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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DENDRITE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[Dendrite Logo]
DENDRITE INTERNATIONAL, INC.
April 17, 2000
Dear Shareholder:
On behalf of the Board of Directors and management, I am pleased to invite
you to the 2000 Annual Meeting of Shareholders of Dendrite International, Inc.
The meeting will be held on Friday, May 12, 2000 at 9:00 a.m. at the Company's
headquarters, 1200 Mount Kemble Avenue, Morristown, New Jersey 07960-6796.
To assure that your vote will be counted, I urge you to read the enclosed
materials carefully and to either complete, sign and mail promptly the proxy
card contained with this letter or vote via the Internet in the manner described
on the proxy card. Also enclosed is a copy of the Company's 2000 Annual Report
to Shareholders.
The officers and directors of Dendrite appreciate your continuing support
and we look forward to seeing you at the Annual Meeting.
/s/ John E. Bailye
John E. Bailye
President and Chief Executive Officer
Morristown, New Jersey
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and either
return it in the enclosed envelope to which no postage need be affixed if mailed
in the United States or transmit it via the Internet.
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[Dendrite Logo]
DENDRITE INTERNATIONAL, INC.
1200 MOUNT KEMBLE AVENUE
MORRISTOWN, NEW JERSEY 07960-6797
WWW.DENDRITE.COM
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 2000
The Annual Meeting of Shareholders (the "Annual Meeting") of Dendrite
International, Inc., a New Jersey corporation (the "Company"), will be held at
the Company's headquarters, 1200 Mount Kemble Avenue, Morristown, New Jersey
07960-6796, on Friday, May 12, 2000 at 9:00 a.m. (local time) for the following
purposes:
1. To elect six directors to serve until the next Annual Meeting and until
their successors have been duly elected and qualified;
2. To ratify the appointment of Arthur Andersen LLP, as the Company's
independent public accountants for the fiscal year ending December 31,
2000;
3. To approve an amendment to the Company's 1997 Stock Incentive Plan, as
amended (the "1997 Stock Plan"), to increase the maximum number of
shares of Common Stock available for issuance under the 1997 Stock Plan
from 6,000,000 shares to 8,500,000 shares; and
4. To act upon such other matters as may properly come before the meeting
or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
shareholders who will be entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment thereof is March 15, 2000. The Annual Meeting may
be adjourned from time to time without notice other than by announcement at the
Annual Meeting. The stock transfer books will not be closed between the record
date and the date of the Annual Meeting. A list of shareholders arranged
alphabetically who are entitled to vote at the Annual Meeting will be available
for inspection at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of the number of shares you may hold. If you receive more than one
proxy card because your shares are registered in different names or addresses,
each such proxy card should be signed and returned to ensure that all of your
shares will be voted. The prompt return of proxies will ensure a quorum is
present at the Annual Meeting and save the Company the expense of further
solicitation. Whether or not you plan to attend the meeting, please complete,
date, sign and return the enclosed proxy promptly either in the accompanying
reply envelope or via the Internet. Your proxy may be revoked at any time prior
to the voting of the proxy at the Annual Meeting. If you decide to attend the
Annual Meeting and wish to change your proxy vote, you may do so by voting in
person at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christopher J. French
Christopher J. French
Secretary
Morristown, New Jersey
April 17, 2000
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DENDRITE INTERNATIONAL, INC.
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Dendrite International, Inc., a New Jersey
corporation ("Dendrite" or the "Company"), for use at the 2000 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at 9:00 a.m. (local time) on
Friday, May 12, 2000, at the Company's headquarters, 1200 Mount Kemble Avenue,
Morristown, New Jersey 07960-6797, and at any adjournment or postponement of the
Annual Meeting. These proxy materials are being distributed to shareholders by
mail or by the Internet on or about April 17, 2000.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
VOTING
The Company's Common Stock, no par value (the "Common Stock"), is the only
type of security entitled to vote at the Annual Meeting. On March 15, 2000, the
record date for determination of shareholders entitled to vote at the Annual
Meeting, there were 38,957,422 shares of Common Stock outstanding. Each
shareholder of record on March 15, 2000 is entitled to one vote for each share
of Common Stock held by such shareholder. All information in this Proxy
Statement with respect to shares of Common Stock reflects the three-for-two
forward split of the Common Stock which became effective on October 8, 1999.
The presence in person or by proxy of the holders, as of the record date,
of a majority of the outstanding shares of Common Stock will constitute a quorum
at the Annual Meeting. In the election of directors, the six candidates
receiving the highest number of affirmative votes will be elected. The Board
wishes to receive a majority of the votes cast at the Annual Meeting for
Proposal 2, while Proposal 3 requires for approval the affirmative vote of a
majority of the votes cast at the Annual Meeting. Abstentions will be treated as
shares that are present for purposes of determining the presence of a quorum but
as unvoted for purposes of determining the approval of any matter submitted for
a vote of the shareholders. Proposals 1 and 2 are considered "discretionary"
items upon which brokerage firms may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions within ten days
of the date of the Annual Meeting. Proposal 3 is "nondiscretionary" and brokers
who have not received instructions from their clients do not have discretion to
vote on this item. In instances where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not returned a proxy (so
called "broker non-votes"), the shares of Common Stock subject to such broker
non-votes will be treated in the same manner as abstentions.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes.
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VOTING ELECTRONICALLY VIA THE INTERNET
Shareholders may vote either by mailing the enclosed proxy card or via the
Internet. Specific instructions to be followed by any registered shareholder
interested in voting via the Internet are set forth on the enclosed proxy card.
The Internet voting procedures are designed to authenticate the shareholder's
identity and to allow shareholders to vote their shares and confirm that their
instructions have been properly recorded. The Company's website for Internet
voting is www.dendrite.com.
If your shares are registered in the name of a bank or brokerage firm, you
still may be eligible to vote your shares electronically over the Internet.
Please contact your bank or brokerage firm for additional information regarding
Internet voting if your shares are registered in the name of such bank or
brokerage firm.
PROXIES
The persons named as proxies are John E. Bailye, George T. Robson and
Christopher J. French. Mr. Bailye is a director and officer of the Company and
Messrs. Robson and French are officers of the Company. Whether or not you are
able to attend the Annual Meeting, you are urged to complete and return the
enclosed proxy, which is solicited by the Company's Board of Directors and which
will be voted as you direct on your proxy when properly completed. In the event
no directions are specified, such proxies will be voted FOR the nominees of the
Board of Directors as provided in Proposal 1, FOR Proposals 2 and 3, and, as to
other matters that may properly come before the Annual Meeting, in the
discretion of the proxy holders. You may revoke or change your proxy at any time
before the voting of the proxy at the Annual Meeting. To do this, send a written
notice of revocation or another signed proxy with a later date to the Secretary
of the Company at the Company's principal executive offices before the beginning
of the Annual Meeting. You may also revoke your proxy by attending the Annual
Meeting and filing a written notice of revocation with the secretary of the
Annual Meeting prior to the voting at the Annual Meeting or by voting the shares
subject to the proxy by written ballot.
DISTRIBUTION OF PROXY MATERIALS BY MAIL OR BY THE INTERNET
In addition to voting electronically via the Internet as described above,
the Company intends to solicit proxies by mail and by the Internet. The Company
will transmit its proxy statement and related materials via the Internet only to
each shareholder of record who has previously consented to receiving such proxy
materials electronically. The Company believes that transmitting the proxy
materials over the Internet to those shareholders who have consented to such
distribution will save the Company money otherwise spent on printing, copying
and postage expenses associated with mailing such proxy materials.
EXPENSES OF SOLICITATION
The Company will bear the entire cost of solicitation, including the
presentation, assembly, printing, and mailing of this Proxy Statement, the
proxy, and any additional soliciting material furnished to shareholders. Copies
of solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, or other means by directors, officers, employees, or agents of the
Company. No additional compensation is anticipated to be paid to these
individuals for any such services.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors is elected annually by the holders of the
Common Stock and is currently comprised of six members (individually a
"Director" and collectively the "Directors"). Each Director holds office until
the next Annual Meeting of Shareholders and until his successor is duly elected
and qualified or until his earlier resignation or removal. The names of the
nominees for Director, each of whom is presently a Director of the Company, and
their positions and offices with the Company are set forth in the table below.
None of the Company's Directors is related to any other Director or to any
executive officer of the Company.
The proxy holders intend to vote all valid proxies received by them for the
nominees listed below unless otherwise instructed. In the event any nominee is
unable or declines to serve as a Director at the time of the Annual Meeting, the
proxies will be voted for any nominee who may be designated by the present Board
of Directors to fill the vacancy. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a Director. The six nominees receiving the highest number of
affirmative votes of the shares entitled to vote at the Annual Meeting will be
elected Directors.
Nominees for Election at the 2000 Annual Meeting are:
POSITIONS AND OFFICES HELD
NOMINEES AGE WITH THE COMPANY
- -------- --- --------------------------
President, Chief Executive
John E. Bailye.............................. 46 Officer,
Director and Chairman of the Board
Bernard M. Goldsmith........................ 56 Director
Edward J. Kfoury............................ 61 Director
Paul A. Margolis............................ 46 Director
John H. Martinson........................... 52 Director
Terence H. Osborne.......................... 61 Director
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED HEREIN.
BUSINESS EXPERIENCE OF NOMINEES
The following describes the current and past five years business experience
and certain directorships of each nominee for Director. This information was
furnished to the Company by each of the respective nominees.
MR. JOHN E. BAILYE has served as President, Chief Executive Officer and
Director since the Company's incorporation in March 1987 and, since October
1991, as Chairman of the Board. Prior to March 1987, Mr. Bailye served as a
market researcher at Foresearch Pty., Limited ("Foresearch"), a consulting
company to the pharmaceutical industry in Australia. In 1976, Mr. Bailye
acquired Foresearch and served as its Managing Director until he sold the
company in 1986. Mr. Bailye holds a Bachelor of Commerce in Finance, Marketing
and Business from the University of New South Wales.
MR. BERNARD M. GOLDSMITH has served as a Director since May 1996. In 1986,
he founded Updata Capital, Inc., an investment banking firm focused on mergers
and acquisitions in the information technology industry ("Updata"). Mr.
Goldsmith currently serves as Managing Director of Updata. Mr. Goldsmith also
founded Updata Software Company, where he served as Chief Executive Officer from
1986 to 1988 and CGA Computer, Inc., where he served as Chairman and Chief
Executive Officer from 1968 to 1986. Mr. Goldsmith is also a director of
Compuware Corporation and several privately held companies. Mr. Goldsmith holds
a Bachelor of Arts in Business Administration from Rutgers University.
MR. EDWARD J. KFOURY has served as a Director since July 1997. Prior to
joining the Company, Mr. Kfoury served as a division President and Vice
President of IBM Corporation ("IBM") from 1988 through 1993 and in various other
positions with IBM from 1963 to 1988. Mr. Kfoury is a director of Mapics,
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Inc. and five privately held companies. Mr. Kfoury is also a director of the
Nature Conservancy, an advisory trustee of the Maine Audobon Society and
President of Rangeley Lakes Heritage Trust. Mr. Kfoury holds a Bachelor of
Business Administration in Marketing from the University of Notre Dame.
MR. PAUL A. MARGOLIS has served as a Director since July 1993. Mr. Margolis
is a Partner at Longworth Venture Partners, a venture capital company which
invests in Internet, electronic commerce, enterprise software and IT services
companies. Mr. Margolis founded Marcam Corporation ("Marcam") in 1980 and was
its Chairman, President and Chief Executive Officer until 1996 and a director of
Marcam until 1998. Mr. Margolis is also a director of Canopy International,
Digital Paper Corporation, eMaven, Inc. and Syndicated Research Group, Inc. Mr.
Margolis holds a Bachelor of Arts from Brown University and an M.B.A. from
Harvard Business School.
MR. JOHN H. MARTINSON has served as a Director since September 1991. In
1986, he founded the Edison Venture Fund. He currently serves as Managing
Partner of Edison Partners I, II, III and IV and as President of Edison
Management Corporation. Mr. Martinson is also a director of Best Software, Inc.
and eight privately held companies. He is the former Chairman of the New Jersey
Technology Council and President of the National Venture Capital Association.
Mr. Martinson holds a Bachelor of Science in Aeronautics from the United States
Air Force Academy, an M.S. in Astronautics from Purdue University and an M.B.A.
from Southern Illinois University.
MR. TERENCE H. OSBORNE has served as a Director since August 1998. Mr.
Osborne served as Chairman of Dr. Solomon's Group PLC from 1996 until 1998. Mr.
