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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CLINTRIALS RESEARCH INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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:
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CLINTRIALS LOGO
CLINTRIALS RESEARCH INC.
11000 WESTON PARKWAY
CARY, NORTH CAROLINA 27513
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of ClinTrials Research Inc.:
The Annual Meeting of Stockholders of ClinTrials Research Inc., a Delaware
corporation (the "Company"), will be held at NationsBank of Tennessee, One
NationsBank Plaza, 3rd Floor Board Room, Nashville, Tennessee, at 9:00 a.m.
Central Daylight Time, on Tuesday, June 22, 1999 for the following purposes:
(1) To elect five (5) directors, to hold office for the ensuing year
or until their successors have been duly elected and qualified;
(2) To approve the adoption of the Company's 1999 Long-Term Incentive
Compensation Plan (the "Plan");
(3) To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
The proxy statement and form of proxy accompanying this Notice are being
mailed to stockholders on or about May 24, 1999. Only stockholders of record at
the close of business on May 10, 1999 are entitled to notice of and to vote at
the meeting or any adjournment or postponement thereof.
Your attention is directed to the Proxy Statement accompanying this notice
for a more complete statement regarding the matters to be acted upon at the
meeting.
We hope very much that you will be able to be with us. If you do not plan
to attend the meeting in person, you are requested to complete, sign and date
the enclosed proxy and return it promptly in the enclosed addressed envelope,
which requires no postage if mailed in the United States.
By Order of the Board of Directors
Jerry R. Mitchell, M.D., Ph.D.
Chairman of the Board,
Chief Executive Officer and
President
May 17, 1999
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CLINTRIALS RESEARCH INC.
11000 WESTON PARKWAY
CARY, NORTH CAROLINA 27513
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PROXY STATEMENT
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This Proxy Statement and enclosed Proxy are being furnished to stockholders
of ClinTrials Research Inc., a Delaware corporation ("ClinTrials" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders (the
"Annual Meeting") of the Company to be held at 9:00 a.m. Central Daylight Time
on June 22, 1999, at NationsBank of Tennessee, One NationsBank Plaza, 3rd Floor
Board Room, Nashville, Tennessee and at any adjournments or postponements
thereof. The cost of soliciting proxies in the accompanying form will be borne
by the Company. The persons named as proxies were selected by the Board of
Directors of the Company and are executive officers of the Company.
This Proxy Statement and enclosed Proxy were initially mailed or delivered
to stockholders on or about May 24, 1999. The Company's Annual Report, including
financial statements for the fiscal year ended December 31, 1998, is being
concurrently mailed or delivered with this Proxy Statement to stockholders
entitled to vote at the Annual Meeting. The Annual Report is not to be regarded
as proxy soliciting material.
The Company has fixed the close of business on May 10, 1999 as the record
date for determining the holders of its common stock, $.01 par value (the
"Common Stock") who will be entitled to notice of and to vote at the meeting. On
that date, the Company had issued and outstanding 18,017,172 shares of Common
Stock which are the only outstanding shares of capital stock of the Company.
Holders of the Company's Common Stock are entitled to one vote for each share
owned of record. A majority of shares entitled to vote constitutes a quorum. A
share, once represented for any purpose at the meeting, is deemed present for
purposes of determining a quorum for the meeting (unless the meeting is
adjourned and a new record date is set for the adjourned meeting), even if the
holder of the share abstains from voting with respect to any matter brought
before the meeting.
If properly executed and returned in time for the Annual Meeting, the
enclosed Proxy will be voted in accordance with the choices specified thereon.
Where a signed Proxy is returned, but no choice is specified, the shares will be
voted "for" the election of each director nominee, "for" the approval of the
adoption of the 1999 Stock Option Plan, and in the discretion of the proxies on
such other matters as may properly come before the meeting. Any stockholder who
executes and returns a Proxy may revoke it in writing at any time before it is
voted at the Annual Meeting by executing and delivering a later-dated proxy, or
by appearing at the meeting and voting in person. Abstentions and broker
non-votes will not be counted as affirmative votes on matters to be voted upon,
but will be counted for purposes of determining the presence or absence of a
quorum. They have no legal effect on the election of directors, which are
elected by a plurality of votes. On the approval of the adoption of the 1999
Stock Option Plan and other matters requiring a majority vote for approval,
abstentions and broker non-votes have the effect of negative votes.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ClinTrials is authorized to issue 50,000,000 shares of common stock. As of
March 31, 1999, there were 18,017,172 shares issued and outstanding.
The following table sets forth as of March 31, 1999, information with
respect to the beneficial ownership of ClinTrials' outstanding common stock by
(i) each director of ClinTrials, (ii) each named executive officer, (iii) all
directors and executive officers as a group, and (iv) each stockholder known by
ClinTrials to be the beneficial owner of more than 5% of its outstanding common
stock. Except as otherwise indicated, the persons or entities listed below have
sole voting and investment power with respect to all shares of common stock
owned by them, except to the extent such power may be shared with a spouse.
SHARES
BENEFICIALLY OWNED(1)
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NAME AND ADDRESS NUMBER PERCENT
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Richard J. Eskind**......................................... 1,709,632 9.5%
104 Lynwood Blvd.
Nashville, TN
Herbert J. Schulman, M.D.................................... 1,330,745 7.4
109 Westhampton Place
Nashville, TN
Irwin B. Eskind, M.D.**..................................... 1,328,064 7.4
541 Jackson Blvd.
Nashville, TN
Dimensional Fund Advisors Inc.(2)........................... 1,286,200 7.1
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
William C. O'Neil, Jr.(3)................................... 1,248,217 6.8
5035 Hill Place Drive
Nashville, TN 37205
Jerry R. Mitchell, M.D., Ph.D. **(4)........................ 137,500 *
Edward G. Nelson **(5)...................................... 97,211 *
William U. Parfet **(6)..................................... 75,000 *
Paul J. Ottaviano(7)........................................ 71,250 *
Roscoe R. Robinson, M.D. **(8).............................. 23,668 *
Michael F. Ankcorn(9)....................................... 10,126 *
Neil M. Frazer, MB, ChB, FRCA(10)........................... 5,000 *
William L. Shaw, MB, ChB(11)................................ 5,000 *
All directors and executive officers as group (10
persons)(12).............................................. 3,462,451 18.9
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* Less than 1%
** Director
(1) Based on 18,017,172 shares of common stock outstanding at March 31, 1999.
For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of March 31,
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1999 that such person or group has the right to acquire within 60 days
after such date, or with respect to which such person otherwise has or
shares voting or investment power. For purposes of computing beneficial
ownership and the percentages of outstanding shares held by each person or
group of persons on a given date, shares which such person or group has the
right to acquire within sixty days after such date are shares for which
such person has beneficial ownership and are deemed to be outstanding for
purposes of computing the percentage for such person, but are not deemed to
be outstanding for the purpose of computing the percentage of any other
person.
(2) Share ownership data obtained solely from Schedule 13G filed in February
1999.
(3) Includes 84,467 shares owned by Mr. O'Neil's wife. Mr. O'Neil disclaims
beneficial ownership of these shares. Also includes 391,250 shares issuable
upon the exercise of vested options.
