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Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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DENDRITE INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter
and
Name of Person Filing Proxy Statement)
================================================================================
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
______________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
______________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________
(5) Total fee paid:
______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: _____________________________________
Form, Schedule or Registration Statement No.: _________________
Filing Party: ________________________________________________
Date Filed: __________________________________________________
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[DENDRITE LOGO]
April 12, 2001
Dear Shareholder:
On behalf of the Board of Directors and management, I am pleased to
invite you to the 2001 Annual Meeting of Shareholders of Dendrite International,
Inc. The meeting will be held on Tuesday, May 15, 2001 at 9:00 a.m. at the
Company's headquarters, 1200 Mount Kemble Avenue, Morristown, New Jersey
07960-6797.
Your vote at the Annual Meeting is important to Dendrite and we ask you
to vote your shares by following the voting instructions in the enclosed proxy.
The Notice of Annual Meeting, Proxy Statement and form of proxy are enclosed
with this letter.
The officers and directors of Dendrite appreciate your continuing
support and we look forward to seeing you at the Annual Meeting.
/s/ JOHN E. BAILYE
John E. Bailye
Chairman of the Board and Chief
Executive Officer
Morristown, New Jersey
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
To assure your representation at the Annual Meeting, please vote your
proxy as promptly as possible, whether or not you plan to attend the Annual
Meeting.
- --------------------------------------------------------------------------------
[DENDRITE LOGO]
1200 Mount Kemble Avenue
Morristown, New Jersey 07960-6797
www.dendrite.com
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2001
To Dendrite Shareholders:
The Annual Meeting of Shareholders of Dendrite International, Inc., a
New Jersey corporation (the "Company"), will be held at the Company's
headquarters, 1200 Mount Kemble Avenue, Morristown, New Jersey 07960-6797, on
Tuesday, May 15, 2001 at 9:00 a.m. (local time) (the "Annual Meeting") for the
following purposes:
1. To elect seven directors.
2. To approve an amendment to the Company's 1997 Stock Incentive
Plan to increase the number of authorized plan shares
by 1,750,000 shares.
Shareholders of record at the close of business on March 26, 2001 are
entitled to notice of and to vote at the Annual Meeting or at any postponement
or adjournment.
It is important that your shares are represented at the Annual Meeting
regardless of the number of shares you may hold. If you receive more than one
proxy card because your shares are registered in different names or addresses,
each such proxy card should be signed and returned to ensure that all of your
shares are voted. The prompt return of proxies will ensure a quorum is present
at the Annual Meeting. Whether or not you plan to attend the meeting, please
vote your proxy promptly.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ CHRISTINE A. PELLIZZARI
Christine A. Pellizzari
Secretary
Morristown, New Jersey
April 12, 2001
DENDRITE INTERNATIONAL, INC.
1200 Mount Kemble Avenue
Morristown, New Jersey 07960-6797
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2001
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Dendrite International,
Inc., a New Jersey corporation ("Dendrite" or the "Company"), for use at the
2001 Annual Meeting of Shareholders to be held at 9:00 a.m. (local time) on
Tuesday, May 15, 2001, at the Company's headquarters, 1200 Mount Kemble Avenue,
Morristown, New Jersey 07960-6797 and at any adjournment or postponement thereof
(the "Annual Meeting"). This Proxy Statement, Notice of Annual Meeting and proxy
are being distributed to shareholders by mail or by the Internet on or about
April 12, 2001.
GENERAL
Voting
- ------
The presence in person or by proxy of the holders of Common Stock
representing a majority of the shares of Common Stock outstanding as of the
record date constitutes a quorum for the transaction of business at the Annual
Meeting. Each shareholder is entitled to one vote in person or by proxy for each
share of Common Stock held as of the record date on each matter to be voted on.
On March 26, 2001, the record date for the Annual Meeting, there were 39,872,940
shares of Common Stock outstanding. Abstentions and broker non-votes are
included in determining whether a quorum is present. Broker non-votes occur when
a broker returns a proxy but does not have authority to vote on a particular
proposal.
Directors are elected by the affirmative vote of the holders of a
plurality of the votes cast at the Annual Meeting. Approval of the amendment to
the 1997 Stock Incentive Plan requires the affirmative vote of a majority of the
votes cast at the Annual Meeting. Abstentions and broker non-votes have no
effect on the outcome of these proposals.
This year shareholders may vote using one of three alternative methods:
(1) by competing and mailing the proxy card; or
(2) over the telephone, by dialing 1-800-690-6903 and following
the instructions for telephone voting on the proxy card; or
(3) via the Internet, by going to the website
http://www.proxyvote.com and following the instructions for
Internet voting on the proxy card.
If your shares are registered in the name of a bank or brokerage firm,
you still may be eligible to vote your shares over the Internet. You should
contact your bank or brokerage firm for additional information regarding
Internet voting in such case.
Proxies
- -------
Whether or not you attend the Annual Meeting, you are urged to submit
your proxy, which will be voted as directed on your proxy when properly
completed.
A proxy may be revoked, prior to the exercise of the proxy, either by
submitting written notice of revocation of that proxy to the Secretary of the
Company or by submitting a new proxy bearing a later date via proxy card or the
Internet. A proxy may also be revoked by voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not in itself constitute revocation of a
proxy.
This proxy solicitation is being made by the Board of Directors of the
Company and the expense of preparing, printing and mailing this Proxy Statement
and proxy is being paid by the Company. In addition to use of the mails, proxies
may be solicited personally or by electronic mail, facsimile or telephone by
regular employees and directors of the Company without additional compensation.
The Company will reimburse banks, brokers and other custodians, nominees and
fiduciaries for their costs in sending proxy materials to the beneficial owners
of Common Stock. In addition, Dendrite has retained Morrow & Co., Inc. to assist
in soliciting proxies for a fee of approximately $5,500, plus reasonable
out-of-pocket expenses.
Internet Distribution of Proxy Materials
- ----------------------------------------
The Company will transmit the Proxy Statement and related proxy
materials via the Internet to each shareholder of record that has previously
consented to receiving such proxy materials electronically. The Company believes
that transmitting the proxy materials over the Internet to those shareholders
who have consented will save the Company the expense of printing and mailing
proxy materials.
Multiple Copies of Annual Report and Proxy Statement
- ----------------------------------------------------
When more than one holder of Common Stock has the same address, the
Company may deliver only one Annual Report and Proxy Statement to that address
unless the Company has received contrary instructions from one or more of those
shareholders. Similarly, brokers and other intermediaries holding shares of
Common Stock in "street name" for more than one beneficial owner with the same
address may deliver only one Annual Report and one Proxy Statement to that
address if they have received consent from the beneficial owners of the Common
Stock.
Dendrite will deliver promptly upon written or oral request a separate
copy of the Annual Report and Proxy Statement to any shareholder, including a
beneficial owner of stock held in "street name," at a shared address to which a
single copy of either of those documents was delivered. To receive additional
copies of the Annual Report and Proxy Statement, you may write, call or e-mail
the Director of Investor Relations, 1200 Mount Kemble Avenue, Morristown, New
Jersey 07960, telephone 973-425-2527, e-mail brentc@drte.com. You may also
access a copy of Dendrite's Annual Report and Proxy Statement on the Company's
website, www.dendrite.com.
You may also contact the Director of Investor Relations at the address
or telephone number above if you are a shareholder of record of Dendrite and you
wish to receive a separate Annual Report and Proxy Statement in the future, or
if you are currently receiving multiple copies of our Annual Report and Proxy
Statement and want to request delivery of a single copy in the future. If your
shares are held in "street name" and you want to increase or decrease the number
of copies of the Annual Report and Proxy Statement delivered to your household
in the future, you should contact the broker or other intermediary who holds the
shares on your behalf.
PROPOSAL 1
ELECTION OF DIRECTORS
General
- -------
Directors are elected annually by the holders of Common Stock.
