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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14-11(c) or 240.14a.12
APPLIED BIOSCIENCE INTERNATIONAL INC.
(Name of Registrant as Specified in Its Charter)
APPLIED BIOSCIENCE INTERNATIONAL INC.
(Name of Persons Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0.11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0.11.:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
APPLIED BIOSCIENCE INTERNATIONAL INC.
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 22, 1995
-------------------
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Stockholders of
Applied Bioscience International Inc., a Delaware corporation (herein called
"APBI" or the "Company"), will be held at the offices of Lehman Brothers Inc.,
625 Madison Avenue, New York, New York, on June 22, 1995, at 11:00 a.m., Eastern
Daylight Time, to consider and act upon the following matters:
1. To elect one director of the Company to hold office until the 1998
Annual Meeting of Stockholders and until his successor shall be elected
and shall qualify.
2. To approve a proposal to adopt a Stock Option Plan For Outside Directors,
which would provide certain directors of the Company with an opportunity
to acquire a proprietary interest in the Company and an additional
incentive to promote its success.
3. To approve an amendment of the APBI Stock Incentive Program (1990), which
would both increase the number of shares of APBI Common Stock reserved
for grants of options and restricted stock awards under such Program from
5,000,000 to 6,500,000 and place certain limitations on the number of
options and restricted stock awards that may be awarded to any of the
Company's senior executives or other plan participants during the
remaining term of such program.
4. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
Only stockholders of record as of the close of business on May 1, 1995, are
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
Dated: May 15, 1995
BY ORDER OF THE BOARD OF DIRECTORS
BY: CRAIG E. CHASON
Corporate Secretary
APPLIED BIOSCIENCE INTERNATIONAL INC.
4350 NORTH FAIRFAX DRIVE
ARLINGTON, VIRGINIA 22203-1627
-------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 1995
-------------------
GENERAL
This Proxy Statement is furnished to stockholders of Applied Bioscience
International Inc., a Delaware corporation (hereinafter called the "Company" or
"APBI"), in connection with the solicitation of proxies in the form enclosed
herewith for use at the Annual Meeting of Stockholders of the Company to be held
on Thursday, June 22, 1995, or at any adjournment thereof, at 11:00 a.m. for the
purposes set forth in the Notice of Annual Meeting. This Proxy Statement and the
accompanying form of proxy are first being mailed to stockholders on or about
May 15, 1995.
If properly executed and returned to the Company and not revoked, proxies
will be voted at the meeting or any adjournment or adjournments thereof, in
accordance with the instructions contained therein. At any time before it is
voted at the meeting, any proxy may be revoked by the person giving it by (i)
delivering to the Secretary of the Company a written notice stating that the
proxy is revoked, (ii) executing and delivering a later dated proxy, or (iii)
voting in person at the meeting.
VOTING
Only holders of record of shares of the common stock of the Company, par
value $.01 per share (the "Common Stock"), as of the close of business on the
record date, May 1, 1995, are entitled to receive notice of, and to vote at, the
meeting or any adjournment thereof. The Common Stock constitutes the only class
of securities of the Company outstanding and entitled to vote at the meeting.
Each holder of outstanding shares of Common Stock is entitled to one vote for
each share of Common Stock held as of the record date. All shares of Common
Stock that are present at the meeting, in person or represented by proxy, will
count towards determining the presence of a quorum at the meeting. Shares that
are not voted on a particular matter (whether by abstention, broker nonvote or
otherwise), therefore, will have no impact on the determination of the presence
of a quorum. At the close of business on May 1, 1995, 28,175,048 shares of
Common Stock were issued and outstanding.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of May 1, 1995 by (i) each person who
was known by the Company to own beneficially more than five percent (5%) of the
Company's Common Stock then outstanding, (ii) each nominee for election as a
director of the Company, (iii) each director of the Company and each of the
executive officers of the Company named in the Summary Compensation Table, and
(iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated, each of the directors,
executive officers and stockholders listed below, and the directors and
executive officers as a group, have sole voting power and sole investment power
with respect to the shares beneficially owned by them.
COMMON STOCK OF THE COMPANY,
PAR VALUE $.01 PER SHARE
-------------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
- -------------------------------------------------------- ----------------- ----------
General American Investors Company, Inc.(1)............. 2,220,513 7.9%
Merrill Lynch & Co., Inc.(2)............................ 2,347,100 8.3
Pioneering Management Corporation(3).................... 1,540,800 5.5
State of Wisconsin Investment Board(4).................. 2,800,000 9.9
Richard J. Hawkins(5)................................... 2,278,313 8.1
Kenneth H. Harper(6).................................... 529,220 1.8
Stephen L. Waechter(7).................................. 12,855 *
John D. Bryer(8)........................................ -- --
Swep T. Davis(9)........................................ 21,250 *
Charles L. Defesche(10)................................. 26,052 *
Steven A. Fleckman...................................... -- --
Frederick Frank......................................... -- --
Joseph H. Highland(11).................................. 569,166 2.0
Frank E. Loy............................................ 4,500 *
Thomas J. Russell....................................... -- --
John H. Timoney(12)..................................... 202,556 *
Grover C. Wrenn(13)..................................... 920,580 3.3
All directors and executive officers as a group
(14 persons)(14)...................................... 2,327,934 8.0
- ------------
* Represents less than 1%
(1) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 10, 1995. Includes 809,032 shares over
which General American Investors Company, Inc. shares voting and investment
power with General American Advisers, Inc. The address of General American
Investors Company, Inc. is 450 Lexington Avenue, New York, New York 10017.
(2) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 9, 1995. Consists of shares over which
Merrill Lynch & Co., Inc., Merrill Lynch Group, Inc. and Princeton
Services, Inc. may be deemed to exercise shared voting and investment
authority. Merrill Lynch & Co., Inc., Merrill Lynch Group, Inc. and
Princeton Services, Inc. disclaim beneficial ownership of such shares. The
address of Merrill Lynch & Co., Inc. and Merrill Lynch Group, Inc. is World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281.
The address of Princeton Services, Inc. is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
(3) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on January 25, 1995. The address of Pioneering
Management Corporation is 60 State Street, Boston, Massachusetts 02114.
(4) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 13, 1995. The address of the State of
Wisconsin Investment Board is P.O. Box 7842, Madison, Wisconsin 53707.
(5) Based on information contained in a Schedule 13D filed with the Securities
and Exchange Commission on April 27, 1994. Mr. Hawkins' address is 324
Eanes School Road, Austin, Texas
(Footnotes continued on following page)
2
(Footnotes continued from preceding page)
78746. Includes 1,189,799 shares owned by Mr. Hawkins' wife, as to which
Mr. Hawkins does not disclaim beneficial ownership.
(6) Includes 529,220 shares which may be acquired within the next 60 days
pursuant to the exercise of options granted under the Company's Stock
Incentive Program (1990).
(7) Includes 4,000 shares owned jointly by Mr. Waechter and his wife and 855
shares owned by the Applied Bioscience International Inc. U.S. Retirement
Savings Plan, a 401(k) Plan, for the account of Mr. Waechter. Includes
8,000 shares which may be acquired within the next 60 days pursuant to the
exercise of options granted under the Company's Stock Incentive Program
(1990). Does not include 36,000 shares subject to options granted under the
Company's Stock Incentive Program (1990) which are not currently
exercisable and will not become exercisable within the next 60 days.
(8) Does not include 65,000 shares subject to options granted under the
Company's Stock Incentive Program (1990) which are not currently
exercisable and will not become exercisable within the next 60 days.
(9) Includes 4,000 shares owned by a partnership of which Mr. Davis is a
general partner and 500 shares held by Mr. Davis' mother, as to which Mr.
Davis does not disclaim beneficial ownership. Includes 16,750 shares which
may be acquired within the next 60 days pursuant to the exercise of options
granted under the Company's Stock Incentive Program (1990). Does not
include 50,250 shares subject to options granted under the Company's Stock
Incentive Program (1990) which are not currently exercisable and will not
become exercisable within the next 60 days.
(10) Includes 25 shares which were transferred from the Pharmaco LSR
International Inc. ESOP Program to the Applied Bioscience International
Inc. U.S. Retirement Savings Plan, a 401(k) Plan, 25 shares owned by the
Applied Bioscience International Inc. U.S. Retirement Savings Plan, a
401(k) Plan, for the account of Dr. Defesche and 26,002 shares which may be
acquired within the next 60 days pursuant to the exercise of options
granted under the Company's Stock Incentive Program (1990). Does not
include 108,008 shares subject to options granted under the Company's Stock
Incentive Program (1990) which are not currently exercisable and will not
become exercisable within the next 60 days.
(11) Includes 97,500 shares held by the Highland-Mills Foundation, of which Dr.
Highland is an officer and trustee, and 41,872 shares which may be acquired
within the next 60 days pursuant to the exercise of options granted under
the Company's Stock Incentive Program (1990). Does not include 18,222
shares subject to options granted under the Company's Stock Incentive
Program (1990) which are not currently exercisable and will not become
exercisable within the next 60 days.
(12) Includes 23,298 shares owned jointly by Mr. Timoney and his wife, as to
which they share voting and investment power and 178,458 shares which may
be acquired within the next 60 days pursuant to the exercise of options
granted under the Company's Stock Incentive Program (1990). Does not
include 45,296 shares issuable pursuant to a supplemental retirement
arrangement maintained by the Company for Mr. Timoney and 10,334 shares
subject to options granted under the Company's Stock Incentive Program
(1990) which are not currently exercisable and will not become exercisable
within the next 60 days.
(13) Includes 574,576 shares owned by the Grover C. Wrenn Revocable Trust, of
which Mr. Wrenn is the sole trustee, beneficiary, and settlor; 2,870 shares
owned by the Grover and Suzie Wrenn Foundation, of which Mr. Wrenn is an
officer and director; 48,000 shares owned by the Wrenn Charitable Trust, of
which Mr. Wrenn is a beneficiary; 22,374 shares owned by the Applied
Bioscience International Inc. U.S. Retirement Savings Plan, a 401(k) Plan,
for the account of Mr. Wrenn; 200,000 shares owned by Mr. Wrenn's wife; and
72,094 shares which may be acquired within the next 60 days pursuant to the
exercise of options granted under the Company's Stock Incentive Program
(1990). Does not include 75,334 shares subject to options granted under the
Company's Stock Incentive Program (1990) which are not currently
exercisable and will not become exercisable within the next 60 days.
(Footnotes continued on following page)
3
(Footnotes continued from preceding page)
(14) Includes 911,951 shares which may be acquired within the next 60 days
pursuant to the exercise of options granted under the Company's Stock
Incentive Program (1990). Does not include 373,926 shares subject to
options granted under the Company's Stock Incentive Program (1990) which
are not currently exercisable and will not become exercisable within the
next 60 days.
ELECTION OF DIRECTORS (ITEM NO. 1)
The Company's Certificate of Incorporation provides that the Board of
Directors is to be divided into three classes of directors, with each class to
be as nearly equal in number of directors as possible. The Board of Directors
currently consists of nine directors divided into three classes, with the term
of the first class expiring at the 1995 Annual Meeting of Stockholders, the term
of the second class expiring at the 1996 Annual Meeting of Stockholders, and the
term of the third class expiring at the 1997 Annual Meeting of Stockholders.
The Company's objective is to have a majority of nonmanagement ("outside")
directors on its Board effective as of the 1995 Annual Meeting of Stockholders.
As of the Company's last annual meeting of stockholders, the Company's Board of
Directors consisted of twelve directors but since that date, in connection with
certain departures and management changes, three current of former members of
management have voluntarily resigned from their Board seats. Mr. Swep T. Davis,
who holds one of the two seats on the Board Directors whose terms expire at the
1995 Annual Meeting of Stockholders, and is the former president of the
Company's Environmental Sciences Group, is not standing for reelection. In
addition, in the interest of facilitating the restructuring of the Board's
composition toward greater outside director participation, it is anticipated
that prior to the Company's upcoming stockholders meeting that several other
members of the Company's senior management may step down from their current
Board seats.
