.4%
466 Lexington Avenue
New York, NY 10017
Abbott Laboratories (1) ...................... 7,951,744 10.3%
100 Abbott Park Road
Abbott Park, IL 60064-3500
Orbimed Advisors, LLC (2) .................... 4,942,000 6.4%
787 Third Avenue
New York, NY 10010
T. Rowe Price Associates, Inc. (3) ........... 3,935,600 5.1%
100 East Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP (4) ....... 3,885,660 5.0%
75 State Street
Boston, MA 02109
Chris A. Rallis, J.D. (5)(14) ................ 363,537 *
Anthony B. Evnin, Ph.D. (6) .................. 1,029,884 1.3%
30 Rockefeller Plaza
New York, NY 10112
Standish M. Fleming (7) ...................... 2,206,893 2.9%
9255 Towne Centre Drive
Suite 300
San Diego, CA 92121
Dennis B. Gillings, Ph.D. (8) ................ 3,803,000 4.9%
4709 Creekstone Drive
Durham, NC 27703
-17-
Henry G. Grabowski, Ph.D. (9) ................ 18,000 *
Duke University,
305 Social Sciences, Box 90097
Durham, NC 27708
Stewart J. Hen (10) .......................... 7,500 *
466 Lexington Avenue
New York, NY 10017
Jonathan S. Leff (11) ........................ 23,392,387 30.4%
466 Lexington Avenue
New York, NY 10017
George McFadden (12) ......................... 1,169,000 1.5%
745 Fifth Avenue
New York, NY 10151
James L. Tyree (13) .......................... 7,951,744 10.3%
100 Abbott Park Road
Abbott Park, IL 60064
Robert F. Amundsen, Jr. (15) ................. 44,792 *
Anne F. McKay (16) ........................... 118,626 *
George R. Painter, III, Ph.D. (14)(17) ....... 210,608 *
Franck S. Rousseau, M.D. (14)(18) ............ 178,990 *
David W. Barry, M.D. (19) .................... 1,525,861 2.0%
Carolyn S. Underwood ......................... 30,200 *
801 Capitola Drive
Durham, NC 27713
All directors and executive officers
as a group (17 persons) (5)-(20) ......... 42,204,810 54.1%
---------- -------
------------
* Less than 1%.
(1) Includes 7,500 shares of common stock issuable upon the exercise of
options beneficially owned by James L. Tyree and 6,000 shares of common
stock issuable upon the exercise of options. Mr. Tyree, a director of
Triangle Pharmaceuticals, Inc., is a Vice President of Abbott
Laboratories. Mr. Tyree disclaims beneficial ownership of the shares
beneficially owned by Abbott Laboratories.
(2) Includes shares of common stock held by the following entities that are
advised by Orbimed Advisors, LLC (i) 950,000 shares owned by Caduceus
Capital II, L.P., (ii) 1,940,000 shares owned by PW Eucalyptus Fund,
L.L.C., (iii) 227,000 shares owned by PW Eucalyptus Fund, Ltd., (iv)
1,825,000 shares owned by Winchester Global Trust Company Limited as
Trustee for Caduceus Capital Trust.
(3) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc., Price Associates, serves
as investment advisor with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(4) These securities are owned by clients for whom Wellington Management
Company, LLP serves as investment advisor with shared power to vote the
securities.
(5) Includes 158,543 shares of common stock issuable upon the exercise of
options. Also includes 500 shares held separately by Mr. Rallis' wife,
1,500 shares held by Mr. Rallis' wife as custodian for their children
under the Uniform Gift to Minors Act and 15,800 shares held by The Rallis
Richner Foundation, Inc., a charitable North Carolina corporation of which
Mr. Rallis serves as President. Mr. Rallis disclaims beneficial ownership
of the shares beneficially owned by The Rallis Richner Foundation, Inc.
(6) Includes 6,667 shares of common stock issuable upon the exercise of
options. Also includes 653,561 shares of common stock beneficially owned
by Venrock Associates and 324,902 shares owned by Venrock Associates II,
L.P.. Dr. Evnin is a general partner of Venrock Associates and Venrock
Associates II, L.P. and consequently shares voting and investment power
with respect to all these shares. Dr. Evnin disclaims beneficial ownership
of these shares other than to the extent of his individual partnership
interest.
(7) Includes 7,334 shares of common stock issuable upon the exercise of
options. Also includes a total of 2,093,477 shares of common stock
beneficially owned by each of the following persons in the amounts
indicated: (i) 1,229,130 shares owned by Forward Ventures IV, L.P., (ii)
520,000 shares owned by Forward Ventures II, L.P., (iii) 233,663 shares
owned by Forward Ventures III, L.P., (iv) 104,200 shares owned by Forward
Ventures IV B, L.P., (v) 4,122 shares owned by Forward II Associates,
L.P., and (vi) 2,362 shares owned by two family trusts. Mr. Fleming is a
general partner of
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Forward II Associates, L.P., which is the general partner of Forward
Ventures II, L.P., and a managing member of Forward III Associates,
L.L.C., which is the general partner of Forward Ventures III, L.P., and a
managing member of Forward IV Associates, L.L.C., which is the general
partner of Forward Ventures IV, L.P. and Forward Ventures IV B, L.P., and
consequently shares voting and investment power with respect to all these
shares. Mr. Fleming disclaims beneficial ownership of these shares other
than to the extent of his individual partnership and member interests.
(8) Includes 8,000 shares of common stock issuable upon the exercise of
options and 3,775,000 shares of common stock beneficially owned by
QFinance, Inc., a subsidiary of Quintiles Transnational Corp. Dr. Gillings
is Chairman and a significant shareholder of Quintiles Transnational Corp.
Dr. Gillings disclaims beneficial ownership of shares beneficially owned
by QFinance, Inc.
(9) Includes 8,000 shares of common stock issuable upon the exercise of
options and 10,000 shares of common stock held in a pension fund.
(10) Includes 7,500 shares of common stock issuable upon the exercise of
options.
(11) Includes 7,500 shares of common stock issuable upon the exercise of
options and 23,384,887 shares of common stock beneficially owned by
Warburg Pincus Private Equity VIII, L.P. Warburg Pincus & Co. is the sole
general partner of Warburg Pincus Private Equity VIII, L.P. which is
managed by Warburg Pincus LLC. Lionel I. Pincus is the managing partner of
Warburg Pincus & Co. and the managing member of Warburg Pincus LLC and may
be deemed to control both entities. Mr. Leff, a director of Triangle, is a
Managing Director of Warburg Pincus LLC, the manager of Warburg Pincus
Private Equity VIII, L.P., and disclaims beneficial ownership of the
shares beneficially owned by Warburg Pincus Private Equity VIII, L.P.
(12) Includes 6,000 shares of common stock issuable upon the exercise of
options. Also includes a total of 885,000 shares of common stock
beneficially owned by each of the following persons in the amounts
indicated: (i) 515,000 shares owned by a family trust under the will of
Alexander B. McFadden, (ii) 210,000 shares owned by three family trusts
for the benefit of Mr. McFadden's children, (iii) 85,000 shares owned by
Mr. McFadden's wife, and (iv) 75,000 shares owned by a former family
member as custodian for one of Mr. McFadden's children. Mr. McFadden
exercises shared voting and investment power with respect to all such
shares. Mr. McFadden disclaims beneficial ownership of these shares other
than to the extent of his pecuniary interest in the shares beneficially
owned by the family trust under the will of Alexander B. McFadden.