Directors will hold office until the next Annual Meeting or until their
successors are duly chosen and qualified. In the event that any of the nominees
should become unavailable for election, which is not expected, the persons named
in the accompanying proxy intend to vote for such other person or persons, if
any, as the Board of Directors may designate as a substitute nominee. The Board
of Directors recommends that the shareholders vote FOR the nominees for
Director.
Set forth below is a brief description of the background of each
nominee for Director. All nominees are current Directors of the Company.
Nominee Age Position With The Company
- ------- --- -------------------------
John E. Bailye...................... 47 Chairman of the Board and
Chief Executive Officer
Bernard M. Goldsmith................ 57 Director
Edward J. Kfoury.................... 62 Director
Paul A. Margolis.................... 47 Director
John H. Martinson................... 53 Director
Terence H. Osborne.................. 62 Director
Patrick J. Zenner................... 54 Director
Recommendation of the Board of Directors
- ----------------------------------------
The Board of Directors recommends a vote FOR the nominees listed herein.
Business Experience of Nominees
- -------------------------------
John E. Bailye has served as Chief Executive Officer and Director since
the Company's founding in 1987 and since 1991 in the additional position as
Chairman of the Board. Prior to 1987, Mr. Bailye served as a market researcher
at Foresearch Pty., Limited, a consulting company to the pharmaceutical industry
in Australia. In 1976, Mr. Bailye acquired Foresearch and served as its Managing
Director until he sold the company in 1986. Mr. Bailye holds a Bachelor of
Commerce in Finance, Marketing and Business from the University of New South
Wales.
Bernard M. Goldsmith has served as a Director of the Company since
1996. In 1986, he founded Updata Capital, Inc., an investment banking firm
focused on mergers and acquisitions in the information technology industry. Mr.
Goldsmith currently serves as Managing Director of Updata. Mr. Goldsmith also
founded Updata Software Company where he served as Chief Executive Officer from
1986 to 1988 and CGA Computer, Inc. where he served as Chairman and Chief
Executive Officer from 1968 to 1986. Mr. Goldsmith is also a Director of
Compuware Corporation, Frontstep, Inc. and Astea International, Inc. Mr.
Goldsmith holds a Bachelor of Arts in Business Administration from Rutgers
University.
Edward J. Kfoury has served as a Director of the Company since 1997.
Prior to joining the Company as a Director, Mr. Kfoury served as a division
President and Vice President of IBM Corporation from 1988 through 1993 and in
various other positions with IBM from 1963 to 1988. Mr. Kfoury is a Director of
Mapics, Inc. and various privately held companies. Mr. Kfoury is also a Director
of the Nature Conservancy, an advisory trustee of the Maine Audubon Society and
President of Rangeley Lakes Heritage Trust. Mr. Kfoury holds a Bachelor of
Business Administration in Marketing from the University of Notre Dame.
Paul A. Margolis has served as a Director of the Company since 1993.
Mr. Margolis is a Partner at Longworth Venture Partners, a venture capital
company which invests in Internet, electronic commerce, enterprise software and
IT services companies. Mr. Margolis founded Marcam Corporation ("Marcam") in
1980 and was its Chairman, President and Chief Executive Officer until 1996 and
a director of Marcam until 1998. Mr. Margolis holds a Bachelor of Arts from
Brown University and an M.B.A. from Harvard Business School.
John H. Martinson has served as a Director of the Company since 1991.
In 1986, he founded the Edison Venture Funds. He currently serves as Managing
Partner of Edison Venture Funds. Mr. Martinson is also a Director of various
privately held companies. He is the former Chairman of the New Jersey Technology
Council and President of the National Venture Capital Association. Mr. Martinson
holds a Bachelor of Science in Aeronautics from the United States Air Force
Academy, an M.S. in Astronautics from Purdue University and an M.B.A. from
Southern Illinois University.
Terence H. Osborne has served as a Director of the Company since 1998.
Mr. Osborne serves as a Special Advisor to General Atlantic Partners, LLC and
until March 2001 served as Chairman of the Board of Prime Response Inc. He is
also a Director of Mapics, Inc., Eyretel PLC and various privately held
companies. From 1996 to 1998, Mr. Osborne was Chairman of Dr. Solomon's Group
PLC. Prior to this, Mr. Osborne served initially as Vice President - Europe and
subsequently as President of System Software Associates ("SSA"). Prior to
joining SSA, he was employed by IBM from 1961 in various capacities including
vice president level positions in both the United States and Europe. Mr. Osborne
holds a Bachelor of Science, with honors, in Pure and Applied Mathematics from
London University.
Patrick J. Zenner was appointed as a Director of the Company on April
6, 2001. Mr. Zenner served as the President and Chief Executive Officer of
Hoffmann-La Roche, Inc. ("Roche"), a leading research-intensive pharmaceutical
company from 1993 to 2000. Mr. Zenner has served in various other capacities
with Roche since 1969, including Senior Vice President of Roche's pharmaceutical
division from 1988 to 1993, as Head of International Pharmaceutical Marketing
from 1988 to 1992 and as Vice President and General Manager of Roche
Laboratories from 1982 to 1988. Mr. Zenner is the immediate past Chairman of the
HealthCare Institute of New Jersey, a former Director of the Pharmaceutical
Research and Manufacturers of America and the Biotechnology Industry
Organization, and a Trustee of Creighton University and Fairleigh Dickinson
University. Mr. Zenner holds a Bachelor of Science in Business Administration
from Creighton University and a Masters in Business Administration from
Fairleigh Dickinson University.
Board Committees And Meetings
- -----------------------------
The Company has four standing Committees: the Audit Committee, the
Compensation Committee, the Employee Plan Committee and the Operations and
Technology Committee.
The Audit Committee (currently comprised of Messrs. Margolis and
Martinson, each of whom is independent in accordance with NASDAQ rules) reviews
the internal accounting procedures of the Company and consults with and reviews
the services provided by the Company's independent public accountants. In
accordance with NASDAQ rules, a third independent director will be appointed to
the Audit Committee in or before June 2001.
The Compensation Committee (currently comprised of Messrs. Kfoury and
Osborne) makes general policy decisions relating to compensation and benefits
for the Company's executives and Directors. The Compensation Committee also
administers various equity incentive plans of the Company.
The Employee Plan Committee (currently comprised of Messrs. Goldsmith,
Margolis and Martinson) administers the Company's employee stock purchase plan.
The Operations and Technology Committee (currently comprised of Messrs.
Kfoury and Osborne) is responsible for providing the Company with business
advice with respect to its service delivery operations and technology-related
matters. Mr. Kfoury is responsible for matters relating to the Company's United
States operations while Mr. Osborne is responsible for matters relating to the
Company's European operations.
In fiscal 2000, the Board of Directors held four meetings, the Audit
Committee held four meetings, and the Compensation Committee held five meetings.
Each Director attended at least 75% of the meetings of the Board of Directors
and of the Committees of which he was a member.
Director Compensation
- ---------------------
Directors receive no cash compensation for services provided as a
Director. Directors receive reimbursement for expenses incurred traveling to and
from Board meetings. In addition, each non-employee Director receives annually a
nonqualified stock option to purchase shares of the Company's Common Stock, with
such options having a value equal to approximately $100,000 determined using the
Black-Scholes option pricing method. These options are granted with an exercise
price equal to the fair market value of the shares at the grant date and vest
one year from the grant date.
Certain Transactions with Related Parties
- -----------------------------------------
In the first and second quarters of 2000, the Company chartered use of
an aircraft from a third party charter company, Executive Jet Management
("EJM"). One of the aircraft that EJM from time to time chartered to the Company
for business trips was a Hawker 700 airplane owned by Kookaburra Air, LLC
("Kookaburra") whose only members are Mr. Bailye and his spouse. In the third
and fourth quarters of 2000, the Company entered into similar transactions with
TAG Aviation ("TAG"). Neither EJM or TAG are affiliates of Mr. Bailye. The
Company paid fees of $87,559 and $167,950 to EJM and TAG, respectively, for
aircraft charters in fiscal year 2000. In addition, the Company reimbursed
certain Company executives an aggregate amount of $337,467 for the direct costs
associated with the charter of a Hawker 700 airplane from Kookaburra for
business trips in 2000. All such charters were on terms which the Company
believes were no more or less favorable to the Company than EJM, TAG or
Kookaburra offered generally to its other customers for comparable aircraft.
