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 Section 240.14a-11(c) or Section 240.14a-12
ChiRex Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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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(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
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was paid previously. Identify the previous filing by registration statement
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Notes:
CHIREX INC.
LOGO
CHIREX
NOTICE OF 1998 ANNUAL MEETING
AND
PROXY STATEMENT
April 15, 1998
CHIREX INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 15, 1998
To our Stockholders:
The Annual Meeting of Stockholders of ChiRex Inc., a Delaware corporation
("ChiRex"), will be held on Wednesday, April 15, 1998, at 10:00 A.M., Eastern
Standard Time, at the corporate offices of ChiRex, 300 Atlantic Street, Suite
402, Stamford, Connecticut 06901, and at any adjournment thereof, for the
purpose of acting upon the following matters as well as such other business as
may properly come before the Annual Meeting or any adjournment thereof:
(1) the election of two Class II directors; and
(2) the ratification of the appointment of Arthur Anderson LLP as
independent auditors for fiscal year 1998.
Only stockholders of record at the close of business on March 9, 1998 will
be entitled to vote at the Annual Meeting or any adjournment thereof.
Your vote is important. To support your Board, please mark, date and sign
the enclosed proxy card and return it promptly in the accompanying envelope.
Your proxy may be revoked by delivering written notice of revocation to the
Secretary of ChiRex prior to the time voting is declared closed or by
attending the Annual Meeting and voting your shares in person.
By Order of the Board of
Directors,
MICHAEL A. GRIFFITH
Chief Financial Officer
and Secretary
Stamford, Connecticut
March 17, 1998
CHIREX INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 15, 1998
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of ChiRex Inc. ("ChiRex" or the "Company") of proxies to be
voted at the Annual Meeting of Stockholders to be held on Wednesday, April 15,
1998, at 10:00 A.M., Eastern Standard Time, at the corporate offices of the
Company, 300 Atlantic Street, Suite 402, Stamford, Connecticut 06901, and at
any adjournment thereof, for the purposes set forth in the accompanying
Notice. This Proxy Statement and the accompanying proxy card are first being
sent to stockholders on or about March 17, 1998.
Only holders of Common Stock of ChiRex, par value $.01 per share ("Common
Stock"), at the close of business on March 9, 1998 will be entitled to vote at
the Annual Meeting. At that date there were 11,798,983 shares of Common Stock
outstanding. Each stockholder is entitled to one vote for each share of Common
Stock held by him or her on the record date. The presence in person or by
proxy of stockholders holding a majority of the shares of Common Stock will
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be included in the computation of the
number of shares of Common Stock that are present for purposes of determining
the presence of a quorum.
ITEM I.
ELECTION OF DIRECTORS
At the 1998 Annual Meeting, two Class II directors are to be elected to hold
office until the 2001 Annual Meeting, or until their successors have been duly
elected and qualified. The Board of Directors proposes for election Dirk
Detert, Ph.D. and Elizabeth M. Greetham, both of whom are now directors of the
Company.
The Board of Directors currently consists of 6 directors, divided into three
classes. On August 21, 1997, Robert L. Bratzler, Ph.D. resigned from the Board
of Directors and the Board of Directors elected Eric N. Jacobsen as a Class
III director, filling the vacancy left by Mr. Bratzler.
Stockholders voting at the Annual Meeting may not vote for more than the
number of nominees listed in this Proxy Statement. Each nominee receiving the
votes of a plurality of the shares of Common Stock present, either in person
or by proxy, and voting at the Annual Meeting shall be elected a director. The
persons named in the enclosed proxy card (Michael A. Griffith, Beth P. Hecht
and James M. Lindstrom) have advised that unless otherwise instructed in any
form of proxy, they intend to vote FOR the election of the two nominees. They
also have advised that in the event either or both nominees shall not be
available for election, they will vote for the election of such substitute
nominee or nominees, if any, as the Board of Directors may propose. However,
the Board of Directors has no reason to believe that any of the nominees will
not be available for election as directors.
NOMINEES FOR CLASS II DIRECTORS
(TERM EXPIRING IN 2001)
DIRK DETERT, PH.D.
Dr. Detert, 56, has 26 years of experience in the pharmaceutical industry.
Dr. Detert was formerly the General Manager of Wellcome GmbH with
responsibility for Central Europe and Germany, as a Managing Director. He is a
former Member of the Board of the German Pharmaceutical Association and the
German Chemical Association. Dr. Detert holds a Ph.D. in Chemistry from the
University of Alberta, Edmonton, Canada and a Bachelor of Science in chemistry
from the University of Kiel.