(13) Includes 7,500 shares of common stock issuable upon the exercise of
options, 7,938,244 shares of common stock beneficially owned by Abbott
Laboratories and 6,000 shares of common stock issuable upon the exercise
of options beneficially owned by Abbott Laboratories. Mr. Tyree is a Vice
President of Abbott Laboratories, and disclaims beneficial ownership of
the shares beneficially owned by Abbott Laboratories.
(14) Excludes an aggregate of 5,294 shares of common stock purchased by
executive officers on the conclusion of the purchase interval, ending
February 28, 2002, under our employee stock purchase plan.
(15) Includes 44,792 shares of common stock issuable upon the exercise of
options.
(16) Includes 114,260 shares of common stock issuable upon the exercise of
options.
(17) Includes 121,794 shares of common stock issuable upon the exercise of
options. Also includes 8,500 shares held separately by Dr. Painter's wife.
(18) Includes 175,689 shares of common stock issuable upon the exercise of
options.
(19) Includes 255,381 shares of common stock issuable upon the exercise of
options, 500,000 shares of common stock held by Barry Asset Partners,
L.P., a Georgia limited partnership of which Dr. Barry served as a general
and limited partner, and 70,480 shares of common stock held by the Barry
Charitable Foundation, Inc., a charitable North Carolina corporation of
which Dr. Barry served as President. Dr. Barry died unexpectedly on
January 28, 2002. Under the terms of his employment agreement, all of his
outstanding options automatically became fully exercisable as of the date
of his death.
(20) Includes 1,068,796 shares of common stock issuable upon the exercise of
options.
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EXECUTIVE OFFICERS
The executive officers of Triangle Pharmaceuticals, Inc. as of March 28,
2002 are as follows:
NAME AGE POSITION
-------------------------------------- --- ------------------------------------------------------------------------
Chris A. Rallis, J.D. .............. 48 President, Chief Operating Officer and Director
Robert F. Amundsen, Jr., M.B.A. .... 48 Executive Vice President and Chief Financial Officer
Paul A. Dreyer, M.B.A. ............. 52 Executive Vice President, Commercial Operations and Business Development
R. Andrew Finkle, J.D. ............. 42 Executive Vice President, General Counsel and Secretary
Anne F. McKay ...................... 47 Executive Vice President, Drug Regulatory Affairs
George R. Painter, III, Ph.D. ...... 51 Executive Vice President, Research and Development
Franck S. Rousseau, M.D. ........... 44 Executive Vice President, Medical Affairs and Chief Medical Officer
CHRIS A. RALLIS, J.D. is the President and Chief Operating Officer and a
director. See "Election of Directors" for a discussion of Mr. Rallis' business
experience.
ROBERT F. AMUNDSEN, JR., M.B.A. has served as Executive Vice President and
Chief Financial Officer since July 2000. Before joining Triangle, Mr. Amundsen
served for seven years at Covance Biotechnology Services, Inc., most recently as
Executive Vice President of Finance and Planning and Chief Financial Officer.
While at Covance, Mr. Amundsen played a key role in leading the company from
start-up to maturity, including the securing of financing and the direction of
Covance's strategic planning. In addition, Mr. Amundsen's financial experience
includes service as Senior Vice President of Finance and Administration and
Chief Financial Officer at Applied Bioscience International, Inc., and Vice
President of Finance and Administration and Chief Financial Officer at Pharmaco
Dynamics Research, Inc., and Controller at Tessco, Inc. Mr. Amundsen received
his B.A. from Dartmouth College and M.B.A. from University of Texas.
PAUL A. DREYER, M.B.A. has served as Executive Vice President of
Commercial Operations and Business Development since October 2000, as Vice
President, Marketing and Sales from June 1999 through September 2000, and as
Vice President, Sales from April 1998 through May 1999. Prior to joining
Triangle, Mr. Dreyer had been at GlaxoSmithKline plc, Glaxo, as Group Director
of Sales and Marketing in Dermatology since August 1995. Mr. Dreyer was
previously at Burroughs Wellcome Co. for twenty-three years, where he held
positions in Marketing, Sales and Business Development. Mr. Dreyer received his
B.A. from Rutgers College and M.B.A. from Rutgers Graduate School of Management.
R. ANDREW FINKLE, J.D. has served as Executive Vice President, General
Counsel and Secretary since July 2000. Prior to joining Triangle, Mr. Finkle
served for four years as Vice President, Assistant General Counsel and Head of
Regulatory Affairs at Sterling Diagnostic Imaging, Inc./AGFA Corporation, a
former subsidiary of Bayer A.G. Mr. Finkle's legal experience includes eight
years as legal counsel to Societe Nationale Elf Aquitaine/PCS, Inc. and private
practice. Mr. Finkle's practice has concentrated on strategic business and
international transactions, mergers and acquisitions, FDA compliance and
intellectual property management. Mr. Finkle received his B.A. from Washington
and Lee University and a J.D. from the University of Virginia School of Law.
ANNE F. MCKAY has served as Executive Vice President, Drug Regulatory
Affairs since October 2000, and as Vice President, Drug Regulatory Affairs from
October 1996 through September 2000. Prior to joining Triangle, Ms. McKay served
as Director of Regulatory Affairs with Medco Research, Inc. Prior to that, Ms.
McKay served as Director of Regulatory Affairs, North America, and held various
other regulatory positions during a 15-year tenure at Burroughs Wellcome. Ms.
McKay's department was responsible for
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providing support for various FDA submissions, including the NDA submissions for
AZT and acyclovir. Ms. McKay received her B.S. in animal science from Michigan
State University.
GEORGE R. PAINTER, III, PH.D. has served as Executive Vice President,
Research and Development since August 1999, as Vice President, Research and
Development from July 1997 through July 1999, and as Vice President, Chemistry
and Technical Development of Triangle from January 1996 through June 1997. From
July 1995 through January 1996, Dr. Painter served as Director of Research
Process for Glaxo, and from June 1993 through July 1995, he served as Assistant
Director of Virology for Burroughs Wellcome. While at Burroughs Wellcome, Dr.
Painter led the international development of both an HIV protease inhibitor and
Coviracil(R)(emtricitabine), formerly known as FTC. Dr. Painter received a B.S.
in chemistry, a M.S. in physical chemistry and a Ph.D. in organic chemistry from
Emory University.
FRANCK S. ROUSSEAU, M.D. has served as Executive Vice President, Medical
Affairs and Chief Medical Officer since August 1999, and as Vice President,
Medical Affairs and Chief Medical Officer from March 1997 through July 1999.
From 1995 through March 1997, Dr. Rousseau served as Associate Director,
International Antiviral Clinical Research for Glaxo. Prior to joining Glaxo, Dr.