Mr. Fred Frank is the only member of the Board of Directors whose term
expires at the 1995 Annual Meeting of Stockholders and who has been proposed for
reelection to the Board of Directors. With Mr. Frank's reelection, the Board
would have four outside directors which, after taking into consideration the
additional anticipated management resignations, would constitute a majority of
the Board. The Company intends further to increase the number of outside
directors and, through its Nominating Committee, is actively identifying and
reviewing other possible outside candidates. It is anticipated that further
information will be available in this regard and will be announced at the
Company's 1995 Annual Meeting of Stockholders.
The persons named in the proxy, unless otherwise directed, will vote each
proxy for the election of Mr. Frank. If, for any presently unforeseen reason,
such nominee shall become unavailable to stand for election, the persons named
in the proxy will have the right to use their discretion to vote for a
substitute nominee.
The person elected to the Board at the 1995 Annual Meeting of Stockholders
will hold office until the 1998 Annual Meeting of Stockholders and until his
successor shall be elected and shall qualify. Effective as of the date of the
1995 Annual Meeting of Stockholders, the Board of Directors has approved the
reduction in the size of the Board to eight members so that the decision of Mr.
Davis not to stand for reelection will not create a vacancy. To the extent any
vacancies would otherwise be created by any management members subsequently
stepping down from the Board, as described above, the Board intends to further
reduce the size of the Board so that any vacancies are eliminated.
4
The following table sets forth, with respect to each current director and
executive officer of the Company, the name, age and all positions and offices
with the Company currently held by each such person (unless such person will not
be continuing in the capacity of either a director or executive officer
following the 1995 Annual Meeting of Stockholders):
DIRECTOR
NAME AGE SINCE POSITION
- -------------------------------------- --- -------- -------------------------------------
Kenneth H. Harper(1)(2)............... 64 1986 President, Chief Executive Officer
and Chairman of the Board of
Directors of the Company
Stephen L. Waechter(2)................ 45 1993 Senior Vice President, Chief
Financial Officer, Treasurer and
Director of the Company
John D. Bryer......................... 61 -- President and Chief Executive Officer
of the Company's Pharmaco LSR
International Inc. subsidiary
Jamie G. Donelan...................... 41 -- Controller
Steven A. Fleckman(1)(3)(4)........... 45 1993 Director
Frederick Frank(1)(3)(5).............. 62 1988 Director
Marvin L. Hendrix..................... 52 -- Assistant Treasurer and Assistant
Secretary
Joseph H. Highland(4)................. 50 1990 Chief Executive Officer of the
ENVIRON division of the Company's
APBI Environmental Sciences Group,
Inc. subsidiary and Director of the
Company
Frank E. Loy(1)(3)(4)................. 66 1991 Director
Thomas J. Russell, Jr.(1)(2)(3)....... 63 1986 Director
John H. Timoney(2).................... 61 1986 Senior Vice President of the Company,
Secretary of the Company's APBI
Investor Relations, Inc. subsidiary,
and Director of the Company
- ------------
(1) Member of the Nominating Committee.
(2) Term as a director expires in 1996.
(3) Member of the Audit Committee and the Compensation and Stock Plans
Committee.
(4) Term as a director expires in 1997.
(5) Term as a director expires in 1995.
Under the terms of their respective employment agreements, upon expiration
of the initial term or any subsequent term of service as a director of the
Company that is within the term of the employment agreement, the Company has
agreed to use its best efforts to cause its Board of Directors to nominate Dr.
Harper and Mr. Timoney for reelection as directors of the Company.
VOTE REQUIRED TO ELECT NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS OF THE
COMPANY
The affirmative vote of the holders of a plurality of the shares of Common
Stock cast on the matter at a meeting at which a quorum is present is required
to elect each director of the Company. "Plurality" means that the individuals
who receive the largest number of votes cast are elected as directors, up to the
maximum number of directors to be elected at the meeting. Accordingly, shares
that are not voted (whether by abstention, broker nonvote or otherwise) have no
impact on the election of directors except to the extent that such failure to
vote for a particular individual results in another individual receiving a
larger number of votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE AS
A DIRECTOR OF THE COMPANY.
5
BIOGRAPHICAL INFORMATION
Dr. Harper was a co-founder of Pharmaco LSR Ltd. (formerly Life Science
Research Limited), a United Kingdom subsidiary of the Company. Dr. Harper served
as the Managing Director and Chairman of Life Science Research Limited from the
time of its formation in 1972 until the Company became publicly held in 1987.
From 1987 to 1991, Dr. Harper served as President and Chief Executive Officer of
the Company. In 1991, Dr. Harper was appointed Chairman of the Board of the
Company and continued to serve as Chief Executive Officer of the Company until
January 1, 1993. Effective in February of 1995, Dr. Harper was reappointed to
serve as President and Chief Executive Officer of the Company. Dr. Harper
received his Ph.D. in Pathology from the University of London. He is also a
graduate of the Advanced Management Program of the Harvard Business School.
Mr. Waechter served, from 1989 to 1993, as the Vice President--Finance for
GE Information Services, a division of General Electric Company, which provides
enhanced computer-based communications services to commercial and industrial
customers through a worldwide network. From 1987 to 1989, Mr. Waechter served as
the Manager of Operations Analysis for GE Electric Distribution and Control, a
division of General Electric Company. In September 1993, Mr. Waechter was
appointed Chief Financial Officer and Treasurer of the Company. Mr. Waechter
received his Master of Business Administration from Xavier University in 1974.
Mr. Bryer served, from 1988 to 1994, as the President of Lexis
Pharmaceuticals Inc. From 1985 to 1988, Mr. Bryer was the President of Ivy
Laboratories, Inc. In February 1995, Mr. Bryer was appointed President and Chief
Executive Officer of Pharmaco LSR. Mr. Bryer holds a business degree from
Manchester University and the London School of Economics.
Ms. Donelan served from 1990 to 1994 as Controller of ENVIRON International
Corporation and subsequently as group Controller of the Company's environmental
sciences group. In June 1994, she was appointed Controller of the Company. Ms.
Donelan received a Master of Accounting from the George Washington University in
1982. Before joining the Company she spent eight years with Arthur Andersen LLP
(formerly Arthur Andersen & Co.), in its audit practice.
Mr. Fleckman was a partner in the law firm of Arnold & Fleckman from 1988 to
1991. Since 1991, Mr. Fleckman has been a partner in the law firm of Fleckman &
McGlynn (formerly Fleckman & Schless and, prior to that, Fleckman, Johnson &
Passman) and currently is the managing partner of the firm. Mr. Fleckman
received his Juris Doctorate from Harvard Law School in 1975.
Mr. Frank has been an investment banker with Lehman Brothers since 1969, and
is currently a Senior Managing Director of Lehman Brothers. Mr. Frank also
serves on the Boards of Directors of R.P. Scherer Corporation and Physicians'
Computer Network Inc. Mr. Frank received his Master of Business Administration
from Stanford University in 1958.
Mr. Hendrix, a certified public accountant, served as Controller of
Bio/dynamics, Inc. ("Bio/dynamics") from 1977 until the Company became publicly
held in 1987. In 1987, I.M.S. International, Inc. ("IMS") transferred its
shareholdings in Bio/dynamics and Life Science Research Limited to the Company
and sold its entire interest in the Company to the public. Since that time, Mr.
Hendrix has served as Assistant Treasurer and Assistant Secretary of the Company
and served as Controller of the Company until June 1994.
Dr. Highland co-founded ENVIRON in 1982. He is currently the Chief Executive
Officer of the ENVIRON division of APBI Environmental Sciences Group, Inc.,
which was formerly Environ International Corporation, a subsidiary of the
Company, and has served as such since February 1992. Dr. Highland, who holds a
Ph.D. in Biochemistry from the University of Minnesota's School of Medicine,
served as co-director of the Hazardous Waste Research Program at Princeton
University before joining ENVIRON.
6
Mr. Loy has been the President of the German Marshall Fund of the United
States since 1981 and previously served as a Director of the Bureau of Refugee
Programs of the United States Department of State and as President and Chief
Operating Officer of the Penn Central Corporation and the Pennsylvania Company.
Dr. Russell founded Bio/dynamics in 1961 and, following the acquisition of
Bio/dynamics by IMS in 1973, served as President of the division of IMS which
included Bio/dynamics and Life Science Research Limited until the Company became
publicly held in 1987. Dr. Russell served as a director of IMS from 1984 to
1988, and as Chairman of the Board of IMS from 1987 to 1988. Dr. Russell was
Chairman of the Board of the Company from 1986 to 1991. He holds a doctorate
degree in Biochemistry and Physiology from Rutgers University. Dr. Russell also
serves on the Boards of Directors of Cordiant Plc, Uniroyal Technology
Corporation and Adidas AG.
Mr. Timoney served as Controller of the division of IMS which included
Bio/dynamics and Life Science Research Limited from 1978 to 1987. From 1987 to
1992, Mr. Timoney served as the Vice President--Finance, Treasurer and Secretary
of the Company. In May 1992, Mr. Timoney was appointed to serve as Senior Vice
President of the Company and the Secretary of APBI Investor Relations, Inc., a
subsidiary of the Company. Mr. Timoney is responsible for the Company's investor
relations and is involved in strategic planning and in merger and acquisition
activity.
There are no family relationships among any of the directors and executive
officers of the Company.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership of such equity securities with the
Securities and Exchange Commission (the "SEC"). Such persons are also required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that, with respect to the period from January 1, 1994 through December
31, 1994, its directors, executive officers and 10% beneficial owners complied
with all Section 16(a) filing requirements, except that Mr. Grover C. Wrenn, the
Company's former chief executive officer, failed to report in a timely manner
the purchase of 666 shares of Common Stock on May 11, 1994. Such share purchase
was subsequently reported on an Annual Statement of Changes In Beneficial
Ownership on Form 5 filed on February 14, 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has appointed a standing Audit Committee, which is
responsible for reviewing with the Company's independent auditors their audit
plans and the results of their audit (including their recommendations regarding
internal controls), and exercises general oversight over the Company's system of
internal audit controls and the accounting principles employed by the Company in
its financial reporting. During the past fiscal year, the Audit Committee met
six times. Mr. Frank, Mr. Loy and Dr. Russell served as members of the Audit
Committee during all of fiscal 1994 and Mr. Fleckman became a member of the
Audit Committee effective October 21, 1994. Mr. Fleckman, Mr. Frank, Mr. Loy and
Dr. Russell are the current members of the Audit Committee.
The Compensation and Stock Plans Committee is responsible for reviewing and
approving compensation arrangements, including bonuses and incentive programs,
and stock option and restricted stock awards, for senior management of the
Company. The Committee also is generally responsible for granting stock awards
and stock options under the Company's stock option plans. During 1994, the
Committee met four times. Mr. Frank, Mr. Loy and Dr. Russell served as members
of the Compensation and Stock Plans Committee during all of fiscal 1994 and Mr.
Fleckman became a member of the Committee effective January 1, 1995. Mr.
Fleckman, Mr. Frank, Mr. Loy and Dr. Russell are the current members of the
Compensation and Stock Plans Committee.