Mr. Bailye is a party to a registration rights agreement with the
Company under which he has certain rights with respect to the registration for
resale to the public of certain shares of Common Stock owned by him.
From January 1, 1998 to February 1, 1999, Updata informally provided
advice to the Company with respect to certain investment banking issues. On
February 1, 1999, the Company retained Updata as one of its financial advisors.
Mr. Goldsmith, a Director of the Company, currently serves as a Managing
Director of Updata.
In 1998, the Company entered into a consulting agreement with Mr.
Kfoury, a Director of the Company, providing that Mr. Kfoury would provide
certain consulting services to the Company in exchange for a grant of options to
purchase 36,000 shares of Common Stock. Such options were granted at the fair
market value of the underlying shares of Common Stock and are subject to a
three-year vesting schedule. In addition, the Company will reimburse Mr. Kfoury
for his reasonable travel and business expenses related to any business travel
or expenditure specifically requested by the Company. Mr. Kfoury and the Company
have agreed that his service on the Company's Operations and Technology
Committee will satisfy his obligations under his Consulting Agreement.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Compensation Committee Report
- -----------------------------
Compensation matters for the Company's executive officers for fiscal
year 2000 were reviewed and approved by the Board of Directors, based upon
recommendations made by the Compensation Committee.
General Policy
The overall objective of the Company's executive compensation program
is to attract and retain the highest level of executive talent and to induce the
Company's executives to achieve both short-term objectives and long-term growth
and profitability for the Company. To achieve these objectives, the Company's
2000 fiscal year executive compensation program consisted of the following
components: annual base salary, other annual compensation and benefits, annual
cash bonus, performance awards, and long-term compensation in the form of stock
options or other stock awards. Factors used in determining compensation include
competitive market considerations both within and without the industry, the
contribution by the individual to the present financial success of the Company
and/or a particular department of the Company, and the long-term performance of
the Company. The Compensation Committee may apply entirely different factors or
may vary the weight given to each of these factors in making recommendations to
the Board of Directors with respect to executive compensation in future years.
Annual Component: Base Salary, Bonus and Other Compensation
Each element of executive compensation has a different purpose and
basis. The base salary and other annual compensation and benefits paid in 2000
were made to compensate ongoing performance throughout the year. The base salary
for each executive officer was based on several factors, including a comparison
of compensation practices of other companies in the industry, personal
performance, and performance of the Company and/or a particular department of
the Company. Benefits for all executive officers included, in addition to the
equity programs discussed below, group term life insurance premiums, the
Company's matching portion of the executive's 401(k) plan contribution and an
annual reimbursement of up to $10,000 per executive officer for financial and
tax planning services. The Compensation Committee's policy is to have annual
compensation at the higher end of the range reported by companies in its
industry.
From time to time, the Company may pay to one or more of its executive
officers annual and/or quarterly cash bonuses and/or performance awards in the
form of option grants or share grants as an additional incentive and reward for
reaching and exceeding Company objectives for revenues, profitability or other
financial results. These cash bonuses reflect the Compensation Committee's
assessment, in consultation with the Chief Executive Officer, of that
individual's achievement and the significance of that executive officer's
contribution to the financial success of the Company and/or a particular
department of the Company during a year. The Compensation Committee has also
established an over-achievement bonus program whereby the Company may pay
additional one-time cash bonuses to each of the Company's executive officers if
the Company surpasses certain milestones in excess of the Company's budgeted
financial objectives. Based on pre-established milestones, certain quarterly
bonuses were not paid to these executive officers during fiscal 2000 in
particular instances.
Long-Term Component: Incentive Stock Options, Anniversary Share Awards,
Employee Plan And Annual Option Grant Program
The long-term component of executive compensation involves primarily
the award of tax-qualified incentive stock options to align the interests of the
executive with those of the shareholders. The number of options awarded is
intended to be set at a level sufficient to create a meaningful opportunity for
stock ownership by executives other than Mr. Bailye. Options are granted with an
exercise price equal to the fair market value per share of Common Stock on the
grant date. To induce a long-term employment commitment to the Company, options
granted to such executive officers become exercisable as follows: twenty-five
percent (25%) on the first anniversary of the date of grant and the remaining
seventy-five percent (75%) pro-rata on a monthly basis over the following three
years. Options under the 1997 Stock Incentive Plan were granted in 2000 to
certain of the Company's executive officers in connection with such executive
officers' individual performance. In addition, new executive officers were
granted options in 2000 in accordance with the terms of their respective
employment agreements with the Company.
In 1999, the Compensation Committee adopted an Annual Option Grant
Program for senior management. The purpose of this program is to demonstrate the
Company's commitment to having Directors and executive officers maintain a
significant level of ownership interest in the Company and to align such
individual's interests with those of the Company's shareholders. Accordingly, in
2000, each of the Company's executive officers and non-employee Directors were
granted options to purchase a certain number of shares of the Company's Common
Stock having a pre-determined Black-Scholes grant value for each level of
executive officer and for the non-employee Directors. Such options were issued
with an exercise price equal to the fair market value on the date of grant.
Chief Executive Officer Compensation
The 2000 annual base salary for Mr. Bailye, the Chairman of the Board
and Chief Executive Officer of the Company, was established pursuant to his
Employment Agreement. The Compensation Committee may, in its discretion,
determine to pay Mr. Bailye an annual or quarterly cash bonus if the Company
meets or exceeds its goals in a particular fiscal year. Mr. Bailye received a
quarterly cash bonus for the first and second quarters of the 2000 fiscal year.
From time to time, the Compensation Committee may grant to Mr. Bailye options to
purchase shares of the Company's Common Stock. In 2000, Mr. Bailye was granted
options to purchase an aggregate of 108,500 shares of Common Stock pursuant to
the Annual Option Grant Program as well as an option for 188,560 shares by
reason of the use of previously owned shares in satisfaction of the exercise
price for certain options exercised during fiscal 2000. Mr. Bailye does not
participate in decisions of the Board relating to his own compensation.
Year-End Incentive Stock Bonus Program
In 1999, the Compensation Committee approved the adoption of the
Incentive Stock Bonus Program whereby executive officers may elect to receive
their incentive bonus (including any amounts earned but deferred in accordance
with the Company's Bonus Plan) in shares of the Company's Common Stock ("Bonus
Shares"). The number of such Bonus Shares equals the amount of the executive
officer's bonus which such individual elects to receive in Common Stock divided
by the closing price of the Company's Common Stock on the trading date
immediately prior to the payment date of such bonus. To encourage such executive
officers to elect to receive their bonus in Bonus Shares, the Company grants to
each executive officer who elects to receive such Bonus Shares, a stock option
to purchase that number of shares of the Company's Common Stock equal to the
number of Bonus Shares such individual receives (calculated without giving
effect to any Bonus Shares withheld to pay any required withholding taxes) (the
"Tandem Options"). Such Tandem Options are considered incentive stock options to
the extent permitted by law and will vest and become fully exercisable on the
first anniversary of the bonus payment date. The Tandem Options and the Bonus
Shares are issued under the Company's 1997 Stock Incentive Plan.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code generally disallows a
deduction to publicly traded companies to the extent of excess compensation over
$1 million paid to the chief executive officer or to any of the four other most
highly compensated executive officers in a fiscal year. Qualifying performance
based compensation will not be subject to the deduction limit if certain
requirements are not met. The Company's various equity incentive plans currently
meet the necessary conditions for exclusion from consideration of
non-deductibility as set forth in Section 162(m) of the Code.
The policy of the Compensation Committee and the Board of Directors is
to establish and maintain compensation programs which recognize and reward
performance which increases the value of the Company and, to the extent
consistent with this policy, to seek to maintain and maximize the favorable tax
treatment of such compensation.