1
ELIZABETH M. GREETHAM
Ms. Greetham, 48, has 20 years of investment experience as a health care
analyst, both in Europe and the United States. From 1982 to 1993, she
consulted for F. Eberstadt & Co. and Weiss, Peck & Greer Investments before
joining the latter firm as a Portfolio Manager of the WPG Life Sciences Fund
and health care analyst. Ms. Greetham serves as a member of the Board of
Directors of Guilford Pharmaceuticals, PathoGenesis Corporation, Progenics
Pharmaceuticals Inc. and Sangstat Medical Corp. Ms. Greetham holds a B.Sc. and
an M.A. (Honors) from the University of Edinburgh.
CONTINUING CLASS I DIRECTORS
(TERM EXPIRING IN 2000)
MICHAEL A. GRIFFITH
Mr. Griffith, 39, has served as Chief Financial Officer since April 10,
1996, as Secretary since September 5, 1996 and as a member of the Board of
Directors since October 17, 1996. From June 1994 until April 1996, Mr.
Griffith was a Director of Equity Capital Markets at Credit Suisse First
Boston, and prior to that was a Vice President of Leveraged Finance and High
Yield Capital Markets at BT Securities Corporation, a subsidiary of Bankers
Trust Company. Mr. Griffith holds a Master of Management in finance, marketing
and international economics from the J.L. Kellogg Graduate School of
Management at Northwestern University, and a Bachelor of Science in Business
Administration from the University of Kansas.
W. DIETER ZANDER
Mr. Zander, 82, was educated in Germany and Switzerland and founded Henley &
Co., Inc., a chemical pharmaceutical company with offices in the United States
and Canada. In 1980, Henley & Co., Inc. was sold to Boehringer Ingelheim GmbH.
Mr. Zander later joined Arnhold and S. Bleichroeder, Inc., a privately owned
investment bank, where he is currently a Managing Director in the
International Corporate Finance Department.
CONTINUING CLASS III DIRECTORS
(TERM EXPIRING IN 1999)
ALAN R. CLARK
Mr. Clark, 51, has served as Chairman of the Board and Chief Executive
Officer of the Company since October 17, 1996. From December 1995 until
October 1996, Mr. Clark served as President and Chief Operating Officer of the
Company. From 1991 until the initial public offering of the Company on March
11, 1996, Mr. Clark was Managing Director of Sterling Organics Limited
(currently an indirect wholly-owned subsidiary of the Company which was
renamed ChiRex (Dudley) Limited) and was successful in leading the management
team that, together with other investors, purchased Sterling Organics Limited
from Sanofi S.A. in August 1995. From 1975 to 1991, he worked for Sterling
Winthrop in a variety of senior roles. Mr. Clark holds a First Class Honors
Degree in chemical engineering from the University of Manchester, Institute of
Science & Technology.
ERIC N. JACOBSEN, PH.D.
Dr. Jacobsen, 38, is a Professor in the Department of Chemistry and Chemical
Biology at Harvard University and a member of the ChiRex Inc. Scientific
Advisory Board. He also currently serves as consultant to Merck & Co., Inc.
and Versicor, Inc., where he is co-founder and Chairman of the Scientific
Advisory Board. Prior to joining the faculty at Harvard, Dr. Jacobsen served
from 1988 to 1993 at the University of Illinois at Urbana-Champaign, most
recently as Associate Professor. He received his B.S. in Chemistry from New
York University, his Ph.D. from the University of California, Berkeley, and
has served as a National Institute of Health Postdoctoral Fellow at the
Massachusetts Institute of Technology.
Except as otherwise indicated, the nominees and continuing directors have
held the principal occupations described above during the past five years.
2
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit Committee
and Compensation Committee. During 1997, 10 meetings of the Board of Directors
were held. The Audit Committee and the Compensation Committee each met five
times during 1997. Each director attended at least 75% of the total meetings
of the Board of Directors and the committees on which they served.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent public accountants. Current
members of the Audit Committee are Mr. Zander and Ms. Greetham.
The Compensation Committee makes recommendations concerning salaries and
compensation for employees of and consultants to the Company, and administers
and grants stock options and awards pursuant to the Company's equity incentive
plans. Current members of the Compensation Committee are Mr. Zander and Ms.
Greetham.
COMPENSATION OF DIRECTORS
The Company pays to its non-employee directors a $5,000 annual fee payable
at the Annual Meeting of Shareholders plus $600 per meeting of the Board
attended per day and reimburses directors for their out-of-pocket expenses
incurred in attending meetings. Directors who are members of any committee of
the Board also receive $500 per committee meeting attended. In addition, each
non-employee director participates in the Company's Amended and Restated 1995
Director Stock Option Plan, as described below.