Rousseau was Director of Infectious Diseases and HIV Clinical Research at
Wellcome France from 1993 through 1995. From 1990 through 1993, Dr. Rousseau was
a Clinical Research Physician with the French National Agency for Research
Against AIDS. Dr. Rousseau has been involved with the clinical development of
several anti-HIV drugs. Dr. Rousseau received the equivalent of a B.A. from the
University of Paris and his M.D. from the University of Paris, College of
Medicine.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table contains information concerning the aggregate
compensation we paid to David W. Barry, our former Chief Executive Officer,
Chris A. Rallis, our President and Chief Operating Officer, the four additional
most highly compensated executive officers (collectively referred to as the
Named Executive Officers) and Carolyn Underwood, a former officer of Triangle,
for services rendered in all capacities to Triangle for the years ended December
31, 1999, 2000 and 2001. The aggregate amount of perquisites and other personal
benefits, if any, did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus reported for each Named Executive Officer and has
therefore been omitted.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------------- -----------
SECURITIES
UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
---------------------------------------- ---- ------- ------- ------------ ------------
Chris A. Rallis, J.D. ................ 2001 308,196 -- 50,000 3,700
President, Chief Operating 2000 255,919 76,775 97,500 3,530
Officer and Director 1999 209,405 282,524 (2) 30,000 3,375
Robert F. Amundsen, Jr. .............. 2001 210,000 -- 45,000 2,000
Executive Vice President and 2000(3) 91,797 45,000 110,000 2,417(4)
Chief Financial Officer 1999(3) -- -- -- --
Anne F. McKay ........................ 2001 210,000 -- 30,000 3,024
Executive Vice President, Drug 2000 172,301(5) 54,690 57,304 (5) 3,281
Regulatory Affairs 1999 158,000(6) 92,400 29,862 (6) 1,750
George R. Painter, III, Ph.D. ........ 2001 252,396 -- 30,000 2,822
Executive Vice President, 2000 213,813 64,145 35,000 3,005
Research & Development 1999 161,620(7) 105,150 38,416 (7) 2,086
Franck S. Rousseau, M.D. ............. 2001 267,036 -- 70,000 3,394
Executive Vice President, 2000 226,215 67,865 35,000 3,742
Medical Affairs and 1999 187,470(8) 111,775 35,223 (8) 2,000
Chief Medical Officer
David W. Barry, M.D. (9) ............. 2001 320,004 -- 10,000 30,609(10)
former Chairman and Chief 2000 263,500 100,000 60,000 28,289(10)
Executive Officer 1999 250,950 170,000 50,000 26,111(10)
Carolyn S. Underwood (11) ............ 2001 -- -- -- 217,100(12)
former Executive Vice 2000 183,283 90,055 20,000 36,710(12)
President, Commercial 1999 194,215 108,988 32,937 105
Operations
------------
(1) Represents the amounts paid 2001, 2000 and 1999 in the form of premiums
for individual life insurance policies for the benefit of the Named
Executive Officers and as matching 401(k) contributions in the following
amounts for the following Named Executive Officers: Mr. Rallis, $2,000,
$2,000 and $2,000; Mr. Amundsen, $2,000 and $417; Ms. McKay, $2,000,
$2,000 and $1,750; Dr. Painter, $2,000, $1,773 and $1,881; Dr. Rousseau,
$2,000, $2,000 and $2,000 and Dr. Barry, $2,000, $1,956 and $1,863.
(2) Includes 6,235 shares of common stock granted to Mr. Rallis on June 25,
1999 under our Stock Issuance Program under the 1996 Stock Incentive Plan.
The fair market value per share on June 25, 1999 was $16.25.
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(3) Mr. Amundsen was not employed by Triangle prior to July 17, 2000.
(4) Includes amounts paid by Triangle for income tax liabilities related to
life insurance premiums.
(5) Excludes an aggregate of $10,000 of Ms. McKay's salary earned in 2000
allocated toward the acquisition of options to purchase 2,304 shares of
common stock under our Salary Investment Option Grant Program for $4.34
per underlying share. The options were granted on January 4, 2000, were
fully vested as of December 31, 2000, and are exercisable at a price of
$8.66 per share.
(6) Excludes an aggregate of $10,000 of Ms. McKay's salary earned in 1999
allocated toward the acquisition of options to purchase 2,237 shares of
common stock under our Salary Investment Option Grant Program for $4.468
per underlying share. The options were granted on January 29, 1999, were
fully vested as of December 31, 1999, and are exercisable at a price of
$8.938 per share.
(7) Excludes an aggregate of $25,000 of Dr. Painter's salary earned in 1999
allocated toward the acquisition of options to purchase 5,594 shares of
common stock under our Salary Investment Option Grant Program for $4.468
per underlying share. The options were granted on January 29, 1999, were
fully vested as of December 31, 1999, and are exercisable at a price of
$8.938 per share.
(8) Excludes an aggregate of $10,000 of Dr. Rousseau's salary earned in 1999
allocated toward the acquisition of options to purchase 2,237 shares of
common stock under our Salary Investment Option Grant Program for $4.468
per underlying share. The options were granted on January 29, 1999, were
fully vested as of December 31, 1999, and are exercisable at a price of
$8.938 per share.
(9) Dr. Barry died unexpectedly on January 28, 2002.
(10) Includes amounts paid by Triangle for income tax liabilities related to
life insurance premiums.
(11) Ms. Underwood's employment ended October 31, 2000.
(12) Includes payments made under an agreement between Triangle and Ms.
Underwood. Under the terms of this agreement, we agreed to make payments
to Ms. Underwood through April 2002.
STOCK OPTIONS
The following table contains information concerning stock option grants
made to each of the Named Executive Officers during the year ended December 31,
2001. We granted options to acquire an aggregate of 1,395,455 shares of common
stock to our officers and employees in 2001. We did not grant any stock
appreciation rights to the Named Executive Officers during the year ended
December 31, 2001.
All options were granted under the 1996 Stock Incentive Plan. Unless
otherwise indicated, each option vests and becomes exercisable as follows: 25%
after 12 months of service from the date of the option grant, indicated by
footnote for each grant, and the remaining 75% thereafter in a series of
36-equal-monthly installments. Unless otherwise indicated, the shares subject to
each option will immediately vest in the event we are acquired by a merger or
asset sale, unless the options are assumed by the acquiring entity. The options
further provide that the shares subject to each option will immediately vest
even if options are assumed by the acquiring entity if the Named Executive
Officer's employment is terminated involuntarily, which includes a reduction in
the responsibilities of the Named Executive Officer, at any time within 12
months after the merger or asset sale.
Unless otherwise indicated, the exercise price per share of options
granted represented the fair market value of the underlying shares of common
stock on the dates the options were granted as determined by the Compensation
Committee of the Board of Directors. Option holders may pay the exercise price
in cash or in shares of common stock valued at fair market value on the exercise
date or a combination of cash and shares or any other form of consideration
approved by the Board of Directors or the Compensation Committee. The fair
market value of shares of common stock is determined in accordance with
provisions of the 1996 Stock Incentive Plan based on the closing selling price
of a share of common stock on the date in question on the Nasdaq National
Market.