Compensation Committee
Edward J. Kfoury
Terence H. Osborne
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee of the Board of Directors is comprised of
two outside independent directors, Messrs. Kfoury and Osborne.
Report of the Audit Committee
- -----------------------------
The Audit Committee of the Board of Directors is comprised entirely of
independent directors. Its primary function is to oversee the Company's system
of internal controls, financial reporting practices and audits to ensure their
quality, integrity and objectivity. The Board of Directors has approved and
adopted the written charter for the Audit Committee attached as Exhibit A.
For the fiscal year 2000, the Audit Committee has reviewed the overall
audit scope, plans and results of the audit engagement. The Committee also met
separately, without management, with the independent public accountants. In
addition, the Audit Committee reviewed and discussed the Company's annual
financial statements with management before issuance.
The Audit Committee has discussed with the independent public
accountants the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, of the American Institute
of Certified Public Accountants, to the extent applicable. The Audit Committee
has also received and reviewed the written disclosures and confirmation from the
independent public accountants required by Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committee, and has discussed with the
auditors the auditors' independence.
Based on the foregoing review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year 2000.
Audit Committee
Paul A. Margolis
John H. Martinson
Executive Compensation
- ----------------------
Summary Compensation Table
The following table sets forth compensation information for the
Company's Chief Executive Officer and the other four most highly compensated
executive officers of the Company (the "Named Officers").
Long-Term
Compensation Awards
Annual Compensation --------------------
------------------- Number of
Name and Principal Fiscal Securities All Other
Position Year Salary($) Bonus($) Underlying Options(#) Compensation($)(1)
------------------------------ ---- ---------- --------- ---------------------- ------------------
John E. Bailye................ 2000 450,000 98,550 297,060 5,100
Chairman of the 1999 450,000 403,000 187,500 17,981
Board and 1998 450,000 360,000 9,000 164,604
Chief Executive Officer
R. Bruce Savage.............. 2000 302,260 78,300 68,000 5,100
Executive Vice 1999 302,284 318,500 112,500 6,974
President and Chief 1998 297,500 288,750 84,000 8,139
Operating Officer
George T. Robson............ 2000 310,000 78,300 68,000 6,127
Executive Vice President 1999 310,000 318,500 187,500 68,652
1998 305,833 300,000 120,000 7,064
Teresa F. Winslow......... 2000 270,000 172,525 134,000 5,100
Senior Vice President 1999 260,576 340,000 52,500 6,598
and President, Americas 1998 255,556 535,000 9,000 5,408
Division
Mark H. Cieplik............ 2000 270,000 63,450 134,000 5,100
Senior Vice President, 1999 260,000 285,000 52,500 10,183
Sales and Marketing 1998 255,004 236,250 0 408
- ----------------------------------------------------------------------------
(1) All Other Compensation for fiscal year 2000 represents the Company's
contribution to the 401(k) plan and for Mr. Robson deferred
compensation plan life insurance premiums of $1,027.
Option Grants In Last Fiscal Year
The following table sets forth stock option grants made to the Named
Officers during fiscal 2000 under the 1997 Stock Plan.
Option Grants In Last Fiscal Year
---------------------------------
Percentage Potential Realizable
Number of of Total Value at Assumed Annual
Securities Options Exercise Rates of Stock Price
Underlying Granted to or Base Appreciation
Options Employees in Price Per For Option Term($)
Granted Fiscal Year Share Expiration ------------------
Name (#)(1) (%) ($/Share) Date 5% 10%
------------------------- ------------ ------------ --------- ----------- ------------ ------------
John E. Bailye.......... 108,500 4.3 33.1875 1/24/10 2,264,556 5,738,818
188,560(2) 7.5 12.0625 10/22/07 925,952 2,157,862
R. Bruce Savage......... 68,000 2.7 33.1875 1/24/10 1,419,258 3,596,678
George T. Robson........ 68,000 2.7 33.1875 1/24/10 1,419,258 3,596,678
Teresa F. Winslow....... 34,000 1.4 33.1875 1/24/10 709,629 1,798,339
100,000 4.0 22.875 10/24/10 1,438,596 3,645,686
Mark H. Cieplik......... 34,000 1.4 33.1875 1/24/10 709,629 1,798,339
100,000 4.0 22.875 10/24/10 1,438,596 3,645,686
(1) Each of the options, with the exception of the grant to Mr. Bailye for
188,560, vests and becomes exercisable over a four-year vesting period
with 25% vesting one year from the grant date and 75% vesting pro-rata
on a monthly basis over the following three years. All options granted
subsequent to December 1999 are eligible for the Company's replacement
option program under which if the optionee tenders previously-owned
shares in satisfaction of the option exercise price, a replacement
option for the number of shares tendered is granted for the remaining
term of the underlying option, with the option exercise price equal to
the fair market value per share of the Common Stock on the grant date
of the replacement option. Replacement options vest and become fully
exercisable one year from the grant date.
(2) Represents an option under the Company's replacement option program.
Option Exercises and Year-End Option Holdings
The following table sets forth information regarding option exercises
during fiscal 2000 and 2000 year-end option holdings for the Named Officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
---------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Value Fiscal Year End(#) Fiscal Year End(1)
Acquired on Realized ------------------- -------------------
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------- ----------- ---------- ----------- -------------- ----------- -------------
John E. Bailye.......... 383,000 2,551,216 199,218 535,342 $2,412,264 $4,576,524
R. Bruce Savage......... 120,560 2,155,368 64,533 184,407 470,594 903,039
George T. Robson........ 131,100 2,709,685 297,050 305,351 4,012,731 2,277,232
Teresa F. Winslow....... 80,478 1,272,000 109,124 195,347 1,767,088 730,553
Mark H. Cieplik......... 68,000 1,524,100 103,404 200,096 1,614,435 801,503
(1) Calculated on the basis of the closing price of the Common Stock at
December 31, 2000 of $22.375 per share, less the per share exercise
price.
Employment Contracts And Change In Control Agreements
- -----------------------------------------------------
Employment Agreement With John E. Bailye
The Company has an employment agreement with Mr. Bailye (the "Bailye
Employment Agreement"), which names Mr. Bailye as the President and Chief
Executive Officer of the Company. The Bailye Employment Agreement provides for
an annual base salary of not less than $425,000 per year, to be increased each
year in accordance with the increase in the Consumer Price Index ("CPI").
At a minimum of once every two years (but in no event more than once
every year), the Compensation Committee will review Mr. Bailye's annual base
salary in light of the performance of the Company for the purpose of evaluating
an adjustment in Mr. Bailye's annual base salary to be considered along with any
CPI increase. Mr. Bailye also receives an annual bonus to be determined by the
Compensation Committee and which is generally targeted not to exceed fifty
percent (50%) of Mr. Bailye's annual base salary for the year. Mr. Bailye is
also entitled to the employee benefits generally available to other executives
of the Company from time to time.
The Bailye Employment Agreement has a current term continuing through
December 31, 2001 (the "Term"). Upon December 31 of each year during the Term,
the Term is automatically renewed for an additional year unless, prior to such
December 31, either Dendrite or Mr. Bailye provides written notice of the intent
not to renew. Upon a "Change in Control" (as defined below), the remaining Term
shall, if less than two years at such date, be extended automatically to
continue for at least two years following such Change in Control.
Either Mr. Bailye or the Board of Directors may terminate the Bailye
Employment Agreement for any reason whatsoever, with or without "Cause" or for
"Good Reason" (as defined below) by providing the other party with certain
advance written notice.
For purposes of the Bailye Employment Agreement, "Cause" is defined to
include: any gross misconduct or gross neglect on Mr. Bailye's part with respect
to his duties under his employment agreement which has or is likely to have a
material adverse effect upon the business of the Company; provided Mr. Bailye's
good faith exercise of his business judgment in executing his duties shall not
constitute Cause, or the indictment of Mr. Bailye for a felony which relates to
his duties under his employment agreement or has or is likely to have a material
adverse effect on the business of the Company; provided that if Mr. Bailye
ultimately is not convicted of and does not plead guilty or nolo contendere to
such felony, Mr. Bailye's termination of employment shall be treated
retroactively as a termination by the Company without Cause and he shall be paid
severance under his employment agreement. The Bailye Employment Agreement
terminates automatically in the event of his death or Disability (as defined
below).