7
The Board of Directors has appointed a Nominating Committee, in part, to
seek to increase outside director participation on the Board. The Nominating
Committee is responsible for proposing to the Board of Directors a slate of
nominees for election by the stockholders of the Company at each annual meeting
and proposing candidates to fill any vacancies on the Board of Directors. The
Nominating Committee will give appropriate consideration to qualified persons
recommended by stockholders for nomination as directors, provided that such
recommendations are accompanied by sufficient information to enable the
Nominating Committee to evaluate the qualifications of such person and provided
that the following requirements are met. The Certificate of Incorporation of the
Company requires the stockholder to give written notice to the Secretary of the
Corporation of its intention to make such nomination or nominations, either by
personal delivery, or by mail, postage prepaid, not later than ninety (90) days
prior to the date that is one year from the date of the immediately preceding
annual meeting of stockholders. The notice must set forth (a) the name and
address of the stockholder, (b) a representation that the stockholder is a
holder of record of stock of the Company entitled to vote generally in the
election of directors at such meeting and that such stockholder intends to
appear at such meeting to nominate the person or persons specified in the
notice, (c) the name, age, business and residence addresses and principal
occupation or employment of each proposed nominee, (d) a description of all
arrangements or understandings between the stockholder and proposed nominee with
respect to such person's nomination, (e) such other information regarding the
proposed nominee as would be required to be included in a proxy statement under
the rules of the Securities and Exchange Commission, and (f) the written consent
of the proposed nominee to serve as a director. Mr. Frank, Dr. Harper, Mr. Loy
and Dr. Russell served on the Committee during all of fiscal 1994 and Mr.
Fleckman became a member of the Nominating Committee effective October 21, 1994.
Mr. Fleckman, Dr. Harper, Mr. Frank, Mr. Loy and Dr. Russell are the current
members of the Nominating Committee. The Nominating Committee met four times in
1994.
DIRECTOR COMPENSATION AND BOARD AND COMMITTEE ATTENDANCE
During the past fiscal year, the Board of Directors met eight times. Each of
the incumbent directors of the Company attended at least 75% of the aggregate of
all meetings of the Board of Directors and of each committee of which such
director was a member, held while such member was a director during the past
fiscal year.
The Company pays the expenses of all directors in connection with attendance
at meetings of the Board of Directors and committees thereof. In addition, in
1994, non-employee directors who are not officers of the Company or any of its
subsidiaries were paid a fee of $10,000 per year plus $1,000 for each regular
and special meeting of the Board of Directors and $750 for each meeting of any
committee of the Board of Directors, attended by such director.
Effective with the 1995 Annual Meeting of Stockholders, non-employee
directors who are not officers of the Company or any of its subsidiaries will be
paid an annual fee of $15,000 with $5,000 of such fee to be paid in shares of
the Company's common stock plus $1,500 for each in-person regular and special
meeting of the Board of Directors, $750 for each telephonic regular and special
meeting of the Board of Directors and $850 for each meeting of any committee of
the Board of Directors (but no fees shall be paid for committee meetings held
on the same day as board meetings). In addition, each outside chairman of a
committee will be paid an annual fee of $1,000. The Company's new director
compensation program has been developed in consultation with its outside
compensation consultant with a view towards increasing the representation of
outside directors on the Company's Board of Directors.
8
COMPENSATION AND STOCK PLANS COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation and Stock Plans Committee (the "Committee") of the Board of
Directors of the Company is responsible for determining the compensation
arrangements for the Company's senior executive officers and administering the
APBI Stock Incentive Program (1990). During 1994, the Company's senior executive
officers consisted of the Company's chief executive officer and chief financial
officer, the chief executive officer of Pharmaco LSR, the Company's life
sciences group, the president of APBI Environmental Sciences Group, the
Company's environmental sciences group, and five other senior corporate officers
of the Company.
The Committee strives to attract and retain key executives, who are
important to the continued success of the Company and its operating subsidiaries
and divisions. The Committee seeks to provide strong financial incentives to its
senior management at a reasonable cost to the Company's stockholders and uses
certain components of compensation to provide senior management with incentives
to enhance the long-term value of the stockholders' investment in the Company.
The Committee was comprised of three outside directors in 1994 and is
currently comprised of four outside directors.
THE ECONOMIC VALUE ADDED COMPENSATION PROGRAM
The Company's senior executive officers, and certain other officers and key
employees of the Company and its subsidiaries, are compensated primarily under
the Company's "Economic Value Added" ("EVA") compensation program. There are
three components of compensation under the EVA program: a base salary, an annual
bonus or incentive award (a portion of which may be deferred), and stock option
awards. The Committee believes that the EVA program, which was initially
implemented in 1993, is an appropriate compensation scheme by which to provide
incentive compensation to senior management, because it believes that this
program provides the Company with a tool to compensate management based on an
objective measure of performance that closely correlates with increases in
stockholder value.
Generally, the Committee's objectives under the EVA program are to provide
the Company's senior executive officers with base salaries that roughly
approximate the median base salaries paid to similarly situated executive
officers at comparable companies, although the Committee takes into
consideration other factors, including corporate performance, in setting annual
base salaries. The bonus or incentive portion of compensation earned by program
participants under the EVA program is intended to be higher than the median
incentive payments of comparable companies in years in which the Company's
performance (or that of individual business units) exceeds certain predetermined
performance targets and is intended to be lower than the median incentive paid
by comparable companies when the Company's performance (or that of individual
business units) is below performance targets.
Annual bonuses generally are awarded to program participants based on the
improvement in EVA for the participant's business unit (or, in the cases of
certain executive officers of the Company, the overall improvement in EVA for
the Company). (EVA is equal to the difference between (i) net operating income,
defined as operating income adjusted to eliminate the impact of certain
accounting charges such as goodwill amortization, and (ii) a capital charge,
defined as capital employed times the weighted average cost of capital.) Target
bonus awards are generally specified as a percentage of the participant's base
salary, and such percentages are typically set by organizational level within
the Company.
Stock option awards, which have been used by the Committee as the third
compensation component under the EVA program, are intended to closely align
management's interest with that of the
9
Company's stockholders. This component of the EVA program is also designed to
retain management by having option grants vest ratably over a period of time,
generally set at three years.
As part of the administration of the EVA program, the Company's chief
executive officer makes annual compensation recommendations to the Committee for
the Company's senior executive officers (other than with respect to CEO
compensation). These annual compensation recommendations are developed in
conjunction with outside compensation consultants based on surveys of
competitive market data. In 1993, in connection with the implementation of the
EVA program, Stern Stewart & Co. ("Stern Stewart") made the initial
recommendations relating to salary levels, annual target bonuses and stock
option awards. These were reviewed and updated in 1994 by the Alexander &
Alexander Consulting Group ("Alexander & Alexander").
The Company's operations are in two business segments: environmental and
health-care related contract research services. Health-care services is an
emerging area and there continue to be only a limited number of contract
research organizations ("CROs") that are publicly traded corporations and even a
smaller number of CROs that are comparable to the Company in terms of size and
services offered. Because of this, the Company historically reviewed salaries at
environmental sciences service companies, that are comparable to the Company in
terms of services and size, to obtain comparable company salary information. In
1994, the Company, working with Alexander & Alexander, used more general
industry survey data for comparable size companies which included both
professional service businesses and clinical services businesses. The Company
did not seek specifically to review salary information for the companies
included in the NASDAQ Health Services Index, with which the Company's
performance is compared in the performance graph. In the future, as the health
care-related services industry matures, and there are more public companies in
that field comparable to APBI, the Company expects to use more industry specific
salary information.
1994 EXECUTIVE OFFICER COMPENSATION
During 1994, the Company's compensation for its senior and other executive
officers consisted primarily of base salary and stock option awards made under
the EVA program. With the exception of the executive officers of the Company who
are responsible for APBI Environmental Sciences Group or the ENVIRON division of
APBI Environmental Sciences Group, the senior executive officers received either
relatively small bonuses or no bonuses under the EVA program.
Base Salaries. In setting base salaries in 1994, the Committee considered
the recommendations of management with respect to individual salary levels.
Consistent with the objectives of the EVA program, the Committee generally
sought to set salaries by position at a level roughly equivalent to the median
levels of executives at comparable companies. Management salary recommendations,
both for specific individuals and for certain organizational levels within the
Company, were prepared in conjunction with the consulting firm of Alexander &
Alexander. In evaluating salary recommendations, the Committee also took into
consideration the improved performance of the Company in 1994 and that
relatively few salary increases had been approved in 1992 and 1993 based on the
Company's overall disappointing financial performance in each of those years.
In addition, certain of the executive officers of the Company have
employment agreements that provide for a minimum base salary, subject to such
increases as may be approved by the Board of Directors of the Company. In
considering the compensation for Mr. Davis and Dr. Defesche, the chief operating
officers of the Company's two primary business segments during 1994, the
Committee also considered that the Company had entered into employment
agreements with each of them during 1992, at which time their base salaries were
established and option awards were made. In the case of Mr. Davis, the Committee
also took into consideration that his position was subject to possible
elimination based on the planned divestiture of the Company's Paragon Global
Services division and the planned divestiture of the Company's ETC division, two
of the four divisions formerly comprising the Company's Environmental Sciences
Group. Effective as of January 31, 1995, Mr. Davis' position was
10
subsequently eliminated and he entered into a separation agreement with the
Company. See "Employment Agreements."
After considering the above factors, in 1994 the Committee approved either
no increases or relatively small increases in the base salaries of the Company's
executive officers (other than Mr. Wrenn, the Company's former chief executive
officer). For the Company's eight senior executive officers as a group
(excluding Mr. Wrenn), base salaries were increased an average of 3.0%. Such
increases were approved where, in the opinion of the Committee and based on
recommendations of management, (1) the individual performance of the executive
officer or an increase in his overall responsibilities warranted an increase, or
(2) the increase was necessary to cause the Company to pay a base salary to an
individual that approximated that being paid by comparable companies to
similarly situated executives. Generally, increases in base salaries for 1994
for the senior executive officers of the Company named in the Summary
Compensation Table were consistent with maintaining their salaries at a level
roughly approximate to the median levels of their counterparts in the comparable
companies comprising the surveyed companies used by Alexander & Alexander;
however, the adjustment to the base salary of the Company's chief executive
officer was substantially less than suggested by the survey information
presented by Alexander & Alexander, based on the Committee's view that a longer
period of sustained profitability and growth needed to be maintained before
increasing his salary level to those of comparable companies.
Annual Bonus Awards. As discussed above, under the EVA program target bonus
awards are generally specified as a percentage of the participant's base salary,
with more senior officers having a higher percentage of their salary as the
target award. Although the Company's overall financial performance improved in
1994, except in the environmental sciences group, the level of improvement on a
Company-wide basis did not result in significant bonuses.
As a group, the senior executive officers, who are also the Company's
corporate officers, a total of six individuals (excluding the former chief
executive officer), received limited bonuses in 1994, totaling $55,400 in the
aggregate. Included in that group is Mr. Waechter, who joined the Company in
September 1993 as its chief financial officer and a vice president, and who
received a $25,000 bonus in 1994. This represented a guaranteed minimum bonus
that was negotiated in connection with his original 1993 employment offer but
was only slightly higher than the bonus he otherwise would have received based
on his target bonus under the EVA program. The executive officers of Pharmaco
LSR, the Company's Life Sciences Group, which includes Dr. Defesche, did not
receive bonuses in 1994 under the EVA program, based on that group's operating
performance. Mr. Davis, the former president of the Company's APBI Environmental
Sciences Group, and Dr. Highland and the other executive officers of the
Company's ENVIRON division, were paid significant bonuses under the EVA program
based on the marked improvement in that group's 1994 performance.
Stock Options. In 1994, the Company awarded stock options under the EVA
program. Stock option awards were made to all program participants based
primarily on the recommendation of the outside consulting firm retained by the
Company. The Committee believes that the stock option component of compensation
is important, because options provide management with a strong incentive to
maximize the Company's performance that is aligned with the interests of the
Company's stockholders. The number of options awarded to each of the executive
officers named in the Summary Compensation Table was based primarily on the
recommendations of Alexander & Alexander. However, no new options were awarded
to Mr. Davis in 1994, because a substantial number of stock options had been
granted to him during 1992 at the time of his appointment as President of the
APBI Environmental Sciences Group. Both Mr. Davis and Mr. Defesche were allowed
to receive substitute options, as part of the Company's 1994 option replacement
program. See "1994 Option Replacement Program."
11
1994 CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer of the Company from January 1993 until February
1995 was Mr. Grover C. Wrenn. His base salary for 1993 and the initial nine
months of 1994 was $181,000, unchanged from his 1992 base salary. Effective as
of October 1, 1994, Mr. Wrenn's base salary was increased to $250,000.