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We provide no assurance to any Named Executive Officer or any other holder
of our securities that the actual stock price appreciation over the 10-year
option term will be at the assumed 0%, 5% or 10% levels or at any other defined
level. Unless the market price of the common stock does in fact appreciate over
the option term, no value will be realized from the option grants made to the
Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------------------
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS/ STOCK PRICE APPRECIATION FOR
SECURITIES SARS GRANTED OPTION TERM
UNDERLYING TO EMPLOYEES EXERCISE OR ------------------------------
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR (%) ($/SH) DATE 0%($) 5%($) 10%($)
----------------------------------- ------- -------- ------ ---- ----- ----- ------
Chris A. Rallis, J.D. ............ 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
30,000(2) 2.1 3.60 12/16/11 0 67,921 172,124
Robert F. Amundsen, Jr. .......... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
25,000(2) 1.8 3.60 12/16/11 0 56,601 143,437
Anne F. McKay .................... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
10,000(2) 0.7 3.60 12/16/11 0 22,640 57,375
George R. Painter, III, Ph.D. .... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
10,000(2) 0.7 3.60 12/16/11 0 22,640 57,375
Frank S. Rousseau, M.D. .......... 20,000(1) 1.4 2.55 8/12/11 0 32,074 81,281
50,000(2) 3.6 3.60 12/16/11 0 113,201 286,874
David W. Barry, M.D. ............. 10,000(2)(3) 0.7 3.60 12/16/11 0 22,640 57,375
------------
(1) Represents options granted on August 13, 2001 pursuant to our
Discretionary Option Grant Program. Each option vests and becomes
exercisable as follows: 50% after 12 months of service measured from the
date of the option grant and 50% after 24 months of service measured from
the date of the option grant. If applications for marketing approval in
the United States or Europe are approved before August 13, 2003, the
vesting of these options will be accelerated and the options will become
fully exercisable.
(2) Represents options granted on December 17, 2001 pursuant to our
Discretionary Option Grant Program.
(3) Upon the death of Dr. Barry on January 28, 2002, the vesting of these
options was accelerated so that all of the options were fully vested as of
January 28, 2002.
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OPTION EXERCISES AND HOLDINGS
The following table provides information concerning option exercises
during the year ended December 31, 2001 by the Named Executive Officers and Ms.
Underwood and the value of unexercised options held by each of the Named
Executive Officers as of December 31, 2001. No stock appreciation rights were
exercised during the year ended December 31, 2001. Value of unexercised
in-the-money options is defined as the fair market price of our common stock at
December 31, 2001 less the exercise price of the option. On December 31, 2001,
the closing selling price of a share of our common stock on the Nasdaq National
Market was $4.01.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FY-END (#) DECEMBER 31, 2001
ACQUIRED ON VALUE ------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------- ------------ -------- ----------- ------------- ----------- -------------
Chris A. Rallis, J.D. .......... -- -- 150,699 125,771 $68,497 $41,500
Robert F. Amundsen, Jr........... -- -- 37,917 117,083 0 $39,450
Anne F. McKay ................... -- -- 108,847 82,796 0 $33,300
George R. Painter, III, Ph.D. ... -- -- 117,431 70,474 0 $33,300
Franck S. Rousseau, M.D. ........ -- -- 171,252 111,391 0 $49,700
David W. Barry, M.D. ............ -- -- 175,798 79,583 0 $4,100
Carolyn S. Underwood............. 111,035 $418,571 -- -- -- --
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
We have entered into employment agreements with each of our officers,
including each Named Executive Officer. These employment agreements
automatically renew from year to year, unless otherwise terminated. Each officer
is also eligible to participate in our retirement and welfare benefit plans. The
officer's employment is terminable at will by either us or the officer. In the
event we terminate the officer's employment without cause or we elect not to
renew the officer's term, we have agreed to continue to pay the officer's
then-current base salary for a period of eighteen months and to accelerate by 12
months the vesting of unvested stock and/or options, subject to the officer's
agreement during the eighteen-month period not to engage in the same or similar
function area in any for-profit pharmaceutical business that competes with us in
the field of HIV/hepatitis B within North America. In addition, in the event
that, within 12 months following a change in control, we terminate the officer's
employment without cause, the officer resigns for good reason, or we elect not
to renew the officer's term, we have agreed to continue to pay the officer's
then-current base salary for a period of two years and to accelerate totally the
vesting of any unvested stock and/or options.
All of the options awarded to the Named Executive Officers during the year
ended December 31, 2001 provide that the shares subject to each option will
immediately vest in the event we are acquired by a merger or asset sale, unless
the options are assumed by the acquiring entity. The options also provide that
the shares subject to each option will immediately vest even if the options are
assumed by the acquiring entity if the Named Executive Officer's employment is
terminated involuntarily, which includes a reduction in the responsibilities of
the Named Executive Officer, at any time within twelve months after the merger
or asset sale.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We established our Compensation Committee in June 1996. Its members are
Dr. Evnin, Mr. McFadden and Mr. Leff. Dr. Evnin is a general partner of Venrock
Associates and Venrock Associates II, L.P., both of which purchased preferred
stock from us as part of several private placement transactions completed during
the years ended December 31, 1995 and 1996. Mr. McFadden and several affiliated
individuals and entities also purchased preferred stock from us as part of these
financings. Mr. Leff is a Managing Director of Warburg Pincus LLC, the manager
of Warburg Pincus Private Equity VIII, L.P. which purchased 23,384,887 shares of
common stock from us during 2001.
Notwithstanding anything to the contrary contained in our previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, that might incorporate future filings, including this proxy
statement, in whole or in part, the following report of the Compensation
Committee and the performance graph on page 30 shall not be incorporated into
any future filings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee offers this report regarding compensation for
Triangle's executive officers and Chief Executive Officer.
GENERAL COMPENSATION POLICY
Triangle's primary objective is to maximize the value of its shares over
time. Accomplishing this objective requires Triangle to successfully develop and
market safe and effective drugs, primarily for the treatment of viral diseases.
The Compensation Committee, with this objective in mind, authorizes compensation
packages for executive officers designed to retain and attract top quality
management and to encourage them to contribute to the achievement of Triangle's
business objectives. In addition, the Compensation Committee attempts to
establish compensation packages that are comparable to the packages received by
executives of similar companies and reasonable in light of Triangle's
expenditures on its drug development programs.
Triangle compensates its executive officers with a combination of salary
and incentives designed to encourage efforts to achieve both its short-term and
long-term goals. The compensation structure attempts to reward both individual
contributions as well as Triangle's overall performance. Many traditional
measures of corporate performance, such as earnings per share or sales growth,
are less applicable to the performance of development stage pharmaceutical
companies, like Triangle's, than to mature pharmaceutical companies or companies
in other industries. As a result, in making executive compensation decisions,
the Compensation Committee evaluates other indications of performance, such as
the progress of Triangle in achieving milestones in the development of its drug
candidates, in obtaining rights to drug candidates and in raising the capital
needed for its operations.
The basic components of compensation packages for the executive officers
include the following:
o Base Salary
o Annual Incentives
o Long-term Incentives
o Benefits
Each officer's package contains a mix of these elements and is designed to
provide a level of compensation competitive with the compensation paid to
comparable officers of companies of similar size in similar industries. Based on
various surveys of executive compensation within Triangle's industry, the
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Compensation Committee believes it achieved this level of aggregate executive
compensation during 2001. Triangle 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 more weight upon long-term incentives in
the form of stock options than upon base salary and annual incentives.
BASE SALARY and increases in base salary are determined by both individual
and company performance and the salary levels in effect for companies of similar
size in similar industries. During 2001, the Compensation Committee sought to
set the base salaries of the officers of Triangle at a level around the 75th
percentile of the range of salaries of officers in comparable companies. In
addition, the Compensation Committee considered the following factors in setting
the base salaries for executive officers during 2001:
o Triangle's success in achieving milestones in the development
of its drug candidates,
o Triangle obtaining rights to drug candidates,
o capital raised for operations,
o any special expertise of a particular executive.