Osborne also served as President and Chief Operating Officer of System Software
Associates ("SSA"), a computer software company, from November 1994 until
October 1996. From October 1992 until November 1994, he served as SSA's General
Manager and Vice President -- Europe. Prior to joining SSA, he was employed by
IBM in various capacities since 1961, including vice president level positions
in both the United States and Europe. Mr. Osborne is also Chairman of Prime
Response, Inc. and Cimax International and a director of Mapics, Inc. and
Firepond, Inc. Mr. Osborne holds a Bachelor of Science, with honors, in Pure and
Applied Mathematics from London University.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1999, the Board of Directors held
five (5) meetings. During this period, each member of the Board of Directors
attended or participated in more than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the period for which
such person has been a Director) and (ii) the total number of meetings held by
all Committees of the Board on which each such Director served (during the
periods such Director served). During the fiscal year ended December 31, 1999,
the Board of Directors also acted by unanimous written consent nine (9) times.
The Company has four standing Committees: the Audit Committee, the
Compensation Committee, the Employee Plan Committee and the Operations and
Technology Committee.
The Audit Committee (currently comprised of Mr. Martinson and Mr. Margolis)
reviews the internal accounting procedures of the Company and consults with and
reviews the services provided by the Company's independent public accountants.
In addition, pursuant to the new rules promulgated by the Securities and
Exchange Commission (the "SEC") and the Nasdaq National Market which went into
effect on March 15, 2000, the Audit Committee will also be responsible for: (i)
reviewing the audited financial statements and annual report of the Company, as
well as the Company's unaudited quarterly financial statements and reports, and
(ii) discussing such matters with the Company's management and independent
public accountants. During the fiscal year ended December 31, 1999, the Audit
Committee held four (4) meetings.
The Compensation Committee (currently comprised of Mr. Kfoury and Mr.
Osborne) makes general policy decisions relating to compensation and benefits
for the Company's employees and Directors. In addition, the Compensation
Committee is responsible for the administration of all of the Company's stock
option plans. During the fiscal year ended December 31, 1999, the Compensation
Committee held four (4) meetings. Mr. Osborne replaced Mr. Goldsmith on the
Compensation Committee effective February 1, 1999. At one (1) of such meetings,
the Compensation Committee consisted of Messrs. Goldsmith and Kfoury and at
three (3) of such meetings, the Compensation Committee consisted of Messrs.
Osborne and Kfoury.
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During the fiscal year ended December 31, 1999, the Compensation Committee also
acted by unanimous written consent four (4) times.
The Employee Plan Committee (currently comprised of Mr. Goldsmith, Mr.
Margolis and Mr. Martinson) administers the Company's 1997 Employee Stock
Purchase Plan, as amended (the "Employee Plan"). During the fiscal year ended
December 31, 1999, the Employee Plan Committee did not meet.
The Operations and Technology Committee (currently comprised of Mr. Kfoury
and Mr. Osborne) is responsible for providing the Company with business advice
with respect to the conduct of its service delivery operations and
technology-related matters. Mr. Kfoury is responsible for matters relating to
the Company's United States operations while Mr. Osborne is responsible for
matters relating to the Company's European operations. During the fiscal year
ended December 31, 1999, the Operations and Technology Committee did not meet.
However, each of Messrs. Kfoury and Osborne provided substantial business advice
to the management of the Company during the fiscal year ended December 31, 1999
with respect to operational and technology-related matters concerning the
Company's domestic and international operations.
DIRECTOR COMPENSATION
Directors receive no cash compensation for services provided as a Director
and received no such cash compensation in the 1999 fiscal year. Directors
receive reimbursement for reasonable expenses incurred traveling to and from
Board meetings. In addition, effective as of the date of the Annual Meeting (and
for each year thereafter), each non-employee member of the Board of Directors
shall be granted annual non-qualified stock options to purchase shares of the
Company's Common Stock with a value equal to $116,000 as determined by
application of the Black-Scholes option pricing formula. Such options shall (i)
be issued under the 1997 Stock Plan, (ii) be granted at the fair market value of
the underlying shares of Common Stock, and (iii) vest and become one hundred
percent (100%) exercisable on the first anniversary of the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, the Company leased use of an aircraft from a third party leasing
company, LynStar, Inc. ("LynStar"). One of the aircraft which LynStar, from time
to time, leased to the Company was a Beechcraft King Air airplane owned by
Kookaburra Air, LLC, a limited liability company, ("Kookaburra"), whose only
members are Mr. Bailye and his spouse. LynStar is not an affiliate of Mr.
Bailye. The Company paid fees to LynStar for aircraft leases of $179,424 during
the year ended December 31, 1999. Furthermore, in November 1999 and December
1999, the Company paid fees in the aggregate amount of $14,644 to Kookaburra for
the lease of a Hawker 700 airplane. All such leases were on terms no more or
less favorable to the Company than LynStar or Kookaburra offered to its other
customers.
John E. Bailye is a party to a registration rights agreement with the
Company under which he has certain rights with respect to the registration under
the Securities Act of 1933, as amended, for resale to the public of certain of
the shares of Common Stock which are owned by him.
From January 1, 1998 to February 1, 1999, Updata informally provided advice
to the Company with respect to certain investment banking issues. On February 1,
1999, the Company retained Updata as one of its financial advisors. Mr.
Goldsmith, a Director of the Company, currently serves as a Managing Director of
Updata. In fiscal 1999, the Company paid fees to Updata in the aggregate amount
of $702,224 for services rendered during 1999 in connection with the
acquisitions of CorNet International, Ltd. and Marketing Management
International, Inc.
As of January 5, 1998, the Company entered into a Consulting Agreement with
Edward J. Kfoury, a Director of the Company, providing that Mr. Kfoury would
provide certain consulting services to the Company in exchange for a grant of
options to purchase 36,000 shares of Common Stock. Such options were granted at
the fair market value of the underlying shares of Common Stock and are subject
to a three-year vesting schedule. In addition, the Company will reimburse Mr.
Kfoury for his reasonable travel and business expenses related to any business
travel or expenditure specifically requested by the Company. Mr. Kfoury and the
Company have agreed that his service on the Company's Operations and Technology
Committee will satisfy his obligations under his Consulting Agreement.
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EXECUTIVE OFFICERS
The following table identifies the current executive officers of the
Company(1):
NAME AGE CAPACITIES IN WHICH SERVED IN CURRENT POSITION SINCE
- ---- --- -------------------------- -------------------------
John E. Bailye....... 46 President, Chief Executive March 1987
Officer, Director and Chairman (Chairman since October 1991)
of the Board
R. Bruce Savage...... 51 Executive Vice President and September 1994
Chief Operating Officer
George T. Robson..... 52 Executive Vice President and June 1997
Chief Financial Officer (Executive Vice President
since
February 1999)
Teresa F. Winslow.... 44 Senior Vice President and June 1997
President, Americas Division (President, Americas Division
since July 1999)
Mark H. Cieplik...... 45 Senior Vice President, Worldwide June 1997
Sales
Stephen Webb......... 46 Senior Vice President, September 1999
International
Christopher J.
French............. 40 Vice President, General Counsel January 1996
and Secretary (Secretary since July 1996)
Kathleen E.
Donovan............ 39 Vice President and Controller March 1999
- ---------------
(1) In January 2000, the Company re-evaluated its executive officers' reporting
requirements under applicable federal securities laws and determined that
certain officers of the Company, who were considered executive officers for
1999 and who continue to hold the same office of the Company, are no longer
considered current executive officers as defined under such federal
securities laws.
None of the Company's executive officers are related to any other executive
officer or to any Director of the Company. Each executive officer serves at the
discretion of the Board of Directors.
MR. R. BRUCE SAVAGE has served as Executive Vice President and Chief
Operating Officer since September 1994. From June 1993 until September 1994, Mr.
Savage was Vice President, Europe/Asia and, from September 1988 to June 1993,
Vice President, Europe. He also served as General Manager for Dendrite New
Zealand from 1986 to 1987, and served as the General Manager of Dendrite
Australia and Dendrite New Zealand from 1987 until September 1988. Prior to
joining the Company, Mr. Savage spent 15 years in the pharmaceutical industry
working for Ciba Geigy (NZ) Limited as Manager of Sales and Marketing.
MR. GEORGE T. ROBSON has served as Executive Vice President since February
1999, and as Senior Vice President and Chief Financial Officer since June 1997.
Prior to joining the Company, Mr. Robson served as Senior Vice President and
Chief Financial Officer of H&R Block, Inc. from January 1996 to May 1997, and as
Treasurer of such corporation from June 1996 to May 1997. In addition, Mr.
Robson served as Senior Vice President of Unisys Corporation from April 1991 to
January 1996, and as Chief Financial Officer of such corporation from January
1990 until January 1996. Mr. Robson holds a Bachelor of Science in Economics
from the Wharton School of the University of Pennsylvania and an M.S. in
Management Science from Binghamton University, previously known as the State
University of New York.
MS. TERESA F. WINSLOW has served as President, Americas Division since July
1999 and Senior Vice President since June 1997. Ms. Winslow served as Senior
Vice President for the Pfizer Pharmaceutical Global Account Group from September
1996 to June 1997, as Vice President, Sales and Business Development from
September 1994 to September 1996, as Executive Director, International Sales
from August 1993 to
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September 1994 and as Director of Marketing and Sales for Dendrite Americas from
October 1991 to August 1993. Prior to joining the Company, Ms. Winslow served in
various positions at Schering Laboratories, a division of Schering-Plough
Corporation, most recently as National Sales Director. Ms. Winslow is a
registered pharmacist and holds a Bachelor of Science in Pharmacy from the
University of the Sciences, previously known as Philadelphia College of Pharmacy
and Science.
MR. MARK H. CIEPLIK has served as Senior Vice President, Worldwide Sales
since June 1997. Prior to joining the Company, Mr. Cieplik served as Vice
President of Americas of Interleaf, Inc. from May 1995 to May 1997. In addition,
Mr. Cieplik served as Director of North America Major Accounts for System
Software Associates from December 1991 to April 1995, and served in various
capacities for IBM from 1976 until 1991. Mr. Cieplik holds a Bachelor of Science
in Marketing from Millikin University.
MR. STEPHEN WEBB has served as Senior Vice President, International since
September 1999. Prior to joining the Company, Mr. Webb spent nine (9) years at
Walsh, a division of IMS Health Strategic Technologies, a subsidiary of IMS
Health, most recently as Vice President of its direct marketing, sales force
management and physician database management businesses. Mr. Webb holds an
Accountancy degree from Southhampton Technical College and is a member of both
the Chartered Certified Accountancy and the Chartered Institute of Marketing in
the United Kingdom.
MR. CHRISTOPHER J. FRENCH has served as Vice President and General Counsel
since January 1996, and as Secretary since July 1996. Prior to joining the
Company, Mr. French was an associate at Skadden, Arps, Slate, Meagher & Flom
from 1987 to 1996. Mr. French holds a Bachelor of Science in Economics from the
Wharton School of the University of Pennsylvania and a J.D. from Fordham
University School of Law.
MS. KATHLEEN E. DONOVAN has served as Vice President and Corporate
Controller since March 1999. Ms. Donovan served as Vice President of Financial
Operations from August 1997 to March 1999. Prior to joining the Company, Ms.
Donovan spent 14 years at Unisys Corporation, most recently as Director of
Corporate Financial Planning. Ms. Donovan holds a Bachelor of Science in Finance
from Georgetown University.
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EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
Compensation of executive officers of the Company is established by the
full Board of Directors of the Company, based upon recommendations made to it by
its Compensation Committee. In addition, the Compensation Committee also
administers the 1992 Stock Plan, as amended (the "1992 Stock Plan"), the 1992
Senior Management Incentive Stock Option Plan, as amended (the "ISO Plan"), and
the 1997 Stock Plan. The Employee Plan, however, is administered by the Employee
Plan Committee. The Compensation Committee is responsible for establishing the
Company's general policy with regard to executive compensation, and is currently
comprised of two directors of the Company, Messrs. Kfoury and Osborne, who are
not employees of the Company. Mr. Osborne replaced Mr. Goldsmith on the
Compensation Committee effective February 1, 1999.
GENERAL POLICY
The Compensation Committee's general policy regarding the form and level of
executive compensation is to attract and retain the highest level of executive
talent possible and to induce such executives to achieve both short-term
objectives and long-term growth and profitability for the Company. Factors used
in determining such compensation include competitive market considerations, the
contribution of the individual to the present financial success of the Company,
and the long-term performance of the Company. The Compensation Committee does
not, however, rely upon objective factors to make compensation decisions, but
instead reaches its determination based upon a subjective review of the factors
set forth above. To achieve these objectives, the Company's 1999 fiscal year
executive compensation program consisted of the following elements: annual base
salary; other annual compensation and benefits; annual cash bonus; performance
awards; and long-term compensation in the form of stock options. As part of the
Company's general executive compensation policy, in 1999 the Compensation
Committee decided to freeze the annual base salary of each of its executive
officers for years 2000 and thereafter, and to award any future compensation
increases in the form of annual cash bonuses and/or the grant of stock options
and/or shares of Common Stock. Pursuant to the terms of their respective
employment agreements, Messrs. John E. Bailye and R. Bruce Savage are each
entitled to an increase in their respective base salary in accordance with the
increase in the consumer price index (all-items portion, for urban consumers) as
published in the U.S. Bureau of Labor Statistics (the "CPI"). Each of Messrs.
