1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [Section]240.14a-11(c) or
[Section]240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CHIREX Inc.
(Name of Registrant as Specified In Its Charter)
CHIREX Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
2
CHIREX INC. CHIREX LOGO
NOTICE OF 1997 ANNUAL MEETING
AND
PROXY STATEMENT
APRIL 17, 1997
3
CHIREX INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 1997
To our Stockholders:
The Annual Meeting of Stockholders of ChiRex Inc., a Delaware corporation
("ChiRex"), will be held on Thursday, April 17, 1997, at 10:00 A.M., Eastern
Standard Time, at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New
York, New York 10019, 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 I directors;
(2) the ratification of the appointment of Arthur Anderson LLP as
independent auditors for fiscal year 1997;
(3) the approval of the 1995 Amended and Restated Director Stock Option
Plan; and
(4) the approval of the 1997 Stock Incentive Plan.
Only stockholders of record at the close of business on March 14, 1997 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,
/s/ Michael A. Griffith
MICHAEL A. GRIFFITH
Chief Financial Officer
and Secretary
Wellesley, Massachusetts
March 19, 1997
4
CHIREX INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 17, 1997
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 Thursday, April 17,
1997, at 10:00 A.M., Eastern Standard Time, at the offices of Cravath, Swaine &
Moore, 825 Eighth Avenue, New York, New York 10019, 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 19, 1997.
Only holders of Common Stock of ChiRex, par value $.01 per share ("Common
Stock"), at the close of business on March 14, 1997 will be entitled to vote at
the Annual Meeting. At that date there were 10,943,678 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.
ChiRex's address is ChiRex Inc., 65 William Street, Suite 330, Wellesley,
Massachusetts 02181.
ITEM I.
ELECTION OF DIRECTORS
At the 1997 Annual Meeting, two Class I directors are to be elected to hold
office until the 2000 Annual Meeting, or until their successors have been duly
elected and qualified. The Board of Directors proposes for election Michael A.
Griffith and W. Deiter Zander, both of whom are now directors of the Company.
The Board of Directors currently consists of 6 directors, divided into
three classes. On April 30, 1996, the Board of Directors increased the size of
the Board of Directors from 4 directors to 5 directors and elected Dirk Detert
as a Class II director. On October 17, 1996, the Board of Directors increased
the size of the Board of Directors from 5 directors to 6 directors and elected
Michael A. Griffith, Chief Financial Officer and Secretary of the Company, as a
Class I director.
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 (Alan R. Clark, Roger B. Pettman 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.
5
NOMINEES FOR CLASS I DIRECTORS
(TERM EXPIRING IN 2000)
MICHAEL A. GRIFFITH
Mr. Griffith, 38, 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 from
August 1988 until June 1994 he 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, 81, 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 II DIRECTORS
(TERM EXPIRING IN 1998)
DIRK DETERT, PH.D.
Dr. Detert, 55, 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.
ELIZABETH M. GREETHAM
Ms. Greetham, 47, 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 Access
Pharmaceuticals, Guilford Pharmaceuticals, PathoGenesis Corporation and Sangstat
Medical Corp. Ms. Greetham holds a B.Sc. and an M.A. (Honors) from the
University of Edinburgh.
2
6
CONTINUING CLASS III DIRECTORS
(TERM EXPIRING IN 1999)
ROBERT L. BRATZLER, PH.D.
Dr. Bratzler, 50, is President of Bratzler Associates, a private consulting
firm. He was Chairman of the Board and Chief Executive Officer of the Company
from its incorporation on December 19, 1995, until his resignation on October
17, 1996. From November 1994 to the closing of the initial public offering of
the Company on March 11, 1996, Dr. Bratzler was President of SepraChem Inc.
(currently a wholly-owned subsidiary of the Company which was renamed ChiRex
America Inc.). He served as Executive Vice President of Sepracor Inc. from 1985
until his resignation on March 11, 1996. Dr. Bratzler holds a B.S.ChE. in
chemical engineering from the University of Michigan and a Ph.D. in chemical
engineering from the Massachusetts Institute of Technology.
ALAN R. CLARK
Mr. Clark, 50, 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
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.
Except as otherwise indicated, the nominees and continuing directors have
held the principal occupations described above during the past five years.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Audit Committee
and Compensation Committee. During 1996, eight meetings of the Board of
Directors were held. The Audit Committee did not meet independently of the Board
of Directors during 1996. The Compensation Committee (together with the Option
Committee which was dissolved as of February 20, 1997) met six times. 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 $1,000 per meeting of the
Board attended and reimburses non-employee directors for their out-of-pocket
expenses incurred in attending meetings. In addition, each non-employee director
participates in the Company's 1995 Director Stock Option Plan, as described
below.
3
7
The 1995 Director Stock Option Plan (the "Director Plan") was adopted by
the Board of Directors in December 1995 and approved by the stockholders of the
Company in February 1996. Under the terms of the Director Plan, members of the
Board of Directors 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 to each eligible member of the Board of Directors on each
subsequent date that he or she is re-elected as a member of the Board of
Directors (a "Re-election Option"). Each Initial 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
the grant of such option. Each Re-election Option will become exercisable in
full immediately prior to the annual meeting of stockholders next following the
date of grant. The exercise price of options granted under the Director Plan
will equal the closing price of the Common Stock on The Nasdaq Stock Market's
National Market on the date of grant. Options granted under the Director Plan
generally may not be exercised unless the optionee, at the time he or she
exercises the option, is, and has been at all times since the date of grant, a
member of the Board of Directors. 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 ten years from
the date of grant.
On February 20, 1997, the Board of Directors adopted the Amended and
Restated 1995 Director Stock Option Plan which will be submitted for stockholder
approval at the Annual Meeting. See "Item III. Approval of Amended and Restated
Director Stock Option Plan."
For a description of retirement benefits provided to certain of the
employee directors of the Company, see "Retirement Benefits."
CERTAIN TRANSACTIONS
Dirk Detert, a member of the Board of Directors, received consulting fees
in the amount of $64,957 during the year ended December 31, 1996 in connection
with his work as a marketing consultant for InNova Pharmaceuticals SRL
("InNova"), the Company's joint venture with Dabur India Ltd. ("Dabur"). The
Company and Dabur have agreed in principle to dissolve InNova.
In addition, in connection with his resignation as Chairman and Chief
Executive Officer on October 17, 1996, Robert Bratzler and the Company entered
into a settlement agreement and a consulting agreement. See "Executive
Employment and Other Agreements -- Settlement and Consulting Agreements."