During 2001, the base salaries for the Named Executive Officers, excluding
Dr. Barry and Ms. Underwood, increased by an average of approximately 15.7% over
their annualized base salaries during 2000.
ANNUAL INCENTIVES in the form of cash bonuses are awarded by the
Compensation Committee based upon its evaluation of the performance of each
executive officer and the achievement of company goals during the year. In 2001,
no cash bonuses were awarded.
LONG-TERM INCENTIVE compensation in the form of stock options is expected
to be the largest element of total compensation over time. Grants of stock
options are designed to align the long-term interests of each officer with the
interests of stockholders and to provide long-term incentives for the individual
officer to remain with Triangle. Stock options provide each officer with a
significant incentive to manage Triangle from the perspective of an owner with
an equity stake in the business. The size of the option grant to each officer is
based on the officer's current position and expected future contributions to
Triangle's 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.
During 2001, the Named Executive Officers, excluding Dr. Barry, were
granted ten-year options to purchase an aggregate of 225,000 shares of our
common stock. Of the 225,000 option shares granted, 100,000 were granted in
August 2001 at an exercise price of $2.55 per share and 125,000 were granted in
December 2001 at an exercise price of $3.60 per share. The 100,000 option shares
granted in August 2001 vest over a two-year period as long as the Named
Executive Officer continues to be employed by us. If applications for marketing
approval in the United States or Europe are approved before August 13, 2003, the
vesting of these options will be accelerated and the options will become fully
exercisable. The 125,000 options vest over a four-year period as long as the
Named Executive Officer continues to be employed by us. The options were awarded
by the Compensation Committee based on the milestones we achieved during 2001.
The Compensation Committee also considered the total percentage of outstanding
shares beneficially owned by the Named Executive Officers as compared to the
stock ownership of similar officers at comparable companies. The Compensation
Committee believes that the option grants were at a level not exceeding the 50th
percentile of the range of option grants to officers in comparable companies.
BENEFITS offered to executive officers serve as a safety net of protection
against the financial catastrophes that can result from illness, disability or
death. Benefits offered to executive officers are substantially the same as
those offered to all regular employees.
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CEO COMPENSATION
Dr. Barry's 2001 base salary of $320,004 represented an increase of
approximately 21% over his base salary during 2000. Dr. Barry did not receive a
cash bonus in 2001. The amount of Dr. Barry's base salary and cash bonus were
below the average for chief executive officers of comparable companies,
reflecting the Compensation Committee's objective, particularly in the case of
Dr. Barry, of placing more weight upon long-term incentives than upon base
salary and annual incentives.
During 2001, Dr. Barry received ten-year options to purchase 10,000 shares
of common stock at an exercise price of $3.60 per share. These options became
fully vested at the time of his death. The Board of Directors is currently
conducting a search for a chief executive officer. When a qualified candidate is
identified, the Compensation Committee will evaluate the appropriate level of
cash and stock-based compensation for such individual.
COMPENSATION COMMITTEE
Anthony B. Evnin, Ph.D.
George McFadden
Jonathan S. Leff
AUDIT COMMITTEE REPORT
Triangle's Audit Committee of the Board of Directors consists of three
non-employee directors that are considered independent under the NASDAQ National
Market independent director and audit committee listing standards. The current
members of the Audit Committee are Standish M. Fleming, Chairman, Henry G.
Grabowski, Ph.D., and George McFadden. The Board of Directors has adopted a
written charter for the Audit Committee.
Management is responsible for the integrity of Triangle's internal control
environment and its financial reporting process. Triangle's independent public
accountants, PricewaterhouseCoopers LLP, are responsible for performing an
independent audit of Triangle's consolidated financial statements in accordance
with generally accepted auditing standards and for issuing a report on these
financial statements. The Audit Committee is responsible for overseeing and
monitoring these processes.
The Audit Committee held five meetings during calendar 2001, including
pre-issuance reviews of quarterly financial statements and press releases. The
Audit Committee believes Triangle management maintains an effective system of
internal control that results in the fair presentation of our financial
statements and the appropriate safeguard of corporate assets. Based on review
and ratification of the 2001 audit plan and discussion of the results of its
execution with management and PricewaterhouseCoopers, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in Triangle's Annual Report on Form 10-K for the year ended December
31, 2001 filed with the Securities and Exchange Commission.
The Audit Committee and PricewaterhouseCoopers have discussed all matters
required by Statement on Auditing Standards No. 61, Communications with Audit
Committee. The Audit Committee has considered the compatibility of non-audit
services performed by PricewaterhouseCoopers and other pertinent information
regarding the accountant's independence and has determined the firm to be
appropriately independent from Triangle. Additionally, the Audit Committee has
received from PricewaterhouseCoopers written disclosure regarding its
independence as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committee.
Fees for the calendar year 2001 audit and related quarterly reviews are
approximately $60,000 of which approximately $30,000 has been billed through
December 31, 2001. Fees billed for other projects
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rendered by PricewaterhouseCoopers for the calendar 2001 year were approximately
$55,000. These fees relate primarily to assistance with 1933 Securities Act
filings, consultation on our tax returns and other tax matters and audit of our
401-K retirement plan.
The Audit Committee of the Board of Directors of Triangle Pharmaceuticals, Inc.
Standish M. Fleming
Henry G. Grabowski, Ph.D.
George McFadden
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PERFORMANCE GRAPH
The following graph compares our total stockholder returns over the last
five years 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 December 31, 1996 in each of our common stock, the Nasdaq Broad Index and 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
Code 283 (category description "Drugs"). The companies comprising the Nasdaq
Pharmaceutical Index are available upon written request to Investor Relations at
our executive offices. 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.
[GRAPHIC OMITTED]
CUMULATIVE TOTAL RETURN
-------------------------------------------------
DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
TRIANGLE PHARMACEUTICALS, INC. 100 64 60 56 22 18
NASDAQ STOCK MARKET-US 100 122 173 321 193 153
NASDAQ PHARMACEUTICALS 100 103 131 247 308 262
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into employment agreements with each of our officers. See
"Executive Compensation and Other Information--Employment Contracts and Change
of Control Arrangements."
We entered into a number of agreements with direct or indirect
wholly-owned subsidiaries of Quintiles Transnational Corp., collectively,
Quintiles, under which Quintiles has rendered or agreed to render contract
services for us, including clinical monitoring, drug product formulation and
packaging and central laboratory services. Dennis B. Gillings, Ph.D., a director
of Triangle, is the Chairman and a significant shareholder of Quintiles
Transnational Corp. We incurred approximately $1,035,000 in development expenses
for services rendered by Quintiles during 2001. In addition, QFinance, Inc., a
wholly-owned subsidiary of Quintiles Transnational Corp., purchased 1,500,000
shares of common stock at $6.00 per share in March 2001 and 2,275,000 shares at
$2.65 per share in October 2001 in two separate private placements with several
other investors.