(4) Includes 137,500 shares issuable upon the exercise of warrants and vested
options.
(5) Includes 3,000 shares owned by Mr. Nelson's wife. Mr. Nelson disclaims
beneficial ownership of such shares. Also includes 65,964 shares held by
Nelson Capital Corp. and certain of its affiliates, beneficial ownership of
which Mr. Nelson disclaims. Mr. Nelson is the principal stockholder and
president of Nelson Capital Corp. Also includes 18,500 shares issuable upon
the exercise of vested options.
(6) Includes 75,000 shares issuable upon the exercise of vested warrants.
(7) Includes 71,250 shares issuable upon the exercise of vested options.
(8) Includes 2,168 shares owned by Dr. Robinson's wife. Dr. Robinson disclaims
beneficial ownership of these shares. Also includes 21,500 shares issuable
upon the exercise of vested options.
(9) Includes 10,126 shares issuable upon the exercise of vested options.
(10) Includes 5,000 shares issuable upon the exercise of vested options.
(11) Includes 5,000 shares issuable upon the exercise of vested options.
(12) Includes 343,876 shares issuable upon the exercise of warrants and vested
options.
PROPOSAL 1. ELECTION OF DIRECTORS
All directors hold office until the next Annual Meeting of the Company's
stockholders and until their successors are duly elected and qualified. The
Company's executive officers are appointed annually by the Board of Directors
and serve at the discretion of the Board.
It is intended that proxies received in response to this solicitation will
be voted in favor of the election of the nominees named herein to be directors
of the Company until the next Annual Meeting and until their successors are
elected and qualified, unless authority to vote is withheld.
If any of the nominees should become unable to accept election or declines
to serve, neither of which the Board anticipates, it is intended, in the absence
of contrary direction, that the proxies will be voted for the balance of those
named below and for substitute nominee(s) as the Board may designate, unless the
Board has taken prior action to reduce its membership. The proxies will in no
event be voted for a greater number of nominees than six.
During 1998, the Board of Directors held 16 meetings. Each incumbent
director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees on which the individual director served. There are two committees
of the Board of Directors which assist the Board in discharging its
responsibilities. These committees, their members and functions are discussed
below.
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INFORMATION ABOUT NOMINEES FOR DIRECTORS
Jerry R. Mitchell, M.D., Ph.D., 57 years of age, joined the Company in
January 1998 as its Chief Executive Officer and President and was named Chairman
of the Board in May 1998. Prior to joining the Company, Dr. Mitchell served on
the Board of Directors of ILEX Oncology, Inc. of San Antonio, Texas, and in
1996, co-founded MPILEX Partners, L.P, a joint venture with ILEX to develop
oncology drugs. He also co-founded MPI Research, a drug safety and
pharmaceutical development company with Mr. Parfet, also a director of the
Company, in 1995, and continues to serve on MPI's Board of Directors. From 1993
to 1995, Dr. Mitchell served as Vice Chairman of the Board of the Upjohn Company
after serving as the President of Upjohn Pharmaceutical Laboratories from 1990
to 1993. Dr. Mitchell has also served as Section Chief at the National Heart,
Lung and Blood Institute of the National Institutes of Health, and as Director
of the Center for Experimental Therapeutics and as Professor of Medicine and
Pharmacology at Baylor Medical College. Dr. Mitchell has served on a number of
national science committees and is a member of numerous professional
organizations, and was recently elected to lead the American Society of
Pharmacology and Experimental Therapeutics (ASPET) as its President from
1998-2000. He is the author of numerous research publications and was designated
in 1990 as a "Citation Superstar" in "The Scientist" newspaper. Dr. Mitchell
received his M.D. and Ph.D. degrees from Vanderbilt University.
Irwin B. Eskind, M.D., 74 years of age, has been a director of the Company
since February 1992. Dr. Eskind engaged in the private practice of internal
medicine from 1954 until his retirement in January 1996. Dr. Eskind is the
brother of Richard J. Eskind, also a director of the Company.
Richard J. Eskind, 68 years of age, has served as a director of the Company
since February 1992. Mr. Eskind has served since October 1986 as Vice
President -- Investments of A.G. Edwards & Sons, Inc., a broker-dealer firm. Mr.
Eskind is the brother of Irwin B. Eskind, M.D., also a director of the Company.
Edward G. Nelson, 67 years of age, has been a director of the Company since
November 1990. Mr. Nelson formed Nelson Capital Corp., a merchant banking firm,
in 1984, and has served as the President and Chairman of the Board since its
organization. Mr. Nelson serves as a director of Berlitz International, Inc., a
language services company; Central Parking Corporation, a parking services
company; and Advocat Inc., a long-term care company.
Roscoe R. Robinson, M.D., 68 years of age, has served as a director of the
Company since December 1997. Dr. Robinson served as Vice Chancellor for Health
Affairs for Vanderbilt University from 1981 until 1997 and has served as a
professor of medicine at Vanderbilt University since 1981. Dr. Robinson has been
a member of the Board of Directors of First American Corporation since 1992 and
a Trustee of Duke University since 1994.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two committees of the Company's Board of Directors: the
Compensation and Stock Option Committee and the Audit Committee. The
Compensation and Stock Option Committee, which met once during 1998, is composed
of Dr. Irwin Eskind, Mr. Nelson and Dr. Robinson and is responsible for the
approval of remuneration arrangements for executive officers of the Company, the
review of the Company's compensation plans and the general review of the
Company's employee compensation policies. The Audit Committee, which met once
during 1998, was composed of Mr. Parfet and Mr. Richard Eskind, and is
responsible for the engagement of independent auditors, the review of audit
fees, the supervision of matters relating to audit functions, the review and
setting of internal policies and procedures regarding audit, accounting and
other financial controls and the review of related party transactions.
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COMPENSATION OF DIRECTORS
Non-employee directors owning less than 5% of the Company's outstanding
Common Stock (Mr. Nelson and Dr. Robinson) are compensated $15,000 annually.
Non-employee directors owning 5% or more of the company's outstanding Common
Stock (Dr. Eskind and Mr. Eskind) receive no compensation.
On February 6, 1998, the Company's board of directors approved the adoption
of the Company's 1998 Non Qualified Stock Option Plan for Directors (the "1998
Director Option Plan"). The 1998 Director Option Plan was approved by the
Company's shareholders on May 11, 1998. The 1998 Director Option Plan is a
formula plan under which options to acquire 10,000 shares of the Company's
common stock are to be initially granted to each director of the Company who is
not an employee and does not beneficially own more than 2.5% of the Company's
outstanding stock upon the date of initial election to the board of directors.
Directors are automatically eligible to receive annual grants of options to
acquire 1,000 shares of the Company's common stock. At December 31, 1998, there
were 18,000 options outstanding under this plan, all of which were granted in
1998 at exercise prices between $2.81 and $3.63. At December 31, 1998, there
were 182,000 shares available for grant.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE PROPOSED NOMINEES TO THE BOARD OF DIRECTORS. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTES CAST ON PROPOSAL 1, IN PERSON OR BY PROXY, IS NECESSARY
FOR THE ELECTION OF THE NOMINEES NAMED HEREIN TO BE DIRECTORS OF THE COMPANY.