The Amended and Restated 1995 Director Stock Option Plan (the "Director
Plan") was adopted by the Board of Directors in February 1997 and approved by
the stockholders of the Company at the 1997 Annual Meeting. Under the terms of
the Director Plan, members of the Board of Directors of the Company who are
not employees of the Company or any subsidiary of the Company are eligible to
receive non-statutory options to purchase shares of Common Stock. A total of
100,000 shares of Common Stock may be issued upon exercise of options granted
under the Director Plan. Each eligible member of the Board of Directors will
be granted an option to purchase 3,000 shares of Common Stock on the date of
his or her initial election to the Board of Directors (an "Initial Option").
An additional option to purchase 3,000 shares of Common Stock will be granted
upon the close of business on the date of each annual meeting of the
stockholders to each eligible member of the Board of Directors then in office
(an "Annual Option"). Each Initial Option and Annual Option will become
exercisable on a cumulative basis as to one-fifth of the shares subject to the
option on each of the first, second, third, fourth and fifth anniversaries of
the date of grant of such option. The exercise price of options granted under
the Director Plan will equal the closing price of the Common Stock on the
Nasdaq National Market on the date of grant. Except in cases of death or
disability, options granted under the Director Plan must be exercised within
90 days after the date he or she ceases to be a member of the Board of
Directors of the Company. In addition, the options are personal and no rights
granted under the Director Plan may be transferred, assigned, pledged or
hypothecated in any way, except by will or by the laws of descent and
distribution. No option is exercisable after the expiration of seven years
from the date of grant.
For a description of retirement benefits provided to certain of the employee
directors of the Company, see "Retirement Benefits."
CERTAIN TRANSACTIONS
In connection with Robert Bratzler's resignation as a director of the
Company on August 21, 1997, the Company paid Mr. Bratzler $172,186
representing all amounts owed to Mr. Bratzler under a settlement agreement and
a consulting agreement entered into in connection with his resignation as
Chairman and Chief Executive Officer of the Company in 1996 and certain
expenses associated with his resignation.
3
Dr. Jacobsen, a director of the Company, is also a member of the Company's
Scientific Advisory Board ("SAB") and is a party to a Consulting Agreement
with the Company dated July 19, 1996. In 1997, the Company paid Dr. Jacobsen
$20,000 for consulting services rendered thereunder. In consideration of his
participation on the SAB, Dr. Jacobsen was also granted options to purchase
25,000 shares of Common Stock on June 17, 1997.
STOCK OWNERSHIP OF CERTAIN PERSONS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 9, 1997 (unless otherwise indicated
by footnote) by (i) each person or entity known to the Company to beneficially
own more than 5% of the Common Stock, (ii) each of the Directors, (iii) each
of the executive officers named under "Executive Compensation" and (iv) all
Directors and executive officers as a group.
COMMON STOCK
BENEFICIALLY OWNED
----------------------
NAME NUMBER PERCENT
---- ------------ ---------
American Express Company(1)....................... 1,165,000 9.9%
American Express Tower
200 Vesey Street
New York, NY 10285
Warburg Pincus Asset Management, Inc.(2).......... 913,900 7.7
466 Lexington Avenue
New York, NY 10017
Alan R. Clark..................................... 93,828 *
Dirk Detert....................................... 0 *
Elizabeth M. Greetham(3).......................... 600 *
Michael A. Griffith(4)............................ 74,000 *
Eric N. Jacobson(5)............................... 1,917 *
W. Dieter Zander(6)............................... 2,635 *
Roger B. Pettman(7)............................... 115,857 1.0
David F. Raynor................................... 67,596 *
J. Graham Thorpe.................................. 67,596 *
John E. Weir...................................... 69,596 *
Directors and executive officers as a group (10
persons)(8)...................................... 493,625 4.2
- --------
* Less than one percent
(1) As reported on Schedule 13G filed with the Securities and Exchange
Commission ("SEC") for the year ended December 31, 1997. American Express
Company is the parent holding company of American Express Financial
Corporation, a registered Investment Adviser under Section 203 of the
Investment Advisers Act of 1940 and IDS Discovery Fund, Inc., a registered
Investment Company under Section 8 of the Investment Company Act of 1940.
According to the Schedule 13G, American Express Company has shared
dispositive power for 1,165,000 shares; American Express Financial
Corporation has shared dispositive power for 1,165,000 shares; and IDS
Discovery Fund, Inc. has sole voting power for 850,000 shares and shared
dispositive power over 850,000 shares.
(2) As reported on Schedule 13G filed with the SEC for the year ended December
31, 1997. According to the Schedule 13G, Warburg Pincus has sole voting
power for 530,500 shares, shared voting power for 332,700 shares and sole
dispositive power for 913,900 shares.
(3) Represents shares subject to vested options.
(4) Includes 69,000 shares subject to vested options.
(5) Represents shares subject to vested options.
(6) Represents shares subject to vested options.
(7) Includes 90,857 shares subject to vested options.
(8) Includes an aggregate of 165,009 shares subject to vested options.