The Company, incorporated in 1995, is a combination of Sterling Organics
Limited (subsequently renamed ChiRex Limited, "ChiRex Ltd."), a fine chemicals
manufacturer, and the chiral chemistry business of Sepracor Inc. ("Sepracor"),
which was conducted through its subsidiary, SepraChem Inc. (subsequently renamed
ChiRex America Inc., "ChiRex America"). The Company completed its initial public
offering on March 11, 1996 (the "IPO"). Immediately prior to the closing of the
IPO, the share capital of Crossco (157) Limited (subsequently renamed ChiRex
(Holdings) Limited, "ChiRex Holdings Ltd."), a private company incorporated in
England and Wales that is the sole shareholder of ChiRex Ltd., was contributed
to the Company (the "Contribution") in exchange for shares of Common Stock and
promissory notes of the Company. In connection with the Contribution, Messrs.
Clark, Raynor, Thorpe and Weir received an aggregate of 300,205 shares of Common
Stock and $4.2 million in cash in exchange for shares of capital stock of ChiRex
Holdings Ltd. held by them prior to the Contribution.
4
8
In addition to the Contribution, concurrently with the IPO, Sepracor
contributed ChiRex America to the Company through a merger of a newly formed
wholly-owned subsidiary of the Company with and into ChiRex America (the
"Merger"). In connection with the Merger, Sepracor received 3,489,301 shares of
Common Stock and Messrs. Bratzler, Pettman and Zander received options to
purchase 285,535, 87,857 and 2,635 shares of Common Stock, respectively, in
exchange for options to purchase shares of common stock of ChiRex America. Each
of the options is exercisable at a price of $1.48 per share. See "Executive
Compensation-Option Grants in Last Fiscal Year." In addition, Mr. Pettman
received 25,000 shares of Common Stock in exchange for 56,911 shares of common
stock of ChiRex America granted to him prior to the IPO by Sepracor in
consideration of his business development efforts in the formation of InNova.
Under a Technology Transfer and License Agreement, effective January 1,
1995, Sepracor granted to the Company (with certain exceptions) an exclusive,
royalty-free perpetual right and license to use and practice certain
technologies (and improvements thereto) licensed and sublicensed thereunder (the
"Licensed Technologies") on a worldwide basis in a defined field (the "Company
field"). The term of this agreement ends on December 31, 1998, unless either
party exercises its option to terminate such agreement on six months written
notice after the date on which Sepracor's ownership of the outstanding voting
stock of the Company first drops below 20%. The termination of the agreement
will not affect the Company's ability to continue using the Licensed
Technologies in the Company field. In the period since the IPO, the Company has
paid $158,000 to Sepracor under the Technology Transfer and License Agreement
for patent and licensing expenses and has received $609,000 in licensing
royalties.
5
9
STOCK OWNERSHIP OF CERTAIN PERSONS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 10, 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
- ------------------------------------------------------------------------- --------- -------
Sepracor Inc.(1)......................................................... 3,489,301 31.9%
33 Locke Drive
Marlborough, MA 01752
Mellon Bank Corporation(2)............................................... 1,380,000 12.6
One Mellon Bank Center
Pittsburgh, PA 15258
State of Wisconsin Investment Board(3)................................... 852,000 7.8
P.O. Box 7842
Madison, WI 53707
American Express Company(4).............................................. 603,000 5.5
American Express Tower
200 Vesey Street
New York, NY 10285
Robert L. Bratzler(5).................................................... 285,535 2.6
Alan R. Clark............................................................ 93,828 *
Dirk Detert.............................................................. -0- --
Elizabeth M. Greetham.................................................... -0- --
Michael A. Griffith(6)................................................... 60,000 *
W. Dieter Zander(7)...................................................... 2,635 *
Roger B. Pettman(8)...................................................... 112,857 1.0
David F. Raynor.......................................................... 69,459 *
J. Graham Thorpe......................................................... 69,459 *
John E. Weir............................................................. 71,459 *
Directors and executive officers as a group(10 persons)(9)............... 765,232 6.7
- ---------------
* Less than one percent
(1) The Company filed a registration Statement on Form S-1 on February 26, 1997
with the Securities and Exchange Commission pursuant to which Sepracor
intends to dispose of all of its shares of Common Stock. The sale of
Sepracor shares is expected to be completed prior to April 1, 1997.
(2) As reported on Schedule 13G filed with the Securities and Exchange
Commission for the year ended December 31, 1996. Mellon Bank Corporation is
the parent holding company of Mellon Bank N.A. and The Dreyfus Corporation,
a registered Investment Adviser under Section 203 of the Investment Advisers
Act of 1940. Mellon Bank Corporation has voting power over 1,380,000 shares,
sole dispositive power over 126,000 shares and shared dispositive power over
1,254,000 shares; Mellon Bank N.A. has voting power over 1,026,000 shares,
sole dispositive power over 20,000 shares and shared dispositive power over
1,006,000 shares; and The Dreyfus Corporation has voting power over
1,006,000 shares.
(footnotes continue on following page)
6
10
(footnotes continued from previous page)
(3) As reported on Schedule 13G filed with the Securities and Exchange
Commission for the year ended December 31, 1996.
(4) As reported on Schedule 13G filed with the Securities and Exchange
Commission for the year ended December 31, 1996. 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. American Express Company has
shared voting power over 3,500 shares and shared dispositive power over
603,500 shares; American Express Financial Corporation has shared voting
power over 3,500 shares and shared dispositive power over 603,500 shares;
and IDS Discovery Fund, Inc. has sole voting power over 600,000 shares and
shared dispositive power over 600,000 shares.
(5) Includes 263,535 shares subject to vested options.
(6) Includes 55,000 shares subject to vested options.
(7) Represents shares subject to vested options.
(8) Includes 87,857 shares subject to vested options.
(9) Includes an aggregate of 409,027 shares subject to vested options.
7
11
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the years ended
December 31, 1995 and 1996 for the Company's current and former 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 and 1996 exceeded
$100,000 (the Chief Executive Officer and such other executive officers are
hereinafter referred to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -----------
COMPENSATION SECURITIES
------------------- OPTIONS(#) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) UNDERLYING COMPENSATION($)
- --------------------------------------- ----- --------- -------- ----------- -----------------
Alan R. Clark.......................... 1996 149,193 32,208 84,240(2)
Chairman and Chief Executive Officer 1995 123,240 41,679
Michael A. Griffith.................... 1996 109,485 125,000
Chief Financial Officer, Secretary
and Director(3)
Roger B. Pettman....................... 1996 139,816 37,000 102,857(4) 325,000(6)
Vice President, Sales and Marketing 1995 133,770 9,750
David F. Raynor........................ 1996 110,498 23,550 20,253(2)
Vice President, Operations 1995 89,029 27,166
J. Graham Thorpe....................... 1996 86,124 18,355 29,835(2)
Vice President, Commercial
Development 1995 66,755 20,149
John E. Weir........................... 1996 83,344 17,316 27,300(2)
Vice President, Finance & Treasurer 1995 62,367 18,715
Robert L. Bratzler..................... 1996 178,636 50,000 285,535(5) 141,086(7)
Director and Former Chairman and
Chief............................. 1995 168,168 38,549
Executive Officer
- ---------------
(1) Compensation for Messrs. Clark, Raynor, Thorpe and Weir was paid in Pounds
Sterling and amounts shown were translated from Pounds Sterling into U.S.