PROPOSAL 2. ADOPTION OF 1999 LONG-TERM INCENTIVE COMPENSATION PLAN
The Board of Directors has approved a new Long-Term Incentive Compensation
Plan for the Company. The Company's current stock option plan, established in
1989, expires in 1999 and cannot be extended due to restrictions imposed by the
Internal Revenue Code of 1986, as amended ("Code") relating to Incentive Stock
Options. Stock options and other forms of long-term incentive compensation
remain a valuable tool for the Board of Directors in attracting and retaining
key personnel, so the Board has concluded that is in the best interest of the
Company to adopt a new Long-Term Incentive Compensation Plan.
A copy of the proposed 1999 Long-Term Incentive Compensation Plan (the
"Plan") is attached hereto as Exhibit A. The following is a summary of the Plan.
PURPOSE AND ADMINISTRATION
The purpose of the Plan is to provide an opportunity for certain persons
performing services to the Company, including officers, key employees and
directors of the Company and its subsidiaries ("Participants"), to acquire
shares of Common Stock, to obtain additional compensation based on appreciation
of the Common Stock and/or be rewarded for achieving certain performance goals.
Through the Plan, the Company seeks to continue to attract and retain qualified
personnel, and to further align the interests of its key personnel with the
success of the Company and its stockholders.
The Plan provides for the grant of stock options ("Options"), which may be
either incentive stock options ("ISOs") meeting the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified
stock options ("NQSOs"), stock appreciation rights ("SARs"), Restricted Stock,
Performance Shares or Performance Units, all as further described below (all of
the above are sometimes referred to collectively as "Incentives" and
individually as an "Incentive").
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The Compensation and Stock Option Committee (the "Committee" refers to such
committee or, in the absence of such a committee, the full Board) will
administer the Plan, as it does the current plan. The Committee will determine
the persons eligible to receive Incentives, and the terms and provisions of the
Incentives granted. In determining eligibility for Incentives, the Committee may
take into account such factors as the nature of services rendered, present and
potential contributions to the Company, and other factors it considers relevant.
The Committee will also have full and conclusive authority to interpret the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of Incentive agreements; to
determine the restrictions on transferability of Common Stock acquired pursuant
to the Plan; and to make all other determinations necessary or advisable for the
proper administration of the Plan.
OPTIONS
The terms and conditions of each Option granted under the Plan will be set
forth in a written option agreement ("Option Agreement"). Payment for Common
Stock purchased pursuant to the exercise of an Option will be made in cash or,
if approved by the Committee, in Common Stock or a combination of cash and
Common Stock. The Plan also authorizes the Committee to make full recourse
loans, secured by any Common Stock acquired pursuant to such loans, to
Participants so that they can exercise their Options.
The Participant who is a holder of an Option as such will have no rights as
a stockholder of the Company. Options will be subject to transfer restrictions,
as well as restrictions on exercise in the event of termination of employment
with the Company. Options are also subject to a limited right of exercise upon
the occurrence of certain events such as a tender offer for the Common Stock,
approval by the Company of a merger or consolidation with another corporation, a
decision by the Company to sell or otherwise dispose of all or substantially all
of its assets, or the acquisition by certain persons or groups of 50% or more of
the Common Stock.
ISOs
ISOs may only be granted to employees of the Company or its subsidiaries
("Employees"). Further, the exercise price per share of ISOs cannot be less than
the fair market value of the Common Stock on the date the ISO is granted. For
Employees holding more than ten percent of the Common Stock, the exercise price
cannot be less than 110% of fair market value. The maximum term of an ISO is ten
years, or, for Employees holding ten percent of the Common Stock, five years.
NQSOs
The exercise price per share of an NQSO will be determined by the
Committee, but may not be less than 80% of the fair market value of the Common
Stock on the date the NQSO is granted. The term of each NQSO will be determined
by the Committee and set forth in the Option Agreement.
SARs
SARs provide compensation based on the appreciation of the Common Stock by
entitling the Participant to receive, upon exercise of an SAR, the excess of the
fair market value of the Common Stock over the exercise price of the SAR. The
exercise price of an SAR will be set by the Committee, but may not be less than
80% of the fair market value of the Common Stock at the time the SAR is granted.
The term of each SAR will also be set by the Committee. Transfer of SARs is
restricted, as is exercise in the event of
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termination of employment with the Company. Payment for exercise of the SARs may
be made in cash or stock, as provided in the SAR agreement or as determined by
the Committee. Each grant of an SAR will be evidenced by a written SAR
agreement, which may contain additional terms and conditions as the Committee
may determine.
RESTRICTED STOCK
Restricted stock awards will provide Participants with Common Stock
consisting of all the rights of ownership of non-restricted stock, except that
the terms of Restricted Stock provide for a risk of forfeiture (generally, in
the event of termination of employment for reasons other than death, disability
or retirement) and certain restrictions on transferability of the stock. The
terms of forfeiture and restrictions on transferability are set forth in a Stock
Restriction agreement. The Stock Restriction agreement also provides for vesting
of the restricted stock, at which time the risk of forfeiture and restrictions
on transferability lapse. The restrictions and forfeiture risk also lapse upon
death, disability or retirement of the Participant. The price of Restricted
Stock may be discounted by the Committee to reflect the risk of forfeiture and
restrictions on transferability.
PERFORMANCE SHARES
The award of Performance Shares will allow the Company to compensate
Participants for achieving certain performance criteria. Performance Shares are
deemed equivalent to shares of Common Stock at the time of the grant, and the
Participant is entitled to receive payment in Common Stock or the cash
equivalent of shares of Common Stock correlating to the number of Performance
Shares held. The number of Performance Shares granted, the performance criteria
on which payment is based, the timing of judgment as to whether performance
criteria have been met as well as the corresponding amount of payments will be
set forth in a written Performance Share agreement. The Committee will have the
right to approve different performance criteria for each Performance Share
agreement, and each agreement may also contain such other provisions as the
Committee deems advisable. Performance Shares will be forfeited upon termination
of employment or at the end of the time period set forth in the agreement,
unless the Committee determines that the circumstances warrant payment.
PERFORMANCE UNITS
Performance Units will allow Participants to receive payment in cash and/or
Common Stock based on the degree to which performance standards established by
the Committee and specified in a written Performance Unit agreement have been
achieved. Performance standards may be based on any objective goals established
by the Committee, including such factors as earnings growth, return on assets or
achievement of balance sheet or income statement objectives. The time and method
of exercise of Performance Units will be specified by the Committee and set
forth in the Performance Unit Agreement, which may also contain such other terms
and conditions as the Committee deems advisable.
GENERAL
Incentives may be adjusted or substituted to reflect stock dividends, the
merger or consolidation of the Company, changes in capitalization of the
Company, or such other events where the Committee determines that adjustment is
equitable or appropriate. Participants do not, however, have any rights by
reason of the subdivision or combination of the shares of Common Stock, or any
other increase or decrease in the number of
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shares of Common Stock. Upon a dissolution or liquidation of the Company, any
Incentives granted under the Plan will terminate.