4
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the years ended December
31, 1995, 1996 and 1997 for the Company's Chief Executive Officer and for each
of its five other executive officers whose annual salary and bonus for the
fiscal years ended December 31, 1995, 1996 and 1997 exceeded $100,000 (the
Chief Executive Officer and such other executive officers are hereinafter
referred to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- ------------ ---------------
Alan R. Clark............. 1997 206,250 73,151 150,000 (2)
Chairman and Chief
Executive Officer 1996 149,193 32,208 84,240(3)
1995 123,240 41,679
Michael A. Griffith(4).... 1997 180,000 69,009 125,000 (5)
Chief Financial Officer,
Secretary and Director 1996 109,485 125,000
Roger B. Pettman.......... 1997 150,000 51,049 25,000 (5)
Vice President, Sales and
Marketing 1996 139,816 37,000 102,857(6) 325,000(7)
1995 133,770 9,750
David F. Raynor........... 1997 135,300 48,545 60,000 (2)
Vice President,
Operations 1996 110,498 23,550 20,253(3)
1995 89,029 27,166
J. Graham Thorpe.......... 1997 115,500 42,537 60,000 (2)
Vice President,
Commercial Development 1996 86,124 18,355 29,835(3)
1995 66,755 20,149
John E. Weir.............. 1997 103,950 39,277 50,000 (2)
Vice President, Finance &
Treasurer 1996 83,344 17,316 27,300(3)
1995 62,367 18,715
- --------
(1) Compensation for Messrs. Clark, Raynor, Thorpe and Weir was paid in Great
Britain pounds sterling and amounts shown were translated from Great
Britain pounds sterling into U.S. dollars at the rate of $1.65 per
(Pounds)1.00 for 1997 and $1.56 per (Pounds)1.00 for 1996 and 1995. For
the year ended December 31, 1995 and the period from January 1, 1996 until
March 11, 1996, compensation for Mr. Pettman was paid by SepraChem Inc.
and compensation for Messrs. Clark, Raynor, Thorpe and Weir was paid by
Sterling Organics Limited. Amounts paid by SepraChem Inc. to Dr. Pettman
for the period from January 1, 1996 until March 11, 1996 were $66,000
(including a $37,000 bonus). Amounts paid by Sterling Organics Limited to
Messrs. Clark, Raynor, Thorpe and Weir for the period from January 1, 1996
until March 11, 1996, were $68,553 (including a $32,208 bonus), $52,546
(including a $23,550 bonus), $34,701 (including a $18,355 bonus) and
$30,882 (including a $17,316 bonus), respectively.
(2) The Company provides U.K. executives use of a Company leased automobile
and gas and maintenance allowances. The incremental cost of such
perquisites in 1997 was not in excess of the lesser of (a) $50,000 and (b)
10% of the amounts reported as Salary and Bonus for 1997 in the Summary
Compensation Table.
(3) Other compensation for Messrs. Clark, Raynor, Thorpe and Weir in 1996
represents payments made pursuant to a management retention program
entered into in connection with the MBO on August 10, 1995.
(4) Mr. Griffith was elected Chief Financial Officer of the Company effective
as of April 10, 1996, Secretary of the Company on September 5, 1996 and a
director of the Company on October 17, 1996.
(5) Mr. Griffith and Dr. Pettman participate in a Company sponsored 401(k)
program. The incremental cost of such perquisite in 1997 was not in excess
of the lesser of (a) $50,000 and (b) 10% of the amounts reported as Salary
and Bonus for 1997 in the Summary Compensation Table.
(6) Represents options to purchase 87,857 shares of common stock which were
granted in exchange for options to purchase common stock of SepraChem Inc.
in connection with the merger of a wholly owned subsidiary of the Company
with and into SepraChem Inc. and options to purchase 15,000 shares of
common stock granted under the 1995 Stock Incentive Plan.
(7) Represents the fair market value at the time of grant of 25,000 shares of
common stock of the Company granted in exchange for 56,911 shares of
common stock of SepraChem Inc. which were transferred to Mr. Pettman prior
to the merger of a wholly owned subsidiary of the Company with and into
SepraChem Inc.
5
Stock Option Grants
The following table sets forth certain information concerning stock options
granted in fiscal year 1997 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- -------------- ---------- ---------- ---------------------------
Alan R. Clark(2)........ 150,000 18.5% $10.00 and 4/17 and 656,449 1,529,806
$12.25 6/17/04
Michael A. Griffith(3).. 125,000 15.4% $10.00 and 4/17 and 554,674 1,292,627
$12.25 6/17/04
Roger B. Pettman........ 25,000 3.1% $10.00 4/17/04 124,675 290,545
David F. Raynor......... 60,000 7.4% $10.00 4/17/04 299,219 697,307
J. Graham Thorpe........ 60,000 7.4% $10.00 4/17/04 299,219 697,307
John E. Weir............ 50,000 6.2% $10.00 4/17/04 249,349 581,089
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the common stock and the date on which
the options are exercised.