Dollars at the rate of L0.64 to $1.00. For the year ended December 31, 1995
and the period from January 1, 1996 until March 11, 1996, compensation for
Messrs. Bratzler and 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 Messrs. Bratzler and Pettman for
the period from January 1, 1996 until March 11, 1996 were $89,312 (including
a $50,000 bonus) and $66,000 (including a $37,000 bonus), respectively.
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) 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.
(3) 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.
(footnotes continue on following page)
8
12
(footnotes continued from previous page)
(4) 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 and options to purchase 15,000 shares of
Common Stock granted under the 1995 Stock Incentive Plan.
(5) Options to purchase Common Stock which were granted in exchange for options
to purchase common stock of SepraChem Inc. in connection with the Merger.
Includes options to purchase 26,797 shares of Common Stock granted in
exchange for options to purchase 61,000 shares of common stock of SepraChem
Inc. granted in 1995.
(6) Represents the fair market value at the time of grant of 25,000 shares of
Common Stock granted in exchange for 56,911 shares of common stock of
SepraChem Inc. which were transferred to Mr. Pettman prior to the Merger.
(7) Mr. Bratzler resigned from his positions as Chairman and Chief Executive
Officer on October 17, 1996. In connection with his resignation, Mr.
Bratzler and the Company entered into a settlement agreement and a
consulting agreement. Amounts presented include payments made pursuant to
the settlement agreement of $49,906 in the year ended December 31, 1996.
"See--Executive Employment Agreements and Other Arrangements."
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted in fiscal year 1996 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
OPTIONS GRANTS IN LAST FISCAL YEAR POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------ ---------- -------------- -------- ---------- ---------- ----------
Alan R. Clark........... 0 0 0 0 0 0
Michael A. Griffith..... 125,000(2) 13.3 10.875 4/10/03 553,402 1,289,662
Roger B. Pettman........ 87,857(3) 9.3 1.48 3/11/03 1,477,079 2,095,681
15,000(4) 1.6 11.50 6/28/03 70,225 163,654
David F. Raynor......... 0 0 0 0 0 0
J. Graham Thorpe........ 0 0 0 0 0 0
John E. Weir............ 0 0 0 0 0 0
Robert L. Bratzler...... 285,535(3) 30.3 1.48 3/11/03 4,800,502 6,810,958
- ---------------
(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.
(footnotes continue on following page)
9
13
(footnotes continued from previous page)
(2) Represents (i) options to purchase 100,000 shares of Common Stock, 30% of
which vested upon the commencement of Mr. Griffith's employment on April 10,
1996 and the remaining 70% of which vest at annual rate of 20% and (ii)
options to purchase 25,000 shares of Common Stock which vested upon the
filing of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(3) Represents fully vested options to purchase shares of Common Stock which
were granted in exchange for options to purchase shares of common stock of
SepraChem Inc. in connection with the Merger.
(4) Represents options to purchase 15,000 shares of Common Stock granted on June
28, 1996, which vest at an annual rate of 20%.
STOCK OPTION EXERCISES
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- ----------- ----------- -------------------------- --------------------------
Alan R. Clark........ 0 0 0 0
Michael A.
Griffith........... 0 0 30,000 / 95,000 33,750 / 106,875
Roger B. Pettman..... 0 0 87,857 / 15,000 924,255 / 7,500
David F. Raynor...... 0 0 0 0
J. Graham Thorpe..... 0 0 0 0
John E. Weir......... 0 0 0 0
Robert L. Bratzler... 22,000 264,000 263,535 / 0 2,772,388 / 0
RETIREMENT BENEFITS
Employees of the Company, including senior management, are entitled to
participate in the ChiRex Pension Plan (the "Pension Plan"). Messrs. Clark,
Raynor, Thorpe and Weir currently participate in the Pension Plan; however,
Messrs. Griffith and Pettman do not participate.
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),
10
14
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.
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 Pounds Sterling and amounts shown were
translated from Pounds Sterling into U.S. Dollars at the rate of
[pound]0.64 to $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. Weir'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.
11
15
On October 17, 1996, the Company entered into a settlement agreement with
Mr. Bratzler. The settlement agreement provided for a cash severance payment to
Mr. Bratzler of $91,180. In addition, under the agreement, an escrow agreement
that restricted the sale of Mr. Bratzler's shares of Common Stock was
terminated. The Company also agreed to provide Mr. Bratzler with continued
benefits coverage and with office space and secretarial services until April 17,
1998. The settlement agreement contains certain restrictive covenants, including
provisions relating to noncompetition, nonsolicitation and the nondisclosure of
proprietary information. In addition, the settlement agreement included a
release of claims by the Company in favor of Mr. Bratzler and a release of
claims by Mr. Bratzler in favor of the Company.
The Company is also party to a consulting agreement with Mr. Bratzler for
the period commencing October 17, 1996 and ending on April 17, 1998. Under the
agreement, Mr. Bratzler performs consulting, advisory and related services as
requested by the Company and receives a monthly consultant's fee of $19,583.
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 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.
12
16
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. 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 1996, 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 and the Committee intends to award Mr. Clark stock options early in
1997.
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 acknowledgement 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
13
17
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 Standard & Poor's 500 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 March 6, 1996
in each of the Common Stock, Standard & Poor's 500 Index and the peer group.
COMPARISON OF TOTAL RETURN
COMPANY, S&P 500 INDEX AND PEER GROUP
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) CHIREX S&P 500 INDEX PEER GROUP
06-MAR-96 100 100 100
29-MAR-96 85.4 99.0 103.0
28-JUN-96 95.8 102.9 102.9
30-SEP-96 108.3 105.4 96.4
31-DEC-96 100.0 113.6 99.3
14
18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during fiscal year 1996 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.
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 1997.
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 1997 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.