Unless sooner terminated as provided in the Plan, the Plan will terminate
in April 2009. The Committee may terminate the Plan at any time or make such
modification or amendment to it that it deems advisable; provided, however, that
any modification or amendment of the Plan must be approved by a majority of
stockholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act, applicable state law, or applicable
National Association of Securities Dealers, Inc. or exchange listing
requirements.
Approximately 150 individuals are eligible to receive Incentives under the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide to the federal
income tax consequences under current law with respect to participation in the
Plan and does not attempt to describe all possible federal or other tax
consequences of participation. Furthermore, the tax consequences of
participation in each particular type of Incentive are complex and subject to
change and a Participant's particular situation may be such that some variation
of the described consequences is applicable. Participants should consult their
own tax advisors regarding the tax effect of participation in the Plan.
The grant of ISOs is not a taxable event either for the Company or the
Employee. No income is recognized by the Employee and no deduction may be taken
by the Company when an ISO is exercised. However, the amount by which the fair
market value of the stock on the date of exercise of an ISO exceeds the exercise
price is included in the Employee's income in the year of exercise for
alternative minimum tax purposes. (Employees should consult their own tax
advisors for information on the alternative minimum tax.) The Employee's basis
in the stock received pursuant to the ISO will equal the exercise price. The
Employee's holding period begins on the date the ISO is exercised.
When stock acquired pursuant to an ISO is disposed of, the difference
between its fair market value on the date of disposition and the exercise price
is capital gain or loss; provided, that the stock is not disposed of within
either (i) two years from the date the ISO was granted or (ii) one year from the
date the stock was acquired upon its exercise (either being a "disqualifying
disposition"). No deduction may be taken by the Company absent a disqualifying
disposition. If stock acquired pursuant to exercise of an ISO is disposed of in
a disqualifying disposition, the difference between its fair market value on the
date of exercise and the exercise price is ordinary income to the Employee (and
is deductible by the Company) in the year of the disposition and any further
gain on the disposition is treated as capital gain. If the value of the stock on
the date of disposition is less than its value on the date of exercise, only the
difference between the exercise price and the sale price is treated as ordinary
income.
The grant of NQSOs is not a taxable event either for the Company or the
Participant. When a NQSO is exercised, the Participant generally recognizes
ordinary income equal to the amount by which the fair market value of the stock
on the date of exercise exceeds the exercise price. The Company is entitled to a
deduction for the amount of ordinary income recognized by the Participant in the
year in which such income is recognized by the Participant.
The Participant's basis in the stock acquired under the NQSO is the sum of
the exercise price and the amount included in income by the Participant due to
the exercise of the NQSO. The Participant's holding period begins on the date
the NQSO is exercised. The Participant will recognize capital gain or loss on
the
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disposition of stock acquired through the exercise of a NQSO based on the
difference between the amount realized on the disposition and the Participant's
basis in the stock.
The grant of a SAR is not a taxable event either for the Company or the
Participant. The Participant will recognize ordinary income equal to the sum of
the cash and the fair market value of stock received pursuant to the SAR less
the exercise price of the SAR. The Company will be entitled to a deduction for
the amount of ordinary income recognized by the Participant in the year in which
such income is recognized by the Participant. If the Participant receives stock
upon the exercise of the SAR, the Participant's basis in the stock will equal
the sum of the amount included in income attributable to stock issued pursuant
to the exercise of the SAR and the exercise price. The Participant's holding
period will begin on the date the SAR is exercised. The Participant will
recognize capital gain or loss upon the disposition of stock acquired through
the exercise of the SAR based on the difference between the amount realized by
the Participant on the disposition and Participant's basis in the stock.
Generally, the issuance of Restricted Stock is not a taxable event for the
Company or the Participant. Rather, the Participant will recognize ordinary
income based on the value of the Restricted Stock on the date the risk of
forfeiture is removed. The Participant, however, may elect to recognize income
on the date the stock is issued based on the value of the Restricted Stock on
that date. In either case, the Participant's basis in the Restricted Stock will
equal the amount included in income by the Participant. The Participant's
holding period will begin on the date the Participant recognizes income. The
Company is entitled to a deduction for the amount of ordinary income recognized
by the Participant in the year in which such income is recognized by the
Participant. The Participant will recognize capital gain or loss upon the
disposition of Restricted Stock based on the difference between the amount
realized by the Participant on the disposition and Participant's basis in the
stock.
The grant of Performance Shares or Performance Units is not a taxable event
to the Company or the Participant. The Participant will recognize ordinary
income equal to cash received and the fair market value of stock received in the
year of receipt. The Company will be entitled to a deduction in the year in
which income is recognized by the Participant. Stock received under a
Performance Share or a Performance Unit arrangement will have a basis equal to
the fair market value of the stock on the date it is issued to the Participant.
The Participant's holding period for such shares will begin on the date the
value of the shares is included in income. The Participant will recognize
capital gain or loss on the disposition of the stock based on the difference
between the amount realized by the Participant on the disposition and
Participant's basis in the stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE 1999 LONG-TERM INCENTIVE COMPENSATION PLAN. THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE VOTES CAST ON PROPOSAL 2, IN PERSON OR BY PROXY, IS NECESSARY
FOR APPROVAL OF THE PLAN.
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EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company, other than Dr. Mitchell, whose information is set forth
above.
NAME AGE POSITIONS
- ---- --- ---------
Paul J. Ottaviano.......................... 52 Executive Vice President -- Worldwide
Operations
S. Colin Neill............................. 52 Senior Vice President and Chief Financial
Officer
William L. Shaw, MB, ChB................... 52 President -- Europe/Asia Pacific
Neil M. Frazer, MB, ChB, FRCA.............. 43 President -- The Americas
Michael F. Ankcorn......................... 56 Chairman, President and Chief Executive
Officer, ClinTrials BioResearch Ltd.
Paul J. Ottaviano has served the Company as Executive Vice
President -- Worldwide Operations since December 1995 after serving as Executive
Vice President -- U.S. Operations since July 1992. From May 1989 until joining
the Company in July 1992, he was President and Chief Executive Officer of
National Psychopharmacology Laboratories, Inc., a specialty laboratory company.
Mr. Ottaviano was Chief Operating Officer of Med Inc. (later ImageAmerica,
Inc.), a medical imaging company, from April 1988 through May 1989. From July
1987 until April 1988, Mr. Ottaviano was the Vice President -- Operations and
President -- ICL East of International Clinical Laboratories, Inc. From January
1987 until July 1987, Mr. Ottaviano served as a Division President of
International Clinical Laboratories, Inc.
S. Colin Neill has served as Senior Vice President and Chief Financial
Officer of the Company since October 1998. Prior to joining the Company, Mr.
Neill served as a financial consultant to a variety of companies from October
1997 to October 1998. Mr. Neill served from July 1996 to October 1997 as Vice
President, Chief Financial Officer of Continental Health Affiliates, Inc. and
its majority owned subsidiary Infu-Tech, Inc., a network of health care
companies focused on home care, long term care, assisted living and managed
care. Mr. Neill's career experience has included that of Acting Vice
President -- Finance, Chief Financial Officer of Pharmos Corporation, a
biopharmaceutical company in the business of developing novel drug technologies
from January 1995 to July 1996; Vice President -- Finance, Chief Financial
Officer of BTR Inc., the US subsidiary of BTR plc, a British diversified
manufacturing company with US revenues of approximately $3.5 billion from 1992
to December 1994; and Vice President -- Financial Services of The BOC Group,
Inc., a British industrial gases company with substantial operations in the
health care industry. He began his career in public accounting with Arthur
Andersen LLP in Ireland as a Senior Auditor and later with Price Waterhouse LLP
in New York City as a Senior Manager.