Bailye and Savage have agreed to waive this increase.
ANNUAL COMPONENT: BASE SALARY, OTHER COMPENSATION AND BONUS
Each of the elements of executive compensation has a different purpose and
basis. The base salary and other annual compensation and benefits paid in 1999
were made to compensate ongoing performance throughout the year. The base salary
for each executive officer was based on several factors, including, but not
limited to, a comparison of compensation practices of other companies in the
industry, personal performance, and performance of the Company. Benefits for all
executive officers included, in addition to the option and share programs
discussed below, group term life insurance premiums, the Company's matching
portion of the executive's 401(k) plan contribution and an annual reimbursement
of up to $10,000 per executive officer for financial and tax planning services.
The Compensation Committee's policy is to have annual compensation at the higher
end of the range reported by the companies in its industry.
From time to time, the Company may pay to one or more of its executives
annual and/or quarterly cash bonuses and/or performance awards in the form of
option or share grants as an additional incentive and reward for his or her
contribution in reaching and exceeding short-term Company objectives for
revenues and profitability. These cash bonuses reflect the Compensation
Committee's assessment, in consultation with the President and Chief Executive
Officer, of that individual's achievement and the significance of that executive
officer's contribution to the financial success of the Company during a
particular fiscal year. Moreover, the Compensation Committee has also
established an over-achievement bonus program whereby the Company will pay
additional one-time cash bonuses to each of the Company's executive officers if
the Company surpasses certain milestones in excess of the Company's budgeted
1999 financial objectives. During 1999,
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quarterly cash bonuses were paid to each of the Company's executive officers. To
further induce the executives' continued employment commitment to the Company,
payment of 50% of the cash bonuses earned by each executive officer in the third
and fourth quarters of 1999 was deferred until the achievement of the Company's
1999 financial objectives. The deferred portion of these bonuses was paid in
February 2000. Finally, in February 2000, as part of the Compensation
Committee's over-achievement plan discussed above, the Company paid additional
one-time cash bonuses to each of its executive officers to reflect the Company's
significant financial achievements in 1999.
LONG-TERM COMPONENT: INCENTIVE STOCK OPTIONS, ANNIVERSARY SHARE AWARDS,
EMPLOYEE PLAN AND ANNUAL OPTION GRANT PROGRAM
The long-term component of executive compensation involves primarily the
award of tax-qualified incentive stock options to align the interests of the
executive with those of the shareholders. The amount of options awarded is
intended to be set at a level sufficient to create a meaningful opportunity for
stock ownership in executives other than Mr. Bailye, the Company's founding
shareholder. To comply with Federal income tax requirements for incentive stock
options, the options are granted with an exercise price equal to the fair market
value per share of the Common Stock at the time of the grant. To induce the
executives' long-term employment commitment to the Company, any options granted
in 1999 became exercisable in equal twenty-five percent (25%) installments over
a four-year vesting schedule, and expire if not exercised within ten years after
the date of grant. However, effective as of December 8, 1999, such options
previously granted or to be granted to such executive officers become
exercisable as follows: twenty-five percent (25%) on the first anniversary of
the date of grant and the remaining seventy-five percent (75%) pro-rata on a
monthly basis over the following three years. Options under the 1997 Stock Plan
were granted in 1999 to each of the Company's executive officers in connection
with such executive officers' individual performance. In addition, Mr. Robson
was granted additional options in 1999 in accordance with the terms of his
employment agreement.
Furthermore, the Company's Employee Plan provides, among other things,
certain eligible employees, including the executive officers, with an
opportunity to acquire an interest in the Company through the purchase of Common
Stock through accumulated payroll deductions. The Company also awards shares of
its Common Stock to executive officers upon such person's five-year anniversary
of employment with the Company. Such share grants are designed to reward
employees for their long-term employment commitment to the Company.
On December 8, 1999, the Company's Compensation Committee approved the
adoption of an Annual Option Grant Program for senior management. The purpose of
this program is to demonstrate the Company's commitment to having the individual
members of the Company's Board of Directors and its executive officers maintain
a significant level of ownership interest in the Company and to align such
individual's interests with those of the Company's shareholders. Accordingly,
effective for calendar year 2000 and thereafter, each of the Company's executive
officers and non-employee Directors will be granted options to purchase a
certain number of shares of the Company's Common Stock having a pre-determined
Black-Scholes grant value for each level of executive officer and for such
non-employee Directors. Such options shall (i) be granted under the 1997 Stock
Plan, (ii) be issued with an exercise price equal to the fair market value on
the date of grant, and (iii) with respect to the Company's executive officers,
become exercisable pursuant to the vesting schedule provided above, and with
respect to the Company's non-employee members of the Board of Directors, vest
and become one hundred percent (100%) exercisable on the first anniversary of
the date of grant.
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION
The 1999 annual base salary for Mr. Bailye, the Chairman of the Board,
President and Chief Executive Officer of the Company, was established pursuant
to his Employment Agreement. The Compensation Committee may, in its discretion,
determine to pay Mr. Bailye an annual cash bonus if the Company meets or exceeds
its budgeted goals in a particular fiscal year, which Mr. Bailye received for
the 1999 fiscal year. From time to time, the Compensation Committee may, in its
discretion, grant to Mr. Bailye options to purchase shares of the Company's
Common Stock. However, none of such options are deemed incentive stock options,
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to the extent that the exercise price does not exceed 110% of the fair market
value of the Company's Common Stock at the time of grant, because Mr. Bailye's
stock ownership in the Company exceeds ten percent (10%). In 1999, Mr. Bailye
was granted options to purchase an aggregate of 187,500 shares of Common Stock
and, in January 2000, Mr. Bailye was granted additional options to purchase an
aggregate of 108,500 shares of Common Stock. None of such options were incentive
stock options. Mr. Bailye does not participate in decisions of the Board
relating to his own compensation.
DEFERRED COMPENSATION PLAN
The Company's Deferred Compensation Plan provides certain highly
compensated employees of the Company with the opportunity to elect to defer
receipt of specified portions of compensation and to have such deferred amounts
treated as if invested in specified investment vehicles. Under the Deferred
Compensation Plan, the amount of compensation or awards deferred will be
credited to a deferral account maintained by the Company on the date such
deferred compensation would have been paid to the employee. Such deferred
compensation in the deferred accounts shall be invested in certain investment
vehicles as may be specified from time to time by the Deferred Compensation
Plan's administrator. The Company shall settle the deferral account by payment
of cash or, in the discretion of the Company, by delivery of other assets having
a fair market value equal to the amount credited to the deferral account.
Payments in settlement of a deferral account shall be made as soon as
practicable after the date, and in such installments, as may be directed by the
employee. If the total distribution to be made is less than $25,000, then the
form of distribution in all cases will be a lump sum.
OPTION PROFIT DEFERRAL PROGRAM
Pursuant to the Deferred Compensation Plan, in January 2000, the Board of
Directors approved the adoption of the Option Profit Deferral Program whereby
executive officers may defer receipt of shares of Common Stock (the "Profit
Shares") that such person would otherwise have been entitled to receive upon the
exercise of a stock option previously granted by the Company to such person.
Such Profit Shares will be treated as deferred compensation under the Deferred
Compensation Plan. Distribution of the Profit Shares will be made in the form of
shares of the Company's Common Stock, and such participant may not elect to
receive cash in lieu of stock. Profit Shares will be distributed at such time as
the executive officer elects pursuant to the Deferred Compensation Plan's
distribution provisions.
SHARE OWNERSHIP PROGRAM
On December 8, 1999, the Company's Compensation Committee approved the
adoption of a Share Ownership Program for senior management. The purpose of this
program is to demonstrate its commitment to have the individual members of the
Company's Board of Directors and executive officers maintain a significant level
of ownership interest in the Company and to align such individual's interests
with those of the Company's shareholders. Set forth below are the mandatory
ownership levels for each of the specified positions.
MANDATORY MINIMUM
POSITION OWNERSHIP LEVEL (SHARES)
- -------- ------------------------
President and Chief Executive Officer................... 100,000
Executive Vice President................................ 50,000
Senior Vice President................................... 25,000
Vice President.......................................... 15,000
Non-employee Director................................... 15,000
For each level of executive officer or non-employee member of the Board of
Directors, fifty percent (50%) of the applicable mandatory ownership level must
be achieved by the later of (i) the third anniversary of the effective date of
this policy (December 8, 2002) or (ii) the third anniversary of the date of hire
or promotion to the applicable position, whichever is later. One hundred percent
(100%) of the applicable mandatory ownership level must be achieved by the fifth
anniversary of the later of the applicable dates referenced in the immediately
preceding sentence. The Share Ownership Program provides, among other
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things, that the failure of such Director or executive officer to meet the
required ownership levels will disqualify such individual from receiving any
further options or long-term incentive awards until such individual's ownership
is brought into compliance with the mandatory ownership levels specified in the
Share Ownership Program.
1999 YEAR-END INCENTIVE STOCK BONUS PROGRAM
On December 8, 1999, the Company's Compensation Committee approved the
adoption of the 1999 Year-End Incentive Stock Bonus Program whereby executive
officers may elect to receive their 1999 year-end incentive bonus (including any
amounts earned but deferred in accordance with the Company's 1999 Bonus Plan) in
shares of the Company's Common Stock (the "Bonus Shares"). The number of such
Bonus Shares shall equal the amount of the executive officer's 1999 bonus which
such individual elects to receive in Common Stock divided by the closing price
of the Company's Common Stock on the trading date immediately prior to the
payment date of the 1999 bonus. In order to encourage such executive officers to
elect to receive their 1999 bonus in Bonus Shares, the Company will grant to
each executive officer who elects to receive such Bonus Shares, a stock option
to purchase that number of shares of the Company's Common Stock equal to the
number of Bonus Shares such individual receives (calculated without giving
effect to any Bonus Shares withheld to pay any required withholding taxes) (the
"Tandem Options"). Such Tandem Options will be considered incentive stock
options to the extent permitted by law and will vest and become fully
exercisable on the first anniversary of the 1999 bonus payment date. The Tandem
Options and the Bonus Shares will be issued under the Company's 1997 Stock Plan.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
A feature of the Omnibus Budget Reconciliation Act of 1993 (the "Act")
limits deductibility of certain compensation for the Chief Executive Officer and
the other four highest compensated executive officers (the "Covered Employees")
to $1 million per year, effective for tax years beginning on or after January 1,
1994. Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), if certain conditions are met, including the removal of
positive discretion in the determination of individual rewards, compensation may
be excluded from consideration of the $1 million limit. The policy of the
Compensation Committee related to this Act is to establish and maintain a
compensation program which maximizes the creation of long-term shareholder
value.
The Company's 1992 Stock Plan, the ISO Plan, the 1997 Stock Plan and the
Employee Plan meet the necessary conditions for exclusion from consideration of
non-deductibility as set forth in Section 162(m) of the Code. The actions taken
by the Company, pursuant to Section 162(m) of the Code, evidence the intention
of the Compensation Committee to comply with the intent of the Board of
Directors and the shareholders of the Company to recognize and reward
performance which increases the value of the Company.
COMPENSATION COMMITTEE
(as constituted at year-end)
Edward J. Kfoury
Terence H. Osborne
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are as named above in the Compensation Committee Report. No member of
any such Committee was at any time during the 1999 fiscal year or at any other
time an officer or employee of the Company.
No executive officer of the Company served on the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and accompanying footnotes provide certain summary
information concerning the compensation earned by the Company's President and
Chief Executive Officer and the next four most highly compensated executive
officers for 1999 (the "Named Officers"), in each case for services rendered in
all capacities to the Company and its subsidiaries for the years ended December
31, 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------------ LONG-TERM
COMPENSATION
AWARDS/
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ------------------ ------------ ------------------
John E. Bailye.......... 1999 $450,000 $403,000 $ 0 187,500 $17,981
President and Chief 1998 450,000 360,000 0 0 164,604
Executive Officer 1997 436,920 160,000 11,766 416,000 5,443
R. Bruce Savage......... 1999 302,284 318,500 0 112,500 6,974
Executive Vice President 1998 297,500 288,750 0 50,000 8,139
and Chief Operating 1997 293,977 109,000 11,766 136,000 5,898
Officer
George T. Robson........ 1999 217,000 193,500 218,000 187,500 68,652
Executive Vice President 1998 284,083 200,000 121,750 80,000 7,064
and Chief Financial 1997 200,000 120,000 0 400,000 674
Officer
Teresa F. Winslow....... 1999 70,776 42,337 487,463 52,500 6,598
Senior Vice President and 1998 168,735 79,926 541,895 0 5,408
President, Americas 1997 219,267 235,900 3,138 176,000 5,015
Division
Mark H. Cieplik......... 1999 260,000 285,000 0 52,500 10,183
Senior Vice President, 1998 255,004 236,250 0 0 408
Worldwide Sales 1997 161,062 100,000 0 220,000 148
- ---------------
(1) Other annual compensation includes the following:
(A) In the case of Mr. Bailye, such amount for 1997 represents the fair
market value as of the date of issuance of a stock award granted to
him.