In August 1999, we completed a worldwide strategic alliance with Abbott
Laboratories, Abbott, which now relates to three antiviral compounds. Under the
terms of the alliance, we and Abbott will collaborate with respect to the
clinical development, registration, distribution and marketing of various
proprietary pharmaceutical products for the prevention and treatment of HIV and
hepatitis B virus. During 2001, Triangle incurred approximately $5,014,000 for
development services performed by Abbott, was reimbursed approximately
$1,725,000 of marketing and development expenses by Abbott and recognized
$5,795,000 of collaborative revenue in association with our strategic alliance
with Abbott. In March 2001, Abbott exercised its rights under the terms of a
stockholder rights agreement to purchase 1,300,000 shares of common stock from
us at $6.00 per share in a private placement with several other investors. James
L. Tyree is a Vice President of Abbott and is a director of Triangle.
Jonathan S. Leff, a managing director of Warburg Pincus LLC, and Stewart
J. Hen, a vice president of Warburg Pincus LLC, became members of our Board of
Directors on August 24, 2001 in fulfillment of a provision of an agreement with
Warburg Pincus Private Equity VIII, L.P., Warburg Pincus, entitling Warburg
Pincus to designate two representatives on our Board of Directors. In 2001,
Warburg Pincus purchased an aggregate of 23,384,887 shares of common stock from
us at $2.65 per share in a two-stage private placement with several other
investors.
Dr. David W. Barry served on the Board of Directors of Dynavax
Technologies Corporation, Dynavax, before his death, and Standish M. Fleming is
a general partner of Forward Ventures which has a greater than 5% ownership in
Dynavax. In association with our strategic license and collaborative agreement,
we utilized Dynavax for assistance in conducting the initial clinical trial
associated with our immunostimulatory pharmaceutical candidates and incurred
approximately $2,063,000 of expenses during 2001 for these development services.
A spouse of one of our Executive Vice Presidents provided consulting
services for us. In 2001, we incurred approximately $73,000 of expenses for
these services.
We have a policy that all material transactions between us and any of our
officers, directors, principal stockholders and other affiliates will be
approved in accordance with the Delaware General Corporation Law by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors, and will be on terms no less
favorable to us than we could obtain from unaffiliated third parties.
Our Second Restated Certificate of Incorporation eliminates, with a few
exceptions, directors' personal liability to us or our stockholders for monetary
damages for breaches of fiduciary duties. The Second Restated Certificate of
Incorporation does not, however, eliminate or limit the personal liability of a
director for (i) any breach of the director's duty of loyalty to us or our
stockholders, (ii) acts or omissions not
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in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper personal
benefit.
Our Restated Bylaws provide that we will indemnify our directors and
executive officers to the fullest extent permitted under the Delaware General
Corporation Law, and may indemnify our other officers, employees and agents as
provided in the Delaware General Corporation Law. In addition, we have entered
into indemnification agreements with our directors and officers. The
indemnification agreements contain provisions that require us to indemnify our
directors and executive officers against liabilities, other than liabilities
arising from intentional or knowing and culpable violations of law, that may
arise by reason of their status or service as our directors or executive
officers or as directors or officers of other entities to which they provide
service at our request and to advance expenses they may incur as a result of any
proceeding against them as to which they could be indemnified. We believe that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. We have obtained an insurance policy covering directors
and officers for claims that directors and officers may otherwise be required to
pay or for which we are required to indemnify them, with a few exclusions.
As of the date of this proxy statement, there is no pending litigation or
proceeding involving any of our directors, officers, employees or other agents
as to which indemnification is being sought. We are not aware of any pending or
threatened litigation that may result in claims for indemnification by any
director, officer, employee or other agent.
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 our equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and the Nasdaq Stock Market and to furnish us with copies of
those reports.
Based solely on a review of the copies of reports furnished to us, or
written representations that no reports were required, we believe that, during
2001, all Section 16(a) filing requirements applicable to our officers,
directors and greater than 10% stockholders were satisfied.
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DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals that are intended to be presented at our annual
meeting of stockholders to be held in 2003 must be received by us no later than
December 13, 2002, in order to be included in the proxy statement and related
proxy materials.
In addition, if we have not received notice prior to February 26, 2003, of
any matter a stockholder intends to propose for a vote at the annual meeting of
stockholders to be held in 2003, then a proxy solicited by the Board of
Directors may be voted on that matter in the discretion of the proxyholder.
FORM 10-K
ENCLOSED WITH THIS PROXY STATEMENT IS A COPY OF OUR ANNUAL REPORT ON FORM
10-K, INCLUDING THE FINANCIAL STATEMENTS AND LIST OF EXHIBITS. YOU MAY REQUEST
AN ADDITIONAL COPY BY WRITING TO THE ATTENTION OF INVESTOR RELATIONS AT OUR
EXECUTIVE OFFICES WHICH ARE LOCATED AT 4 UNIVERSITY PLACE, 4611 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 on any additional matters
in accordance with their best judgment.
Dated: April 12, 2002 Order of the Board of Directors
/s/ R. Andrew Finkle
R. Andrew Finkle, SECRETARY
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APPENDIX A
TRIANGLE PHARMACEUTICALS, INC.
1996 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH FEBRUARY 27, 2002)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1996 Stock Incentive Plan is intended to promote the interests
of Triangle Pharmaceuticals, Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
- the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary), and
- the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B. The provisions of Articles One and Six shall apply to all equity
programs under the Plan and shall govern the interests of all persons under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders and shall have sole and exclusive authority to
administer the Salary Investment Option Grant Program with respect to all
eligible individuals.
1.
B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan or any
other stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).
C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant,
Salary Investment Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding options or stock issuances thereunder as it may
deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to any
option grants or stock issuances made under this program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
2.
B. Only Employees who are Section 16 Insiders and other highly
compensated Employees shall be eligible to participate in the Salary Investment
Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals eligible to participate in the Automatic Option
Grant Program shall be determined in accordance with the provisions of Article
Five.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. Effective February 27, 2002, the number of
shares of Common Stock reserved for issuance under the Plan shall be 9,162,158
shares. On January 1 of each year, beginning January 1, 2003, the number of
shares of Common Stock reserved for issuance under the Plan shall automatically
increase so that the number of authorized shares available for new grants under
the plan on each January 1 will equal the lesser of 4.5% of the total number of
shares of Triangle Common Stock outstanding on the preceding December 31st or
5,000,000 shares. For example, if on any such December 31, there are 200,000
shares that remain available for future grants under the Plan, and 70,000,000
shares of Common Stock are outstanding, then the number of shares issuable under
the Plan shall be increased by 2,950,000 additional shares, so that 3,150,000
shares (70,000,000 x 4.5%) are available for issuance under the Plan as of the
following January 1.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1996 calendar year.
C. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plan) shall be
available for subsequent issuance under the Plan to the extent (i) those options
expire or terminate for any reason prior to exercise in full or (ii) those
options are cancelled in accordance with the cancellation/regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be
3.
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan. However, should the exercise price of an option
under the Plan be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
D. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which the share
reserve under the Plan is to be increased each year pursuant to the automatic
annual increase provisions of Section V.A of this Article One, (iii) the number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances under this Plan per calendar year, (iv) the number and/or class of
securities for which grants are subsequently to be made under the Automatic
Option Grant Program to new and continuing non-employee Board members, (v) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan and (vi) the number and/or class of
securities and price per share in effect under each outstanding option
incorporated into this Plan from the Predecessor Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
4.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions
to (a) a Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required
to be withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
5.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.