William L. Shaw, MB, ChB, joined the Company in January 1998 as
President -- Europe/Asia Pacific. Prior to joining the Company, Dr. Shaw served
as Chief Executive Officer -- Europe, Asia and Pacific Rim for Pharmaco
International Ltd. and as a Director for APBI Holdings Ltd., a life and
environmental sciences research and consulting company, from 1996 through 1997;
as Chief Operating Officer for HLS Ltd., a pre-clinical contract research
organization, from 1995 through 1996; as a Director for LCRC Ltd., a Phase I
contract research organization, from 1993 through 1996; and as Managing Director
for HRC Ltd., a pre-clinical contract research organization, from 1993 through
1995.
Neil M. Frazer, MB, ChB, FRCA has served as President -- Americas since
July 1998, after serving as Senior Director of Medical and Regulatory Affairs
when he joined the Company in October 1997. Prior to
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joining the Company, Dr. Frazer had served for ten years as research physician,
head of clinical pharmacology, and a director of medical affairs for Glaxo
Wellcome.
Michael F. Ankcorn has served as President of ClinTrials BioResearch Ltd.
since its acquisition by the Company in August 1996. From 1979 to July 1996 Mr.
Ankcorn served as President and Chief Executive Officer of Bio-Research
Laboratories Ltd. From 1977 to 1979 he served as Assistant Vice President for
the Canada Development Corporation.
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or other
compensation during fiscal years ended December 31, 1998, 1997 and 1996 for the
Company's Chief Executive Officers and the persons who, at December 31, 1998,
were the other four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (#)(1) COMPENSATION(2)
- --------------------------- ---- -------- ------- ------------ ------------ ---------------
Jerry R. Mitchell, M.D.,
Ph.D........................ 1998 $252,083 $ 0 $ 0 600,000 $114,257
Chairman of the Board, 1997 N/A N/A N/A N/A N/A
President and Chief 1996 N/A N/A N/A N/A N/A
Executive Officer
William C. O'Neil, Jr......... 1998 103,125 0 0 0 700,194
Chairman of the Board, 1997 275,000 0 0 10,000 14,213
President and Chief 1996 250,000 50,000 0 0 14,291
Executive Officer(3)
Paul J. Ottaviano............. 1998 240,000 0 0 15,000 12,375
Executive Vice President -- 1997 240,000 0 0 15,000 12,102
Worldwide Operations 1996 220,000 30,000 0 0 12,135
William S. Shaw, MB, ChB...... 1998 240,336 0 0 20,000 125,202
President -- Europe/Asia 1997 N/A N/A N/A N/A N/A
Pacific 1996 N/A N/A N/A N/A N/A
Neil M. Frazer, MB, ChB,
FRCA........................ 1998 170,000 19,285 0 0 8,280
President, Americas 1997 N/A N/A N/A 20,000 N/A
1996 N/A N/A N/A N/A N/A
Michael F. Ankcorn............ 1998 166,140 85,020 0 20,250 57,952
ClinTrials BioResearch Ltd. 1997 173,232 72,829 0 20,250 79,340
Chairman, President and 1996 67,494 19,880 0 0 9,238
Chief Executive Officer(4)
- ---------------
(1) Although the Company's existing stock option plan permits the grant of stock
appreciation rights, no such rights have been granted to date.
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(2) Amounts represent life insurance premium payments, profit sharing
contributions at 5% of the U.S. participant's base salary (subject to
limitations), supplemental retirement plan contributions for overseas
employees, 401(k) plan Company matching contributions at 33% of U.S.
participant's voluntary deduction, severance, and car allowances. The
amounts represented by each of those forms of compensation for 1998 are as
follows:
PROFIT SHARING
401(K)/
INSURANCE PENSION PLAN CAR
PREMIUM CONTRIBUTIONS RELOCATION SEVERANCE ALLOWANCE
--------- -------------- ---------- --------- ---------
Jerry R. Mitchell, M.D............. $1,969 $ 8,954 $103,334 $ 0 $ 0
William C. O'Neil, Jr.............. 1,316 3,300 0 695,578 0
Paul J. Ottaviano.................. 1,575 10,800 0 0 0
William L. Shaw, MB, ChB........... 7,296 64,397 33,364 0 20,145
Neil M. Frazer, MB, ChB, FRCA...... 780 7,500 0 0 0
Michael F. Ankcorn................. 4,163 44,590 0 0 9,199
(3) Effective February 1, 1998, Mr. O'Neil resigned as President and Chief
Executive Officer. Mr. O'Neil was not re-elected as Chairman of the Board of
Directors on May 12, 1998 but remained a Director. Effective February 17,
1999, Mr. O'Neil resigned as a Director.
(4) ClinTrials BioResearch Ltd. was acquired by the Company on July 31, 1996.
Mr. Ankcorn's 1996 compensation information includes compensation from that
date forward.
The tables below provide certain information with respect to grants of
stock options to the Named Executive Officers pursuant to the Company's 1989
Stock Option Plan during the year ended December 31, 1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF ANNUAL RATE OF STOCK
UNDERLYING TOTAL OPTIONS/ MARKET PRICE APPRECIATION FOR
OPTIONS/ SARS GRANTED EXERCISE OF PRICE ON OPTIONS TERM(2)(3)
SARS TO EMPLOYEES IN BASE PRICE DATE OF EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) GRANT DATE 5% 10%
- ---- ---------- --------------- ----------- -------- ---------- --------- -----------
Jerry R, Mitchell,
M.D., Ph.D.(4)(5)... 300,000 --% $3.25 $3.25 1/30/04 $245,421 $ 594,346
250,000 -- 3.25 3.25 1/30/08 423,691 1,102,232
50,000 -- 3.25 3.25 9/08/08 122,557 291,405
------- ---- -------- ----------
Total....... 600,000 41.0 791,669 1,987,983
======= ==== ======== ==========
Paul J. Ottaviano..... 15,000 1.0 5.00 5.00 7/30/08 47,167 119,531
William L. Shaw, MB,
ChB................. 20,000 1.4 6.81 6.81 1/06/08 85,693 217,163
Michael F. Ankcorn.... 20,250 1.4 5.00 5.00 7/30/08 63,676 161,366
- ---------------
(1) All options granted to the Named Executive Officers are exercisable in four
equal annual installments beginning one year after the date of grant. This
per share exercise price represents the fair market value of the Common
Stock on the date of grant except for the grants that represent repriced
options for which the exercise price is $3.25 (see Note 4 below).
(2) Potential realizable value is calculated from a stock price equal to the
exercise or base price of the options granted.
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(3) The potential realizable values illustrate values that might be realized
upon exercise immediately prior to the expiration of the term of these
options using 5% and 10% appreciation rates, as required by the Securities
and Exchange Commission, compounded annually. These values do not, and are
not intended to, forecast possible future appreciation, if any, of the
Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for vesting over a
period of years or termination of options following termination of
employment.