(B) In the case of Mr. Savage, such amount for 1997 represents the fair
market value as of the date of issuance of a stock award granted to
him.
(C) In the case of Mr. Robson, such amount for 1999 represents deferred
compensation consisting of $93,000 of deferred salary and $125,000 of
deferred bonus. Such amount for 1998 represents deferred compensation
consisting of $21,750 of deferred salary and $100,000 of deferred
bonus. Such amount for 1997 represents the fair market value as of the
date of issuance of a stock award granted to him.
(D) In the case of Ms. Winslow, such amount for 1999 represents deferred
compensation consisting of $189,800 of deferred salary and $297,663 of
deferred bonus. Such amount for 1998 represents deferred compensation
consisting of $86,821 of deferred salary and $455,074 of deferred
bonus. Such amount for 1997 represents the fair market value as of the
date of issuance of a stock award granted to her.
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(2) All other compensation includes the following:
(A) In the case of Mr. Bailye, such amount in 1999 includes Group Term Life
Insurance premiums of $638, the Company's matching portion of the
employee's 401(k) contributions of $4,800, and $10,250 in federal tax
and $2,293 in Medicaid tax relating to the forgiveness of debts and
receivables for Kookaburra Inc., the Company's predecessor in interest
("Kookaburra Inc.") (as more fully described in the Company's Proxy
Statement for its 1999 Annual Meeting of Shareholders). Such amount in
1998 includes Group Term Life Insurance premiums of $1,346, the
Company's matching portion of the employee's 401(k) contributions of
$5,000 and $116,908 relating to the forgiveness of the Kookaburra Inc.
receivable and $41,350 as payment for the cash value of the tax benefit
relating to such receivable. Such amount in 1997 includes Group Term
Life Insurance premiums of $693 and the Company's matching portion of
the employee's 401(k) contributions of $4,750. Such amounts under all
other compensation previously reported for Mr. Bailye in 1997 included
life insurance premium payments of $5,120. The foregoing payments were
deemed not to be compensation to Mr. Bailye because such amounts
represented key man life insurance premium payments on a policy whose
primary beneficiary is the Company.
(B) In the case of Mr. Savage, such amount in 1999 includes Group Term Life
Insurance premiums of $2,174 and the Company's matching portion of the
employee's 401(k) contributions of $4,800. Such amount in 1998 includes
Group Term Life Insurance premiums of $3,139 and the Company's matching
portion of the employee's 401(k) contributions of $5,000. Such amount
in 1997 includes Group Term Life Insurance premiums of $1,148 and the
Company's matching portion of the employee's 401(k) contributions of
$4,750.
(C) In the case of Mr. Robson, such amount in 1999 includes Group Term Life
Insurance premiums of $2,232, the Company's matching portion of the
employee's 401(k) contributions of $4,800, the reimbursement of $14,578
for taxes which were charged in error relating to the exercise of
incentive stock options in 1998, Deferred Compensation Plan Life
Insurance premiums of $964 and $46,078 in relocation expenses. Such
amount in 1998 includes Group Term Life Insurance premiums of $3,168
and the Company's matching portion of the employee's 401(k)
contributions of $3,896. Such amount in 1997 includes Group Term Life
Insurance premiums of $674.
(D) In the case of Ms. Winslow, such amount in 1999 includes Group Term
Life Insurance premiums of $374 and the Company's matching portion of
the employee's 401(k) contributions of $2,123, the reimbursement of
$3,488 for taxes which were charged in error relating to the exercise
of incentive stock options in 1998, and Deferred Compensation Plan Life
Insurance premiums of $613. Such amount in 1998 includes Group Term
Life Insurance premiums of $408 and the Company's matching portion of
the employee's 401(k) contributions of $5,000. Such amount in 1997
includes Group Term Life Insurance premiums of $265 and the Company's
matching portion of the employee's 401(k) contributions of $4,750.
(E) In the case of Mr. Cieplik, such amount in 1999 includes Group Term
Life Insurance premiums of $374, the Company's matching portion of the
employee's 401(k) contributions of $4,800 and the reimbursement of
$5,009 for taxes which were charged in error relating to the exercise
of incentive stock options in 1998. Such amount in 1998 includes Group
Term Life Insurance premiums of $408. Such amount in 1997 includes
Group Term Life Insurance premiums of $148.
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OPTION GRANTS IN FISCAL 1999
The following table contains information concerning the stock option grants
made under the 1997 Stock Plan to each of the Named Officers for the fiscal year
ended December 31, 1999. No stock appreciation rights were granted to these
individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE OF ASSUMED
PERCENTAGE ANNUAL
NUMBER OF OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE OR PRICE APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(1)(%) ($/SH)(2) DATE 5% 10%
- ---- ---------- ----------------- ----------- ---------- ---------- ----------
John E. Bailye........... 187,500 8.9% $16.75 5/09/09 $1,975,122 $5,005,347
R. Bruce Savage.......... 112,500 5.3% 16.75 5/09/09 1,185,073 3,003,208
George T. Robson......... 112,500 5.3% 16.75 5/09/09 1,185,073 3,003,208
75,000 3.5% 22.00 5/31/09 1,037,676 2,629,675
Teresa F. Winslow........ 52,500 2.5% 16.75 5/09/09 553,034 1,401,497
Mark H. Cieplik.......... 52,500 2.5% 16.75 5/09/09 553,034 1,401,497
- ---------------
* Less than one percent.
(1) Such percentages were based upon a total of 2,116,202 options granted to all
employees in fiscal 1999.
(2) All options were granted under the 1997 Stock Plan at fair market value on
the date of grant as determined by the Compensation Committee.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are prescribed by rules of the SEC and are calculated on the basis of the
fair market value of the underlying securities on the date of grant as
determined by the Compensation Committee. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Common Stock. There can be
no assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
option term will be at the assumed 5% and 10% levels or at any other defined
level.
Each of the options shall become exercisable and vested based upon a
four-year vesting schedule with 25% of each option grant vesting on the first
anniversary of the date of grant while the remaining 75% vest pro-rata on a
monthly basis over the following three years. The underlying shares are subject
to cancellation by the Company, to the extent unvested, should the optionee
cease employment. The Compensation Committees has the discretion to accelerate
the date of exercisability of any portion of any option granted under the 1997
Stock Plan. Each option has a maximum term of ten years.
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AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL 1999 YEAR-END OPTION
VALUES
The following table sets forth, for each of the Named Officers, information
concerning option exercises and option holdings for the fiscal year ended
December 31, 1999. No stock appreciation rights were exercised during such year
or were outstanding at the end of that year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
John E. Bailye.......... -- -- 633,000 187,500 $17,386,354 $3,210,938
R. Bruce Savage......... 324,750 4,977,785 76,812 224,688 1,933,652 4,651,404
George T. Robson........ 133,250 2,679,147 190,500 475,000 5,412,964 10,941,920
Teresa F. Winslow....... 135,000 1,637,589 108,749 142,501 3,207,898 3,594,221
Mark H. Cieplik......... 90,000 1,292,317 78,125 169,375 2,314,453 4,361,484
- ---------------
(1) Calculated on the basis of the closing price of the Common Stock at December
31, 1999 of $33.875 per share, less the per share exercise price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
EMPLOYMENT AGREEMENT WITH JOHN E. BAILYE
The Company has entered into an Employment Agreement with John E. Bailye
(the "Bailye Employment Agreement"), which names Mr. Bailye as the President and
Chief Executive Officer of the Company. Pursuant to the Bailye Employment
Agreement, Mr. Bailye's current annual base salary is $450,000 per year, to be
increased each year in accordance with the increase in the CPI. Mr. Bailye has
agreed to waive the CPI increase in his annual base salary for 1999.
At a minimum of once every two years (but in no event more than once every
year) the Compensation Committee will review Mr. Bailye's annual base salary in
the light of the performance of the Company and evaluate whether it should
consider any adjustment in Mr. Bailye's annual base salary in addition to any
CPI adjustment to which he may be entitled. In addition to his base salary, the
Compensation Committee, in its discretion, shall pay Mr. Bailye a bonus which is
generally envisaged to be fifty percent (50%) of Mr. Bailye's annual base salary
for the year. Under his agreement, Mr. Bailye is entitled to the fringe benefits
generally made available to employees of the Company from time to time and shall
be entitled to four weeks annual vacation, which may be carried forward from
year to year, provided that any accumulated vacation in excess of eight weeks
shall be forfeited.
The Bailye Employment Agreement has an initial term continuing through
December 31, 2000 (the "Term"). Upon December 31 of each year during the Term,
the Term shall automatically be continued for an additional year unless, prior
to such December 31, either party gives written notice to the other party that
the Term will not be extended. In addition, upon a Change in Control (as defined
therein), the remaining Term shall, if less than two years at such date, be
extended automatically to continue for at least two years following such Change
in Control. Notwithstanding its stated term, (i) either party may terminate the
Bailye Employment Agreement for any reason whatsoever by providing the other
party with certain advance written notice, and (ii) the Board of Directors of
the Company may terminate the Bailye Employment Agreement for (A) any gross
misconduct or gross neglect on Mr. Bailye's part with respect to his duties
under the agreement which gross misconduct or gross neglect has or is likely to
have a material adverse effect upon the business of the Company, provided,
however, that Mr. Bailye's good faith exercise of his business judgment in
executing his duties under the agreement does not constitute Cause (as defined
therein) thereunder, or (B) the indictment of Mr. Bailye for a felony which
relates to his duties under the agreement or has or is likely to have a material
adverse effect on the business of the Company, provided, that, if Mr. Bailye
ultimately is not convicted of, or does not plead guilty or nolo contendere to,
such felony, Mr. Bailye's termination of employment shall be treated
retroactively as a termination by the Company without cause and he shall be
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entitled to severance under the agreement. The Bailye Employment Agreement shall
terminate automatically in the event of the death or Disability (as defined
therein) of Mr. Bailye.
In the event that Mr. Bailye's employment is terminated by (i) the Company
for any reason other than Cause or Disability, or as a result of Mr. Bailye's
death, or (ii) Mr. Bailye for Good Reason (as defined therein), Mr. Bailye shall
be entitled to receive severance payments in the aggregate amount equal to the
sum of (A) the annual rate of his base salary in effect as of the date of
termination (not taking into account any reductions which would constitute Good
Reason) and (B) the average of the total annual bonus compensation earned by him
during the three completed fiscal years of the Company immediately preceding his
date of termination, divided by twelve (12), and multiplied by the number of
full and fractional months remaining in the Term as of his date of termination.
Such severance payments shall be paid by the Company in cash in consecutive
equal monthly payments commencing no later than thirty (30) days after the
effective date of the termination of Mr. Bailye's employment for a period
through the remainder of the Term as of the date of termination.
In the event that, during the Term and within the two-year period following
a Change in Control, Mr. Bailye's employment is terminated by (i) the Company
for any reason other than Cause or Disability, or as a result of Mr. Bailye's
death, or (ii) Mr. Bailye for Good Reason, Mr. Bailye shall be entitled to
receive severance payments in the aggregate amount equal to three (3) times the
sum of (A) the annual rate of his base salary in effect as of the date of
termination (not taking into account any reductions which would constitute Good
Reason) and (B) the highest annual bonus compensation earned by him during the
three (3) completed fiscal years of the Company immediately preceding his date
of termination. Such severance payments shall be paid by the Company in a lump
sum in cash.
In the event that the Company provides Mr. Bailye with written notice that
it is not extending the Term, the Compensation Committee shall determine, in its
sole discretion, the amount of any severance payments to be made to Mr. Bailye,
which amount shall be determined as of Mr. Bailye's date of termination in
accordance with what is usual and customary for companies of comparable size
operating in a similar industry as the Company as it exists as of the effective
date of termination and which is appropriate for Mr. Bailye's employment
position with the Company.
During the period of his employment with the Company and for a period of
two (2) years following any voluntary termination by him (other than a
termination for Good Reason) or any termination by the Company for Cause, Mr.