The Committee did not increase Mr. Wrenn's base compensation in 1993 because
the Company's profitability in recent years has been lower than expected,
although in connection with the implementation of the EVA program, Stern Stewart
advised the Committee that Mr. Wrenn's base salary was lower than the median
salary at comparable companies, and recommended that his salary be increased. As
discussed above, during 1994 the Committee engaged Alexander & Alexander to
obtain additional information regarding salaries of chief executive officers at
comparable companies. Pursuant to such engagement, Alexander & Alexander
indicated that a median base salary for the position of chief executive officer
was $300,000 per annum. Because the Committee perceived that the Company as
still in a turnaround situation, but at the same time believed that the
Company's chief executive officer was undercompensated compared to similarly
situated executives, it approved a salary increase to the level of $250,000 per
annum.
Upon implementation of the option component of the EVA program in 1993, Mr.
Wrenn was granted an initial award of options to acquire 52,000 shares of the
Company's Common Stock, at an option exercise price of $5.625 per share. In
1994, an additional option award was made to Mr. Wrenn under the Company's EVA
program, consisting of 50,000 shares of the Company's Common Stock, at an option
exercise price of $5.875 share. All option grants under the EVA program are made
at the fair market value of the Company's Common Stock on the date on which the
options are granted. The number of options awarded to Mr. Wrenn by the Committee
during 1993 and 1994 was determined based on the recommendations to the
Committee by outside consulting firms, which were, in turn, based in part on a
comparison with compensation levels at comparable companies. Mr. Wrenn and
certain other senior executive officers of the Company were not eligible to
receive substitute options, as part of the Company's 1994 option replacement
program. See "1994 Option Replacement Program."
As noted above, Mr. Wrenn served as the Company's chief executive officer
until February 1995. At this time, the Company and Mr. Wrenn are engaged in
negotiations related to an appropriate separation arrangement, but it is
anticipated that in connection with his separation from the Company, the
consideration paid to Mr. Wrenn will include a one-time severance payment of
$43,841 in lieu of the bonus he otherwise would have received under the
Company's EVA program. This amount reflects a reduction to take into account the
negative incentive award account maintained for Mr. Wrenn under the EVA program
with respect to 1993.
1994 OPTION REPLACEMENT PROGRAM
In April 1994, the Committee adopted a stock option replacement program
("Replacement Program"). Under the terms of this program, employees holding
options having an exercise price of $12.00 or greater were permitted to exchange
such options for a lesser number of new options with an exercise price of $7.00.
Any of the Company's executive officers that were elected or appointed to their
positions prior to January 1, 1992 were not eligible to participate in the
Replacement Program. The number of replacement options each individual was
eligible to receive under the Replacement Program in exchange for his or her old
options was determined using a standard option pricing model; the exchange rate
ranges were from 46% for options priced at $18 5/8 to 68% for options priced at
$12 7/8.
As a result of the Replacement Program, the Company's employees and certain
eligible executive officers exchanged options to acquire 892,480 shares of
Common Stock for new stock options to acquire 481,320 shares of Common Stock.
All new options granted under the Replacement Program are subject to a new
four-year vesting period.
12
The Committee's administration of the Company's Stock Incentive Program
(1990), and the granting of options thereunder, is intended to attract and
retain qualified employees and to encourage and reward superior performance. The
Committee decided to adopt the Replacement Program because in its view the
significant decline in the market price of the Company's Common Stock during
1993 below the exercise price of many of the options previously granted had a
detrimental effect on employee morale and undermined the incentive purposes of
the Stock Incentive Program (1990). At the same time, the Company's most senior
executives were largely precluded from participation in the Replacement Program
(other than Mr. Davis and Dr. Defesche, who did not assume senior executive
positions with the Company until 1992).
The following table sets forth information regarding outstanding options
that were replaced during fiscal 1994 under the Company's Replacement Program
and during the period from January 1, 1985 through December 31, 1994, and were
held by each of the executive officers of the Company named in the Summary
Compensation Table. None of the options held by the named executive officers,
other than those executive officers named below, were repriced or amended during
those periods.
TEN-YEAR OPTION REPRICINGS
MARKET LENGTH OF
NUMBER OF PRICE OF EXERCISE ORIGINAL
SECURITIES STOCK AT PRICE AT OPTION TERM
UNDERLYING TIME OF TIME OF REMAINING AT
OPTIONS REPRICING REPRICING NEW DATE OF
REPRICED OR OR OR EXERCISE REPRICING OR
AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
NAME DATE (#) ($) ($) ($) (IN YEARS)
- ----------------------------- -------------- ----------- ------------ --------- -------- -----------------
Swep T. Davis(1)............. April 13, 1994 67,000 $ 5.875 $ 12.00 $ 7.00 8.5
Charles L. Defesche(2)....... April 13, 1994 36,510 5.875 16.4375 7.00 7.8
67,500 5.875 12.1250 7.00 8.6
- ------------
(1) Mr. Davis exchanged options to acquire a total of 100,000 shares of Common
Stock for the new options to acquire 67,000 shares of Common Stock as
reflected above.
(2) Dr. Defesche exchanged options to acquire a total of 170,076 shares of
Common Stock for the new options to acquire 104,010 shares of Common Stock
as reflected above.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Federal tax legislation enacted in 1993 limits to $1 million per executive
officer the federal income tax deduction for compensation paid to executive
officers named in the Summary Compensation Table by publicly held companies. The
limitation imposed by Section 162(m) of the Internal Revenue Code first became
effective for fiscal year 1994. However, the Company was not affected by such
limitation since the compensation paid to the Company's executive officers in
1994 did not exceed the $1 million limit per officer. Moreover, it is expected
that compensation to be paid to the Company's executive officers for 1995 will
not exceed such limit. Regulations proposed by the Internal Revenue Service
interpreting Section 162(m) provide that stock option plans that comply with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, will not be considered in applying the limitation of Section 162(m)
until 1997. The Company's Stock Option Plan is qualified under Rule 16b-3. As a
result, the Committee does not anticipate that Section 162(m) will be applicable
to stock options outstanding in 1994 or 1995.
Frederick Frank
Frank E. Loy
Thomas J. Russell, Jr.
13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Dr. Thomas J. Russell, Jr., who was a member of the Compensation and Stock
Plans Committee during 1994, was the Chairman of the Board of the Company from
1986 to 1991. Neither of the other two members of the Compensation and Stock
Plans Committee, or Mr. Fleckman, who joined the Committee in January 1995, is a
current or former officer or employee of the Company or any of its subsidiaries.
Lehman Brothers, of which Mr. Frank is a Senior Managing Director, provided
financial advisory services to the Company during 1994. It is anticipated that
Lehman Brothers may provide financial advisory services to the Company during
fiscal year 1995.
PERFORMANCE GRAPH
Date Company Market Market Peer Peer Date
Index Index Count Index Count
12/29/89 100 100 4426 100 98 1989
12/31/90 128.226 85.017 4230 115.99 104 1990
12/31/91 183.871 135.708 4187 258.161 105 1991
12/31/92 120.968 157.359 4189 267.444 116 1992
12/31/93 66.129 181.152 4676 308.566 123 1993
12/30/94 70.968 175.248 4974 332.18 131 1994
The above graph compares the performance of Applied Bioscience International
Inc. with that of the Total Return Index for the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") Stock Market (United
States and foreign companies) and the NASDAQ Health Services Industry Index
(United States and foreign companies), which is a published industry index.
The comparison of total return on investment (change in year end stock price
plus reinvested dividends) for each of the periods assumes that $100 was
invested on December 31, 1989, in each of Applied Bioscience International Inc.,
the Total Return Index for the NASDAQ Stock Market, and the NASDAQ Health
Services Industry Index.
14
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash compensation paid by the Company and
its subsidiaries for or with respect to the fiscal years ended December 31,
1992, 1993 and 1994, to each of the five most highly compensated executive
officers of the Company, including the Chief Executive Officer, during fiscal
year 1994, for all capacities in which they served.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------------------------------ ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/ ALL OTHER
NAME AND SALARY BONUS COMPENSATION SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($) (#)(2) ($)(3)
- ---------------------------- ----------------------------------------------------------------------------
Grover C. Wrenn(4).......... 1994 $198,625 $ -- -- 50,000 $ 22,645
President and Chief 1993 181,500 -- -- 52,000 19,858
Executive Officer 1992 181,500 -- -- -- 100,729
Swep T. Davis(5)............ 1994 $200,000 100,000 -- 67,000 8,456
President of APBI 1993 200,000 28,125 -- -- 5,842
Environmental Sciences 1992 23,288 -- -- 100,000 5,034
Group
Charles L. Defesche(6)...... 1994 $229,828 -- -- 134,010 11,488
President and Chief 1993 225,000 -- -- -- 29,814
Executive Officer of 1992 205,303 278,050 -- 170,076 26,319
Pharmaco LSR
International Inc.
Joseph H. Highland.......... 1994 $211,667 150,000 -- 8,000 25,183
Chief Executive Officer of 1993 200,000 60,889 -- 6,666 18,673
the ENVIRON division of 1992 177,513 -- -- -- 20,842
APBI Environmental
Sciences Group
Stephen L. Waechter(7)...... 1994 $163,125 25,000 -- 20,000 5,051
Senior Vice President, 1993 48,513 15,000 -- 24,000 1,292
Chief Financial Officer 1992 -- -- -- -- --
and Treasurer
- ------------
(1) With the exception of Mr. Waechter's bonus amounts, the annual bonus amounts
with respect to fiscal years 1994 and 1993 were determined under the EVA
compensation program. Dr. Defesche did not earn a bonus under the EVA
program in 1994 and 1993. Mr. Wrenn did not earn a bonus under the EVA
program in 1993 and it is anticipated that in connection with his separation
from the Company, the consideration paid to Mr. Wrenn will include a
one-time severance payment in lieu of any bonus he may otherwise have
received under the Company's EVA program. Mr. Waechter received a signing
bonus of $15,000 when he joined the Company in September 1993 and was
guaranteed a minimum cash bonus of $25,000 for fiscal year 1994, which was
slightly higher than the bonus Mr. Waechter would otherwise have received
under the Company's EVA compensation program. See "Compensation and Stock
Plans Committee Report on Executive Compensation."
(2) With respect to the options awarded in fiscal year 1994 to Mr. Davis and Dr.
Defesche, (i) the options to acquire 67,000 shares of Common Stock awarded
to Mr. Davis were in substitution for the options to acquire 100,000 shares
of Common Stock awarded to Mr. Davis is fiscal year 1992 and (ii) the
options to acquire 134,010 shares of Common Stock awarded to Dr. Defesche
consisted of options to acquire 104,010 shares of Common Stock awarded to
Dr. Defesche in substitution for the options to acquire 170,076 shares of
Common Stock awarded to Dr. Defesche in fiscal year
(Footnotes continued on following page)
15
(Footnotes continued from preceding page)
1992 and options to acquire 30,000 shares of Common Stock awarded to Dr.
Defesche under the Company's annual compensation program.
(3) The total amounts shown in the "All Other Compensation" column with respect
to fiscal year 1994 consist of the following: (i) $12,624 in matching
Company contributions to the APBI Environmental Sciences Group, Inc. Pension
Plan, a money purchase pension plan, on behalf of Mr. Wrenn, $1,803
represents the taxable benefit to Mr. Wrenn of premiums paid by the Company
for group term life insurance on his behalf, $3,718 represents the taxable
benefit to Mr. Wrenn of premiums paid by the Company for key man life
insurance on his behalf, and $4,500 in matching Company contributions to the
APBI U.S. Retirement 401(k) Savings Plan, a defined contribution plan, on
behalf of Mr. Wrenn; (ii) $1,218 represents the taxable benefit to Mr. Davis
of premiums paid by the Company for group term life insurance on his behalf,
$2,738 represents the premiums paid by the Company for keyman life insurance
on his behalf and $4,500 in matching Company contributions to the APBI U.S.