On September 5, 1996, the Company engaged Arthur Andersen LLP as its
independent accountant and dismissed Coopers & Lybrand L.L.P. from such
position. The decision to change accountants was made by the Board of Directors
of the Company. During the fiscal years ended December 31, 1994 and 1995 and the
subsequent interim period immediately preceding the date of this change in
accountants, the Company and each of its subsidiaries (the "Subsidiaries") had
no disagreements with Coopers & Lybrand L.L.P. on any matter of accounting
principles or practices, financial statements disclosure or auditing scope or
procedure, which disagreement(s), if not resolved to the satisfaction of Coopers
& Lybrand L.L.P., would have caused Coopers & Lybrand L.L.P. to make a reference
to the subject matter of the disagreement in connection with its reports on the
financial statements of the Company or any of the Subsidiaries.
ITEM III.
APPROVAL OF THE AMENDED AND RESTATED 1995
DIRECTOR STOCK OPTION PLAN
The Board of Directors has, subject to stockholder approval, adopted the
Amended and Restated 1995 Director Stock Option Plan (the "Amended Director
Plan") attached hereto as Annex A. The Amended Director Plan increases the stock
based components of director compensation in an effort to encourage stock
ownership by directors and to further align the interests of Directors and
stockholders.
AMENDED AND RESTATED 1995 DIRECTOR STOCK OPTION PLAN
The Amended Director Plan amends the 1995 Director Stock Option Plan to
provide for the grant of an option to purchase 3,000 shares of Common Stock 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 as opposed to the
date of re-election of such eligible members of the Board of Directors. Each
option granted under the new provision 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 the grant of such
option.
15
19
Under the terms of the Amended 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 Amended 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 Amended 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 Amended 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 Amended 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.
The Amended Director Plan became effective on February 20, 1997, the date
on which it was adopted by the Board of Directors, but all grants (if any) will
be conditional upon the approval of the Amended Director Plan by the holders of
the Common Stock. If the Amended Director Plan is not approved, the current
Director Plan will remain in effect.
FEDERAL TAX CONSEQUENCES
There are no Federal tax consequences to a non-employer director upon the
grant or receipt of an option under the Amended Director Plan. On exercise of an
option, the excess of the date-of-exercise fair market value of the shares
acquired over the option price will generally be taxable to the director as
ordinary income and deductible by the Company. The disposition of shares
acquired upon exercise of the option will generally result in a capital gain or
loss for the director, but will have no tax consequences for the Company.
PROPOSED RESOLUTION
The persons named in the enclosed proxy card (Messrs. Clark, Pettman and
Lindstrom) have advised that they intend to vote to approve the Amended Director
Plan unless contrary direction is indicated on the proxy card.
Because W. Dieter Zander, a non-employee director nominee, if elected, will
participate in the Amended Director Plan, and will benefit from the proposed
amendment, he has a personal interest in the adoption of this proposal.
The Board of Directors recommends that the stockholders vote for the
approval of the Amended Director Plan.
The favorable vote of a majority of the shares of Common Stock present,
either in person or by proxy, and voting on the matter at the 1997 Annual
Meeting of Stockholders, is required to approve the Amended Director Plan.
The foregoing resolution will be offered at the Annual Meeting:
"RESOLVED, that the Amended and Restated 1995 Director Stock Option Plan is
hereby approved."
16
20
ITEM IV.
APPROVAL OF 1997 STOCK INCENTIVE PLAN
The Board of Directors has, subject to stockholder approval, adopted the
1997 Stock Incentive Plan (the "1997 Incentive Plan") attached hereto as Annex
B.
The Board of Directors believes that there is a continuing need for a
long-term incentive plan tied directly to stockholder value and applicable to a
broad class of employees. Since the shares of Common Stock available under the
1995 Stock Incentive Plan will soon be exhausted, the Board of Directors
believes that the 1997 Incentive Plan is necessary.
1997 STOCK INCENTIVE PLAN
The 1997 Incentive Plan became effective on February 20, 1997, the date on
which it was approved by the Board of Directors, but all grants (if any) under
the 1997 Incentive Plan shall be conditional upon the approval of the 1997
Incentive Plan by the holders of the Common Stock.
The 1997 Incentive Plan provides for the grant of Stock Options, Stock
Appreciation Rights ("SARs"), Performance Shares and Restricted or Unrestricted
Stock to employees, officers and members of the Board of Directors of, and
consultants or advisors to, the Company. A total of 2,000,000 shares of Common
Stock may be awarded under the 1997 Incentive Plan. The maximum number of shares
of Common Stock which may be granted to any employee under the 1997 Incentive
Plan shall not exceed 350,000 shares during any calendar year. The 1997
Incentive Plan is administered by the Compensation Committee which may adopt,
amend or repeal the administrative rules, guidelines and practices relating to
the plan.
INCENTIVE STOCK OPTIONS; NONSTATUTORY STOCK OPTIONS
The Compensation Committee may award Incentive Stock Options and
Nonstatutory Stock Options, and determine the number of shares to be covered by
each option, the conditions and limitations applicable to the exercise of the
option and the option price therefor, which, in the case of Incentive Stock
Options, must be at least 100% (110% in the case of Incentive Stock Options
granted to a stockholder owning in excess of 10% of the Common Stock) of the
fair market value of the Common Stock as of the date of grant. Incentive Stock
Options shall be subject to and comply with Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). Payment of the option exercise price may
be made in cash, shares of Common Stock or by any other method (including
delivery of a promissory note payable on terms specified by the Board) approved
by the Compensation Committee. The option exercise period for Incentive Stock
Options shall not exceed seven years from the date of grant, or five years if
granted to a stockholder owning in excess of 10% of the Common Stock.
STOCK APPRECIATION RIGHTS
The Compensation Committee may award SARs entitling recipients on exercise
of the SAR to receive an amount, in cash or stock or a combination thereof,
determined in whole or in part by reference to appreciation in the fair market
value of the Common Stock between the date of the award and the exercise of the
award. SARs may be granted in tandem with, or independently of, options granted
under the 1997 Incentive Plan.
PERFORMANCE SHARE AWARDS
The Compensation Committee may make Performance Share Awards entitling
recipients to acquire shares of Common Stock upon the attainment of specified
performance goals, as determined by the Compensation Committee, which may
include earnings per share or revenue targets, completed acquisitions
17
21
and other corporate or individual executive objectives. The Compensation
Committee may make Performance Share Awards independent of or in connection with
any other award under the Incentive Plan. Performance Share Awards and all
rights with respect to such awards may not be sold, assigned, transferred,
pledged or otherwise encumbered.
RESTRICTED AND UNRESTRICTED STOCK AWARDS
The Board may grant Restricted Stock Awards entitling recipients to acquire
shares of Common Stock subject to the right of the Company to repurchase all or
part of such shares at their purchase price from the recipient in the event that
conditions specified by the Compensation Committee are not satisfied prior to
the end of the applicable Restricted Period established by the Compensation
Committee for such award. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered during the applicable Restricted
Period. The Board may, in its sole discretion, grant or sell to participants
shares of Common Stock free of any restrictions under the 1997 Incentive Plan at
a price per share equal to at least 85% of the fair market value of the Common
Stock.