Bailye is prohibited, whether directly or indirectly, in any U.S. state or
foreign country where the Company is doing business at the time of Mr. Bailye's
termination, from (i) engaging in any venture or activity in competition with
the business of the Company or its affiliates, or any business that the Company
may establish that it will likely conduct within one year of Mr. Bailye's
departure; (ii) soliciting for any venture or activity in competition with the
businesses conducted by the Company or its affiliates any customers who were
customers within one year of Mr. Bailye's departure or soliciting, whether
directly or indirectly, such customers to reduce their business with the Company
or its affiliates; or (iii) inducing or attempting to influence any employee of
the Company or its affiliates employed on the effective date of Mr. Bailye's
termination, or within six months prior to such termination, to terminate his or
her employment with the Company. In the event the Company terminates Mr.
Bailye's employment without Cause (or elects not to extend Mr. Bailye's
employment) or Mr. Bailye terminates his employment for Good Reason, the
restrictive covenants described above shall apply for a period of six (6) months
following Mr. Bailye's date of termination. The Bailye Employment Agreement may
not be assigned by either party other than by the Company in connection with
certain business combinations.
OTHER EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (each, an "Employment
Agreement") with each of R. Bruce Savage, Teresa F. Winslow, George T. Robson
and Mark H. Cieplik. Such persons serve at the discretion of the Board of
Directors. Each Employment Agreement provides for annual vacation and such
fringe benefits as are generally made available to employees of the Company.
Mr. Savage's Employment Agreement provides for a current annual base salary
of $302,285, to be increased each year in accordance with the increase in the
CPI. Mr. Savage has agreed to waive the CPI
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20
increase in his annual base salary for 1999. In addition to his base salary, Mr.
Savage is eligible to receive an annual bonus provided that (i) the Company
achieves certain goals and objectives and (ii) Mr. Savage is employed by the
Company at the end of any such year. Upon execution of his Employment Agreement,
Mr. Savage was granted options to purchase 120,000 shares of Common Stock. Such
options were granted at the fair market value of the underlying shares of Common
Stock and are subject to a four-year vesting schedule. Upon the first
anniversary of his Employment Agreement, Mr. Savage received an additional grant
of options to purchase 75,000 shares of Common Stock. The price for such options
was determined by the Compensation Committee and are subject to a four-year
vesting schedule. Notwithstanding the foregoing, in the event of (i) a Change of
Control (as defined therein), if Mr. Savage is not retained in a similar
position or if no similar position is offered to Mr. Savage following a Change
of Control, or (ii) the termination of Mr. Savage's employment by the Company
without Cause (as defined therein), all of Mr. Savage's options owned by him at
the time of such event shall immediately vest.
In the event that the Company terminates Mr. Savage's employment for any
reason other than death, Cause or Disability (as defined) prior to July 24,
2000, Mr. Savage shall be entitled to receive severance payments totaling
twenty-four (24) months base salary (calculated at a rate of base salary then
being paid to Mr. Savage as of the date of termination) and, solely for the
calendar year in which Mr. Savage is terminated, a pro rata portion of the bonus
that Mr. Savage would have otherwise been entitled to had he been employed by
the Company for the entire year in which he was terminated, the amount of any
such bonus corresponding to the portion of the year to have elapsed through the
termination date. Such severance payments in respect of base salary shall be
paid in twenty-four (24) consecutive equal monthly payments commencing not later
than thirty (30) days after the effective date of the termination of Mr.
Savage's employment. Any pro rata bonus payment shall be paid by the Company in
a lump sum within sixty (60) days of the date of termination.
In the event that the Company terminates Mr. Savage's employment for any
reason other than death, Cause or Disability on or after July 24, 2000, Mr.
Savage shall be entitled to receive severance payments totaling twelve (12)
months base salary (calculated at a rate of base salary then being paid to Mr.
Savage as of the date of termination) and, solely for the calendar year in which
Mr. Savage is terminated, a pro rata portion of the bonus that Mr. Savage would
have otherwise been entitled to had he been employed by the Company for the
entire year in which he was terminated, the amount of any such bonus
corresponding to the portion of the year to have elapsed through the termination
date. Such severance payments in respect of base salary shall be paid in twelve
(12) consecutive equal monthly payments commencing not later than thirty (30)
days after the effective date of the termination of Mr. Savage's employment. Any
pro rata bonus payment shall be paid by the Company in a lump sum within sixty
(60) days of the date of termination.
Mr. Robson's Employment Agreement provides for an annual base salary of
$300,000, to be adjusted annually in the discretion of the Compensation
Committee ($310,000 for 1999). In addition to his base salary, commencing on the
completion of the third fiscal quarter of 1997, Mr. Robson is eligible to
receive a target quarterly bonus, provided that Mr. Robson is employed by the
Company at the end of any such quarter, and such target bonus may be increased
or decreased at the discretion of the Board of Directors based upon the
Company's performance against its current year financial objectives. Mr. Robson
was also granted options to purchase 600,000 shares of Common Stock. Such
options were granted at the fair market value of the underlying shares of Common
Stock and are subject to a four-year vesting schedule. Mr. Robson is also
entitled to receive options to purchase 120,000 and 75,000 shares of Common
Stock, respectively, on each of the first and second anniversary date of his
Employment Agreement. The price of such options will be determined by the
Compensation Committee and will be subject to a four-year vesting schedule.
Notwithstanding the foregoing, in the event of a Change of Control (as defined
therein), if Mr. Robson is not retained in a similar position or if no similar
position is offered to Mr. Robson following a Change of Control, all of Mr.
Robson's options owned by him at the time of such event shall immediately vest.
In the event that the Company terminates Mr. Robson's employment for any
reason other than death, Cause (as defined therein) or Disability (as defined
therein), Mr. Robson shall be entitled to receive severance payments totaling
his annual base salary. Such severance payments shall be paid in twelve (12)
consecutive equal monthly payments commencing not later than thirty (30) days
after the effective date of the termination of Mr. Robson's employment.
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Ms. Winslow's Employment Agreement provides for an initial starting salary
of $110,000 to be reviewed at least annually and to be adjusted based on
performance ($260,575 for 1999). In addition to her base salary, Ms. Winslow is
eligible to receive a bonus payable on terms and conditions agreed to between
Ms. Winslow and the Company.
Mr. Cieplik's Employment Agreement provides for an annual base salary of
$250,000, to be adjusted annually in the discretion of the Compensation
Committee ($260,000 for 1999). In addition to his base salary, commencing on the
completion of the third fiscal quarter of 1997, Mr. Cieplik is eligible to
receive a target quarterly bonus, provided that Mr. Cieplik is employed by the
Company at the end of any such quarter, and such target bonus may be increased
or decreased at the discretion of the Board of Directors based upon the
Company's performance against its current year financial objectives. Mr. Cieplik
was also granted options to purchase 330,000 shares of Common Stock. Such
options were granted at the fair market value of the underlying shares of Common
Stock and are subject to a four-year vesting schedule.
In the event that the Company terminates Mr. Cieplik's employment for any
reason other than death, Cause (as defined therein) or Disability (as defined
therein), Mr. Cieplik shall be entitled to receive severance payments totaling
six (6) months Compensation (as defined therein) (calculated at the rate of
Compensation then being paid to Mr. Cieplik). Such severance payments shall be
paid in six (6) consecutive equal monthly payments commencing not later than
thirty (30) days after the effective date of the termination of Mr. Cieplik's
employment.
The Company may terminate the Employment Agreements of each of Mr. Savage,
Mr. Robson and Mr. Cieplik for (i) any gross misconduct on such employee's part
with respect to his duties under his respective agreement, (ii) the engaging by
such employee in an indictable offense which relates to his duties under his
respective agreement or which is likely to have a material adverse effect on the
business of the Company, (iii) the commission by such employee of any willful or
intentional act which injures in a material respect or could reasonably be
expected to injure in any material respect the reputation, business or business
relationships of the Company, or (iv) the engaging by such employee through
gross negligence in conduct which injures materially or could reasonably be
expected to injure materially the business or reputation of the Company. Each
such Employment Agreement shall terminate automatically in the event of the
death or Disability of such employee.
Each Employment Agreement restricts the respective employee from disclosing
any confidential information of the Company, or any confidential information of
the Company's clients, customers or suppliers to any person without the prior
written consent of the Company or the client, customer or supplier, as the case
may be. Each Employment Agreement, other than Ms. Winslow's, also provides that
for a period of two years following termination of employment, with or without
cause, each employee is prohibited from (i) performing services that compete
with the businesses conducted by the Company or any of its affiliates or
rendering services to any organization or entity which competes with the
business or businesses conducted by the Company or any of its affiliates
anywhere in the United States or elsewhere where the Company or any of its
affiliates do business, or any business or businesses that the Company or any of
its affiliates may establish that it will likely conduct within one year (or, in
the case of Ms. Winslow, six months) following the date of such employee's
termination; (ii) soliciting any customers or potential customers of the Company
with whom the employee had contact while employed by the Company or who was a
customer of the Company at any time during the two years immediately before the
employee's termination; (iii) requesting that any of the Company's customers or
suppliers discontinue doing business with the Company; (iv) knowingly taking any
action that would disparage the Company or be to its disadvantage; or (v)
employing or attempting to employ or assisting anyone else to employ any
employee or contractor of the Company to terminate their employment or
engagement with the Company. Ms. Winslow's Employment Agreement is substantially
similar to the other Employment Agreements, except that the term of her
noncompetition covenant is three years, not two. In addition, in consideration
for such noncompetition covenant, the Company has agreed to pay Ms. Winslow one
year's base salary at the Company's discretion, to be paid in equal monthly
installments over two years, except that such payments shall be discontinued if
Ms. Winslow becomes employed during such period. The four Employment Agreements
are not assignable by either party, except that the Company may assign its
rights to any affiliated or successor entity.
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COMMON STOCK PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on June 30, 1995, the first day of public trading in the
Common Stock, along with the composite prices of companies listed in the Nasdaq
Stock Market-US Index and the Hambrecht & Quist Technology Index.
COMPARISON OF CUMULATIVE TOTAL RETURN*(1)(2)
AMONG DENDRITE INTERNATIONAL, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[GRAPH]
DENDRITE NASDAQ STOCK HAMBRECHT & QUIST
INTERNATIONAL, INC. MARKET (U.S.) TECHNOLOGY
------------------- ------------- -----------------
Jun 95 100.00 100.00 100.00
Dec 95 112.00 113.00 107.00
Dec 96 51.00 139.00 133.00
Dec 97 120.00 171.00 156.00
Dec 98 310.00 241.00 243.00
Dec 99 639.00 435.00 542.00
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings made by
the Company under those statutes, the preceding Compensation Committee Report on
Executive Compensation and the Common Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those statutes.
- ---------------
* $100 invested on June 30, 1995 in stock or index, including reinvestment of
dividends, fiscal year ending December 31.
(1) The Company's fiscal year ended on December 31, 1999.
(2) No cash dividends have been declared on the Common Stock. Shareholder
returns over the indicated period should not be considered indicative of
future shareholder returns.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 15, 2000 by (i) each person who is
known by the Company to own beneficially more than five percent of the Common
Stock, (ii) each of the Directors, nominees for Director and Named Officers and
(iii) all current Directors and executive officers as a group. Unless indicated
otherwise, the address of each of these persons is c/o Dendrite International,
Inc., 1200 Mount Kemble Avenue, Morristown, New Jersey 07960-6797.
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(1)(2) PERCENTAGE(3)
- ------------------------------------ ------------ -------------
Pilgrim Baxter & Associates................................. 3,296,416 8.46
825 Duportail Road
Wayne, Pennsylvania 19087
The TCW Group, Inc. ........................................ 3,229,657 8.29
865 South Figueroa Street
Los Angeles, California 90017
Waddell & Reed Financial, Inc. ............................. 2,262,150 5.81
P.O. Box 29217
6300 Lamar Avenue
Overland Park, Kansas 66202-4200
John E. Bailye(4)........................................... 4,975,098 12.55
John H. Martinson(5)........................................ 312,312 *
Bernard M. Goldsmith(6)..................................... 84,000 *
Paul A. Margolis(7)......................................... 58,000 *
Edward J. Kfoury(8)......................................... 156,000 *
Terence H. Osborne(9)....................................... 63,000 *
R. Bruce Savage(10)......................................... 252,209 *
George T. Robson(11)........................................ 316,316 *
Teresa F. Winslow(12)....................................... 164,512 *
Mark H. Cieplik(13)......................................... 92,625 *
All Directors and current executive officers (13
persons)(4)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)............ 6,578,940 16.14
- ---------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Common Stock subject to options currently exercisable or exercisable on or
prior to 60 days after the date as of which information is presented are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
(3) The applicable percentages of ownership are based on 38,957,422 shares of
Common Stock outstanding as of March 15, 2000.