Retirement 401(k) Savings Plan, a defined contribution plan, on behalf of
Mr. Davis; (iii) $522 represents the taxable benefit to Dr. Defesche of
premiums paid by the Company for group term life insurance on his behalf,
$8,274 represents payment for unused vacation benefits and $2,692 in
matching Company contributions to the APBI U.S. Retirement 401(k) Savings
Plan, a defined contribution plan, on behalf of Dr. Defesche; (iv) $2,016
represents the taxable benefit to Dr. Highland of premiums paid by the
Company for group term life insurance on his behalf, $4,500 in matching
Company contributions to the APBI U.S. Retirement 401(k) Savings Plan, a
defined contribution plan, on behalf of Dr. Highland, $5,064 represents the
premiums paid by the Company for keyman life insurance on his behalf and
$13,603 in Company contributions to the APBI Environmental Sciences Group,
Inc. Pension Plan, a money purchase pension plan, on behalf of Dr. Highland;
and (v) $551 represents the taxable benefit to Mr. Waechter of premiums paid
by the Company for group term life insurance on his behalf and $4,500 in
matching Company contributions to the APBI U.S. Retirement 401(k) Savings
Plan, a defined contribution plan, on behalf of Mr. Waechter.
(4) Mr. Wrenn served as the President and Chief Executive Officer of the Company
until February 1995 and as a director of the Company until April 1995.
(5) Mr. Davis joined the Company in November 1992 as President of APBI
Environmental Sciences Group, Inc. and continued to serve as such until
January 31, 1995. Mr. Davis continues to serve as a director of APBI.
(6) Dr. Defesche served as the President and Chief Executive Officer of Pharmaco
LSR until February 1995 and as a director of the Company until April 1995.
Dr. Defesche continues to serve as chairman of Pharmaco LSR.
(7) Mr. Waechter joined the Company in September 1993 as the Chief Financial
Officer and Treasurer of the Company. In October 1994, he also became a
Senior Vice President of the Company.
STOCK OPTION GRANTS IN FISCAL 1994
The following table sets forth certain information concerning the grant of
stock options made under the Company's Stock Incentive Program (1990) during the
fiscal year ended December 31, 1994 to each of the executive officers of the
Company named in the Summary Compensation Table.
16
OPTION GRANTS IN LAST FISCAL YEAR(1)
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL GRANT DATE
SECURITIES OPTIONS VALUE
UNDERLYING GRANTED TO -------------
OPTIONS EMPLOYEES IN EXERCISE OR GRANT DATE
GRANTED FISCAL YEAR BASE PRICE EXPIRATION PRESENT VALUE
NAME (#) (2) ($/SH) DATE ($) (3)
- ----------------------------------- ---------- ------------ ----------- ---------- -------------
Grover C. Wrenn.................... 50,000(4) 5.8 $ 5.875 9/13/04 $ 203,000
Swep T. Davis...................... 67,000(5) 7.8 7.00 4/13/04 265,900
Charles L. Defesche................ 104,010(5) 12.1 7.00 4/13/04 412,920
30,000(4) 3.5 5.875 9/13/04 121,800
Joseph H. Highland................. 8,000(4) 0.9 5.875 9/13/04 32,480
Stephen L. Waechter................ 20,000(4) 2.3 5.875 9/13/04 81,200
- ------------
(1) The Company's stock option plans are administered by the Compensation and
Stock Plans Committee of the Board of Directors. The exercise price per
share of all of the options granted during fiscal year 1994 is equal to or
greater than the fair market value per share of the Company's Common Stock
on the date of the grant, and the options are exercisable over a term of ten
years from the date of grant.
(2) The Company granted options to employees to acquire 858,320 shares of Common
Stock during fiscal year 1994. The 1994 option grants include options to
acquire 481,320 shares of Common Stock which were granted pursuant to the
Company's 1994 replacement program, whereby the Company reduced the exercise
price of certain previously issued options to a price closer to the current
fair market values of the Company's Common Stock. The replacement program
resulted in the cancellation of options to acquire 892,480 shares of Common
Stock. See "1994 Option Replacement Program."
(3) The "Grant Date Present Value" is a hypothetical value determined under the
Black-Scholes Option Pricing Model. It is one of the methods permitted by
the Securities and Exchange Commission for estimating the present value of
options. The Company's stock options are not transferable, and the actual
value of the stock options that an executive officer may realize, if any,
will depend on the excess of the market price on the date of exercise over
the exercise price. The Black-Scholes Option Pricing Model is based on
assumptions as to certain variables such as the volatility of the Company's
stock price and prevailing interest rates, so there is no assurance that any
individual will actually realize the option values presented in this table.
The Company has based its assumption for stock price volatility on the
variance of closing prices for the Company's stock for the five years prior
to the grant date of the option award. In addition, the pricing model
assumes (i) a risk-free rate of return equal to the rate of return for ten
year U.S. Government obligations on the grant date, (ii) no future dividend
payments and (iii) that all options will be held for full ten year terms.
(4) These options were granted on September 13, 1994 and vest ratably over a
three-year period on the anniversary of the date of grant.
(5) The options were granted on April 13, 1994 pursuant to the Company's 1994
option replacement program and vest ratably over a four-year period on the
anniversary of the date of grant. See "Compensation and Stock Plans
Committee Report on Executive Compensation--1994 Option Replacement
Program."
OPTION EXERCISES AND HOLDINGS
No stock options held by any director or officer of the Company were
exercised during the 1994 fiscal year. The following table sets forth
information as of December 31, 1994, regarding the number and value of options
held by each of the executive officers of the Company named in the Summary
Compensation Table. None of the named executive officers held any stock
appreciation rights ("SARs") as of such date.
17
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARs AT
YEAR-END (#) FISCAL YEAR-END (1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- ----------- ------------- ----------- -------------
Grover C. Wrenn.............................. 54,761 92,667 $ -- $ -
Swep T. Davis................................ -- 67,000 -- --
Charles L. Defesche.......................... -- 134,010 -- --
Joseph H. Highland........................... 39,650 20,444 -- --
Stephen L. Waechter.......................... 8,000 36,000 -- --
- ------------
(1) Based on the closing price per share of the Company's Common Stock of $5.50
on the National Association of Securities Dealers Automated Quotation
National Market System on December 31, 1994.
EMPLOYMENT AGREEMENTS
Pursuant to the terms of the 1990 merger agreement between the Company and
ENVIRON, the Company has executed employment agreements with each of the five
former principal shareholders of ENVIRON, including Mr. Wrenn and Dr. Highland.
Pursuant to such employment agreements, each of such individuals is employed by
ENVIRON (now APBI Environmental Sciences Group) for an initial five-year term
ending September 7, 1995, with automatic renewals for additional consecutive
one-year terms unless terminated by either party upon at least 90 days' notice
prior to expiration. The Board of Directors (or an authorized committee thereof)
is authorized to increase the annual salaries for such individuals. Mr. Wrenn
and Dr. Highland are also entitled to participate in such other employee benefit
plan and arrangements as are made available to other senior executives of
ENVIRON during the employment term. In addition, the Company has agreed to
maintain the existing life, accident and disability benefits for each of such
individuals during the term of such employment agreements.
Although Mr. Wrenn's employment agreement by its terms contemplated that he
would hold the position of chief executive officer of ENVIRON, he subsequently
served as both president and chief executive officer of the Company, holding
such positions until February 1995. At this time, the Company is engaged in
discussions with Mr. Wrenn related to the terms of his separation from the
Company.
The Company and Mr. Davis initially executed an employment agreement dated
November 1, 1992, pursuant to which Mr. Davis served as President of APBI
Environmental Sciences Group, Inc. at an annual base salary of $200,000 per
annum. Mr. Davis' position as President of APBI Environmental Sciences Group,
Inc. was eliminated in January 1995. The Company and Mr. Davis signed a
separation agreement effective January 31, 1995 which essentially further
defines the severance payments that he was entitled to receive under his
original employment agreement if his position was eliminated. Pursuant to such
agreement he will be paid a total of $125,000 in eleven monthly installments for
the eleven-month period ending December 31, 1995 and will receive a one-time
lump sum payment of $75,000.
The Company and Dr. Defesche have executed an employment agreement dated
February 29, 1992. Pursuant to this agreement, Dr. Defesche is employed by the
Company for an initial three-year term, with automatic renewals for additional
consecutive one-year terms unless terminated by either party upon at least 90
days' notice. Dr. Defesche's employment may be terminated by the Company prior
to the expiration of his employment term in the event of death; disability (as
that term is defined in the employment agreement); or for cause (as defined in
the employment agreement). Under the terms of such agreement, the Company agreed
to pay Dr. Defesche a base salary of $200,000 per annum, subject to such
increases as may be approved in accordance with the Company's review policies.
In
18
addition, Dr. Defesche has the right to earn a bonus based on performance,
consistent with those awarded to other executives of the Company with equivalent
duties and responsibilities. Dr. Defesche is also entitled to participate in,
and to receive benefits under, any pension, health, life, accident and
disability insurance plans or programs and any other employee or fringe benefit
plans, perquisites or arrangements that the Company makes available generally to
other senior executives and employees during the employment term. The employment
agreement also contains non-competition and confidentiality covenants applicable
to Dr. Defesche.
An interim employment agreement was entered into with Dr. Defesche effective
March 1, 1995, pursuant to which he was appointed to his current position as the
Chairman of Pharmaco LSR, at his then current salary with either the Company or
Dr. Defesche being entitled to terminate such agreement at any time prior to
June 30, 1995 with certain severance payments then being payable by the Company.
In the event Dr. Defesche elects to terminate his employment prior to June 30,
1995, he is entitled to receive, as severance, his base salary for an additional
six-month period and, in the event the Company elects to terminate Dr.
Defesche's employment prior to June 30, 1995, he is entitled to receive, as
severance, his base salary for an additional twelve-month period. In the event
the interim agreement is not terminated prior to June 30, then the term of Dr.
Defesche's employment agreement will be continued until June 30, 1996.
In connection with Mr. Waechter's initial September 1993 employment offer
from the Company, he received a $15,000 sign-on bonus from the Company and was
guaranteed a minimum cash bonus of $25,000 in 1994. He does not otherwise have
an employment agreement with the Company, although the Company and Mr. Waechter
have entered into an agreement which provides for certain severance benefits in
the event that his employment is terminated by the Company within a twelve-month
period following a change in control of the Company (as defined in such
agreement). See "Severance Benefits."
SEVERANCE BENEFITS
In September 1993, the Company entered into an agreement with Mr. Waechter
which provides for certain severance benefits in the event that his employment
is terminated by the Company within a twelve-month period following a change in
control of the Company (as defined in the agreement). Under such agreement, Mr.
Waechter is entitled to receive as severance benefits, his full base salary,
together with benefits through the one-year anniversary of the change in
control. In addition, all stock options granted to Mr. Waechter prior to such
termination automatically vest.
RETIREMENT PLANS
U.K. Pension Plan. The Company maintains a United Kingdom contributory
defined benefit pension plan (the "U.K. Pension Plan") for qualified United
Kingdom resident employees and directors of the Company, which is approved by
the Board of Inland Revenue of the United Kingdom. The U.K. Pension Plan
provides for normal retirement benefits at age 65 for certain male employees and
at age 60 for female employees, directors and certain other senior members of
management. Benefits under the U.K. Pension Plan are based on the average of a
participant's highest three consecutive years of earnings during the thirteen
United Kingdom fiscal years preceding retirement or cessation of qualifying
employment. The benefit payable at normal retirement date for a director is
two-thirds of such director's final pensionable salary, and is increased
annually by a cost of living factor, up to a maximum of five percent (5%) per
year. The benefit payable at normal retirement age for employees is one-sixtieth
of final pensionable salary, multiplied by years of participation, not to exceed
two-thirds of final pensionable salary.
Dr. Harper is the only executive officer who is a participant in the U.K.