In the event of the sale of all or substantially all of the asset of the
Company or a consolidation or merger involving the Company in which the
outstanding shares of Common Stock are exchanged for security, cash or other
property of any other corporation or business entity, then all of the
outstanding stock options granted under the 1997 Incentive Plan shall become
exercisable immediately prior to such event. The 1997 Incentive Plan shall
terminate upon the earlier of (i) the close of business on the day next
preceding the tenth anniversary of the date of its adoption or (ii) the date on
which all shares available for issuance under the 1997 Incentive Plan shall have
been awarded.
The 1997 Incentive Plan became effective on February 20, 1997, the date on
which it was adopted by the Board, but all grants (if any) under the 1997
Incentive Plan shall be conditional upon the approval of the 1997 Incentive Plan
by the holders of the Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following brief description of the tax consequences of awards under the
1997 Incentive Plan is based on Federal tax laws currently in effect and does
not purport to be a complete description of such Federal tax consequences.
OPTIONS
There are no Federal tax consequences either to the optionee or to the
Company upon the grant of an Incentive Stock Option or Nonstatutory Stock
Option. On the exercise of an Incentive Stock Option, the optionee will not
recognize any income and the Company will not be entitled to a deduction,
although such exercise may give rise to alternative minimum tax liability for
the optionee. Generally, if the optionee disposes of shares acquired upon
exercise of an Incentive Stock Option within two years of the date of grant or
one year of the date of exercise, the optionee will recognize ordinary income
and generally the Company will be entitled to a deduction, equal to the excess
of the fair market value of the shares of the date of exercise over the option
price (limited generally to the gain on the sale). The balance of any gain, and
any loss, will be treated as a capital gain or loss to the optionee. If the
shares are disposed of after the foregoing holding requirements are met, the
Company will not be entitled to any deduction, and the entire gain or loss for
the optionee will be treated as a capital gain or loss.
On exercise of a Nonstatutory Stock Option, the excess of the
date-of-exercise fair market value of the shares acquired over the option price
will generally be taxable to the optionee as ordinary income and generally
deductible by the Company. The disposition of shares acquired upon exercise of a
Nonstatutory Stock Option
18
22
will generally result in a capital gain or loss for the optionee, but will have
no tax consequences for the Company.
STOCK APPRECIATION RIGHTS
The amount of any cash (or the fair market value of any Common Stock)
received by the holder of an SAR upon the exercise of the SAR under the 1997
Incentive Plan will be subject to ordinary income tax in the year of receipt and
generally, the Company will be entitled to a deduction for such amount.
PERFORMANCE SHARE AWARDS.
An employee who has been awarded Performance Share Awards will not
recognize taxable income, and the Company will not be entitled to a deduction,
at the time of the award. At the time the employee is entitled to the shares of
Common Stock, the employee will recognize ordinary income equal to the sum of
the cash and the fair market value of the shares of Common Stock at such time,
and generally, the Company will be entitled to a corresponding deduction.
RESTRICTED STOCK AWARDS
An employee (the "Recipient") who has been awarded Restricted Stock will
not recognize taxable income at the time of the award unless he elects
otherwise. At the time any restrictions applicable to the Restricted Stock award
lapse, the Recipient will recognize ordinary income and generally the Company
will be entitled to a corresponding deduction equal to the excess of the fair
market value of such stock at such time over the amount paid therefor. Dividends
paid to the Recipient on the Restricted Stock during the Restricted Period will
be ordinary compensation income to the Recipient and deductible as such by the
Company.
UNRESTRICTED STOCK AWARDS
An employee who has been granted Unrestricted Stock will recognize ordinary
income as of the date of receipt of the shares in an amount equal to the excess
of the fair market value of the shares at that time over the amount paid for
such shares. The employee's tax basis in the shares will be equal to the sum of
the amount paid for such shares plus the amount of ordinary income so
recognized. Generally, the Company is entitled to a deduction equal to the
amount of income recognized by the employee.
PROPOSED RESOLUTION
The persons named in the enclosed proxy card (Messrs. Clark, Pettman and
Lindstrom) have advised that they intend to vote to approve the 1997 Incentive
Plan unless contrary direction is indicated on the proxy card.
The favorable vote of a majority of the shares of Common Stock present,
either in person or by proxy, and voting on the matter at the 1997 Annual
Meeting of Stockholders, is required to approve the 1997 Incentive Plan.
The following resolution will be offered at the Annual Meeting:
"RESOLVED, that the 1997 Stock Incentive Plan is hereby approved."
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
19
23
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 (Messrs. Clark,
Pettman and 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.
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, (ii) FOR
the ratification of the appointment of independent auditors for the 1997 fiscal
year, (iii) FOR the approval of the 1995 Amended and Restated Director Stock
Option Plan and (iv) FOR the approval of the 1997 Stock Incentive Plan.
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 1997 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, (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, (iii) 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 approval of the 1995
20
24
Amended and Restated Director Stock Option Plan and (iv) 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 approval of the 1997 Stock Incentive Plan.
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 1998 Annual Meeting of Stockholders must be received by
ChiRex, subject to certain exceptions, no later than November 19, 1997. Under
the Company's Amended and Restated By-Laws, notice of any stockholder proposal
intended to be presented at the 1998 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 6, 1998, but not earlier
than January 17, 1998. 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.
Wellesley, Massachusetts
March 19, 1997
21
25
ANNEX A
CHIREX INC.
AMENDED AND RESTATED 1995 DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1995 Director Stock Option Plan (the "Plan") of ChiRex
Inc. (the "Company") is to encourage ownership in the Company by outside
directors of the Company whose continued services are considered essential to
the Company's future progress and to provide them with a further incentive to
remain as directors of the Company.
2. ADMINISTRATION
The Board of Directors shall supervise and administer the Plan. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
of interpretation of the Plan or of any options issued under it shall be
determined by the Board of Directors, and such determination shall be final and
binding upon all persons having an interest in the Plan.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under the Plan shall
be 100,000 shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), subject to adjustment as provided in Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
(c) All options granted under the Plan shall be nonstatutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended to date and as it may be amended from time to time (the
"Code").
5. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grants. Each eligible Director 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 (the "Initial Option"). Annual options 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
Director then in office (the "Annual Option").