(4) Represents 3,398,808 shares owned of record by Mr. Bailye, 812,415 shares
owned of record by Carinya Holdings Company ("Carinya"), 84,000 shares
owned of record by the Bailye Family Foundation (the "Foundation") and
options exercisable for 679,875 shares of Common Stock. Carinya is a
general partnership consisting of Mr. Bailye, Mr. Bailey's wife, and trusts
for the benefit of each of their two minor children, the trustees of which
are Mr. Bailey's parents and Mrs. Bailey's parents, respectively, as
general partners. The partnership agreement provides that the voting power
with respect to shares owned
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by the partnership resides with the majority vote of all partners other
than Mr. Bailye. Mr. Bailye disclaims beneficial ownership of the shares
owned of record by Carinya except to the extent of the two 10% partners'
interests therein owned by Mr. Bailye and his spouse, respectively. The
Foundation is a trust established exclusively to provide financial support
for charitable organizations which are exempt institutions under Section
501(c) (3) of the Internal Revenue Code. Mr. Bailye and his spouse
constitute two of the three trustees of the Foundation.
(5) Represents Mr. Martinson's portion of shares previously owned by Edison
Venture Fund II, L.P. and Edison Venture Fund II-Pa, L.P. which were
distributed to the partners of such entities, including Mr. Martinson, and
options exercisable for 120,000 shares of Common Stock.
(6) Represents options exercisable for 84,000 shares of Common Stock.
(7) Represents options exercisable for 58,000 shares of Common Stock.
(8) Represents options exercisable for 156,000 shares of Common Stock.
(9) Represents options exercisable for 63,000 shares of Common Stock.
(10) Represents 208,147 shares owned of record by Mr. Savage and options
exercisable for 44,062 shares of Common Stock.
(11) Represents 32,691 shares owned of record by Mr. Robson and options
exercisable for 283,625 shares of Common Stock.
(12) Represents 26,700 shares owned of record by Ms. Winslow and options
exercisable for 137,812 shares of Common Stock.
(13) Represents options exercisable for 92,625 shares of Common Stock.
(14) Includes 25,088 shares of Common Stock and options exercisable for 79,780
shares of Common Stock held by executive officers not listed in the table.
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PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board is asking the shareholders of the Company to ratify its
appointment of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 2000. The Board wishes to
receive the majority of the votes cast at the Annual Meeting to ratify the
selection of Arthur Andersen LLP.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will reconsider its selection, but may elect to retain Arthur Andersen
LLP nevertheless. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a different independent accounting
firm at any time during the year if the Board of Directors feels that such a
change would be in the Company's and its shareholders' best interests.
Arthur Andersen LLP has audited the Company's financial statements annually
since fiscal year 1993. Its representatives are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP TO SERVE AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE 1997 STOCK PLAN
The 1997 Stock Plan was adopted by the Board of Directors and shareholders
on July 24, 1997 and May 19, 1998, respectively, and authorizes the grant of
"incentive stock options" (within the meaning of Section 422 of the Code),
non-qualified stock options, and stock awards based on the value of the
Company's Common Stock. No more than 6,000,000 shares of Common Stock (subject
to adjustment) are presently available for grant under the 1997 Stock Plan.
Shareholders are being asked to consider and vote upon a proposed amendment
(the "Amendment") to the 1997 Stock Plan to increase the maximum number of
shares of Common Stock available for issuance under the 1997 Stock Plan from
6,000,000 shares to 8,500,000 shares.
The Board of Directors believes that the Amendment provides an important
inducement to recruit and retain the best available personnel. The Board of
Directors believes that providing employees, non-employee directors and
consultants with an opportunity to invest in the Company rewards them
appropriately for their efforts on behalf of the Company.
Even though the 1997 Stock Plan by its terms does not require shareholder
approval for the Amendment to be adopted, the Board of Directors is seeking that
approval for several reasons. First, the additional options which may be granted
under the 1997 Stock Plan following adoption of the Amendment will not be
considered "incentive stock options" or "ISOs" for federal income tax purposes
unless shareholder approval has been obtained within twelve months from the
adoption of the Amendment by the Board of Directors. If shareholder approval is
not obtained, then the options will be treated as non-qualified stock options.
The Board of Directors believes it is in the Company's best interests to permit
option holders to take advantage of the more favorable tax treatment given to
ISOs (as discussed below).
The Company is also seeking shareholder approval for the Amendment so that
all income attributable to the exercise of such additional options will qualify
as performance-based compensation under Section 162(m) of the Code. Income
realized upon exercise of options granted under the 1997 Stock Plan subsequent
to shareholder approval in May 1998 may qualify as performance-based
compensation under Section 162(m) of the Code. Accordingly, the Company may be
able to deduct ordinary income realized by the Covered Employees in excess of
$1,000,000. For purposes of this limit, all ordinary income realized upon
exercise of options previously granted under the 1997 Stock Plan will be
counted.
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PREVIOUSLY GRANTED OPTIONS UNDER THE 1997 STOCK PLAN
As of March 15, 2000, options to purchase 5,695,270 shares of Common Stock
have been granted under the 1997 Stock Plan at an exercise price per share equal
to the fair market value of the Common Stock on the date of grant, including
grants to officers and directors of the Company as set forth in the table below:
NUMBER OF WEIGHTED AVERAGE
NAME AND TITLE OPTIONS GRANTED EXERCISE PRICE
- -------------- --------------- ----------------
John Bailye, President, Chief Executive Officer and
Director............................................ 814,500 $ 8.81
Bernard H. Goldsmith, Director........................ 120,000 6.70
Paul A. Margolis, Director............................ 120,000 6.70
John H. Martinson, Director........................... 120,000 6.70
Edward J. Kfoury, Director............................ 156,000 6.61
Terence H. Osborne, Director.......................... 63,000 14.00
R. Bruce Savage, Executive Vice President and Chief
Operating Officer................................... 334,500 11.84
George T. Robson, Executive Vice President and Chief
Financial Officer................................... 307,500 15.49
Teresa F. Winslow, Senior Vice President and
President, Americas Division........................ 79,500 13.40
Mark H. Cieplik, Senior Vice President, Worldwide
Sales............................................... 52,500 16.75
All current executive officers as a group (8
persons)............................................ 1,920,000 11.79
All current Directors who are not executive officers
as a group (5 persons).............................. 579,000 7.47
All employees, including all current officers who are
not executive officers as a group (1,014 persons)... 3,195,270 10.95
Whether or not shareholder approval of the 1997 Stock Plan is obtained,
options previously granted pursuant to the 1997 Stock Plan will remain valid and
outstanding.
As of March 15, 2000, the fair market value of the Common Stock underlying
options granted pursuant to the 1997 Stock Plan was $21.00 per share equal to
the closing price of the Common Stock on the Nasdaq National Market on such
date.
SUMMARY OF THE PLAN
The purpose of the 1997 Stock Plan is to enhance the ability of the Company
to attract and retain employees, directors, and consultants of outstanding
ability and to provide them with an interest in the Company parallel to that of
the shareholders. The 1997 Stock Plan authorizes the grant of incentives in the
form of stock options to officers, other key employees, consultants and
non-employee directors and stock awards based on the value of Common Stock to
employees. The Compensation Committee administers the Plan. As of March 15,
2000, there were approximately 1,027 employees and non-employee directors who
have received stock options. No other form of stock awards have been granted.
Because future participation in the 1997 Stock Plan and the level of
participation will vary, it is not possible to determine the value of benefits
which may be obtained by those eligible to participate in the 1997 Stock Plan.
The Compensation Committee may grant options under the 1997 Stock Plan to
eligible employees, consultants and directors selected by the Compensation
Committee. No employee may be granted in any year options to purchase more than
1,500,000 shares of Common Stock. The options may be either non-qualified stock
options or incentive stock options qualifying under Section 422 of the Code. The
Compensation Committee is to establish the option price at the time that each
option is granted. Options granted under the 1997 Stock Plan may be exercised at
such time as is determined by the Compensation Committee, but not more than 10
years from their date of grant.
Options may not be transferred except by will or the laws of descent and
distribution, except that the Compensation Committee may permit non-qualified
stock options to be transferred to members of the
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28
holder's immediate family or trusts, partnerships or limited liability companies
established for such family members.
Under the 1997 Stock Plan, each non-employee member of the Board of
Directors shall be granted annual non-qualified stock options to purchase that
number of shares of the Company's Common Stock as determined by the Board of
Directors or the Compensation Committee. Such options shall (i) be issued under
the 1997 Stock Plan, (ii) be granted at the fair market value of the underlying
shares of Common Stock, and (iii) vest and become one hundred percent (100%)
exercisable on the first anniversary of the date of grant.
In the event of a Change in Control (as defined in the 1997 Stock Plan) of
the Company, any option will become vested and exercisable in full and all
restrictions or conditions, if any, on other stock awards will automatically
lapse.
If an option holder engages in certain activity which is harmful to the
Company, all outstanding and unexercised options may be canceled and terminated.
In addition, such option holders may have to reimburse the Company for any gain
realized upon exercise of options within one year of the harmful behavior. This
forfeiture and repayment provision will not apply following a Change in Control.
The Board of Directors may amend, suspend or terminate the 1997 Stock Plan
at any time, but no amendment may adversely affect the rights of any person in
connection with an award previously granted. In addition, no amendment to the
1997 Stock Plan may be made without subsequent shareholder approval if such
approval is required under any applicable law, regulation or stock exchange
rule.
The 1997 Stock Plan became effective upon adoption by the Board and will
have a term of 10 years from its effective date.
FEDERAL INCOME TAX ASPECTS
The following is a general summary of the federal income tax consequences
of the grant and exercise of options under the Plan. This summary is not
intended to provide tax advice to recipients and holders of awards.
Generally, the grant of options does not result in taxable income to the
option holder and the Company is not entitled to a corresponding deduction from
its income taxes.
In the case of ISOs, generally, there will be no taxable income for the
option holder upon exercise. In addition, so long as the option holder disposes
of the shares acquired upon exercise of the ISO until the later of two years
from the date of grant and one year from the date of exercise (a "qualifying
disposition"), any gain or loss realized by the option holder upon disposition
will be taxed as long-term capital gain or loss, as the case may be. The Company
will not be entitled to a tax deduction upon the grant or exercise of ISOs or
the disposition of ISO shares. However, if the option holder disposes of the
shares acquired upon exercise of the ISO earlier than either of two years from
the date of grant and one year from the date of exercise (a "disqualifying
disposition"), then the option holder will realize ordinary income in the year
of disposition in an amount equal to the excess, if any, of the fair market
value of the option shares at the time of exercise (or, if less, the amount
realized on the disqualifying disposition) over the exercise price thereof. The
Company will be entitled to deduct an amount equal to the ordinary income
realized by the option holder upon a disqualifying disposition.
With respect to non-qualified stock options, the option holder will realize
ordinary income equal to the difference between the fair market value of the
option shares upon exercise over the exercise price thereof. The Company will be
entitled to a corresponding deduction in an amount equal to the amount of
ordinary income realized by the option holder. Upon the subsequent disposition
of the option shares, any gain (loss) will be taxed as short-term or long-term
capital gain (loss), as the case may be.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors, officers,
and any person holding more than ten percent of the Common Stock are required to
report initial ownership of the Common Stock and any subsequent changes in
ownership to the SEC. Specific due dates have been established by the SEC, and
the Company is required to disclose in this Proxy Statement any failure to file
by these dates. Except as set forth below, based upon (i) the copies of the
Section 16(a) reports that the Company received from such persons for their 1999
fiscal year transactions and (ii) the written representations received from one
or more of such persons that no annual Form 5 reports were required to be filed
for them for the 1999 fiscal year, the Company believes that there has been
compliance with all Section 16(a) filing requirements applicable to such
directors, officers, and ten percent beneficial owners.
The Company is aware that Paul A. Margolis, a Director of the Company,
filed a Form 4 with the SEC on October 10, 1999. The Company believes that such
Form 4 should have been filed no later than September 10, 1999.
SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented at the 2001 Annual
Meeting of Shareholders currently expected to be held on or about May 11, 2001
must be received by the Company at its principal executive offices no later than
December 15, 2000 and must be in compliance with applicable SEC regulations, in
order to be included in the proxy statement and related proxy materials.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF ITS
ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES, AND
LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO DENDRITE INTERNATIONAL, INC., 1200
MOUNT KEMBLE AVENUE, MORRISTOWN, NEW JERSEY 07960-6797, ATTN: CHRISTOPHER J.
FRENCH, SECRETARY.