(2) Alan R. Clark received two option grants in 1997. The first was granted on
April 17 for 100,000 shares at an exercise price of $10.00. The second was
granted on June 17 for 50,000 shares at an exercise price of $12.25. The
grants have been consolidated for the table above.
(3) Michael A. Griffith received two option grants in 1997. The first was
granted on April 17 for 75,000 shares at an exercise price of $10.00. The
second was granted on June 17 for 50,000 shares at an exercise price of
$12.25. The grants have been consolidated for the table above.
6
Stock Option Exercises
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
SHARES UNEXERCISED OPTIONS THE-MONEY OPTIONS AT
ACQUIRED ON VALUE AT FISCAL YEAR-END(#) FISCAL YEAR-END($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- -------------------------
Alan R. Clark........... 0 0 0/150,000 0/1,031,250
Michael A. Griffith..... 0 0 69,000/181,000 465,750/1,218,625
Roger B. Pettman........ 0 0 90,857/37,000 1,436,826/207,875
David F. Raynor......... 0 0 0/60,000 0/322,500
J. Graham Thorpe........ 0 0 0/60,000 0/322,500
John E. Weir............ 0 0 0/50,000 0/268,750
Retirement Benefits
Employees of the Company who are domiciled in the U.K. are entitled to
participate in the ChiRex Pension Plan (the "Pension Plan"). Messrs. Clark,
Raynor, Thorpe and Weir currently participate in the Pension Plan.
Currently, the Company is required to make a contribution equal to 9% of
each participant's annual salary, and each participant is required to make a
contribution equal to 3% of his or her annual salary. The funding of the
Pension Plan has been designed to provide sufficient assets to satisfy the
pension liabilities of all participants on a going forward basis. In order to
satisfy the past service liabilities of Pension Plan participants who had
previously participated in the pension plan maintained by Sanofi Winthrop,
assets valued at approximately 31 million pounds were transferred from Sanofi
Winthrop to the trust maintained for the Pension Plan. The amount of the asset
transfer was calculated by the Company's actuary and is sufficient to satisfy
the past service liabilities under the Sanofi Winthrop plan that were assumed
by the Company (including the senior executive supplemental pension benefits
for Messrs. Clark and Raynor, described below).
Upon reaching age 65, a vested participant in the Pension Plan is entitled
to receive a basic benefit equal to the product of (i) 1/60th, multiplied by
(ii) years of continuous service (up to a maximum of 40 years), multiplied by
(iii) final average basic earnings in excess of the state basic pension.
Messrs. Clark and Raynor are entitled to receive a supplemental pension
benefit for senior executives related to their participation in the Sterling
Winthrop Senior Executive Pension Plan (the "Executive Pension Plan"), which
is equal to the product of (i) 1/30th, multiplied by (ii) years of continuous
service (up to a maximum of 20 years), multiplied by (iii) the participant's
final average basic earnings in excess of the state basic pension. For
purposes of the Pension Plan, final average basic earnings is defined as a
participant's highest average 12 months of basic salary in the past 5 years,
plus such participant's average additional compensation defined as the average
of the highest 3 consecutive years of additional earnings in the past ten
years (excluding the value of any stock options).
Vesting occurs under the Pension Plan after the completion of two years of
service. The Pension Plan provides for annual pension increases for
participant's pay status equal to the lesser of (i) 5% a year or (ii) the
increase in the Retail Price Index. The Pension Plan also provides for early
retirement, ill health retirement and death in service benefits.
7
The following table provides estimates of annual retirement benefits payable
under the Pension Plan:
PENSION PLAN TABLE
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------------------------
COMPENSATION(1) 10 20 30 40 OR MORE
- --------------- ------- ------- ------- ----------
$ 80,000 $12,900 $25,800 $38,700 $ 51,600
100,000 16,250 32,500 48,750 65,000
120,000 19,580 39,160 58,740 78,320
140,000 22,900 45,800 68,700 91,600
160,000 26,250 52,500 78,750 105,000
180,000 29,580 59,160 88,740 118,320
- --------
(1) Compensation and annual retirement benefits for all employees covered
under the Pension Plan are paid in Great Britain pounds sterling and
amounts shown were translated from Great Britain pounds sterling into U.S.
dollars at the rate of $1.56 per (Pounds)1.00.
The Named Executive Officers have been credited with the following years of
service: Mr. Clark, 20 years; Mr. Raynor, 22 years; Mr. Thorpe, 22 years; Mr.
Weir, 19 years. Under the Executive Pension Plan, Mr. Clark and Mr. Raynor's
estimated annual retirement benefits are equivalent to the estimated benefits
payable under the Pension Plan for employees with 40 or more years of service.