A-1
26
(b) Option Exercise Price. The option exercise price per share for
each option granted under the Plan shall equal (i) the last reported sales
price per share of the Company's Common Stock on The Nasdaq National Market
(or, if the Company is traded on another nationally recognized securities
exchange on the date of grant, the reported closing sales price per share
of the Company's Common Stock by such exchange) on the date of grant (or if
no such price is reported on such date such price as reported on the
nearest preceding day) or (ii) if the Common Stock is not traded on the
Nasdaq National Market or an exchange, the fair market value per share on
the date of grant as most recently determined by the Board of Directors.
(c) Options Nontransferable. Each option granted under the Plan by
its terms shall not be transferable by the optionee otherwise than by will,
or by the laws of descent and distribution, and shall be exercised during
the lifetime of the optionee only by him. No option or interest therein may
be transferred, assigned, pledged or hypothecated by the optionee during
his lifetime, whether by operation of law or otherwise, or be made subject
to execution, attachment or similar process.
(d) Exercise Period. Each Initial Option and Annual Option shall
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. Notwithstanding the
foregoing, and subject to the provisions of Section 5(e), no option may be
exercised more than 90 days after the optionee ceases to serve as a
director of the Company. No option shall be exercisable after the
expiration of seven years from the date of grant.
(e) Exercise Period upon Disability or Death. Notwithstanding the
provisions of Section 5(d), an option granted under the Plan may be
exercised, to the extent then exercisable, by an optionee who became
disabled (within the meaning of Section 22(e)(3) of the Code or any
successor provision thereto) while acting as a director of the Company, or
may be exercised, to the extent then exercisable, upon the death of such
optionee while a director of the Company by the person to whom it is
transferred by will, by the laws of descent and distribution, or by written
notice filed pursuant to Section 5(f), in each case within the period of
one year after the date the optionee ceases to be such a director by reason
of such disability or death; provided that no option shall be exercisable
after the expiration of seven years from the date of grant.
(f) Exercise by Representative Following Death of Director. A
director, by written notice to the Company, may designate one or more
persons (and from time to time change such designation) including his or
her legal representative, who, by reason of the director's death, shall
acquire the right to exercise all or a portion of an option granted under
the Plan. If the person or persons so designated wish to exercise any
portion of an option, they must do so within the term of the option as
provided herein. Any exercise by a representative shall be subject to the
provisions of the Plan.
(g) Exercise Procedure. Options may be exercised only by written
notice to the Company at its principal office accompanied by (i) payment in
cash of the full consideration for the shares as to which they are
exercised or (ii) an irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price or
delivery of irrevocable instructions to a broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price.
6. ASSIGNMENTS
The rights and benefits of participants under the Plan may not be assigned,
whether voluntarily or by operation of law, except as provided in Section 5(c).
A-2
27
7. EFFECTIVE DATE; TERMINATION
The Plan became effective immediately upon its adoption by the Board of
Directors, but all grants of options shall be conditional upon the approval of
the Plan by the stockholders of the Company within 12 months after adoption of
the Plan by the Board of Directors. All options for shares subject to the Plan
shall be granted, if at all, not later than six years after the approval of the
Plan by the Company's stockholders.
8. LIMITATION OF RIGHTS
(a) No Right To Continue as a Director. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor, and no adjustment
will be made for dividends or other rights (except as provided in Section 9) for
which the record date is prior to the date such certificate is issued.
9. CHANGES IN COMMON STOCK
(a) If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock, or other securities, an appropriate and proportionate adjustment will be
made in (i) the maximum number and kind of shares reserved for issuance under
the Plan, (ii) the number and kind of shares or other securities subject to then
outstanding options under the Plan and (iii) the price for each share subject to
any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. No fractional shares
will be issued under the Plan on account of any such adjustments.
(b) In the event that the Company is merged or consolidated into or with
another corporation (in which consolidation or merger the stockholders of the
Company receive distributions of cash or securities of another issuer as a
result thereof), or in the event that all or substantially all of the assets of
the Company are acquired by any other person or entity, or in the event of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or successor corporation (or an affiliate thereof), or (ii) upon
written notice to the optionees, provide that all unexercised options will
terminate immediately prior to the consummation of such merger, consolidation,
acquisition, reorganization or liquidation unless exercised by the optionee
within a specified number of days following the date of such notice.
10. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or review or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company no revision or amendment shall change the number
of shares subject to the Plan (except as provided in Section 9), change the
designation of the class of directors eligible to receive options, or materially
increase the benefits accruing to participants under the Plan.
A-3
28
11. NOTICE
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when received.
12. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
Adopted by the Board of Directors
on February 20, 1997
A-4
29
ANNEX B
CHIREX INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of this 1997 Stock Incentive Plan (the "Plan") is to advance
the interests of ChiRex Inc. by enhancing its ability to attract and retain key
employees, consultants and others who are in a position to contribute to the
Company's future growth and success.
SECTION 2. DEFINITIONS
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under Section 12 of the Securities Exchange Act of
1934, each member of the Committee shall be a "non-employee director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule 16b-3")
and qualify as an "outside director" pursuant to Code Section 162(m) of the Code
and the regulations issued thereunder.
"Common Stock" or "Stock" means the Common Stock, $.01 par value per share,
of ChiRex Inc.
"Company" means ChiRex Inc. and, except where the context otherwise
requires, all present and future subsidiaries of the Company as defined in
Sections 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Committee, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals awarded to a Participant under Section 8.
B-1
30
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Committee
during which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
Fair Market Value of shares of Common Stock over the exercise price awarded to a
Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a Participant
under Section 9(c).
SECTION 3. ADMINISTRATION
The Plan will be administered by the Committee. The Committee shall have
authority to make Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. No member of the Committee shall be liable
for any action or determination relating to the Plan made in good faith. All
decisions by the Committee pursuant to the Plan shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award.
SECTION 4. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible, are
eligible to be Participants in the Plan. The maximum number of shares of Common
Stock which may be the subject of Awards made to any one employee under the Plan
during any calendar year shall be 350,000 shares of Common Stock. For this
purpose, the grant of new Awards in substitution for outstanding Awards shall be
deemed to constitute a new grant of additional Awards separate from the original
grant of Awards that are to be canceled. Incentive Stock Options may be awarded
only to persons eligible to receive Incentive Stock Options under the Code.
SECTION 5. STOCK AVAILABLE FOR AWARDS
(a) Subject to adjustment under subsection (b) below, Awards may be made
under the Plan for up to 2,000,000 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, the shares subject to such Award or so
surrendered, as the case may be, to the extent of such expiration, termination,
forfeiture or decrease, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) In the event that the Committee, in its sole discretion, determines
that any stock dividend, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or other
similar transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Committee
may make
B-2
31
provision for a cash payment with respect to an outstanding Award, provided that
the number of shares subject to any Award shall always be a whole number.