Pension Plan. As of December 31, 1994, Dr. Harper was credited with
approximately 18 years of service under the U.K. Pension Plan. During 1994, Dr.
Harper received the stated pension benefit payable to him under the
19
U.K. Pension Plan, which reduces the amount of salary otherwise payable to him.
Dr. Harper received $158,230 (converted from pounds sterling to U.S. dollars
based on an exchange rate of 1.5293 U.S. dollars per pound sterling, which is
the average of the 13 rates in effect on January 1, 1994 and at the end of each
calendar month in 1994, as quoted in The Wall Street Journal) as pension
benefits under the U.K. Pension Plan during fiscal year 1994.
CERTAIN TRANSACTIONS
Lehman Brothers, of which Mr. Frank is a Senior Managing Director, provided
general financial advisory services to the Company during 1994. It is
anticipated that Lehman Brothers may provide financial advisory services to the
Company during fiscal year 1995.
Mr. Fleckman is a partner and the managing director of the law firm of
Fleckman & McGlynn, which has rendered legal services to Pharmaco LSR
International Inc. (including its predecessor companies) and its subsidiaries,
during fiscal year 1994 and fiscal year 1995. Pharmaco LSR and its subsidiaries
paid fees and expenses of $79,290 to Fleckman & McGlynn during the fiscal year
ended December 31, 1994 for legal services. From January 1, 1995 to May 1, 1995,
Pharmaco LSR and its subsidiaries have paid $7,462 in fees and expenses to
Fleckman & McGlynn for legal services. It is anticipated that Fleckman & McGlynn
will continue to render legal services to Pharmaco LSR and its subsidiaries
during the remainder of fiscal year 1995. The total amount paid by Pharmaco LSR
and its subsidiaries to Fleckman & McGlynn exceeded 5% of the firm's gross
revenues for fiscal year 1994.
ADOPTION OF STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(ITEM NO. 2)
GENERAL
On April 20, 1995, the Board of Directors approved the Stock Option Plan for
Outside Directors (the "Plan") effective as of June 22, 1995. The adoption of
the Plan was approved by the Board, in part, as a means of increasing outside
director participation on the Board, and, if approved by the stockholders,
options granted under the Plan will be part of the annual compensation of such
directors. The purpose of the Plan is to advance the interests of the Company by
providing certain directors with an opportunity to acquire a proprietary
interest in the Company and an additional incentive to promote its success. In
order to achieve the Plan's objectives, the Board adopted the Plan in the form
attached hereto as Exhibit A.
DESCRIPTION OF THE PLAN
The Plan, which provides for the grant of non-statutory options to directors
of the Company who are not also employees of the Company or any of its
subsidiaries ("Outside Directors"), operates automatically according to its
terms. The Board of Directors is responsible for the Plan's implementation but
may not exercise any discretion concerning its administration. Subject to the
approval of the Plan by the stockholders of the Company, each person who is
serving as an Outside Director on June 22, 1995, will receive options to
purchase 6,000 shares of Common Stock. In addition, each person who subsequent
to June 22, 1995, becomes an Outside Director (and who is not currently a
director of the Company) will receive options to purchase 6,000 shares of Common
Stock as of the time of his or her initial appointment or election as a director
of the Company. Thereafter, each Outside Director, who has received an initial
option grant, will receive an annual grant of options to purchase 6,000 shares
as of Common Stock on the date of the annual stockholder's meeting, as part of
his or her annual compensation for serving as such. In each case, options will
be subject to certain vesting requirements as described below. Four directors
are currently eligible to participate under the Plan.
20
The purchase price for each share of Common Stock covered by an option will
be equal to the fair market value per share of the Common Stock on the date the
option is granted. Options are granted for a term of ten years and vest in
one-third increments as of the first, second and third anniversary date after
the date of grant, subject to the individual continuing to serve as a director
as of the vesting date. In the event of merger, consolidation, dissolution, or
liquidation of the Company, the expiration dates and exercise dates of
outstanding options may be accelerated but the effectiveness of such
acceleration will be conditioned upon the consummation of such merger,
consolidation, dissolution, or liquidation. Generally, if an optionee ceases to
be an Outside Director because of death or disability, he, or his beneficiary,
may exercise the vested portion of his options until the first to occur of (i)
two years after he ceases to be an Outside Director or (ii) the date on which
the options expire according to their terms. If an optionee ceases to be an
Outside Director for any other reason, he may exercise the vested portion of his
options until the first to occur of (i) three months after he ceases to be an
Outside Director or (ii) the date on which the options expire according to their
terms.
In the event of changes in the Common Stock by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations, mergers or
consolidations, appropriate adjustments will be made in the price of the shares
and number of shares subject to options. The Board of Directors may amend the
Plan without stockholder approval; provided that, if and to the extent required
by Rule 16b-3 of the Securities and Exchange Act of 1934, no change will be made
that increases the number of shares reserved for issuance, or expands the class
of persons eligible to receive options, or materially increases the optionees'
benefits under the Plan, unless such change is authorized by the stockholders.
In addition, if and to the extent required by Rule 16b-3, the provisions of the
Plan may not be amended more frequently than once every six months unless
otherwise required by law and permitted by Rule 16b-3. Termination of or
amendments to the Plan will not alter previously granted options without the
consent of any optionee who is adversely affected thereby. An aggregate of
150,000 shares of Common Stock will be reserved for issuance pursuant to the
exercise of options granted under the Plan.
The Company generally will receive a tax deduction for compensation expense
when an Outside Director exercises a stock option granted under the Plan. An
Outside Director will not be taxed when a stock option is granted under the
Plan. When an Outside Director exercises an option, the Outside Director
generally will have compensation income equal to the amount by which the fair
market value of the stock exceeds the option price on the date of the option
exercise.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and entitled to vote at the meeting on the matter is required
to adopt the Plan. Abstentions are treated as present and entitled to vote on
the adoption of the Plan and, accordingly, have the effect of a vote against the
proposal. Broker non-votes will not be considered entitled to vote and will have
no effect on the vote required for approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE PLAN.
APPROVAL OF AMENDMENT TO APBI STOCK INCENTIVE PROGRAM (1990)
(ITEM NO. 3)
GENERAL
On September 7, 1990, the stockholders approved the adoption by APBI of the
Stock Incentive Program (1990) (the "Stock Incentive Program"), pursuant to
which 1,000,000 shares of APBI Common Stock were authorized for issuance through
the grant of restricted stock awards and stock options. As a result of a 2-for-1
stock split paid by APBI by way of a stock dividend on January 11,
21
1991, the subsequent amendment of the Stock Incentive Program in February 1992
to add an additional 500,000 shares for issuance under such Program, and a
2-for-1 stock split paid by APBI by way of a stock dividend on April 1, 1992,
5,000,000 shares of APBI Common Stock are currently authorized for issuance
under the Stock Incentive Program. The Stock Incentive Program is the successor
plan to the Stock Option Plan (1987) originally adopted by APBI in March 1987.
As of May 1, 1995, only 782,058 of the 5,000,000 shares of APBI Common Stock
subject to the Stock Incentive Program remain available for the granting of new
options and restricted stock awards. There are options for approximately
3,073,000 shares of APBI Common Stock that have been issued and remain
outstanding but of these the exercise price for a majority of these options was
at least $1.00 higher than the reported closing price of APBI Common Stock as of
May 1, 1995. APBI's Board of Directors believes that it is important and in the
best interests of the Company for its stockholders to approve the amendment of
the Stock Incentive Program to increase the number of shares reserved for
issuance thereunder thereby ensuring the ability of the Company to continue to
grant options and restricted stock awards thereunder. The use of options
continues to be an important component of the Company's EVA compensation
program, and in the view of APBI's Board of Directors, one of the best methods
for more closely aligning management's interests with those of the Company's
stockholders.
Currently, there is no limitation in the Stock Incentive Program on the
number of options or restricted stock awards that may be granted to any
particular senior executive or other Eligible Employees. In order to comply with
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
the Board of Directors has also approved the amendment of the Stock Incentive
Program, subject to stockholder approval, in order to limit the number of shares
that may subsequently be granted to any Eligible Employee as options or
restricted stock to 300,000 shares in the aggregate. Section 162(m), which was
added to the Code in 1993, places a limit of $1,000,000 on the amount of
compensation that may be deducted by the Company in any tax year with respect to
each of the Company's five most highly paid executives. However, certain
performance based compensation that has been approved by shareholders is not
subject to the deduction limit. The Stock Incentive Program is designed to
provide for this type of performance based compensation.
The actual amount of future compensation payable under the Stock Incentive
Program is not presently determinable. However, if the amendment to the Stock
Incentive Program is approved by the Company's stockholders, no executive
employee will be entitled to be granted additional options or restricted stock
with respect to more than 300,000 shares of the Company's common stock. The
amendment applies to grants made following the effective date of stockholder
approval and for the remaining life of the Stock Incentive Program.
The Stock Incentive Program is made up of two components: the Applied
Bioscience International Inc. Stock Award Plan (the "Stock Award Plan") and the
United Kingdom Approved Share Option Scheme (the "U.K. Plan"). The Stock Award
Plan provides for the award of stock options and restricted stock awards and is
open to officers and key employees of APBI and any subsidiary of APBI. In
general, options and restricted stock awards may be granted under the Stock
Incentive Program to employees who, in the opinion of the Compensation and Stock
Plans Committee of the Board of Directors, are capable of contributing in a
substantial measure to the successful performance of APBI and its subsidiaries;
it is contemplated that options and stock awards will be granted to such
employees in consideration of the future services to be rendered by them to APBI
and that such options and awards will vest over several years, in order to
encourage long-term employment with APBI. There are approximately 240 current
employees of APBI and its subsidiaries that have received grants of options and
stock awards under the Stock Award Plan which includes a number of employees
that received options or restricted stock grants in connection with certain
acquisitions undertaken by the Company during the last five years. For those
employees who may be subject to taxation in the United Kingdom, APBI has adopted
the U.K. Plan which has been determined to constitute an approved share option
scheme in the United Kingdom.
22
The following is a brief description of the principal features of the Stock
Incentive Program. The actual language of the proposed amendment to the Stock
Incentive Program, which contemplates an increase in the number of shares
reserved for grants of options and restricted stock awards to a total of
6,500,000 and the approval of certain limitations on the number of option and
restricted stock awards that any senior executive or other participant may
receive during the remainder of the term of the Incentive Stock Program, is
attached hereto as Exhibit B.
SHARES RESERVED UNDER THE STOCK INCENTIVE PROGRAM
There are presently 5,000,000 shares of APBI Common Stock reserved for the
grant of options and restricted stock awards under the Stock Incentive Program,
of which 782,058 shares remain available for the granting of options and
restricted stock awards as of May 1, 1995. Pursuant to the proposed amendment
adopted by the Board of Directors at its April 20, 1995 meeting, subject to
stockholder approval, it is proposed that the number of shares reserved for
grants of options and restricted stock awards under the Stock Incentive Program
be increased by 1,500,000 to 6,500,000. The number of shares reserved for
issuance under the Stock Incentive Program may be adjusted in the event of a
stock split, stock dividend or other relevant change affecting APBI's shares,
and appropriate adjustments would be made in the number of shares that could be
issued in the future and in the number of shares and option prices of all
outstanding grants made before the event. If an option granted under the Stock
Incentive Program expires or terminates unexercised as to any shares under
option, or in the event a restricted stock award is forfeited, those shares
would again be available for inclusion in future stock awards. Shares utilized
for purposes of the Stock Incentive Program may consist of treasury shares or
authorized but unissued shares.
ADMINISTRATION
The Stock Incentive Program is administered by a Committee of the Board of
Directors of APBI composed of three or more nonemployee Directors who are not
eligible to receive awards under the Stock Incentive Program, which has
discretion to adopt such rules and regulations as it deems appropriate to
administer the Stock Incentive Program.