The Pension Plan defines "compensation" generally to include all remuneration
to an employee for services rendered, including base pay, bonuses and special
forms of pay. The definition of "covered compensation" under the Pension Plan,
is not substantially different than the amount reflected in the Annual
Compensation column of the Summary Compensation Table set forth above.
Executive Employment Agreements And Other Arrangements
The Company is party to employment agreements with Mr. Clark, Mr. Raynor,
Mr. Thorpe and Mr. Weir each dated March 11, 1996. Under each agreement, each
executive is entitled to receive an annual base salary. In addition to a base
salary, each executive is entitled to receive annual bonuses based on the
Company's performance. The agreements also entitle the executives to
participate in certain retirement benefit programs maintained by the Company
and to be provided with the use of a company car. The employment agreements
shall continue in effect until terminated upon 12 months' written notice by
either party, except in the case of certain for cause terminations, in which
the Company shall have the right to terminate each executive immediately. In
the event of an executive's termination, the agreements provide that, under
certain circumstances, the executive may be entitled to receive salary and
other benefits for all or part of the 12 month notice period. The Company is
also party to an employment agreement with Michael A. Griffith dated December
22, 1997. Under the agreement, Mr. Griffith is entitled to receive a base
salary and annual bonus based on the Company's operating results and Mr.
Griffith achieving defined goals during such year. The agreement also entitles
Mr. Griffith to participate in certain U.S. benefit programs maintained by the
Company. The agreement has an initial term expiring on December 31, 2000 and
may be automatically extended from year to year thereafter. The agreement may
be terminated by the Company at any time. If the termination is without cause,
the Company is required to pay Mr. Griffith 250% of his then current base
salary in a lump sum payment. The agreement also provides for the payment of
salary and bonus, vesting of certain deferred compensation, stock option and
similar benefits if a change in control of the Company occurs.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview And Philosophy
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for developing and making recommendations to the Board of
Directors with respect to the Company's executive compensation
8
policies. In addition, the Committee, pursuant to authority delegated by the
Board of Directors, recommends on an annual basis the compensation to be paid
to the Company's Chief Executive Officer and each of the other executive
officers of the Company.
The Committee has adopted the following objectives as guidelines for its
compensation decisions:
. Provide a competitive total compensation package that enables the
Company to attract and retain key executives;
. Integrate all compensation programs with the Company's short term and
long term business objectives and strategic goals; and
. Ensure that compensation is meaningfully related to the value created
for stockholders.
Executive Officer Compensation Program Components
The Committee reviews the Company's compensation program to ensure that
salary levels and incentive opportunities are competitive and reflect the
performance of the Company. The Company's compensation program for executive
officers consists of base salary, annual incentive compensation and long-term
compensation in the form of stock options. In addition, Messrs. Clark, Raynor,
Thorpe and Weir are provided pension benefits.
Base Salary
Base salary levels for the Company's executive officers are determined, in
part, through comparisons with companies in the pharmaceutical chemical
industry and other companies with which the Company competes for personnel in
both the United Kingdom and United States. In addition, the Committee also
evaluates individual experience and performance and specific issues particular
to the Company, such as success in developing new customer relationships,
delivering revenue and earnings growth, furthering the Company's proprietary
technology position, creation of stockholder value and achievement of other
specific Company milestones. The Committee reviews each executive's salary
once a year and may increase each executive's salary at that time based on:
(i) the individual's increased contribution to the Company over the prior 12
months; (ii) the individual's increased responsibilities over the prior 12
months; and (iii) any increase in competitive pay levels. Individual
contributions are measured with respect to specific individual accomplishments
established for each executive.
Annual Incentive Compensation
The Company's officers are eligible to receive annual cash incentive
compensation at the time their base salaries are reviewed based on the
achieving defined specific goals and objectives during the 12 months prior to
review. This compensation is intended to provide a direct financial incentive
in the form of an annual cash bonus to executives who achieve (i) earnings per
share targets, (ii) corporate objectives and (iii) personal objectives. Bonus
awards are set at a level competitive within the U.K. and U.S. pharmaceutical
chemical and global contract manufacturing industry as well as among a broader
group of service manufacturing and high technology companies of comparable
size and complexity. Such companies are not necessarily included in the
indices used to compare shareholder returns in the Total Return Performance
Graph.
Stock Option Program
The stock option program is the Company's long-term incentive plan for
executive officers and, to a lesser degree, all other employees. The Committee
strongly believes that by providing those persons who have substantial
responsibility for the management and growth of the Company with an
opportunity to increase their ownership of Common Stock, the best interest of
shareholders and executives will be more closely aligned.
Generally, stock options are granted once every year with exercise prices
equal to the prevailing market value of the Common Stock on the date of grant,
have seven year terms and have vesting periods of five years.
9
Awards are made at a level calculated to be competitive within both the
industry, and a broader group of service manufacturing and high technology
companies of comparable size and complexity.