In the event that Mr. Bailye's employment is terminated (i) by the
Company for any reason other than Cause or Disability, or as a result of Mr.
Bailye's death, or (ii) by Mr. Bailye for Good Reason, Mr. Bailye will be
entitled to receive severance payments in the aggregate amount equal to the sum
of the annual rate of his base salary in effect as of the date of termination,
and the average of the total annual bonus compensation earned by him during the
three completed fiscal years of the Company immediately preceding his date of
termination, divided by twelve, and multiplied by the number of full and
fractional months remaining in the Term as of his date of termination.
In the event that during the Term and within the two year period
following a Change in Control, Mr. Bailye's employment is terminated (i) by the
Company for any reason other than Cause or Disability, or as a result of Mr.
Bailye's death, or (ii) by Mr. Bailye for Good Reason, then Mr. Bailye would be
entitled to receive severance payments in the aggregate amount equal to three
times the sum of the annual rate of his base salary in effect as of the date of
termination and the highest annual bonus compensation earned by him during the
three completed fiscal years of the Company immediately preceding his date of
termination.
In the event that the Company provides Mr. Bailye with written notice
that it is not extending the Term, the Compensation Committee shall determine,
in its sole discretion, the amount of any severance payments to be made to Mr.
Bailye, which amount shall be determined as of the date of termination in
accordance with what is usual and customary for such position in companies of
comparable size operating in a similar industry as the Company.
During the Term and within a period of two years following any
voluntary termination by him (other than a termination for Good Reason) or any
termination by the Company for Cause, Mr. Bailye is prohibited, whether directly
or indirectly, in any U.S. state or foreign country where the Company is doing
business at the time of Mr. Bailye's termination, from (i) engaging in any
venture or activity in competition with the business of the Company or its
affiliates, or any business that the Company may establish that it will likely
conduct within one year of Mr. Bailye's departure; (ii) soliciting for any
venture or activity in competition with the businesses conducted by the Company
or its affiliates any customers who were customers within one year of Mr.
Bailye's departure or soliciting, whether directly or indirectly, such customers
to reduce their business with the Company or its affiliates; or (iii) inducing
or attempting to influence any employee of the Company or its affiliates
employed on the effective date of Mr. Bailye's termination, or within six months
prior to such termination, to terminate his or her employment with the Company.
In the event the Company terminates Mr. Bailye's employment without Cause (or
elects not to extend Mr. Bailye's employment) or Mr. Bailye terminates his
employment for Good Reason, the restrictive covenants described above shall
apply for a period of six months following Mr. Bailye's date of termination. The
Bailye Employment Agreement may not be assigned by either party other than by
the Company in connection with certain business combinations.
Other Employment Agreements
The Company also has employment agreements (each, an "Employment
Agreement") with each of the other Named Officers. Such persons serve at the
discretion of the Board of Directors. Each Employment Agreement provides for
annual vacation and such employee benefits as are generally made available to
employees of the Company.
Mr. Savage had an employment agreement with the Company until July 24,
2000, at which time he became an at-will employee. After expiration of his
Employment Agreement, if Dendrite terminates Mr. Savage's employment for any
reason other than death, Cause or being "Disabled", the Company shall pay to Mr.
Savage post-term severance payments in the amount totaling twelve months base
salary (calculated at a rate of base salary then being paid to Mr. Savage as of
the date of termination) and, solely for the calendar year in which Mr. Savage
is terminated, a pro rata portion of the bonus that Mr. Savage would have
otherwise been entitled to had he been employed by the Company for the entire
year in which he was terminated, the amount of any such bonus corresponding to
the portion of the year to have elapsed through the termination date.
Mr. Robson's Employment Agreement provides for an annual base salary of
$300,000, to be adjusted annually in the discretion of the Compensation
Committee. In addition to his base salary, Mr. Robson is eligible to receive a
target quarterly bonus, provided that Mr. Robson is employed by the Company at
the end of any such quarter, and such target bonus may be increased or decreased
at the discretion of the Board of Directors based upon the Company's performance
against its current year financial objectives. Upon execution of his Employment
Agreement, Mr. Robson was granted options to purchase 200,000 shares of Common
Stock. The price of such options, subject to a four-year vesting schedule, was
the fair market value of the underlying shares of Common Stock on the grant
date. Mr. Robson was also entitled to receive options to purchase 40,000 and
25,000 shares of Common Stock, respectively, on each of the first and second
anniversary date of his Employment Agreement. The price of such options was
determined by the Option Committee and the Compensation Committee and such
options are subject to a four-year vesting schedule. In the event of a Change in
Control, if Mr. Robson is not retained in a similar position or if no similar
position is offered to Mr. Robson, all options owned by him at the time of such
event shall immediately vest.
The Company may terminate Mr. Robson with or without Cause. In the
event that the Company terminates Mr. Robson's employment for any reason other
than death, Cause or being Disabled, Mr. Robson shall be entitled to receive
severance payments equal to his annual base salary in effect at the time of
severance.
Ms. Winslow's Employment Agreement provides for an annual base salary
of not less than $110,000 to be reviewed at least annually and to be adjusted
based on performance. Ms. Winslow shall also receive a bonus payable on terms
and conditions agreed to by Ms. Winslow and the Company. Upon a Change in
Control, all options held by Ms. Winslow at the time of such event shall
immediately vest. If Ms. Winslow's employment is terminated following a Change
in Control, Ms. Winslow is entitled to receive severance payments in the amount
of twelve months salary calculated at the rate of base salary being paid to Ms.
Winslow on the date of termination.
Mr. Cieplik's Employment Agreement provides for an annual base salary
of $250,000, to be adjusted annually in the discretion of the Compensation
Committee. Mr. Cieplik shall also receive a quarterly bonus, provided that Mr.
Cieplik is employed by the Company at the end of any such quarter, and such
bonus may be increased or decreased at the discretion of the Board of Directors
based upon the Company's performance against its current year financial
objectives. Upon execution of his Employment Agreement, Mr. Cieplik was also
granted options to purchase 110,000 shares of Common Stock. The price of such
options, subject to a four-year vesting schedule, was the fair market value of
the underlying shares of Common Stock. Upon a Change in Control, all options
held by Mr. Cieplik at the time of such event shall immediately vest.
In the event that the Company terminates Mr. Cieplik's employment for
any reason other than death, Cause or being Disabled, Mr. Cieplik shall be
entitled to receive severance payments equal to six months compensation
calculated at the rate of compensation then being paid to Mr. Cieplik. If Mr.
Ceiplik's employment is terminated following a Change in Control, Mr. Cieplik is
entitled to receive severance payments in the amount of twelve months salary
calculated at the rate of base salary being paid to Mr. Cieplik on the date of
termination.
"Cause" is generally defined to include any acts of gross misconduct,
indictable offenses, any willful or intentional acts or gross negligence which
injure in any material respect the reputation, business or business
relationships of the Company, and material breaches of the Employment Agreement.
"Disabled" is generally defined as the occurrence of any physical or mental
condition which materially interferes with the performance of customary duties
as an employee of the Company for a period of six months during any twelve month
period. "Change in Control" is defined generally to include significant changes
in the stock ownership of the Company, certain changes in the Board of
Directors, certain business combinations and a sale of all or substantially all
of the Company's assets. "Good Reason" is defined generally in the agreement as
a change or reduction of duties or responsibilities, material breach by
Dendrite, or the occurrence of any of the following upon a Change in Control:
cessation of eligibility to participate in various employee plans, increased
travel or failure to obtain an assumption agreement.
Each such Employment Agreement terminates automatically in the event of
the death or disability of such employee.