(ii) Any outstanding option held by the Optionee at the
time of death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent
and distribution.
(iii) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term,
the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of Service, terminate and
cease to be outstanding to the extent the option is not otherwise at that
time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
limited exercise period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate,
but in no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
6.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in whole or in part during the Optionee's lifetime. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Six shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall NOT be subject to the terms of this Section II.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested
7.
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those options are assumed or replaced and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully-vested shares until the EARLIER of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
provide that one or more of the Corporation's outstanding repurchase rights with
respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate, and the shares subject to those
terminated repurchase rights shall accordingly vest in full.
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control. Each option so
8.
accelerated shall remain exercisable for fully-vested shares until the EARLIER
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution from
the Corporation in an amount equal to the excess of (a) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (b) the aggregate exercise price payable
for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so approved,
then the distribution to which the Optionee shall be entitled may be made
in shares of Common Stock valued at Fair Market Value on the option
surrender date, in cash, or partly in shares and partly in cash, as the
Plan Administrator shall in its sole discretion deem appropriate.
9.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof)
on the option surrender date and may exercise such rights at any time
prior to the LATER of (a) five (5) business days after the receipt of the
rejection notice or (b) the last day on which the option is otherwise
exercisable in accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than ten (10)
years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from
the Corporation in an amount equal to the excess of (A) the Take-Over
Price of the shares of Common Stock which are at the time vested under
each surrendered option (or surrendered portion thereof) over (B) the
aggregate exercise price payable for such shares. Such cash distribution
shall be paid within five (5) days following the option surrender date.
(iii) The Plan Administrator shall pre-approve, at the
time the limited stock appreciation right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and the
provisions of this Section V.C. No additional approval of the Plan
Administrator or the Board shall be required at the time of the actual
option surrender and cash distribution.
(iv) The balance of the option (if any) shall remaining
outstanding and exercisable in accordance with the documents evidencing
such option.
10.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). The Primary Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Primary Committee approves the authorization, the
individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program as soon as possible after the start of the
calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Primary Committee.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED, however,
that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be equal to the excess
of (i) the Fair Market Value per share of Common Stock on the option grant date
over (ii) the amount of the approved Salary Reduction divided by the number of
shares subject to the Option.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x C), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the
Optionee's base salary for the calendar year,
B is the Fair Market Value per share of Common Stock on the
option grant date, and
11.
C is a percentage not less than 33 1/3% nor more than 66 2/3%
fixed by the Plan Administrator, in its sole discretion, for
purposes of the option grants to be made under the Salary
Investment Option Grant Program for a particular calendar year
for which that program is to be in effect.
C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
EARLIER of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Any option not exercised prior to the Change in Control may be repurchased by
the Corporation at the time of the Change in Control at a repurchase price equal
to the amount by which the Optionee's salary was reduced in connection with the
grant of that option. Any option which is neither exercised nor repurchased
shall remain exercisable for fully-vested shares until the EARLIER or (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service.
12.
C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
13.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Six,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the shares are
to vest,
(iii) the interval or intervals (if any) which are to
lapse between installments, and
(iv) the effect which death, Permanent Disability or
other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
14.
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase/cancellation
rights under the Stock Issuance Program shall terminate automatically, and all
the shares of Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase/cancellation rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed in the
Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase/cancellation rights
are assigned to the successor corporation (or parent thereof).
C. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase/cancellation rights remain outstanding under the
Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those
terminated rights shall
15.
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
16.
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Effective with the 2001 Annual Meeting, (i) on the
date that each non-employee Board member is first elected or appointed to the
Board, option grants shall be made to such non-employee Board member and (ii) on
the date that each non-employee Board member is re-elected to the Board, option
grants shall be made to such non-employee Board member. Each automatic option
grant shall be a Non-Statutory Option. For each individual who is first elected
or appointed as a non-employee Board member, the number of shares of Common
Stock subject to the option shall be equal to 7,500 shares. Each non-employee
Board member so elected shall, during any partial year and for each full year of
the term for which the non-employee Board member is elected or appointed, also
receive an option to purchase an additional 7,500 shares of Common Stock. Each
non-employee Board member who is re-elected to the Board at any time after his
or her initial term will receive, during any partial year and for each full year
of the term for which the non-employee Board member is re-elected to the Board,
an automatic grant of an option to purchase an additional 7,500 shares of Common
Stock. There shall be no limit on the number of such automatic grants any one
Eligible Director may receive over his or her period of Board service, and
non-employee Board members who have previously been in the employ of the
Corporation (or any Parent or Subsidiary) or who have otherwise received a stock
option grant from the Corporation prior to becoming a non-employee Board member
shall be eligible to receive one or more such annual option grants over their
period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be exercisable
only with respect to option shares with respect to which the automatic option
grant has become vested. Provided the optionee continues to serve as a Board
member, the automatic option grant shall vest with respect to 2,000 shares on
the day the non-employee Board member is first elected or appointed to the Board
and with respect to an additional 2,000 shares on the day immediately preceding
the date of each subsequent Annual Meeting following the date of the automatic
option grant until the automatic option grant has become fully vested and
exercisable for all the option shares. No portion of the automatic option grant
shall vest after the optionee has ceased to be a member of the Board.
E. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
17.
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution) shall have a
twelve (12)-month period following the date of such cessation of Board
service in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at the
time subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service for any reason other than death or Permanent Disability, terminate
and cease to be outstanding to the extent the option is not otherwise at
that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant shall terminate and cease
to be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following
18.
the surrender of the option to the Corporation. Stockholder approval of this
March 27, 1998 amendment of the Plan shall constitute pre-approval of each
option subsequently granted under this Article Five with such a surrender
provision and the subsequent surrender of that option in accordance with the
terms of this Section II.C. No additional approval of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
19.
ARTICLE SIX
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
STOCK DELIVERY: The election to deliver to the Corporation, at
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan became effective immediately upon the Plan Effective
Date. However, the Salary Investment Option Grant Program shall not be
implemented until such time as the Primary Committee may deem appropriate.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants or direct stock issuances shall be made under the
Predecessor Plan. All options outstanding under the Predecessor Plan on the
Section 12 Registration Date have been incorporated into the Plan and shall be
20.
treated as outstanding options under the Plan. However, each outstanding option
so incorporated shall continue to be governed solely by the terms of the
documents evidencing such option, and no provision of the Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. On the Plan Effective Date, 2,200,000 shares of Common Stock were
available for issuance over the term of the Plan. Such authorized share reserve
was comprised of the number of shares which remained available for issuance, as
of the Plan Effective Date, under the Predecessor Plan as last approved by the
Corporation's stockholders, including the shares subject to the outstanding
options incorporated into the Plan and the additional shares which were
otherwise available for future grant, plus an additional increase of 500,000
shares authorized by the Board and subsequently approved by the stockholders
prior to the Section 12 Registration Date.