CEO Compensation
In December 1996, the Committee established the annual salary and
discretionary bonus award for Mr. Clark as the Company's Chairman of the Board
and Chief Executive Officer. In setting the compensation for Mr. Clark for
fiscal year 1997, the Committee sought to retain a key executive officer while
continuing to tie a significant percentage of such compensation to Company
performance and stock price appreciation. With respect to Mr. Clark's base
salary, it remains the Committee's intent to provide him with a level of
stability and certainty each year and not have this particular component of
compensation affected to any significant degree by Company performance
factors.
It is the Committee's objective to have an increasing percentage of Mr.
Clark's total compensation each year tied to the attainment of performance
targets.
Summary
After its review of all existing programs, the Committee continues to
believe that the Company's compensation program for its executive officers is
competitive with the compensation programs provided by other companies with
which the Company competes. The committee intends that any amounts to be paid
under the annual incentive plan will be appropriately related to corporate and
individual performance, yielding awards that are directly linked to the
achievement of Company goals and annual financial and operational results.
We conclude our report with the acknowledgment that no member of the
Committee is a former or current officer or employee of the Company or any of
its subsidiaries.
Compensation Committee
Elizabeth M. Greetham
W. Dieter Zander
10
TOTAL RETURN PERFORMANCE GRAPH
The following graph, and the table which follows, compares the total return
of the Common Stock to the total return of the Nasdaq Composite Index and a
group of Company peers which consists of Alusuisse-Lonza Holdings AG, DSM
Andeno B.V. and Laporte PLC. The graph assumes an investment of $100 on January
1, 1997 in each of the Common Stock, the Nasdaq Composite Index and the peer
group.
COMPARISON OF TOTAL RETURN
COMPANY, NASDAQ COMPOSITE INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
NASDAQ
Measurement Period COMPOSITE PEER
(Fiscal Year Covered) CHIREX INDEX GROUP
- --------------------- --------------- --------- ----------
FYE 12-31-1996 $100 $100 $100
FYE 12-31-1997 $147 $122 $123
11
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Except as set forth below, the Company believes that during fiscal year 1997
its executive officers and directors have complied with Section 16(a) of the
Securities Exchange Act of 1934, and the rules and regulations adopted
thereunder.
On August 21, 1997, Mr. Jacobsen was elected to the Board of Directors of
the Company. Due to an inadvertent error, a Form 3 with respect to his
ownership of capital stock of the Company was not filed with the SEC until
October 30, 1997.
On October 21, 1997, Mr. Thorpe, Mr. Raynor and Mr. Weir each sold 1,863
shares of Common Stock. Due to inadvertent errors, Form 4s with respect to
those transactions were not filed with the SEC until December 16, 1997.
ITEM II.
RATIFICATION OF AUDITORS
The Board of Directors has, subject to stockholder ratification, appointed
Arthur Andersen LLP to audit the accounts of ChiRex and its subsidiaries for
fiscal 1998.
The following resolution concerning the appointment of independent auditors
will be offered at the meeting:
"RESOLVED, that the appointment by the Board of Directors of the Company
of Arthur Andersen LLP to audit the accounts of the Company and its
subsidiaries for the fiscal year 1998 is hereby ratified."
Representatives of Arthur Andersen LLP will be present at the Annual Meeting
with the opportunity to make a statement and to respond to appropriate
questions. Submission of the appointment to stockholders is not required.
However, the Board of Directors will reconsider the appointment if it is not
approved by the stockholders. The appointment will be deemed ratified if a
majority of the shares of Common Stock present, either in person or by proxy,
and voting on the matter vote in favor of the proposal.
SOLICITATION OF PROXIES
The expenses of solicitation of proxies for the Annual Meeting, including
the cost of preparing and mailing this Proxy Statement and the accompanying
material, will be paid by ChiRex. Such expenses may also include the charges
and expenses of banks, brokerage houses and other custodians, nominees or
fiduciaries for forwarding proxies and proxy material to beneficial owners of
shares. Solicitation may be made by mail, telephone, telegraph and personal
interview, and by regularly engaged officers and employees of ChiRex, who will
not be additionally compensated therefor. ChiRex has arranged for the services
of Corporate Investor Communications, Inc. ("CIC") to assist in the
solicitation of proxies. The fees of CIC, estimated at $4,000 excluding out-
of-pocket expenses, will be paid by ChiRex.
MISCELLANEOUS
The Board of Directors knows of no other matters to be voted upon at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed proxy card (Mr.
Griffith, Ms. Hecht and Mr. Lindstrom) to vote on such matters in accordance
with their judgment.