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christopher J. French
Christopher J. French
Secretary
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DIRECTIONS TO DENDRITE
1200 MT. KEMBLE AVENUE
MORRISTOWN, NEW JERSEY 07960-6797
(973) 425-1200
From NY (Manhattan):
Take Lincoln Tunnel to NJ Turnpike SOUTH, to Route 78 WEST, to Route 287 NORTH,
Exit 30B (Bernardsville/Basking Ridge), follow to traffic light (Route 202
North/Mt. Kemble Avenue). Turn RIGHT at traffic light, follow less than one
mile. Dendrite is on the right.
-OR -
Take Lincoln Tunnel to NJ Turnpike SOUTH, to Route 78 WEST, to Route 24 WEST, to
Route 287 SOUTH, to Exit 30B (Bernardsville/Basking Ridge), follow to traffic
light (Route 202 North/Mt. Kemble Avenue). Turn RIGHT at traffic light, follow
less than one mile. Dendrite is on the right.
From Newark Airport:
Take Route 1 & 9 NORTH, to Route 78 WEST, to Route 287 NORTH, to Exit 30B
(Bernardsville/ Basking Ridge), follow to traffic light (Route 202 North/Mt.
Kemble Avenue). Turn RIGHT at traffic light, follow less than one mile. Dendrite
is on the right.
-OR -
Take Route 1 & 9 NORTH, to Route 78 WEST, to Route 24 WEST, to Route 287 SOUTH,
to Exit 30B (Bernardsville/Basking Ridge), follow to traffic light (Route 202
North/Mt. Kemble Avenue). Turn RIGHT at traffic light, follow less than one
mile. Dendrite is on the right.
From Philadelphia:
Take Route 95 NORTH, to Route 206 NORTH, to Route 287 NORTH, to Exit 30B
(Bernardsville/ Basking Ridge), follow to traffic light (Route 202 North/Mt.
Kemble Avenue). Turn RIGHT at traffic light, follow less than one mile. Dendrite
is on the right.
[MAP TO DENDRITE]
31
[Appendix A]
DENDRITE INTERNATIONAL, INC.
1997 STOCK INCENTIVE PLAN
(AS AMENDED THROUGH MARCH 24, 2000(1))
1. Purpose. The purpose of the Dendrite International, Inc.
1997 Stock Incentive Plan (the "Plan") is to enhance the ability of Dendrite
International, Inc. (the "Company") and its subsidiaries to attract and retain
employees, directors and consultants of outstanding ability and to provide
employees, directors and consultants with an interest in the Company parallel to
that of the Company's shareholders.
2. Definitions.
(a) "Award" shall mean an award determined in
accordance with the terms of the Plan.
(b) "Board" shall mean the Board of Directors of
the Company.
(c) "Change in Control" shall mean the occurrence
of any one of the following events:
(i) any "person" (as such term
is defined in Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
33-1/3% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the Board
(the "Company Voting Securities"); provided, however, that the event
described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the
Company or any subsidiary, (B) by any employee benefit plan sponsored
or maintained by the Company or any subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Control Transaction (as
defined in paragraph (iii)), or (E) a transaction (other than one
described in (iii) below) in which Company Voting Securities are
acquired from the Company, if a majority of the Incumbent Board (as
defined below) approves a resolution providing expressly that the
acquisition pursuant to this clause (E) does not constitute a Change
in Control under this paragraph (i);
(ii) individuals who, on the
Effective Date, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the Effective Date,
whose election or nomination for election was approved by a vote of
at least two-thirds of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be considered a member of
the Incumbent Board; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest with
- --------
(1) The Plan has been amended to reflect the three-for-two forward stock split
(the "Stock Split") of the Company's Common Stock which became effective on
October 8, 1999, and all share amounts and per share prices provided herein have
been adjusted to reflect such Stock Split.
1
32
respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the
Board shall be deemed to be a member of the Incumbent Board;
(iii) the shareholders of the
Company approve a merger, consolidation, share exchange or similar
form of corporate reorganization of the Company or any such type of
transaction involving the Company or any of its subsidiaries (whether
for such transaction or the issuance of securities in the transaction
or otherwise) (a "Business Combination"), unless immediately
following such Business Combination: (A) more than 50% of the total
voting power of the publicly traded corporation resulting from such
Business Combination (including, without limitation, any corporation
which directly or indirectly has beneficial ownership of 100% of the
Company Voting Securities or all or substantially all of the assets
of the Company and its subsidiaries) eligible to elect directors of
such corporation would be represented by shares that were Company
Voting Securities immediately prior to such Business Combination
(either by remaining outstanding or being converted), and such voting
power would be in substantially the same proportion as the voting
power of such Company Voting Securities immediately prior to the
Business Combination, (B) no person (other than any publicly traded
holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the
corporation resulting from such Business Combination), or any person
which beneficially owned, immediately prior to such Business
Combination, directly or indirectly, 33-1/3% or more of the Company
Voting Securities (a "Company 33-1/3% Stockholder")) would become the
beneficial owner, directly or indirectly, of 33-1/3% or more of the
total voting power of the outstanding voting securities eligible to
elect directors of the corporation resulting from such Business
Combination and no Company 33-1/3% Stockholder would increase its
percentage of such total voting power, and (C) at least a majority of
the members of the board of directors of the corporation resulting
from such Business Combination would be members of the Incumbent
Board at the time of the Board's approval of the execution of the
initial agreement providing for such Business Combination (a
"Non-Control Transaction"); or
(iv) the shareholders of the
Company approve a plan of complete liquidation or dissolution of the
Company or the sale or disposition of all or substantially all of the
Company's assets.
Notwithstanding the foregoing, a Change in Control of the Company
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 33-1/3% of the Company Voting Securities as a result of
the acquisition of Company Voting Securities by the Company which, by reducing
the number of Company Voting Securities outstanding, increases the percentage of
shares beneficially owned by such person; provided, that if a Change in Control
of the Company would occur as a result of such an acquisition by the Company (if
not for the operation of this sentence), and after the Company's acquisition
such person becomes the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company shall
occur.
(d) "Code" shall mean the Internal Revenue
Code of 1986, as amended.
(e) "Committee" shall mean a committee of
at least two members of the Board appointed by the Board to administer the Plan
and to perform the functions set forth herein and
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33
who are "non-employee directors" within the meaning of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act and who are also "outside directors" within
the meaning of Section 162(m) of the Code.
(f) "Common Stock" shall mean the common
stock, no par value per share, of the Company.
(g) "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
(h) "Fair Market Value" per share as of a
particular date shall mean the last reported sale price (on the day immediately
preceding such date) of the Common Stock on the Nasdaq National Market List.
(i) "Immediate Family Member" shall mean,
except as otherwise determined by the Committee, a Participant's children,
stepchildren, grandchildren, parents, stepparents, grandparents, spouse,
siblings, in-laws and persons related by reason of legal adoption.
(j) "Incentive Stock Option" shall mean a
stock option which is intended to meet the requirements of Section 422 of the
Code.
(k) "Non-Employee Director" shall mean a
member of the Board who is not an employee of the Company or any Subsidiary.
(l) "Nonqualified Stock Option" shall mean
a stock option which is not intended to be an Incentive Stock Option.
(m) "Option" shall mean either an
Incentive Stock Option or a Nonqualified Stock Option.
(n) "Participant" shall mean an employee,
director or consultant of the Company or its Subsidiaries who is selected to
participate in the Plan in accordance with Section 5.
(o) "Subsidiary" shall mean any subsidiary
of the Company that is a corporation and which at the time qualifies as a
"subsidiary corporation" within the meaning of Section 424(f) of the Code.
3. Shares Subject to the Plan. Subject to adjustment in
accordance with Section 16, the total of the number of shares of Common Stock
which shall be available for issuance pursuant to the grant of Awards under the
Plan shall not exceed 8,500,000 shares, on a post-split adjusted basis;
provided, that for purposes of this limitation, any Option which is canceled or
expires without exercise shall again become available for Awards under the Plan.
Upon forfeiture of Awards in accordance with the provisions of the Plan, and the
terms and conditions of the Award, such shares shall no longer be counted in any
determination of the number of shares available under the Plan and shall be
available for subsequent Awards. To the extent that the exercise price of any
Option granted under the Plan is satisfied by tendering shares of Common Stock
to the Company (either by actual delivery or by attestation), then subject to
the requirements of Section 422 of the Code in connection with any
stock-for-stock exercise of Incentive Stock Options, only the number of shares
of Common Stock issued, net of the shares tendered, shall be deemed delivered
for purposes of determining the total number of shares of Common Stock available
for issuance under the Plan. Subject to adjustment in accordance with Section
16, no employee shall be granted in any calendar year Options to purchase more
than 1,500,000 shares of Common Stock.
-3-
34
Shares of Common Stock available for issue or distribution under the Plan shall
be authorized and unissued shares or shares reacquired by the Company in any
manner.
4. Administration. (a) The Plan shall be
administered by the Committee.
(b) The Committee shall (i) approve the
selection of Participants, (ii) determine the type of Awards to be made to
Participants, (iii) determine the number of shares of Common Stock subject to
Awards, (iv) determine the terms and conditions of any Award granted hereunder
(including, but not limited to, any restriction and forfeiture conditions on
such Award) and (v) have the authority to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating to the Plan, to determine
the terms and provisions of any agreements entered into hereunder, and to make
all other determinations necessary or advisable for the administration of the
Plan. The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the extent it
shall deem desirable to carry it into effect.
(c) Any action of the Committee shall be
final, conclusive and binding on all persons, including the Company and its
Subsidiaries and shareholders, Participants and persons claiming rights from or
through a Participant.
(d) The Committee may delegate to officers
or employees of the Company or any Subsidiary, and to service providers, the
authority, subject to such terms as the Committee shall determine, to perform
administrative functions with respect to the Plan and Award agreements.
(e) Members of the Committee and any
officer or employee of the Company or any Subsidiary acting at the direction of,
or on behalf of, the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified by the Company with respect
to any such action or determination.
5. Eligibility. Individuals eligible to receive
Awards under the Plan shall be the directors, officers, other key employees and
selected consultants of the Company and its Subsidiaries selected by the
Committee. In addition, all Non-Employee Directors shall be eligible to receive
Options as provided in Section 9 hereof.
6. Awards. Awards under the Plan may consist of
Options, stock awards or other awards based on the value of the Common Stock.
Awards shall be subject to the terms and conditions of the Plan and shall be
evidenced by an agreement containing such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
desirable.
7. Options. Options may be granted under the Plan
in such form as the Committee may from time to time approve pursuant to terms
set forth in an Option agreement. The Committee may alter or waive, at any time,
any term or condition of an Option that is not mandatory under the Plan.
(a) Types of Options. Each Option
agreement shall state whether or not the Option will be treated as an Incentive
Stock Option or Nonqualified Stock Option. Incentive Stock Options shall only be
granted to employees of the Company and its Subsidiaries.
(b) Option Price. The purchase price per
share of the Common Stock purchasable under an Option shall be determined by the
Committee, but in the case of Incentive Stock Options, the Option price will be
not less than 100% of the Fair Market Value of the Common Stock on the date of
the grant of the Option and in the case of Incentive Stock Options granted to an
employee
-4-
35
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company and its Subsidiaries (a "10% Shareholder") the
price per share specified in the agreement relating to such Option shall not be
less than 110% of the Fair Market Value per share of the Common Stock on the
date of grant.
(c) Option Period. The term of each
Option shall be fixed by the Committee, but no Option shall be exercisable after
the expiration of 10 years from the date the Option is granted, provided,
however, that in the case of Incentive Stock Options granted to 10%
Shareholders, the term of such Option shall not exceed 5 years from the date of
grant.
(d) Exercisability. Each Option shall vest
and become exercisable at a rate determined by the Committee at or subsequent to
grant.
(e) Method of Exercise. Options may be
exercised, in whole or in part, by giving written notice of exercise to the
Company specifying the number of shares of Common Stock to be purchased. Such
notice shall be accompanied by the payment in full of the Option purchase price.
Such payment shall be made: (a) in cash, or (b) to the extent authorized by the
Committee, by surrender of shares of Common Stock owned by the holder of the
Option, or (c) through simultaneous sale through a broker of shares acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board, or (d)
through additional methods prescribed by the Committee, or (e) by a combination
of any such methods.
8. Stock Awards. Subject to such performance and
employment conditions as the Committee may determine, awards of Common Stock or
awards based on the value of the Common Stock may be granted either alone or in
addition to Options granted under the Plan. Any Awards under this Section 8 and
any Common Stock covered by any such Award may be forfeited to the extent so
provided in the Award agreement, as determined by the Committee.