Each Employment Agreement restricts the respective employee from
disclosing any confidential information regarding the Company, or any
confidential information regarding the Company's clients, customers or
suppliers, to any person without prior written consent from the Company, client,
customer or supplier, as the case may be. Each Employment Agreement, other than
Ms. Winslow's, also provides that for a period of two years following
termination of employment, with or without Cause, each employee is prohibited
from (i) performing services that compete with the businesses conducted by the
Company or any of its affiliates or rendering services to any organization or
entity which competes with the business or businesses conducted by the Company
or any of its affiliates anywhere in the United States or elsewhere where the
Company or any of its affiliates do business, or any business or businesses that
the Company or any of its affiliates may establish that it will likely conduct
within one year (or, in the case of Ms. Winslow, six months) following the date
of such employee's termination; (ii) soliciting any customers or potential
customers of the Company with whom the employee had contact while employed by
the Company or who was a customer of the Company at any time during the two
years immediately before the employee's termination; (iii) requesting that any
of the Company's customers or suppliers discontinue doing business with the
Company; (iv) knowingly taking any action that would disparage the Company or be
to its disadvantage; or (v) employing or attempting to employ or assisting
anyone else to employ any employee or contractor of the Company to terminate
their employment or engagement with the Company. Ms. Winslow's Employment
Agreement is substantially similar to the other Employment Agreements, except
that the term of her noncompetition covenant is three years. In addition, in
consideration for such noncompetition covenant, the Company has agreed to pay
Ms. Winslow one year's base salary, at the Company's discretion, to be paid in
equal monthly installments over two years, except that such payments shall cease
if Ms. Winslow becomes employed during such period.
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total shareholders' return on the Company's Common Stock on a year-end basis,
using the last day of trading prior to the Company's fiscal year end, from
January 1, 1996 to December 31, 2000, with the cumulative total return on the
Nasdaq Stock Market-US Index and the JP Morgan H&Q Technology Index for the same
period. In accordance with the rules of the SEC, the returns are indexed to a
value of $100. No cash dividends have been declared on the Common Stock.
Shareholders' returns over the indicated period should not be considered
indicative of future shareholder returns.
[graphic omitted; the following is a table reflecting the information provided
in the omitted graph.]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG DENDRITE INTERNATIONAL, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE JP MORGAN H & Q TECHNOLOGY INDEX
- ------------------------------------------------------------------------------------------------------
12/95 12/96 12/97 12/98 12/99 12/00
- ------------------------------------------------------------------------------------------------------
DENDRITE INTERNATIONAL, INC. 100 46 108 277 565 373
- ------------------------------------------------------------------------------------------------------
NASDAQ STOCK MARKET (U.S.) 100 123 151 213 395 238
- ------------------------------------------------------------------------------------------------------
JP MORGAN H & Q TECHNOLOGY 100 124 146 227 506 327
- ------------------------------------------------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, the preceding Compensation
Committee Report on Executive Compensation and the Common Stock Performance
Graph will not be incorporated by reference into any of those prior filings, nor
will such report or graph be incorporated by reference into any future filings
made by the Company under those statutes.
____________________
* $100 INVESTED ON 12/31/95 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of the outstanding Common Stock as of March 1, 2001 by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (ii) each of the Directors, nominees for Director and Named
Officers and (iii) all current executive officers and Directors as a group. Such
beneficial owner has sole voting and investment power as to such shares unless
otherwise indicated.
Name and Address of Beneficial Owner Number of Shares Percent of Class
- ------------------------------------ ---------------- -----------------
Waddell & Reed Financial, Inc. (1) 4,089,900 10.1
P.O. Box 29217
6300 Lamar Avenue
Overland Park, Kansas 66202
American Express Financial Corporation (2)
200 AXP Financial Center
Minneapolis, Minnesota 55474 2,667,945 6.6
Reich & Tang Asset Management L.P. (3)
600 Fifth Avenue
New York, New York 10020 2,272,554 5.6
Mellon Financial Corporation (4)
One Mellon Center
Pittsburgh, Pennsylvania 15258 2,235,678 5.5
Massachusetts Financial Services Company (5)
500 Boylston Street
Boston, Massachusetts 02116 2,110,720 5.2
John E. Bailye (6) 4,208,986 10.4
John H. Martinson 208,512 *
Bernard M. Goldsmith 78,375 *
Paul A. Margolis 52,375 *
Edward J. Kfoury 138,000 *
Terence H. Osborne 42,000 *
Patrick J. Zenner -- *
R. Bruce Savage 101,407 *
George T. Robson 402,390 *
Teresa F. Winslow 206,402 *
Mark H. Cieplik 126,369 *
All executive officers and directors as a group (15 persons) (7) 5,714,150 13.7
*Less than 1% of the outstanding shares of Common Stock.
(1) Pursuant to an amended Schedule 13G filed with the SEC on January 23,
2001 by Waddell & Reed Financial, Inc. ("WRFI"), Waddell & Reed
Investment Management Company ("WRIMCO"), Waddell & Reed, Inc. ("WRI")
and Waddell & Reed Financial Services, Inc. ("WRFSI"), WRIMCO has direct
sole voting and sole dispositive power with respect to 4,089,900 shares
and WRFI, WRI and WRFSI each have indirect sole voting and sole
dispositive power with respect to 4,089,900 shares.
(2) Pursuant to a Schedule 13G filed with the SEC on February 2, 2001 by
American Express Financial Corporation on behalf of itself and its
subsidiaries and/or advised accounts including IDS Life Insurance Company
and American Express Asset Management Group Inc. (collectively, "American
Express"), American Express has shared voting power with respect to
1,747,630 shares and shared dispositive power with respect to 2,667,945
shares.
(3) Pursuant to a Schedule 13G filed with the SEC on February 15, 2001 by
Reich & Tang Asset Management L.P. ("Reich & Tang"), Reich & Tang has
shared voting and shared dispositive power with respect to 2,272,554
shares.
(4) Pursuant to a Schedule 13G filed with the SEC on January 18, 2001 by
Mellon Financial Corporation ("Mellon Financial") and Mellon Bank N.A.
("Mellon Bank"), Mellon Financial has sole voting power with respect to
1,592,653 shares, shared voting power with respect to 620,400 shares,
sole dispositive power with respect to 1,601,303 shares and shared
dispositive power with respect to 634,375 shares; and Mellon Bank has
sole voting power with respect to 1,526,003 shares, shared voting power
with respect to 620,400 shares, sole dispositive power with respect to
1,537,328 shares and shared dispositive power with respect to 623,475
shares.
(5) Pursuant to a Schedule 13G filed with the SEC on February 12, 2001 by
Massachusetts Financial Services Company ("MFS"), MFS has sole voting
power with respect to 1,697,045 shares and sole dispositive power with
respect to 2,110,720 shares.
(6) Represents 3,125,396 shares owned of record by Mr. Bailye and 774,405
shares owned of record by Carinya Holdings Company ("Carinya"), which
includes 82,000 shares owned of record by the Bailye Family Foundation
(the "Foundation") and options exercisable for 298,749 shares of Common
Stock. Carinya is a general partnership consisting of Mr. Bailye, Mr.
Bailye's wife, and trusts for the benefit of each of their two minor
children, the trustees of which are Mr. Bailye's parents and Mrs.
Bailye's parents, respectively, as general partners. The partnership
agreement provides that the voting power with respect to shares owned by
the partnership resides with the majority vote of all partners other than
Mr. Bailye. Mr. Bailye disclaims beneficial ownership of the shares owned
of record by Carinya except to the extent of the two 10% partners'
interests therein owned by Mr. Bailye and his spouse, respectively. The
Foundation is a trust established exclusively to provide financial
support for charitable organizations which are exempt institutions under
Section 501(c)(3) of the Internal Revenue Code. Mr. Bailye and his spouse
constitute two of the three trustees of the Foundation.
(7) Includes shares subject to stock options exercisable as of March 1, 2001
or within 60 days thereafter, as follows: Mr. Bailye, 298,749; Mr.
Martinson, 108,750; Mr. Goldsmith, 78,375; Mr. Margolis, 52,375; Mr.