(4) Grants represent the Company's repricing of previously granted options or
warrants. The repricing was effective September 4, 1998 (see Item 13,
"CERTAIN TRANSACTIONS").
(5) Consists of warrants to purchase shares with terms similar to options (see
Item 13, "CERTAIN TRANSACTIONS").
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES OPTIONS/SARS /SARS
UNDERLYING VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
OPTIONS/SARS REALIZED --------------------------- ---------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- -------- ----------- ------------- ----------- -------------
Jerry R. Mitchell, M.D.,
Ph.D................... 0 $0 0 600,000 $ 0 $412,800
William C. O'Neil,
Jr.(2)................. 0 0 388,750 11,250 1,345,500 0
Paul J. Ottaviano........ 0 0 63,750 33,750 8,735 0
William L. Shaw, MB,
ChB.................... 0 0 0 20,000 0 0
Neil M. Frazer, MB, ChB,
FRCA................... 0 0 5,000 15,000 0 0
Michael F. Ankcorn....... 0 0 10,126 30,374 0 0
- ---------------
(1) This amount represents the aggregate of the number of options multiplied by
the difference between $3.94, the fair market value of the Common Stock at
December 31, 1998, and the exercise price for that option.
(2) Effective February 1, 1998, Mr. O'Neil resigned as President and Chief
Executive Officer. Mr. O'Neil was not re-elected as Chairman of the Board of
Directors on May 12, 1998 but remained a Director. Effective February 17,
1999, Mr. O'Neil resigned as a Director.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Dr. Mitchell, Mr.
Ottaviano, Mr. Neill, Dr. Shaw and Mr. Ankcorn.
The employment agreement for Mr. Ottaviano commenced on January 1, 1999 and
ends on December 31, 1999. The employment agreement for Dr. Mitchell commenced
on February 1, 1999 and ends on January 31, 2000. The employment agreement for
Dr. Shaw commenced on December 29, 1998 and ends on December 28, 1999. The
employment agreement for Mr. Neill commenced on October 22, 1998 and ends on
October 21, 1999. Each of the agreements are automatically renewed for
additional and successive one year periods unless the Company provides 90 days
notice prior to any anniversary date to the individual employee of its intent
not to renew the employment agreement. The annual base salary under the
agreement for
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Dr. Mitchell is $275,000; for Mr. Ottaviano, $240,000; for Dr. Shaw,
approximately $235,000; for Mr. Neill, $225,000.
These agreements (other than Mr. Ankcorn's, which is described separately
below) provide for periodic increases in the base salaries at the discretion of
the Board of Directors. The named individuals are entitled to benefits such as
medical insurance, expense reimbursement, vacation and participation in the
Company's 401(k) savings plan or supplemental retirement plan and, in some
cases, incentive bonuses. The agreements contain a non-compete clause providing
that during the term of employment, and for a period of either six months or one
year following the date of termination of employment (for any reason), the
employee may not engage in certain activities competitive with the Company. The
agreements also provide for severance compensation upon termination of
employment, with the amount and type of compensation contingent upon the context
of the termination. For example, if employment is terminated by the Company
other than "for cause" (as defined in the agreement), the employee is entitled
to a lump sum payment of twelve months of the then-current base salary,
continued benefits coverage for twelve months and vesting of any stock options
held for exercise within twelve months. If the employment is instead terminated
by the Company "for cause", the employee is entitled to compensation and
benefits earned or vested as of the date of termination. And if the employee
terminates the agreement with notice, he or she is entitled to an amount equal
to one month's base salary and continuation of benefits coverage for three
months.
The employment agreement for Mr. Ankcorn commenced on July 31, 1996 and
ends on July 31, 2001. The agreement is automatically renewed for an additional
five year period unless the Company provides six months notice prior to the
fifth anniversary date to Mr. Ankcorn of its intent not to renew the employment
agreement. The annual base salary under the agreement for Mr. Ankcorn is
Canadian $220,000. The agreement provides for periodic increases in the base
salary at the discretion of the Board of Directors. Mr. Ankcorn is entitled to
the standard benefits offered at ClinTrials BioResearch. The employment
agreement contains a non-competition clause providing that during the term of
employment, and for thirty-six months following the date of the expiration or
termination of employment, he may not carry on or be engaged in any endeavor in
competition, in whole or in part, with the Company. In the event of termination
by the Company other than "for cause", Mr. Ankcorn is entitled to three years
severance compensation, including a lump sum salary payment and continued
benefits coverage. If the Company fails to renew the agreement, he is entitled
to a lump sum payment of his most recent annual base salary.
CERTAIN TRANSACTIONS
On January 30, 1998, the Company entered into an option agreement (the
"Option") with MPI Research, LLC ("MPI") and its shareholders, Jerry R.
Mitchell, M.D., Ph.D. and William U. Parfet. Dr. Mitchell is the Chairman,
President and Chief Executive Officer of the Company, and Mr. Parfet is a
director of the Company. Pursuant to the Option, the Company paid $1,500,000 in
cash in exchange for an exclusive option to purchase all of the outstanding
stock of MPI at its fair market value at any time on or prior to March 31, 2000.
The shareholders of MPI have the right to cancel the Option at any time after
March 31, 1999, by returning the $1,500,000 cash without interest, provided they
give the Company written notice of their intent to cancel the option and the
Company does not exercise the Option within twenty business days of receipt of
such notice.
On January 30, 1998, the Company granted four separate warrants to purchase
75,000 shares (300,000 shares in the aggregate) of common stock of the Company
to Dr. Mitchell at exercise prices of $7.00, $9.00, $11.00 and $13.00 per share.
On September 4, 1998, all of these warrants were repriced at $3.25 per share.
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Each 75,000 share warrant vests ratably over a period of four years. If there is
a change in control of the Company (as defined in the warrants) or Dr. Mitchell
should die or become disabled, all warrants shall become immediately
exercisable. Each warrant expires on January 30, 2004 (see Item 11, "Option
Repricing"). Each warrant provides that in the event Dr. Mitchell no longer
serves on the board of directors of the Company, as an officer of the Company or
as a consultant to the Company, other than as a result of his death or
disability (in which case all warrants shall remain exercisable until the
expiration date), all unexercisable warrants shall remain unexercisable;
provided, however, that in the event Dr. Mitchell no longer serves in the
capacity of officer, director or consultant other than as a result of the
termination by the Company for cause (as defined in the warrants) or the
resignation by Dr. Mitchell other than for "good reason" (as defined in the
warrants), then 50% of the warrants not then exercisable shall become
exercisable.
On January 30, 1998, the Company granted four separate warrants to purchase
75,000 shares (300,000 shares in the aggregate) of common stock of the Company
to Mr. Parfet at exercise prices of $7.00, $9.00, $11.00 and $13.00 per share.