(c) The Committee may grant Awards under the Plan in substitution for stock
and stock based awards held by employees of another corporation who concurrently
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary or the acquisition by the
Company or a subsidiary of property or stock of the employing corporation. The
substitute Awards shall be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 6. STOCK OPTIONS
(a) General.
(i) Subject to the provisions of the Plan, the Committee may award
Incentive Stock Options and Nonstatutory Stock Options, and determine the number
of shares to be covered by each option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(ii) The Committee shall establish the exercise price of each Option at the
time such Option is awarded. In the case of Incentive Stock Options, such price
shall not be less than 100% of the Fair Market Value of the Common Stock on the
date of award.
(iii) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or check in an amount equal to the exercise
price of such Options or, to the extent permitted by the Committee at or after
the award of the Option, by (A) delivery of shares of Common Stock owned by the
optionee, valued at their Fair Market Value on the date of such option exercise,
(B) delivery of a promissory note of the optionee to the Company on terms
determined by the Committee, (C) delivery of an irrevocable undertaking by a
broker to deliver promptly to the Company sufficient funds to pay the exercise
price or delivery of irrevocable instructions to a broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price, (D) payment of
such other lawful consideration as the Committee may determine, or (E) any
combination of the foregoing.
(v) In the event an optionee pays some or all of the exercise price of an
Option by delivery of shares of Common Stock pursuant to clause 6(a)(iv)(A)
above, the Committee may provide for the automatic award of an option for up to
the number of shares so delivered.
(vi) Each Option granted under the Plan by its terms shall not be
transferable by the optionee otherwise than by will, or by the laws of descent
and distribution, and shall be exercised during the lifetime of the optionee
only by him. No Option or interest therein may be transferred, assigned, pledged
or hypothecated by the optionee during his lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.
(vii) The Committee may at any time accelerate the time at which all or any
part of an Option may be exercised.
B-3
32
(b) Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(i) All Incentive Stock Options granted under the Plan shall, at the
time of grant, be specifically designated as such in the option agreement
covering such Incentive Stock Options. The Option exercise period shall not
exceed seven years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to be
granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company (after taking into account the
attribution of stock ownership rule of Section 424(d) of the Code), then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(x) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of one share of Common Stock at the time of grant; and
(y) The Option exercise period shall not exceed five years from the
date of grant.
(iii) For so long as the Code shall so provide, options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate Fair Market Value (determined
as of the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at the time of
such exercise, the Participant is, and has been continuously since the date
of grant of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised (to the extent
exercisable on the date the Participant ceased to be an employee of the
Company) within the period of three months after the date the
Participant ceases to be an employee of the Company (or within such
lesser period as may be specified in the applicable option agreement),
provided, that the agreement with respect to such Option may designate a
longer exercise period and that the exercise after such three-month
period shall be treated as the exercise of a Nonstatutory Stock Option
under the Plan;
(y) if the Participant dies while in the employ of the Company, or
within three months after the Participant ceases to be such an employee,
the Incentive Stock Option (to the extent otherwise exercisable on the
date of death) may be exercised by the Participant's Designated
Beneficiary within the period of one year after the date of death (or
within such lesser period as may be specified in the applicable Option
agreement); and
(z) if the Participant becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while
in the employ of the Company, the Incentive Stock Option may be
exercised (to the extent otherwise exercisable on the date of death)
within the period of one year after the date of such disability (or
within such lesser period as may be specified in the Option agreement).
In the event of the Participant's death during this one-year period, the
Incentive Stock Option may be exercised by the Participant's Designated
Beneficiary within the period of one year from the date the Participant
became disabled or within such lesser period as may be specified in the
applicable Option agreement.
B-4
33
For all purposes of the Plan and any Option granted hereunder, (i) "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations) and (ii) any option may
provide that if such Option shall be assumed or a new Option substituted
therefor in a transaction to which Section 424(a) of the Code applies,
employment by such assuming or substituting corporation (hereinafter called the
"Successor Corporation") shall be considered for all purposes of such Option to
be employment by the Company. Notwithstanding the foregoing provisions, no
Incentive Stock Option may be exercised after its expiration date.
SECTION 7. STOCK APPRECIATION RIGHTS
(a) The Committee may grant Stock Appreciation Rights entitling recipients
on exercise of the SAR to receive an amount, in cash or Stock or a combination
thereof (such form to be determined by the Committee), determined in whole or in
part by reference to appreciation in the Fair Market Value of the Stock between
the date of the Award and the exercise of the Award. A Stock Appreciation Right
shall entitle the Participant to receive, with respect to each share of Stock as
to which the SAR is exercised, the excess of the share's Fair Market Value on
the date of exercise over its Fair Market Value on the date the SAR was granted.
The Committee may also grant Stock Appreciation Rights that provide that,
following a change in control of the Company (as defined by the Board or the
Committee at the time of the Award), the holder of such SAR will be entitled to
receive, with respect to each share of Stock subject to the SAR, an amount equal
to the excess of a specified value (which may include an average of values) for
a share of Stock during a period preceding such change in control over the Fair
Market Value of a share of Stock on the date the SAR was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option may be granted only at
the time the Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with Options, the
following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) A Stock Appreciation Right granted in tandem with an Incentive
Stock Option may be exercised only when the market price of the Stock
subject to the Option exceeds the exercise price of such Option.
(d) A Stock Appreciation Right not granted in tandem with an Option will
become exercisable at such time or times, and on such conditions, as the
Committee may specify.
B-5
34
(e) The Committee may at any time accelerate the time at which all or any
part of the SAR may be exercised.
SECTION 8. PERFORMANCE SHARES
(a) The Committee may make Performance Share Awards entitling recipients to
acquire shares of Stock upon the attainment of specified performance goals. The
Committee may make Performance Share Awards independent of or in connection with
the granting of any other Award under the Plan. The Committee in its sole
discretion shall determine the performance goals applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Committee may rely on the performance goals and
other standards applicable to other performance plans of the Company in setting
the standards for Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such Awards may
not be sold, assigned, transferred, pledged or otherwise encumbered.
(c) A Participant receiving a Performance Share Award shall have the rights
of a stockholder only as to shares actually received by the Participant under
the Plan and not with respect to shares subject to an Award but not actually
received by the Participant. A Participant shall be entitled to receive a stock
certificate evidencing the acquisition of shares of Stock under a Performance
Share Award only upon satisfaction of all conditions specified in the agreement
evidencing the Performance Share Award.
(d) The Committee may at any time accelerate or waive any or all of the
goals, restrictions or conditions imposed under any Performance Share Award.