Kfoury, 118,000; Mr. Osborne, 42,000; Mr. Savage, 101,407; Mr. Robson,
330,486; Ms. Winslow, 147,674; Mr. Cieplik, 125,904; and all directors
and executive officers as a group, 1,512,685.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file reports regarding ownership
of the Company's Common Stock with the SEC, and to furnish the Company with
copies of all such filings. Based on a review of these filings, the Company
believes that all filings were timely made other than a Form 3 which was
inadvertently filed late on behalf of Marc Kustoff.
PROPOSAL 2
AMENDMENT TO THE 1997 STOCK INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE PLAN
Shareholders are being asked to consider and vote on a proposed
amendment (the "Amendment") to the 1997 Stock Incentive Plan (the "Plan") to
increase the number of shares of Common Stock available for issuance from
8,500,000 shares to 10,250,000 shares.
The Plan authorizes the grant of incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code), nonqualified stock
options, and awards based on the value of the Common Stock.
Of the 8,500,000 shares currently reserved under the Plan, as of March
1, 2001, 5,984,080 shares were subject to outstanding options and 731,223 shares
were available for new awards. The Board of Directors believes that the
Amendment provides an important inducement to recruit and retain the best
available personnel. The Board of Directors believes that providing employees,
non-employee directors and consultants with an opportunity to invest in the
Company rewards them appropriately for their efforts on behalf of the Company.
Awards under the Plan may be satisfied by the use of authorized but
unissued shares or by treasury shares. As a result of the Company's stock
repurchase program, the Company currently has 1,320,400 shares of treasury stock
available to satisfy awards under the Plan.
Forfeited or expired awards or awards otherwise terminated without the
issuance of shares of Common Stock to the participant and shares withheld by or
surrendered to satisfy withholding tax obligations or in payment of the exercise
price of an award ("share counting rules") are available for new awards under
the Plan.
As of March 1, 2001, options to purchase a total of 7,768,777 shares of
Common Stock have been granted to date under the Plan at an exercise price per
share equal to not less than the fair market value of the Common Stock on the
date of grant as set forth in the table below:
Total Number of
Options Granted Since
Name and Title Plan Commencement
- -------------- -----------------
John E. Bailye, Chairman of the Board 1,219,560
and Chief Executive Officer
Bernard H. Goldsmith, Director 135,000
Paul A. Margolis, Director 135,000
John H. Martinson, Director 135,000
Edward J. Kfoury, Director 171,000
Terence H. Osborne, Director 78,000
Patrick J. Zenner, Director --
R. Bruce Savage, Executive Vice President and 402,500
Chief Operating Officer
George T. Robson, Executive Vice President 443,500
Teresa F. Winslow, Senior Vice President and 213,500
President, Americas Division
Mark H. Cieplik, Senior Vice President, Worldwide 186,500
Sales
All current executive officers as a group (10 3,316,461
persons)
All current directors who are not executive 654,000
officers as a group (6 persons)
All employees, including all current officers who 3,798,316
are not executive officers as a group (877 persons)
As of March 1, 2001, the closing price of the Common Stock on the
Nasdaq National Market was $16.75 per share.
Principal Features of the Plan
The purpose of the Plan is to enhance the ability of the Company to
attract and retain employees, directors, and consultants of outstanding ability
and to provide them with an interest in the Company parallel to that of the
shareholders. Approximately 1,340 participants are currently eligible under the
Plan, including key employees, non-employee directors and consultants. The Plan
is administered by the Compensation Committee.
Options granted under the Plan may be either nonqualified stock options
or incentive stock options qualifying under Section 422 of the Code. For
purposes of compliance with Section 162(m) of the Internal Revenue Code, no
employee may be granted in any year options to purchase more than 1,500,000
shares of Common Stock (subject to adjustment for antidilution events). The
option exercise price is determined by the Committee, but in no event may the
option exercise price be less than the fair market value of the Common Stock on
the date of grant and in the case of incentive stock options granted to an
employee who is a 10% shareholder the option exercise price may not be less than
110% of the fair market value of the Common Stock on the date of grant. The term
of each option is fixed by the Committee, but no option may be exercisable after
the expiration of ten years from the grant date (and, in the case of incentive
stock options granted to a 10% shareholder, five years from the grant date).
Each option vests and becomes exercisable as determined by the Committee.
Options may not be transferred except by will or the laws of descent
and distribution, except that the Committee may permit nonqualified stock
options to be transferred to members of the holder's immediate family or trusts,
partnerships or limited liability companies established for such family members.
All options granted subsequent to December 1999 are eligible for the
Company's replacement option program under which, if the optionee tenders back
to the Company previously-owned shares in satisfaction of the option exercise
price, a replacement option for the number of shares transferred will be granted
for the remaining term of the underlying option, with the option exercise price
equal to the fair market value on the date of the replacement option.
Under the Plan, each non-employee director is granted annual
nonqualified stock options to purchase a certain number of shares of Common
Stock as determined by the Board of Directors or the Compensation Committee. The
options are granted with an exercise price equal to the fair market value of the
underlying shares on the date of grant and vest one year from the grant date.
In the event of a "change in control" (as defined in the Plan) any
option will become immediately vested and exercisable in full and restrictions
on any awards automatically lapse.
To date, stock options, bonus shares under the year-end incentive stock
bonus program and anniversary share awards have been granted under the Plan. Any
such awards may be forfeited under conditions established by the Committee.
Because future participation in the Plan and the level of participation is
discretionary, it is not possible to determine the value of benefits under the
Amendment which may be obtained by those eligible to participate.
If an award holder engages in certain activity which is harmful to the
Company, any outstanding awards to that person may be canceled and terminated
and the person may have to reimburse the Company for any gain realized upon
exercise of an award within one year of the activity. This forfeiture and
repayment provision does not apply following a change in control.
The Board of Directors may amend, suspend or terminate the Plan at any
time, but no amendment may adversely affect the rights of any participant in
connection with an award previously granted. In addition, no amendment to the
Plan may be made without subsequent shareholder approval if such approval is
required under any applicable law, regulation or exchange rule.
The Plan became effective on July 24, 1997 and has a term of ten years
from its effective date.
Federal Income Tax Implications
The following is a brief description of the federal income tax
consequences generally applicable to awards under the Plan. The grant of an
option will create no federal income tax consequences for the participant or the
Company. A participant will not have taxable income upon exercising an option
which is an ISO (except that the alternative minimum tax may apply). Upon
exercising an option which is not an ISO, the participant must generally
recognize ordinary income equal to the difference between the exercise price and
the fair market value of the freely transferable and nonforfeitable shares
acquired on the date of exercise.
Upon a disposition of shares acquired upon exercise of an ISO before
the end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the shares at the date of exercise of the ISO minus the exercise price or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price. Otherwise, a participant's disposition of shares acquired upon the
exercise of an option generally will result in short-term or long-term capital
gain or loss measured by the difference between the sale price and the
participant's "basis" in such shares (generally, the "basis" is the exercise
price plus any amount previously recognized as ordinary income in connection
with the exercise of the option).
The Company generally will be entitled to a deduction equal to the
amount recognized as ordinary income by the participant in connection with
options. The Company generally is not entitled to a tax deduction relating to
amounts that represent a capital gain to a participant. Accordingly, the Company
will not be entitled to any tax deduction with respect to an ISO if the
participant holds the shares for the applicable ISO holding periods prior to
disposition of the shares.
The above discussion is intended for the information of shareholders
and not as tax guidance to participants in the Plan.
The Board of Directors recommends a vote FOR the approval of the Amendment.
INDEPENDENT PUBLIC ACCOUNTANTS
During fiscal 2000, Arthur Andersen LLP served as the Company's
independent public accountants and in that capacity rendered an opinion on the
Company's consolidated financial statements for the fiscal year ended December
31, 2000.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
The fees billed for services rendered by Arthur Andersen LLP for fiscal
2000 were as follows:
Audit fees $399,600(1)
Financial information systems design and
implementation fees $0
All other fees $320,575(2)
(1) Amount represents professional services rendered in connection with the
audit of the Company's financial statements for the most recent fiscal
year and foreign statutory audits for certain subsidiaries and the
reviews of the financial statements included in each of the Company's
Quarterly Reports on Form 10-Q during the year ended December 31, 2000.