On September 4, 1998, all of these warrants were repriced at $3.25 per share
(see Item 11, "Option Repricing"). Each 75,000 share warrant vests ratably over
a period of four years. If there is a change in control of the Company (as
defined in the warrants) or Mr. Parfet should die or become disabled, all
warrants shall become immediately exercisable. Each warrant expires on January
30, 2004. Each warrant provides that in the event Mr. Parfet no longer serves on
the board of directors of the Company, as an officer of the Company or as a
consultant to the Company, other than as a result of his death or disability (in
which case all warrants shall remain exercisable until the expiration date), all
unexercisable warrants shall remain unexercisable; provided, however, that in
the event Mr. Parfet no longer serves in the capacity of officer, director or
consultant other than as a result of the termination by the Company for cause
(as defined in the warrants) or the resignation by Mr. Parfet other than for
"good reason" (as defined in the warrants), then 50% of the warrants not then
exercisable shall become exercisable.
COMPENSATION COMMITTEE REPORT
Recommendations on compensation for the Company's executive officers are
made to the Company's Board of Directors by the Compensation and Stock Option
Committee (the "Committee"). Each member of the Committee is a non-employee
director. It is the responsibility of the Committee to determine whether in its
judgment the executive compensation policies are reasonable and appropriate,
meet their stated objectives and effectively serve the best interests of the
Company and its stockholders.
EXECUTIVE COMPENSATION POLICY
The Committee believes that the primary objectives of the Company's
executive compensation policy should be:
- to attract and retain talented executives critical to both the short-term
and long-term success of the Company by providing compensation that is
highly competitive with compensation provided to executives of comparable
position at companies in the contract research organization ("CRO")
industry, pharmaceutical industry, and other related health services
industries, while maintaining compensation levels that are consistent
with the Company's financial objectives and operating performance; and
- to reinforce strategic financial and operating performance objectives
through the use of appropriate annual incentive programs; and
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- to create mutuality of interest between executive officers and
stockholders by providing long-term incentive compensation.
The Committee believes that the Company's executive compensation policy
should be reviewed annually in relation to the Company's financial performance,
annual budgeted financial goals and its position in the CRO industry. The
compensation of individuals should then be reviewed annually by the Committee in
light of its executive compensation policy for that year.
The Committee believes that in addition to corporate performance, it is
appropriate to consider in setting and reviewing executive compensation the
level of experience and responsibilities of each executive as well as the
personal contributions a particular individual may make to the success of the
Company. Such factors as leadership skills, analytical skills and organizational
development are deemed to be important qualitative factors to take into account
in considering levels of compensation. No relative weight is assigned to these
qualitative factors, which are applied subjectively by the Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The Committee believes that the compensation of executive officers should
be comprised of base compensation, annual incentive compensation, and long-term
incentive compensation, and has applied this policy to fiscal 1998 compensation
for executive officers as described below.
Base Compensation. The Committee's approach to base compensation for
executive officers of the Company is to offer competitive salaries in comparison
to its local markets, the CRO industry, the pharmaceutical industry, and other
related health service industries. In determining base compensation for the
executive officers for fiscal 1998, the Committee reviewed salary ranges
recommended by management, consulted with the CEO, and took into account each
executive's experience in business generally and with the Company specifically
and what it viewed to be appropriate levels of base compensation after taking
into consideration the contribution of each executive. For those executive
officers with employment agreements, the base salaries were determined according
to the terms of the respective employment agreements. In addition, Mr. Anckorn's
base salary is set in terms of Canadian dollars and is accordingly subject to
change annually as expressed in U.S. dollars based on fluctuation in currency
exchange rates.
Annual Incentive Programs. The Committee believes that incentive
compensation for the executive officers of the Company should be primarily
linked to operating performance. To achieve this goal, the Committee relies on
cash bonuses. Cash bonuses are awarded to executive officers of the Company
based primarily upon the actual earnings of the Company during the fiscal year
compared to the earnings targets approved by the Board of Directors through the
annual financial budget and subsequent financial projections.
Long-Term Incentive Compensation. The 1989 Stock Option Plan is the only
plan currently in place as a long-term compensation incentive for the Company's
executive officers. There are two types of stock options available for grant:
incentive stock options and non-qualified options. Incentive and non-qualified
stock options are generally granted with an exercise price at not less than the
fair market value of the underlying stock at the date of grant. Stock options
are granted to executive officers by the Board of Directors based primarily upon
the financial performance of the Company as compared to budgeted and projected
earnings, as well as actual or potential contributions to the growth of the
Company.
The Company has a 401(k) profit sharing plan in which all U.S. employees,
including executive officers, have equal participation eligibility. The
Committee annually establishes the Company matching portion of the 401(k)
deposits made to employees' 401(k) accounts. The matching percentage is the same
for executive
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officers and all employees. For 1998, the matching amount was 33% of the amount
withheld by each participant, not to exceed the maximum contribution allowed
under Section 415 of the Internal Revenue Code (the "Code") for a qualified
plan. The profit sharing payments made by the Company to the executive officer's
401(k) and profit sharing account are a percentage of the officer's base pay
determined annually by the Committee. The percentage is the same for executive
officers and all employees and was 5% of base pay for fiscal 1998 (subject to
certain limitations). Mr. Ankcorn and Dr. Shaw are the sole participants in
separate supplemental retirement plans, for which contributions are actuarially
determined.
Section 162(m) of the Code generally disallows a tax deduction to public
companies for executive compensation in excess of $1 million. It is not
anticipated that the Company will pay any of its executives compensation in
excess of $1 million in 1999.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee believes that compensation of the Chief Executive Officer is
consistent with the policies concerning executive compensation and appropriately
reflects the Company's financial objectives and operating performance. Awards of
long-term incentive compensation of the Chief Executive Officer are considered
concurrently with awards to other executive officers.
Dr. Mitchell was hired as CEO in January of 1998, and his compensation
package for 1998 was the result of negotiation between Dr. Mitchell and the
Company in connection with his retention by the Company. For 1998, Dr. Mitchell
received a base salary of $252,083. Dr. Mitchell also received warrants to
purchase 300,000 shares of the Company's common stock at an exercise price
(after re-pricing) of $3.25 per share, and stock options to purchase 300,000
shares of the Company's common stock pursuant to the Company's 1989 Stock Option
Plan. Finally, Dr. Mitchell received other compensation valued at $114,257.
In approving Dr. Mitchell's compensation package, the Board of Directors
considered factors such as the compensation package of its outgoing CEO,
compensation packages for CEOs of comparable companies, and, most importantly,
its judgment as to Dr. Mitchell's anticipated value to the Company based on his
business experience and expertise in the industry.
The foregoing report on executive compensation is provided by the following
directors, who constituted the Compensation and Stock Option Committee during
1998:
Edward G. Nelson, Chairman of Committee
Irwin B. Eskind, M.D.
Roscoe R. Robinson, M.D.
The above Compensation Committee Report is not deemed to be part of a
document filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be deemed
incorporated by reference in any documents filed under the Securities Act or the
Exchange Act, without the express written consent of the Company.
OPTION REPRICING
In September 1998, the Board of Directors voted to reduce the exercise
price of the options and warrants held by Dr. Mitchell due to the general
decline in the stock market and the decline in the market price of the Company's
Common Stock. The options and warrants originally had exercise prices ranging
from $7 to $13 per share and the exercise price on all of them was reduced to
$3.25 per share, the closing price from the
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Common Stock on the date of repricing. The Board felt that the market price of
the Company's Common Stock had fallen to a point so far below the average
exercise price of the options and warrants that they were no longer serving as
compensatory or incentive tools. The Board also felt that the reduction in the
market price of the Company's Common Stock was more a result of general economic
trends and was not the fault of Dr. Mitchell. The Board believed that the
repricing of the options and warrants was in the best interest of the Company
and will serve to retain and motivate Dr. Mitchell.