PROVISIONS OF STOCK AWARD PLAN
1. Eligibility
The Committee is authorized to grant stock options and restricted stock
awards to officers and other key employees of APBI and any subsidiary of APBI,
and to determine the number of shares of APBI Common Stock subject to such
awards. Only employees of APBI or any subsidiary of APBI are eligible to
participate in the Stock Award Plan, and no member of the Board of Directors who
is not also an employee of APBI or any subsidiary of APBI is eligible to
participate in the Plan.
2. Stock Options
The Committee may grant non-statutory options and options qualifying as
incentive stock options under the Code. The term of an incentive stock option
may not exceed ten years from the date of grant and the term of a nonstatutory
option may not exceed ten years and one day from the date of grant (the
description of the provisions of the Stock Award Plan set forth herein relates
to both incentive stock options and non-statutory options, except as otherwise
indicated). The option price will be determined by the Committee on the date of
the grant, provided such price must be at least equal to the fair market value
of shares of APBI Common Stock on the date of grant.
a. Payment for Shares. Optionees, other than optionees granted options
under the U.K. Plan, may pay the option price of options granted under the Stock
Award Plan by delivering cash, shares of
23
APBI Common Stock having a total fair market value equal to the option price or
a combination of cash and shares of APBI Common Stock having an aggregate value,
including the fair market value of such shares, equal to the option price.
b. Exercise of Options. No optionee whose employment terminates, other than
by death or total and permanent disability, may exercise any option more than
three months after such termination, and no optionee whose employment terminates
because of total and permanent disability may exercise any option more than one
year after such termination, provided that any such option may only be exercised
to the extent the optionee could otherwise exercise the option at the time of
termination. Any option exercisable at the time of death of any optionee who
dies while employed by APBI or any of its subsidiaries or within three months
after termination of employment with APBI or any of its subsidiaries may be
exercised, to the extent the optionee could otherwise exercise the option on the
date of death, at any time prior to the expiration of the option by any person
who acquires the option by reason of the death of the optionee.
c. Limitations on Grant of Options. No person owning stock possessing more
than 10% of the total combined voting power of APBI or any subsidiary of APBI is
eligible to receive an incentive stock option, unless the option term does not
exceed five years and the option price is not less than 110% of the fair market
value of the shares under option at the time of grant.
In addition, in no event may the aggregate fair market value, determined as
of the time an option is granted, of APBI Common Stock with respect to which
incentive stock options are exercisable for the first time by an optionee during
any calendar year exceed $100,000. There is no limit on the amount of
non-statutory options that may be awarded to an optionee.
d. Certain Corporate Transactions. In the event of certain reorganizations,
including a merger, sale or all or substantially all of APBI's assets or a
merger in which APBI is the surviving corporation but the holders of APBI's
shares receive cash or securities of another corporation, in which an optionee
has not received satisfactory substitute options, the optionee may elect to
receive cash representing the excess of the highest market price of the APBI
Common Stock immediately preceding the reorganization over the option price (or,
at the election of the surviving or acquiring corporation, under certain
circumstances, publicly-traded stock of such corporation equal to such value).
3. Restricted Stock Awards
The Stock Award Plan authorizes the Committee to grant (either alone or in
addition to other grants under the Plan) restricted stock awards which are
shares of APBI Common Stock, subject to restrictions imposed by the Committee.
Restricted stock may not be disposed or encumbered by the recipient and may be
required to be held in the custody of APBI or an unrelated custodian until the
restrictions established by the Committee lapse. The restrictions could, at the
discretion of the Committee, include, among others, restrictions that lapse
after the recipient completes a specified period of service with APBI. The
Committee may also condition the restricted stock awards upon the attainment of
performance goals.
Upon termination of employment during the restriction period, the restricted
stock would be forfeited, subject to such exceptions as might be authorized by
the Committee including retirement, disability, death or special circumstances.
Recipients of restricted stock would not normally be required to provide
consideration other than the rendering of services; however, the Committee would
have the discretion to grant restricted stock for which a cash payment is
required. During the restriction period the recipient of restricted stock would
have all of the rights of a stockholder of APBI, including the right to vote the
shares, and the right to receive any cash dividends. If the recipient remains
employed by APBI at the time the restrictions lapse
24
and any conditions imposed are met, he or she would have a right to the
restricted stock, free of the foregoing restrictions.
4. Amendment and Termination
The Board of Directors may at any time amend, suspend or terminate any or
all provisions of the Stock Award Plan, provided that, without the consent and
approval of the holders of the majority of the shares of APBI Common Stock, it
may not (i) increase the total number of shares reserved for issuance under the
Plan, (ii) decrease the minimum purchase price for shares, (iii) extend the
expiration date of the Plan, (iv) alter the class of employees eligible for
grants of awards, (v) increase the maximum term of options granted under the
Plan or (vi) withdraw the administration of the Plan from a Committee of the
Board of Directors.
U.K. PLAN PROVISIONS
In order to allow employees who may be subject to taxation in the United
Kingdom to receive favorable tax treatment, the Board of Directors has a adopted
a U.K. Plan as a part of the Stock Incentive Program that is intended to qualify
as an "Approved Share Option Scheme" in the United Kingdom. In most respects,
the U.K. Plan is substantially similar to the provisions of the Stock Award
Plan, except that restricted stock awards may not be granted under the U.K.
Plan. The most significant differences are described below.
1. Eligibility
Stock options under the U.K. Plan may be granted only to a full-time
director or qualifying employee. A director is deemed to be a full-time director
if he is required to work 25 or more hours per week and an employee is deemed to
be a qualifying employee if he is required to work 20 or more hours per week.
2. Grant of Options
The aggregate fair market value of the shares of APBI Common Stock that may
be acquired by an optionee who holds options under the U.K. Plan and any similar
plan of APBI or its subsidiaries is limited to the greater of 100,000 or four
times the person's Relevant Emoluments (as defined in the U.K. Plan). Relevant
Emoluments would include all wages, salaries and other compensation from
employment which is subject to withholding-at-source rules under United Kingdom
tax law. The purchase price for each share of APBI Common Stock subject to an
option upon the U.K. Plan must be paid in cash at the time of exercise.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended to reflect the current provisions of the
Code and the regulations thereunder as applicable to the Stock Award Plan. This
summary does not deal with state and local tax considerations or with estate or
death taxes or foreign taxes.
a. Incentive Stock Options
If the employee does not dispose of any shares received upon the exercise of
an incentive stock option within two years from the original date of grant of
the option or within one year after the transfer of the shares to him or her,
whichever is later, and he or she has been an employee of APBI or any of its
subsidiaries at all times from the date of grant to the date three months before
the date of exercise (which period is extended to one year in the event of total
and permanent disability and waived in the event of death), then there will be
no tax at the date the option is exercised and the shares are
25
purchased. Furthermore, any gain realized by the employee on a later sale or
exchange of such shares will be long-term capital gain and any loss will be
long-term capital loss. In such event, APBI is not allowed an income tax
deduction at any time in connection with the option.
If the employee disposes of any shares received upon the exercise of such an
option within two years from the original date of grant of the option or within
one year after the transfer of such shares to him or her, the employee will be
obligated to report as ordinary income for the year in which the disposition
occurs the amount (if any) by which such fair market value of the shares on the
date of exercise of the option (or, in the case of a sale of such shares at a
price less than the fair market value on the date of exercise, the amount
realized from such sale) exceeds the amount the employee paid for such shares.
Any such ordinary income will increase the employee's tax basis for the purpose
of determining gain or loss on the sale or exchange of the shares. The employee
will be considered to have disposed of shares if he or she sells, exchanges,
makes a gift of or transfers legal title to the shares (except by pledge, by
transfer on death or in connection with certain bankruptcy proceedings). In such
event, APBI is allowed an income tax deduction at the same time and in the same
amount as an employee realizes ordinary income.
The difference between the fair market value of stock acquired upon exercise
of an incentive stock option at the time of exercise and the option price is an
item of adjustment in determining an employee's alternative minimum taxable
income in the year of exercise for purposes of the alternative minimum tax.
b. Non-Statutory Stock Options
An employee who exercises a non-statutory stock option will realize income,
taxable at ordinary income rates, in the amount of the difference between the
option price and the fair market value of the shares on the date of exercise,
and APBI will be entitled to a corresponding tax deduction in the same amount.
Any such ordinary income will increase the employee's tax basis for the purpose
of determining gain or loss on the subsequent sale or exchange of the shares. If
the holding period and other requirements of the capital gain provisions are
satisfied, any gain realized by the employee on a later sale or exchange of such
shares will be long-term capital gain and any loss will be long-term capital
loss.
c. Restricted Stock Awards
Unless an election is made as described below, an employee who receives an
award of restricted stock under the Stock Award Plan will not realize taxable
income at the time of the award, nor will APBI be entitled to a tax deduction at
that time. When the awards become vested (i.e., when restrictions lapse through
attainment of specified performance goals or otherwise) or the election
described below is made, the employee will realize income and APBI may claim a
deduction in an amount equal to the fair market value of the shares at such
time. Dividends paid to the employee with respect to restricted stock prior to
their vesting constitute compensation and, as such, are taxable to the employee
and deductible by APBI.
Pursuant to provisions of Section 83(b) of the Code, the recipient of a
restricted stock award under the Stock Award Plan may elect to be taxed at the
time of the award. If the employee so elects, the full value of the shares
(without regard to restrictions) at the time of the grant, less any amount paid
by the employee, will be taxed to the employee as ordinary income and will be
deductible by APBI. Dividends paid with respect to the shares after their
vesting will be taxable as dividends to the employee and will not be deductible
by APBI.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock represented and entitled to vote at the meeting on the matter is required
to approve the amendment to the Stock
26
Incentive Program. Abstentions are treated as present and entitled to vote on
the amendment of the Stock Incentive Program, and accordingly, have the effect
of a vote against the proposal. Broker non-votes will not be considered entitled
to vote and will have no effect on the vote required for approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE AMENDMENT
TO THE STOCK INCENTIVE PLAN.
AUDITORS
The Company's outside auditors are Arthur Andersen LLP (formerly Arthur
Andersen & Company) for the purpose of auditing and reporting upon the financial
statements of the Company for the fiscal year ending December 31, 1995.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting. At that time, such representatives will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting of Stockholders must be received by the Secretary of the Company
by January 1, 1996 for inclusion in the Company's proxy statement and form of
proxy relating to that meeting.
OTHER ACTION
The Board of Directors knows of no additional matters which are likely to be
brought before the meeting. Should any other matter come before the meeting, it
is the intention of the persons named in the accompanying proxy card to vote
such proxy in accordance with their judgment.
The solicitation of proxies by the Company will be made through the use of
the mails, and may be made personally and by telephone by officers and employees
of the Company, who will receive no additional compensation therefor. In
addition, the Company has retained Shareholder Communications Corporation to
solicit proxies for a fee of $6,000 plus the usual expenses incurred in
connection with the assembling and mailing of the proxy materials. The cost of
the solicitation, including the preparation of the proxy materials, will be
borne by the Company.
It is important that proxies be returned promptly. Therefore, stockholders
who do not expect to attend the meeting in person are urged to execute and
return the enclosed proxy in the self-addressed stamped envelope provided.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, CAN BE
OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO APBI INVESTOR RELATIONS, INC.,
214 CARNEGIE CENTER, PRINCETON, NEW JERSEY 08540, ATTENTION: MR. JOHN H.
TIMONEY, SECRETARY.
Dated: May 15, 1995
APPLIED BIOSCIENCE INTERNATIONAL INC.
By: KENNETH H. HARPER
President, Chief Executive Officer
and Chairman of the Board of Directors
27
EXHIBIT A
APPLIED BIOSCIENCE INTERNATIONAL INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
APPLIED BIOSCIENCE INTERNATIONAL INC., a Delaware corporation (the
"Company"), hereby adopts its Stock Option Plan for Outside Directors, effective
as of June 22, 1995.