(2) Amount represents professional services rendered for the Company and its
affiliates for the year ended December 31, 2000, primarily related to the
following: (i) tax compliance and consulting and (ii) employee benefit
plan audits.
The Audit Committee has considered whether the provision of the
services covered under "Financial information systems design and implementation
fees" and "All other fees" above is compatible with maintaining Arthur Andersen
LLP's independence.
SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented at the
Company's 2002 Annual Meeting of Shareholders must be received by the Secretary
of the Company not later than December 13, 2001 and must be in compliance with
applicable SEC regulations, for inclusion in the proxy statement and related
proxy materials.
Under the terms of the Company's By-laws, shareholders who intend to
submit a nomination for election as a director at an annual meeting of
shareholders must be a shareholder of record on the date of providing such
notice to the Secretary of the Company and on the record date for determination
of shareholders to vote at the annual meeting. To be eligible for consideration,
a shareholder's notice must be timely and in proper written form.
To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than sixty
days nor more than ninety days prior to the date of the annual meeting, provided
that if the Company provides less than seventy days' notice or announcement of
the date of the annual meeting, notice by the shareholder must be received no
later than the close of business on the tenth day following the day on which
notice of the annual meeting date is mailed or announced, whichever occurs
earlier.
To be in proper written form, a shareholder's notice to the Secretary
of the Company must set forth the items specified in the By-laws for each person
whom the shareholder proposes to nominate as a director, including all
information which may be required under Section 14 of the Securities Exchange
Act of 1934 as well as: (a) name, age, business address and residence address;
(b) principal occupation or employment; and (c) class or series and number of
shares of Common Stock that are owned beneficially or by record. In addition, a
shareholder's notice must set forth the items specified in the By-laws for the
shareholder giving notice, including: (a) name and address; (b) class or series
and number of shares of Common Stock that are owned beneficially or of record;
(c) a description of all arrangements or understandings between the shareholder
and each proposed nominee or others relating to the nomination(s); and (d) a
representation that the shareholder intends to appear in person or by proxy at
such annual meeting to nominate the person(s) named in the notice.
FORM 10-K
THE COMPANY WILL MAIL TO SHAREHOLDERS WITHOUT CHARGE, UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULES AND LIST OF EXHIBITS REQUIRED TO BE FILED WITH THE SEC FOR
THE 2000 FISCAL YEAR. REQUESTS SHOULD BE SENT TO DENDRITE INTERNATIONAL, INC.,
1200 MOUNT KEMBLE AVENUE, MORRISTOWN, NEW JERSEY 07960-6797, ATTN: CHRISTINE A.
PELLIZZARI, SECRETARY.
OTHER MATTERS
The Board knows of no other matters which may be presented at the
Annual Meeting. However, if other matters do properly come before the Annual
Meeting, the Board intends that the persons named in the proxies will vote upon
such matters in accordance with their best judgment.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ CHRISTINE A. PELLIZZARI
Christine A. Pellizzari
Secretary
Exhibit A
Effective 10/24/00
DENDRITE INTERNATIONAL, INC.
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
GENERAL
o The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity
of the Company's financial statements. Management and the internal
auditing department are responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal
controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The external auditors
are responsible for planning and carrying out a proper audit and
reviews, including reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form 10-Q,
and other procedures. In fulfilling their responsibilities hereunder,
it is recognized that members of the Audit Committee are not full-time
employees of the Company and are not, and do not represent themselves
to be, accountants or auditors by profession or experts in the fields
of accounting or auditing. Each member of the Audit Committee shall be
entitled to rely on (i) the integrity of those persons and
organizations within and outside the Company that it receives
information from and (ii) the accuracy of the financial and other
information provided to the Audit Committee by such persons or
organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Board of Directors).
PURPOSE OF THE AUDIT COMMITTEE
o The Audit Committee has been established by the Board of Directors to
provide oversight of the Company's financial reporting processes, its
system of internal controls, the external and internal audit process,
the performance of the Company's internal and external auditors and the
independence of the external auditors.
AUTHORITY OF THE AUDIT COMMITTEE
o The Audit Committee is authorized to make recommendations to the Board
of Directors with respect to the Company's internal controls, financial
reporting (including accounting policies), ethical business practices
and management information systems.
o The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee.
o The Audit Committee may request any officer or employee of the Company
or the Company's outside counsel or external auditors to attend a
meeting of the Committee or to meet with any members of, or consultants
to, the Committee.
AUDIT COMMITTEE COMPOSITION
o The committee shall consist of at least three directors, each selected
by the Board of Directors.
o Each member of the Audit Committee shall be "independent" as defined
under applicable U.S. Securities and Exchange Commission ("SEC") and
the NASDAQ rules, subject to any appropriate exceptions or exemptions
from such rules as provided by the SEC or the NASDAQ.
o Each member of the Audit Committee shall have a sufficient
understanding of financial reporting and internal controls, as
determined by the Board of Directors, as shall enable him or her to
effectively fulfill his or her duties as a member of the Audit
Committee. At least one member of the Committee shall have past
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in the individual's financial literacy, as the
Board interprets.
ROLES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
General
o Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
o If necessary, institute special investigations and, if appropriate,
hire special legal counsel or other experts or advisors to assist with
these investigations.
o Meet at least annually with the senior internal auditing executive and
the external auditors in separate executive sessions.
External Audit and Auditors
o Meet with the external auditors prior to commencement of the audit to
discuss the proposed scope of the audit.
o Meet with the external auditors to discuss the results of their audit
prior to the Company's annual earnings being released.
o Review and approve the external auditors' fee arrangements.
o Recommend to the Board of Directors appointment of the external
auditors.
o Evaluate the performance of the external auditors and, if so determined
by the Audit Committee, recommend that the Board replace the external
auditors.
o Receive on a periodic basis from the external auditors a formal written
statement delineating all relationships between the external auditors
and the Company, consistent with Independence Standards Board Standard
1.
o Actively engage in a dialogue with the external auditors with respect
to any disclosed relationships or services that may impact the
objectivity and independence of the external auditors.
o Recommend that the Board of Directors take appropriate action, as it
determines to be necessary, in response to the external auditors'
report, to oversee the independence of the external auditors.
o Discuss with the external auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of
the audit.
o Review with the external auditors any problems or difficulties the
external auditors may have encountered and any management letter
provided by the external auditors and the Company's response to that
letter.
Internal Controls and Audit
o Review the adequacy of the Company's internal control structure with
appropriate input from the external and internal auditors.
o Review the activities, organizational structure and qualifications of
the internal audit function.
o Review the appointment and replacement of the senior internal auditing
executive.
Financial Statement Review
o Review and discuss with management the quarterly and annual financial
statements, including Management's Discussion and Analysis, and review
and discuss with the external auditors their audit findings, including
any significant suggestions for improvements.
o Consider any significant accounting and reporting issues reported on or
disclosed to the Audit Committee, including recent professional and
regulatory pronouncements, and discuss with management (and, as
appropriate, the external auditors) their expected impact on the
financial statements.
o Review significant changes to the Company's auditing and accounting
principles and practices as suggested by management, the external
auditors or internal auditors.
o Recommend to the Board of Directors whether, based on the reviews and
discussions noted above, that the audited financial statements be
included in the Company's Annual Report on Form 10-K for such year.
Compliance Issues
o Review the Company's policies and procedures regarding compliance with
the Company's Code of Conduct.
o Review with the Company's legal counsel, legal matters that may be
expected to have a material impact on the financial statements.
o Review reported or disclosed transactions between the Company and
members of management as well as policies with respect to officers'
expense accounts and perquisites including the policies on the use of
corporate assets.
Reporting
o The Audit Committee shall keep a record of its proceedings.
o The Audit Committee shall regularly report to the Board of Directors on
its proceedings.
o The Audit Committee shall prepare any report required by the rules of
the Securities and Exchange Commission to be included in the Company's
annual proxy statement.