On December 4, 1997, the Board adopted an amendment to the Plan (the "1997
Amendment") to effect the following changes: (i) increase the maximum number of
shares of Common Stock available for issuance over the term of the Plan by an
additional 1,000,000 shares, and (ii) implement an automatic share increase
feature pursuant to which the number of shares of Common Stock available for
issuance under the Plan automatically increased on January 1 of each of the
calendar years 1999, 2000 and 2001 by an amount equal to four percent (4%) of
the total number of shares of Common Stock issued and outstanding on December
31st of the immediately preceding calendar year; provided, however, that in no
event did any such annual increase exceed the difference between (x) 1,000,000
shares and (y) the number of shares of Common Stock available for future option
grants under the Plan on such December 31 (net of all outstanding options and
unvested stock issuances). The increase under this provision was 629,723 shares
effective January 1, 1999, 905,791 shares effective January 1, 2000, and 964,315
shares effective January 1, 2001, for an aggregate of 2,499,829 over this three
year period.
In addition, on March 27, 1998, the Board adopted an amendment to the Plan
(the "1998 Amendment") to effect the following change: under the Automatic
Option Grant Program, effective with the 1998 Annual Meeting (A) automatically
grant to each individual who is first appointed or elected as a non-employee
Board member an option to purchase shares of Common Stock in an amount equal to
2,000 shares of Common Stock plus 2,000 shares for any partial year and for each
full year of the term for which the non-employee Board member is first appointed
or elected, and (B) automatically grant to each individual who is re-elected to
serve as a non-employee Board member an option to purchase 2,000 shares of
Common Stock for each full year of the term for which the non-employee Board
member is re-elected to the Board. The 1997 Amendment and the 1998 Amendment
were approved by the stockholders of the Corporation at the 1998 Annual Meeting.
In addition, on March 6, 2001, the Board unanimously adopted an amendment
to the Plan (the "2001 Amendment") to (i) increase the maximum number of shares
of Common Stock available for issuance over the term of the Plan by an
additional 1,500,000 shares effective January 1, 2002, (ii) increase the maximum
number of shares of Common Stock available for issuance over the term of the
Plan by an additional 1,500,000 shares effective January 1, 2003 and (iii) under
the Automatic Option Grant Program, effective with the 2001 Annual Meeting (A)
automatically grant to each individual who is first appointed or elected as a
non-employee Board member an option to purchase 7,500 shares of Common Stock (B)
during
21.
any partial year and for each full year of the term for which the non-employee
Board member is first appointed or elected, automatically grant an option to
purchase 7,500 shares of Common Stock, and (C) during each full year of the term
for which the non-employee Board member is re-elected to the Board,
automatically grant to each individual who is re-elected to serve as a
non-employee Board member an option to purchase 7,500 shares of Common Stock.
The 2001 Amendment was approved by the stockholders of the Corporation at the
2001 Annual Meeting.
In addition, effective February 27, 2002, the Board unanimously adopted an
amendment to the Plan (the "2002 Amendment"), subject to approval by the
stockholders of the Corporation to (i) increase the number of shares of Common
Stock authorized for issuance under the Plan by an additional 1,962,329 shares
and (ii) increase the number of shares of Common Stock available for issuance
under the Plan effective January 1 of each year beginning January 1, 2003 so
that the number of authorized shares available for new grants under the plan on
each January 1 will equal the lesser of 4.5% of the total number of shares of
Triangle Common Stock outstanding on the preceding December 31st or 5,000,000
shares.
E. The Plan shall terminate upon the EARLIEST of (i) August 30,
2006, (ii) the date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to stock options or unvested stock issuances at the time outstanding under the
Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
if so determined by the Board or pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained any required approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such approval is not obtained within twelve (12)
months after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
22.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any granted option or (ii) under the Stock Issuance Program shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
23.
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders which the Board does
not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Triangle Pharmaceuticals, Inc., a Delaware
corporation, and its successors.
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H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question,
as such price is reported on the Nasdaq National Market. If there is no
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
L. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
M. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.
N. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and
participation in any corporate-performance based bonus or incentive
A-2
programs) by more than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
P. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
Q. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Investment Option Grant or the Automatic
Option Grant Program.
S. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
U. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 1996 Stock Incentive Plan, as set
forth in this document.
W. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
X. PLAN EFFECTIVE DATE shall mean, August 30, 1996, the date on which the
Plan was adopted by the Board.
A-3
Y. PREDECESSOR PLAN shall mean the Corporation's pre-existing 1996 Stock
Option/Stock Issuance Plan in effect immediately prior to the Plan Effective
Date hereunder.
Z. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program with
respect to all eligible individuals.
AA. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under the Plan.
BB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
CC. SECTION 12 REGISTRATION DATE shall mean the date on which the Common
Stock was first registered under Section 12 of the 1934 Act.
DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
FF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
II. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
JJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
KK. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
A-4
LL. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
A-5
PROXY CARD
TRIANGLE PHARMACEUTICALS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Chris A. Rallis and R. Andrew Finkle
jointly and severally, as proxies, with full power of substitution and
resubstitution, to vote all shares of stock which the undersigned is entitled to
vote at the annual meeting of stockholders of Triangle Pharmaceuticals, Inc. to
be held on Thursday, May 23, 2002, or at any postponements or adjournments of
the annual meeting, as specified on the reverse, and to vote in their discretion
on any other business as may properly come before the annual meeting and any
adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 and 4.
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3 AND 4 AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR
DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING OR ANY
ADJOURNMENTS THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS JUST SIGN BELOW, NO BOXES NEED BE CHECKED.
(PLEASE SIGN AND DATE ON REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS
TRIANGLE PHARMACEUTICALS, INC.
MAY 23, 2002
PROXY VOTING INSTRUCTIONS
SELECT ONE OF THE FOLLOWING:
VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
YOUR CONTROL NUMBER IS ________________
DO NOT RETURN YOUR PROXY CARD
IF YOU VOTE BY TELEPHONE
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Election of Directors:
/ / Vote FOR all nominees at right (except as withheld in the space below)
/ / Vote WITHHELD from all nominees
Instruction: To withhold authority to vote for any individual nominee, check the
box "Vote FOR" and write the nominee's name on the line below.
----------------------------------------
NOMINEES:
Anthony B. Evnin, Ph.D., James L. Tyree and Chris A. Rallis, J.D. will stand for
re-election to the Board for terms to expire in 2005.
2. Amendment of Stock Option Plan: To approve an amendment to the 1996 Stock
Incentive Plan (i) increasing the number of shares of common stock authorized
for issuance under the plan in 2002 by 1,962,329 shares and (ii) providing for
automatic annual increases during the term of the plan, beginning in 2003, so
that the number of authorized shares available for new grants under the plan on
each January 1 will equal the lesser of 4.5% of the total number of shares of
Triangle common stock outstanding on the preceding December 31st or 5,000,000
shares
/ / FOR / / AGAINST / / ABSTAIN
3. Amendment of Employee Stock Purchase Plan: To approve an amendment to the
Employee Stock Purchase Plan increasing the number of shares of common stock
authorized for issuance under the plan by 250,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of Accountants: To ratify and approve the selection of
PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending
December 31, 2002.
/ / FOR / / AGAINST / / ABSTAIN
CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING / /
-------------------------- ---------------------------------
SIGNATURE OF STOCKHOLDER PRINTED NAME OF STOCKHOLDER
------------------------ Dated: ______________, 2002
TITLE (IF APPROPRIATE)
Note: Please sign exactly as name appears on this proxy. If signing as attorney,
executor, administrator, trustee or guardian, please give full title as such,
and, if signing for a corporation, give your title. When shares are in the names
of more than one person, each should sign.