9. Non-Employee Director Stock Options.
(a) Initial Grant. Nonqualified Stock
Options to purchase 30,000 shares of Common Stock shall be granted automatically
to each Non-Employee Director who is a Non-Employee Director on the day the
Board approves the adoption of the Plan. With respect to each person who becomes
a Non-Employee Director after such date, Nonqualified Stock Options shall be
granted to each such Non-Employee Director on the day he or she first becomes a
Non-Employee Director. The number of shares of Common Stock to be subject to
such Options granted under this Section 9(a), the exercise price, and all other
terms (not inconsistent with the Plan) of such Options, shall be determined by
the Committee or the Board in their discretion.
(b) Subsequent Options. In addition to
the Nonqualified Stock Options granted to Non-Employee Directors under Section
9(a), Nonqualified Stock Options may be granted from time to time to each
Non-Employee Director. The number of shares of Common Stock to be subject to
such Options granted under this Section 9(b), the exercise price, and all other
terms (not inconsistent with the Plan) of such Options, shall be determined by
the Committee or the Board in their discretion.
(c) Option Price. The purchase price for
each Option granted under this Section 9 to a Non-Employee Director shall be the
Fair Market Value of the Common Stock on the date of grant of the Option.
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(d) Exercisability. Each Initial Option
and Subsequent Option granted under this Section 9 shall become exercisable and
vest on the first anniversary of the date of grant of such Option.
(e) Method of Exercise. Each Option
granted under this Section 9 may be exercised in the same manner as provided in
Section 7(e).
(f) Option Period. Each Option granted
under this Section 9 shall terminate 10 years from the date of grant unless
sooner terminated by reason of termination of service as a director of the
Company and its Subsidiaries.
(g) Termination of Director Status.
(i) In the event of termination
of service as a director of the Company and its Subsidiaries for any
reason other than cause, death or permanent disability (as determined
by the Committee), an Option granted under this Section 9 (to the
extent exercisable as of the date of termination) shall be
exercisable for the remaining term of the Option and shall thereafter
terminate.
(ii) In the event of the death of
a Non-Employee Director while a director of the Company or any
Subsidiaries, the Option (to the extent exercisable as of the date of
death), shall be exercisable by any prior transferee or by the
Non-Employee Director's designated beneficiary, or if none, the
person(s) to whom such Non-Employee Director's rights under the
Option are transferred by will or the laws of descent and
distribution for 180 days following the date of death (but in no
event beyond the term of the Option), and shall thereafter terminate.
(iii) In the event of the
termination of service as a director of the Company and its
Subsidiaries due to permanent disability (as determined by the
Committee), the Option (to the extent exercisable as of the date of
termination), shall be exercisable for 180 days following such
termination of service (but in no event beyond the term of the
Option), and shall thereafter terminate.
(iv) In the event of the
termination of service as a director of the Company and its
Subsidiaries for cause (as determined by the Committee in its sole
discretion), the Option shall terminate upon such termination of
status as director, regardless of whether the Option was then
exercisable.
(h) Except as expressly provided in this
Section 9, any Option granted to a Non-Employee Director hereunder shall be
subject to the terms and conditions of the Plan.
10. Change in Control. Upon the occurrence of a
Change in Control, all Options shall automatically become vested and exercisable
in full and all restrictions or conditions, if any, on any stock awards granted
hereunder shall automatically lapse. The Committee may, in its discretion,
include such further provisions and limitations in any agreement documenting
such Options as it may deem equitable and in the best interests of the Company.
11. Forfeiture. Notwithstanding anything in the Plan
to the contrary, the Committee may provide in any Award agreement that in the
event of a serious breach of conduct by the person granted such Award
(including, without limitation, any conduct prejudicial to or in conflict with
the Company or its Subsidiaries), or any activity of any such person in
competition with any of the businesses
-6-
37
of the Company or any Subsidiary, (a) cancel any outstanding Award granted to
such person, in whole or in part, whether or not vested, and/or (b) if such
conduct or activity occurs within 1 year following the exercise or payment of an
Award, require such person to repay to the Company any gain realized or payment
received upon the exercise or payment of such Award (with such gain or payment
valued as of the date of exercise or payment). Such cancellation or repayment
obligation shall be effective as of the date specified by the Committee. Any
repayment obligation may be satisfied in Common Stock or cash or a combination
thereof (based upon the Fair Market Value of Common Stock on the day prior to
the date of payment), and the Committee may provide for an offset to any future
payments owed by the Company or any Subsidiary to such person if necessary to
satisfy the repayment obligation. The determination of whether any such person
has engaged in a serious breach of conduct or any activity in competition with
any of the businesses of the Company or any Subsidiary shall be determined by
the Committee in good faith and in its sole discretion. This Section 11 shall
have no application following a Change in Control.
12. Withholding. The Company shall have the right to
deduct from any payment to be made pursuant to the Plan the amount of any taxes
required by law to be withheld therefrom, or to require a Participant to pay to
the Company in cash such amount required to be withheld prior to the issuance or
delivery of any shares of Common Stock or the payment of cash under the Plan.
Such taxes may be paid by (a) delivering previously owned shares of Common Stock
or (b) having the Company retain shares of Common Stock which would otherwise be
delivered upon exercise or payment of Awards or (c) any combination of a cash
payment or the methods set forth in (a) and (b) above. For purposes of (a) and
(b) above, shares of Common Stock shall be valued at Fair Market Value
determined as of the day immediately prior to exercise or payment. If and to the
extent authorized by the Committee, the Company may, upon election by a
Participant, withhold from any distribution of Common Stock hereunder shares of
Common Stock with a Fair Market Value in excess of the Participant's required
withholding obligation.
13. Nontransferability, Beneficiaries. Unless
otherwise determined by the Committee with respect to the transferability of
Nonqualified Stock Options by a Participant to his Immediate Family Members (or
to trusts or partnerships or limited liability companies established for such
family members), no Award shall be assignable or transferable by the
Participant, otherwise than by will or the laws of descent and distribution or
pursuant to a beneficiary designation, and Options shall be exercisable, during
the Participant's lifetime, only by the Participant (or by the Participant's
legal representatives in the event of the Participant's incapacity). Each
Participant may designate a beneficiary to exercise any Option held by the
Participant at the time of the Participant's death or to be assigned any other
Award outstanding at the time of the Participant's death. If no beneficiary has
been named by a deceased Participant, any Award held by the Participant at the
time of death shall be transferred as provided in his will or by the laws of
descent and distribution. Except in the case of the holder's incapacity, an
Option may only be exercised by the holder thereof.
14. No Right to Employment. Nothing contained in the
Plan or in any Award under the Plan shall confer upon any employee any right
with respect to the continuation of employment with the Company or any of its
Subsidiaries, or interfere in any way with the right of the Company to terminate
his or her employment at any time. Nothing contained in the Plan shall confer
upon any employee or other person any claim or right to any Award under the
Plan.
15. Governmental Compliance. Each Award under the
Plan shall be subject to the requirement that if at any time the Committee shall
determine that the listing, registration or qualification of any shares issuable
or deliverable thereunder upon any securities exchange or under any Federal or
state law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition thereof, or in connection therewith, no
such grant or award may be exercised or shares issued or
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38
delivered unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
16. Adjustments. In the event of any change in the
outstanding shares of Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spinoff, combination or exchange of
shares or other corporate change, or any distribution to holders of Common Stock
other than regular cash dividends, the number or kind of shares available for
Options and Awards under the Plan may be adjusted by the Committee as it shall
in its sole discretion deem equitable and the number and kind of shares subject
to any outstanding Awards granted under the Plan and the purchase price thereof
may be adjusted by the Committee as it shall in its sole discretion deem
equitable to preserve the value of such Awards.
17. Award Agreement. Each Award under the Plan shall
be evidenced by an agreement setting forth the terms and conditions, as
determined by the Committee, which shall apply to such Award, in addition to the
terms and conditions specified in the Plan.
18. Amendment. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that (a) except
as provided in Section 16, no amendment shall be made that would adversely
affect the rights of a Participant under an Award theretofore granted, without
such Participant's written consent and (b) if and when the Plan is approved by
the shareholders of the Company, no amendment made after such approval shall be
made without shareholder approval if such approval is necessary to comply with
any applicable law, regulation or stock exchange rule.
19. General Provisions.
(a) The Committee may require each
Participant purchasing or acquiring shares pursuant to an Award under the Plan
to represent to and agree with the Company in writing that such Participant is
acquiring the shares for investment and without a view to distribution thereof.
(b) All certificates for shares of Common
Stock delivered under the Plan pursuant to any Award shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable Federal or state securities law, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions. If the Committee determines that the
issuance of shares of Common Stock hereunder is not in compliance with, or
subject to an exemption from, any applicable Federal or state securities laws,
such shares shall not be issued until such time as the Committee determines that
the issuance is permissible.
(c) It is the intent of the Company that
the Plan satisfy, and be interpreted in a manner that satisfies, the applicable
requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act
so that Participants will be entitled to the benefit of Rule 16b-3, or any other
rule promulgated under Section 16 of the Exchange Act, and will not be subject
to short-swing liability under Section 16. Accordingly, if the operation of any
provision of the Plan would conflict with the intent expressed in this Section
19(c), such provision to the extent possible shall be interpreted and/or deemed
amended so as to avoid such conflict.
(d) Except as otherwise provided by the
Committee in the applicable grant or Award agreement, a Participant shall have
no rights as a shareholder with respect to any shares of Common Stock subject to
Options until a certificate or certificates evidencing shares of Common Stock
shall have been issued to the Participant and, subject to Section 16, no
adjustment shall be made for
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39
dividends or distributions or other rights in respect of any share for which the
record date is prior to the date on which Participant shall become the holder of
record thereof.
(e) The law of the State of New Jersey
shall apply to all Awards and interpretations under the Plan regardless of the
effect of such state's conflict of laws principles.
(f) Where the context requires, words in
any gender shall include any other gender.
20. Term of Plan. Subject to earlier termination
pursuant to Section 18, the Plan shall have a term of 10 years from its
Effective Date.
21. Effective Date. The Plan is effective as of July
24, 1997.
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DENDRITE INTERNATIONAL, INC.
1200 MOUNT KEMBLE AVENUE
MORRISTOWN, NEW JERSEY 07960-6797
The undersigned hereby constitutes and appoints John E. Bailye, George T. Robson
and Christopher J. French, each of them, proxies of the undersigned with full
power of substitution, to represent and vote, as designated below, all shares of
Common Stock of Dendrite International, Inc. (the "Company"), which the
undersigned could represent and vote if personally present, at the Annual
Meeting of Shareholders of the Company to be held on May 12, 2000 and at any
adjournment thereof.
- --------------------------------------------------------------------------------
1. Election of Directors
[ ] FOR all nominees listed below (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all six nominees listed below (See
instruction below).
NOMINEES TERM EXPIRES
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John E. Bailye 2001 Annual Meeting
Bernard M. Goldsmith 2001 Annual Meeting
Edward J. Kfoury 2001 Annual Meeting
Paul A. Margolis 2001 Annual Meeting
John H. Martinson 2001 Annual Meeting
Terence H. Osborne 2001 Annual Meeting
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE OR NOMINEES, WRITE NOMINEE'S NAME ON THE FOLLOWING LINE)
----------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE
2. Proposal to ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 2000.
[ ]FOR ratification of [ ]AGAINST ratification of [ ]ABSTAIN
appointment of auditors appointment of auditors
MANAGEMENT RECOMMENDS A VOTE FOR RATIFICATION OF APPOINTMENT OF AUDITORS
41
3. Proposal to approve the amendment to the Company's 1997 Stock Incentive Plan.
[ ] FOR approval of the [ ] AGAINST approval of [ ]ABSTAIN
Company's 1997 Stock the Company's 1997
Incentive Plan Stock Incentive Plan
MANAGEMENT RECOMMENDS A VOTE FOR APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE
PLAN.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" THE NOMINEES FOR DIRECTOR LISTED IN ITEM 1 ABOVE, OR FOR SUCH
SUBSTITUTE NOMINEES AS MAY BE NOMINATED BY THE BOARD OF DIRECTORS IN THE
EVENT ANY OF THE INITIAL NOMINEES SHOULD BECOME UNAVAILABLE, "FOR" ITEMS 2
AND 3 AND, IN THE PROXIES' DISCRETION, ON ANY OTHER MATTER COMING BEFORE THE
ANNUAL MEETING.
The undersigned acknowledges receipt of the Company's 1999 Annual Report to
Shareholders, the Notice of the Annual Meeting of Shareholders and Proxy
Statement, and revokes all former proxies.
Dated: -----------------------------------------------------------
- --------------------------------------------------------, Signature of Shareholder
2000 (Please insert date at left, sign exactly as name appears
on Stock Certificate and mail in the enclosed envelope.
When signing as Officer, Partner, Executor, Administrator,
Trustee or Guardian, please give full title. For joint
accounts, each joint owner should sign.)