SECTION 9. RESTRICTED AND UNRESTRICTED STOCK
(a) The Board may grant Restricted Stock Awards entitling recipients to
acquire shares of Stock, subject to the right of the Company to repurchase all
or part of such shares at their purchase price (or to require forfeiture of such
shares if purchased at no cost) from the recipient in the event that conditions
specified by the Committee in the applicable Award are not satisfied prior to
the end of the applicable Restricted Period or Restricted Periods established by
the Committee for such Award. Conditions for repurchase (or forfeiture) may be
based on continuing employment or service or achievement of pre-established
performance or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the applicable Restricted Period. Shares of Restricted Stock shall be evidenced
in such manner as the Board may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and, unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Board, which shall not be lower than 85% of Fair Market
Value on the date of sale) to Participants shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and Unrestricted
Stock shall be determined by the Committee and may not be less than the par
value of the Common Stock. Such purchase price may be paid in the form of past
services or such other lawful consideration as is determined by the Board.
B-6
35
(e) The Committee may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.
SECTION 10. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Applicability of Rule 16b-3. Those provisions of the Plan which make
an express reference to Rule 16b-3 shall apply to the Company only at such time
as the Company's Common Stock is registered under the Securities Exchange Act of
1934, or any successor provision, and then only to Reporting Persons.
(b) Documentation. Each Award under the Plan shall be evidenced by an
instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable. Such
instruments may be in the form of agreements to be executed by both the Company
and the Participant, or certificates, letters or similar documents, acceptance
of which will evidence agreement to the terms thereof and of this Plan.
(c) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of award or at any time thereafter.
(d) Termination of Status. Subject to the provisions of Section 6(b)(iv),
the Committee shall determine the effect on an Award of the disability, death,
retirement, authorized leave of absence or other termination of employment or
other status of a Participant and the extent to which, and the period during
which, the Participant's legal representative, guardian or Designated
Beneficiary may exercise rights under such Award.
(e) Mergers, Etc. In the event of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity (an "Acquisition"), or in the event of a
liquidation of the Company, the Board or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions as to outstanding Awards: (i)
provide that such Awards shall be assumed, or substantially equivalent Awards
shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof) on such terms as the Board determines to be appropriate, (ii)
upon written notice to Participants, provide that all unexercised options or
SARs will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant within a specified period following the date
of such notice, (iii) in the event of an Acquisition under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the Acquisition (the
"Acquisition Price"), make or provide for a cash payment to Participants equal
to the difference between (A) the Acquisition Price times the number of shares
of Common Stock subject to outstanding Options or SARs (to the extent then
exercisable at prices not in excess of the Acquisition Price) and (B) the
aggregate exercise price of all such outstanding Options or SARs in exchange for
the termination of such Options and SARS, and (iv) provide that all or any
outstanding Awards shall become exercisable or realizable in full prior to the
effective date of such Acquisition. Notwithstanding the foregoing, in the event
of an Acquisition, then all of the outstanding Options granted hereunder shall
become exercisable immediately prior to such Acquisition.
(f) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, and subject
to such conditions as the Committee may establish, such tax obligations may be
paid in whole or in part in shares of
B-7
36
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Participant.
(g) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers necessary
or advisable to achieve the purposes of the Plan or comply with applicable laws.
(h) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(i) Cancellation and New Grant of Options. The Board of Directors shall
have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled Options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.
(j) Conditions on Delivery of Common Stock. The Company will not be
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan (i) until
all conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Common Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Common Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Common Stock bear an appropriate legend restricting
transfer.
SECTION 11. MISCELLANEOUS
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to dismiss
a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she becomes the record holder thereof.
(c) Exclusion from Benefit Computations. No amounts payable upon exercise
of Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature of
benefits that Participants are entitled to under any insurance, retirement or
other benefit plans or programs of the Company.
B-8
37
(d) Effective Date and Term.
(i) Effective Date. The Plan shall become effective when adopted by
the Board of Directors, but no Incentive Stock Option granted under the
Plan shall become exercisable unless and until the Plan shall have been
approved by the Company's stockholders. If such stockholder approval is not
obtained within twelve months after the date of the Board's adoption of the
Plan, no Options previously granted under the Plan shall be deemed to be
Incentive Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring stockholder approval shall
become effective when adopted by the Board of Directors; amendments
requiring stockholder approval shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted after the date of
such amendment shall become exercisable (to the extent that such amendment
to the Plan was required to enable the Company to grant such Incentive
Stock Option to a particular optionee) unless and until such amendment
shall have been approved by the Company's stockholders. If such stockholder
approval is not obtained within twelve months of the Board's adoption of
such amendment, any Incentive Stock Options granted on or after the date of
such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such Option to a
particular optionee. Subject to the limitations set forth in this Section
11(d), Awards may be made under the Plan at any time after the effective
date and before the date fixed for termination of the Plan.
(ii) Termination. The Plan shall terminate upon the earlier of (i)
the close of business on the day next preceding the tenth anniversary of
the date of its adoption by the Board of Directors, or (ii) the date on
which all shares available for issuance under the Plan shall have been
issued pursuant to Awards under the Plan. Awards outstanding on such date
shall continue to have force and effect in accordance with the provisions
of the instruments evidencing such Awards.
(e) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement. Prior to any such approval, Awards may
be made under the Plan expressly subject to such approval.
(f) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
Adopted by the Board of
Directors on February 20, 1997
B-9
38
DETACH HERE
CHIREX INC.
65 William Street
Suite 330
Wellesley, Massachusetts 02181
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
P
The undersigned hereby appoints Alan R. Clark, Roger B. Pettman and
R James M. Lindstrom, jointly and severally, with full power of substitution,
and hereby authorizes them to represent and to vote, as designated on the
O reverse side, all shares of common stock of ChiRex Inc. (the "Company")
held of record by the undersigned on March 14, 1997 at the Annual Meeting
X of Stockholders to be held on April 17, 1997 and any adjournments thereof.
Y 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
-----------
39
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Company that require your
immediate attention.
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.
FOR AGAINST ABSTAIN
1. Election of Directors 2. Ratify the appointment of | | | | | |
Nominees: Michael A. Griffith and Arthur Andersen LLP a
W. Dieter Zander independent auditors.
FOR WITHHELD 3. Approve the Amended | | | | | |
and Restated 1995 Director
| | | | Stock Option Plan.
4. Approve the 1997 Stock | | | | | |
| | Incentive Plan.
---------------------------------------
For all nominees except as noted above 5. In their discretion, the proxies are authorized to vote
upon any other business that may properly come
before the meeting.
[Name and MARK HERE
Address] 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:
-------------------------------- ---------------- ------------------------------- -----------------