Any stockholder who executes a proxy card may revoke it by giving written
notice to the Secretary of ChiRex or by giving to the Secretary a duly
executed form of proxy bearing a date later than the proxy card being revoked,
at any time before such proxy is voted. Attendance at the meeting shall not
have the effect of revoking a proxy unless the stockholder so attending shall,
in writing, so notify the Secretary of the meeting prior to the voting of the
proxy.
12
A proxy card which is properly signed, dated and not revoked will be voted
in accordance with the instructions contained thereon. If no instructions are
given, the persons named on the proxy card solicited by the Board of Directors
intend to vote: (i) FOR the election of the two nominees for directors and
(ii) FOR the ratification of the appointment of Arthur Anderson LLP as the
Company's independent auditors for the 1998 fiscal year.
Any stockholder may strike out the names of the proxies designated by the
Board of Directors on the proxy card and may write in and substitute the name
of any other person and may deliver the revised proxy card to such other
person whom the stockholder may wish to designate as proxy for the purpose of
representing such stockholder at the meeting.
Voting Information: Under Delaware General Corporate law and the Company's
Amended and Restated By-Laws, the presence of a quorum is required to transact
business at the 1998 Annual Meeting of Stockholders. A quorum is defined as
the presence, either in person or by proxy, of a majority of the shares of
Common Stock issued and outstanding and entitled to vote at the meeting.
Abstentions and broker non-votes will be included in the computation of the
number of shares of Common Stock that are present for purposes of determining
the presence of a quorum.
Each stockholder shall have one vote for each share of Common Stock entitled
to vote and a proportionate vote for each fractional share so held, if any.
Votes cast, in person or by proxy, at the Annual Meeting will be tabulated
by representatives of Boston EquiServe, the persons appointed by the Board of
Directors to act as inspectors of election for the Annual Meeting. The
inspectors of election will determine the number of shares outstanding, the
shares represented at the Annual Meeting, the existence of a quorum and the
authenticity, validity and effect of proxies; receive votes or ballots; hear
and determine all challenges and questions in any way arising in connection
with the right to vote; determine when the polls will close; and determine the
results of the election.
Assuming the presence of a quorum, (i) each nominee receiving the votes of a
plurality of the shares present, either in person or by proxy, at the Annual
Meeting shall be elected a director and (ii) the affirmative vote of a
majority of the shares present, either in person or by proxy, and voting at
the Annual Meeting is required for ratification of the independent auditors.
Stockholder Proposals: Proposals which are the proper subject for inclusion
in the proxy statement and for consideration at an annual meeting may be
presented by stockholders. Under current SEC rules, to be included in ChiRex's
proxy statement and proxy card, any proposal by a stockholder intended to be
presented at the 1999 Annual Meeting of Stockholders must be received by
ChiRex, subject to certain exceptions, no later than November 18, 1998. Under
the Company's Amended and Restated By-Laws, notice of any stockholder proposal
intended to be presented at the 1999 Annual Meeting (whether or not included
in the Company's proxy statement) must be received by the Secretary of ChiRex,
subject to certain exceptions, no later than February 4, 1999, but not earlier
than January 15, 1999. Any such notice shall set forth as to each proposal (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons therefor; (ii) the name and address of the stockholder
proposing such business; (iii) the class and number of shares beneficially
owned by such stockholder; (iv) any material interest of the stockholder in
such business; and (iv) if applicable, a representation that the stockholder
intends to solicit proxies in support of such proposal.
Please fill in, sign and date the enclosed form of proxy and return it in
the accompanying addressed envelope which requires no further postage if
mailed in the United States. If you attend the Annual Meeting and wish to vote
your shares in person, you may do so. Your cooperation in giving this matter
your prompt attention will be appreciated.
Stamford, Connecticut
March 17, 1998
13
DETACH HERE
CHIREX INC.
300 Atlantic Street
Suite 402
P
Stamford, Connecticut 06901
R
SOLICITED BY THE BOARD OF DIRECTORS
O FOR THE ANNUAL MEETING OF STOCKHOLDERS
X The undersigned hereby appoints Michael A. Griffith, Beth P. Hecht and
James M. Lindstrom, jointly and severally, with full power of substitution,
Y and hereby authorizes them to represent and to vote, as designated on the
reverse side, all shares of common stock of ChiRex Inc. (the "Company")
held of record by the undersigned on March 9, 1998 at the Annual Meeting of
Stockholders to be held on April 15, 1998 and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL
BE VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
Dear Stockholder:
Please take note of the important information enclosed with this Proxy.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
ChiRex Inc.
DETACH HERE
[X] Please mark
votes as in
this example.
1. Election of Directors
Nominees: Dirk Detert, Ph.D. and Elizabeth M. Greetham
FOR WITHHELD
[_] [_]
[_]
----------------------------------------
For all nominees except as noted above
2. Ratify the appointment of Arthur Andersen LLP as independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature: Date: Signature: Date:
------------- ---------- ------------- ---------