1. Purpose.
This Stock Option Plan for Outside Directors (the "Plan") is intended to
advance the interests of the Company by providing directors of the Company who
are not employees of the Company or a subsidiary ("Directors") with an
opportunity to acquire a proprietary interest in the Company and an additional
incentive to promote its success. All stock options ("Options") granted under
the Plan are non-statutory options. The Plan conforms to the provisions of Rule
16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934 (the " '34 Act"), as
presently in effect.
2. Eligibility and Grant of Options.
Subject to approval of the Plan by the shareholders of the Company:
(a) Each Director who is serving on June 22, 1995 shall receive an
Option to purchase 6,000 shares as of such date which shall vest in
accordance with Section 5 hereof.
(b) Each new Director shall receive an Option to purchase 6,000 shares
of common stock of the Company ("Common Stock") at the time of his or her
initial appointment or election to the position of Director.
(c) Each Director who has received an initial grant shall receive an
annual grant of an Option to purchase 6,000 shares on the date of the
commencement of each subsequent regular annual stockholders' meeting;
provided that the individual continues to serve as a Director immediately
following such meeting; and provided further that the Company continues to
have sufficient shares reserved pursuant to Section 3 hereof to cover the
exercise of all options after giving effect to the new Options.
The option price for each Option shall be determined as of the date of
grant, pursuant to Section 4 below. The Company shall effect the grant of
Options under the Plan by the execution and delivery of written option
agreements between the Company and the Directors receiving the Options
("Optionees"). No Option, nor anything contained in this Plan shall confer upon
any Optionee any right to continue as a Director of the Company nor limit in any
way the ability of the Company to terminate his or her service as a Director at
any time.
3. Stock.
The Company has reserved an aggregate of 150,000 shares of Common Stock for
issuance pursuant to the exercise of Options granted under the Plan. The
aggregate number is subject to future adjustments as hereinafter provided in
Section 8. The aggregate number of shares of Common Stock reserved shall be
reduced by the issuance of shares upon the exercise of Options, but it shall not
be reduced if Options, for any reason, expire or terminate unexercised. The
Company shall not be required to issue or deliver any certificate for shares of
its Common Stock purchased upon the exercise of any part of an Option before (i)
the admission of such shares to listing on any stock exchange on which the
Common Stock may then be listed, (ii) receipt of any required representations by
the Optionee or completion of any required registration or other qualification
of such shares under any state or federal law or regulation that the Company's
counsel shall determine is necessary or advisable, and (iii) the Company shall
have been advised by counsel that all applicable legal requirements have been
complied with.
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4. Price.
Except as provided below, the purchase price of each share of Common Stock
covered by an Option (the "Option Price") shall be equal to the fair market
value, as hereinafter defined, of one share of Common Stock on the date the
Option is granted. If the Common Stock is traded in the over-the-counter market,
its fair market value on a given day shall be the mean between the closing bid
and asked prices on such day as reported by NASDAQ. If the Common Stock is
traded on an exchange, its fair market value on a given day shall be the mean of
the high and low prices at which it is traded on such day on the exchange on
which it generally has the greatest trading volume. In no event shall the Option
Price be less than the par value of the Common Stock.
Payment of the Option Price may be made (a) in cash, (b) by the surrender of
shares of Common Stock owned by the Director exercising the Option and having a
fair market value on the date of exercise equal to the aggregate Option Price,
or (c) any combination thereof. Shares of Common Stock surrendered in payment of
the Option Price shall be valued at the fair market value thereof on the date of
exercise as defined above.
5. Term and Limitations on Exercise.
Options may be exercised, in whole or in part, but only with respect to
whole shares of Common Stock, as outlined below, by giving timely written notice
to the Company:
(a) The term of any Option shall be ten years from the date it is
granted. No Option may be exercised after the expiration of its term or
after the date set forth in subsection (c), (d), or (e) below, if earlier.
(b) No Options shall be exercisable unless and until the shareholders of
the Company approve the Plan. Thereafter, the Optionee may exercise this
Option in cumulative annual installments of up to one-third of the shares
covered by the Option on or after each of the first, second and third
anniversary dates of the initial grant of the Option; provided that the
Optionee continues to serve as a Director. In the event of the Optionees'
death or disability while he is a Director, any further vesting of such
Options shall automatically cease.
(c) If an Optionee ceases to be a Director on account of his death or
disability (as determined under the federal Social Security Act), the
Optionee (or his or her legatees or distributees or the personal
representative of his estate, in the event of his death) may exercise his or
her outstanding and vested Options at any time (subject to the limitations
of subsection (b) above) until the first to occur of (x) the date that is
two years after the Optionee ceases to be a Director or (y) the date on
which the Options expire according to their terms.
(d) If an Optionee ceases to be a Director for any reason other than
described in subsection (c) above, the Optionee may exercise his or her
outstanding and vested Options at any time (subject to the limitations of
subsection (b) above) until the first to occur of (x) the date that is three
months after the Optionee ceases to be a Director or (y) the date on which
the Options expire according to their terms.
(e) If an Optionee dies after he ceases to be a Director, but within the
time period during which his or her outstanding and vested Options are still
exercisable, the Director's outstanding Options may be exercised by his or
her legatees or distributees or the personal representative of his or her
estate. The vested portion of Options may be exercised at any time (subject
to the limitations of subsection (b) above) until the first to occur of (x)
the date that is two years after the Optionee ceases to be a Director or (y)
the date on which the Options expire according to their terms.
(f) Notwithstanding the foregoing, in the event of a merger,
consolidation, dissolution, or liquidation of the Company, the expiration
dates of any outstanding Options may be accelerated
A-2
and the dates on which outstanding Options may be exercised may be
accelerated (to the extent permitted by Rule 16b-3), but the effectiveness
of such acceleration, and any exercise of Options pursuant thereto with
respect to shares in excess of the number of shares that could have been
exercised in the absence of such acceleration, shall be conditioned upon the
consummation of the merger, consolidation, dissolution, or liquidation. The
Board of Directors shall appoint a committee of persons who meet the
requirements of "disinterested persons" under Rule 16b-3 to determine
whether such acceleration shall occur.
(g) Notwithstanding anything herein to the contrary, Options shall
always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3, or any replacement rule adopted pursuant to the
provisions of the '34 Act, as the same now exists or may, from time to time,
be amended.
(h) The exercise of any Option and delivery of the Option shares shall
be contingent upon the receipt by the Company of the full purchase price in
cash or shares of Common Stock as provided in Section 4.
6. Non-transferability of Options.
Options, by their terms, shall not be transferable other than by will or the
laws of descent and distribution and may be exercised during the lifetime of the
Optionee only by the Optionee or the Optionee's guardian or legal
representative.
7. Tax Withholding.
To the extent required by applicable federal, state, local or foreign law,
an Optionee shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise by reason of the
exercise of an Option or any sale of the shares of Common Stock acquired upon
exercise of an Option. The Company shall not be required to issue shares until
such obligations are satisfied. The Company may permit these obligations to be
satisfied by having the Company withhold a portion of the shares of Common Stock
that otherwise would be issued to him or her upon exercise of the Option.
8. Effect of Stock Dividends and Other Changes.
Appropriate adjustments shall be made to the price of the shares and the
number of shares subject to option if there are any changes in the Common Stock
by reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, mergers, or consolidations.
9. Administration of the Plan.
The Board of Directors shall be responsible for the proper implementation of
the Plan, but the Board of Directors shall not exercise any discretion with
respect to the administration of the Plan. As required by Rule 16b-3, a person
who does not meet the requirements of a "disinterested person" under Rule 16b-3
may not be given discretion concerning the administration of the Plan.
10. Expiration and Termination of the Plan.
Options may be granted under the Plan at any time until the Plan is
terminated by the Board of Directors or until such earlier date when termination
of the Plan shall be required by applicable law. If not sooner terminated, the
Plan shall terminate automatically on June 22, 2005, which is ten years from the
effective date of this Plan.
A-3
11. Amendments.
The Board of Directors may from time to time make such changes in and
additions to the Plan as it may deem proper; provided that, if and to the extent
required by Rule 16b-3, no change shall be made that increases the total number
of shares reserved for issuance pursuant to Options granted under the Plan
(except pursuant to Section 8), expands the class of persons eligible to receive
Options, or materially increases the benefits accruing to Optionees under the
Plan, unless such change is authorized by the shareholders. In addition, if and
to the extent required by Rule 16b-3, the provisions of the Plan may not be
amended more frequently than once every six months unless otherwise required by
law and permitted by Rule 16b-3. The termination of the Plan or any change or
addition to the Plan shall not, without the consent of any Optionee who is
adversely affected thereby, alter any Options previously granted to the Optionee
pursuant to the Plan.
12. Effective Date.
The Plan shall be effective as of June 22, 1995, subject to approval by the
Company's shareholders on such date.
A-4
EXHIBIT B
The section of the APBI Stock Incentive Program (1990) entitled "Shares
Reserved" would be amended and replaced in its entirety by the following:
SHARES RESERVED
The Board of Directors shall reserve for purposes of the Stock Award Plan
and the United Kingdom Scheme, out of the Company's authorized but unissued
common stock, par value $0.01 per share ("Common Stock"), or out of shares of
Common Stock held in the Company's Treasury, or partly out of each, a total of
6,500,000 shares of Common Stock (or the number and kind of shares of Common
Stock or other securities which, in accordance with Section 7 of the Stock Award
Plan and Clause 8 of the United Kingdom Scheme, shall be substituted for such
shares or for which such shares shall be adjusted).
In the event that an option or other stock award granted under the Stock
Incentive Program expires or is terminated unexercised as to any shares covered
by such option or award, such shares shall thereafter be again available for the
granting of options and stock awards under this Stock Incentive Program.
During the remaining term of this Plan, additional Options and Restricted
Stock Awards granted or awarded to any single Eligible Employee shall not
entitle such Participant to acquire in excess of 300,000 shares of Common Stock,
in the aggregate. For purposes hereof, the remaining term of this Plan shall
begin as of the date the Company's stockholders approve this amendment of the
Plan.
B-1
APPLIED BIOSCIENCE INTERNATIONAL INC.
PROXY CARD ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS JUNE 22, 1995
The undersigned hereby appoints Kenneth H. Harper, Stephen L. Waechter and
John H. Timoney, and each of them with full power of substitution, as proxies to
represent the undersigned at the 1995 Annual Meeting of Stockholders of Applied
Bioscience International Inc. ("APBI") to be held at the offices of Lehman
Brothers Inc., 625 Madison Avenue, New York, New York, on Thursday, June 22,
1995 at 11:00 a.m. Eastern Daylight Time, or at any adjournment or adjournments
thereof, and to vote upon the following matters the number of shares which the
undersigned would be entitled to vote if personally present:
1. Election of Directors
Nominee: Mr. Frederick Frank
FOR the nominees / / VOTE WITHHELD from the nominees / /
2. Approval of a proposal to adopt a Stock Option Plan for Outside Directors.
FOR / / AGAINST / / ABSTAIN / /
3. Approval of a proposal to amend the APBI Stock Incentive Program (1990) in
order to increase the number of shares of APBI Common Stock reserved for
grants of options and restricted stock awards under such Program from
5,000,000 to 6,500,000 and place certain limitations on the number of
options and restricted stock awards that may be awarded to any of APBI's
senior executives or other plan participants during the remaining term of
such program.
FOR / / AGAINST / / ABSTAIN / /
4. Upon such other matters as may properly come before the meeting or any
adjournment or adjournments thereof.
(Continued and to be DATED and SIGNED on REVERSE SIDE)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY
INSTRUCTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR
NOMINEE SET FORTH ABOVE, FOR THE PROPOSED STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS AND FOR THE PROPOSED AMENDMENT TO THE APBI STOCK INCENTIVE PROGRAM
(1990).
Dated: _____________________, 1995
____________________________________
Stockholder's Signature
Please sign exactly as your
name appears hereon. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If
signer is a corporation,
please sign in full corporate
name by authorized officer.
If signer is a partnership,
please sign in partnership
name by authorized person. If
shares are held jointly, both
must sign.
PLEASE DATE, SIGN AND RETURN
THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.