The following table sets forth information concerning options or warrants
granted to any executive officer of the Company for which the exercise price was
adjusted since the Company's incorporation in 1989. The repricing was
unanimously approved by the Board of Directors, except for Dr. Mitchell and Mr.
Parfet, who each abstained from voting.
TEN-YEAR OPTION/SAR REPRICINGS
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SECURITIES MARKET PRICE TERM
UNDERLYING OF STOCK AT EXERCISE PRICE REMAINING
OPTIONS/SARS TIME OF AT TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---- ------- ------------ ------------- -------------- --------- ------------
Jerry R. Mitchell, M.D.,
Ph.D.......................... 9/4/98 300,000 $3.25 $7 to $13 $3.25 3.4 years
Chairman of the Board,
President and Chief
Executive Officer
Jerry R. Mitchell, M.D.,
Ph.D.......................... 9/4/98 250,000 3.25 7.00 3.25 9.4 years
Michael F. Ankcorn.............. 4/18/97 20,250 7.63 22.00 8.38 9.3 years
ClinTrials BioResearch Ltd.
Chairman of the Board,
President and Chief
Executive Officer
Barry B. Kanarek(1)............. 4/18/97 45,000 7.63 22.00 8.38 9.7 years
Albert J. Siemens(2)............ 4/18/97 6,750 7.63 12.92 8.38 8.7 years
- ---------------
(1) Dr. Kanarek resigned from the Company effective April 2, 1998.
(2) Dr. Siemens resigned from the Company effective January 31, 1998.
The foregoing report on option repricing is provided by the Board of
Directors:
Edward G. Nelson
Roscoe R. Robinson, M.D.
Irwin B. Eskind, M.D.
Richard J. Eskind
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such executive officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon the Company's review of copies of the Section 16(a) forms
furnished to the Company for the fiscal year ended December 31, 1998, the
Company believes that, during such fiscal year, its executive officers,
directors and greater than 10% stockholders complied with applicable Section
16(a) filing requirements, except as discussed below.
Mr. Kevin Duffy, an officer of the Company during 1998, and his wife made
purchases of the Company's common stock and failed to timely report these
holdings. Mr. Duffy did update his holdings on Form 5 in February 1999. Dr.
Robinson, a director of the Company did not report a purchase of the Company's
common stock by his wife during 1998. Dr. Robinson made the required filing in
April 1999.
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COMPANY PERFORMANCE
The following graph sets forth the yearly percentage change in cumulative
total stockholder return during the preceding five years ended December 31, 1998
on (a) the Company, (b) the Center for Research in Security Prices ("CRSP")
Index for Nasdaq Stock Market (U.S. Companies) ("Nasdaq U.S. Stock Index") and
(c) the CRSP Index for Nasdaq Health Services Stocks ("Nasdaq Health Services
Index"), assuming the reinvestment of all dividends.
Nasdaq
Nasdaq Stock Health
Measurement Period ClinTrials Market (US Services
(Fiscal Year Covered) Research Companies) Stocks
12/31/93 100.0 100.0 100.0
12/30/94 73.5 97.8 107.3
12/29/95 158.8 138.3 136.1
12/31/96 267.6 170.0 135.9
12/31/97 92.6 208.6 138.5
12/31/98 46.3 293.2 118.8
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP has served as the Company's
independent public accountants for the fiscal year ended December 31, 1998. A
representative of that firm will be present at the meeting and will have the
opportunity to make a statement if he so desires and to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting must be received by the Company not later than January 10, 2000 for
inclusion in its Proxy Statement and form of proxy relating to that meeting. Any
such proposals, as well as any questions relating thereto, should be directed to
S. Colin Neill, Senior Vice President, Chief Financial Officer and Secretary,
11000 Weston Parkway, Cary, North Carolina 27513.
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OTHER BUSINESS
It is not anticipated that any other business will arise during the Annual
Meeting as the management of the Company has no other business to present and
does not know that any other person will present any other business. However, if
any other business should be presented at the meeting, the persons named in the
enclosed proxy intend to take such action as will be in harmony with the
policies of the management of the Company.
MISCELLANEOUS
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, stockholders who do not expect to attend in person are
urged, regardless of the number of shares of stock owned, to date, sign and
return the enclosed proxy promptly.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998 MAY BE OBTAINED, WITHOUT CHARGE, BY ANY STOCKHOLDER TO
WHOM THIS PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO S. COLIN NEILL,
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 11000 WESTON PARKWAY, CARY,
NORTH CAROLINA 27513.
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EXHIBIT A
CLINTRIALS RESEARCH INC.
1999 LONG-TERM INCENTIVE COMPENSATION PLAN
1. The Purpose of the Plan. This 1999 Long-Term Incentive Compensation
Plan (the "Plan") is intended to provide an opportunity for individuals
performing services for Clintrials Research Inc., a Delaware corporation (the
"Corporation"), including officers, key employees, and directors of the
Corporation and its subsidiaries, as subsidiaries are defined in section 425 of
the Internal Revenue Code of 1986, as amended (the "Code") (its "Subsidiaries"),
to acquire shares of the Corporation's common stock ("Stock"), to obtain
additional compensation based on appreciation of the Stock and/or to be rewarded
for achieving certain performance goals. The Plan provides for the grant of
incentive stock options, as defined in section 422 of the Code ("Incentive Stock
Options" or "ISOs"), stock options not qualifying as Incentive Stock Options
("Non-Qualified Stock Options" or "NQSOs") (collectively "Options"), stock
appreciation rights, as defined in paragraph 5 ("Stock Appreciation Rights" or
"SARs"), and Restricted Stock, as set forth in paragraph 6, as an incentive to
service or continued service with the Corporation and to aid the Corporation in
retaining and obtaining key personnel of outstanding ability. The Plan also
provides for Performance Shares, as set forth in paragraph 7, and Performance
Units, as set forth in paragraph 8, as an incentive to reach certain performance
goals. As used herein, "Incentives" refers to Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares and Performance Units.
2. Stock Subject to the Plan. The maximum number of shares of the common
stock, $.01 par value, of the Corporation (the "Stock") which may be issued
hereunder shall be a total of 1,500,000 shares of Stock, which may be either
authorized and unissued Stock or Stock held in the treasury of the Corporation,
as shall be determined by the Board of Directors of the Corporation. If an
Option or SAR expires or terminates for any reason without being exercised in
full, or if Restricted Stock or Performance Shares are forfeited, the
unpurchased or forfeited shares shall again be available for purposes of the
Plan. The number of shares which may be issued hereunder shall not exceed
1,500,000 in the aggregate.
3. Administration of the Plan. This Plan shall be administered by the
Board of Directors or a committee appointed by the Board of Directors. As used
herein, the term "Committee" refers to such committee or, in the absence of
appointment of such committee, to the Board of Directors. The Committee shall
have full authority in its discretion to determine the eligible persons to whom
Incentives shall be granted and the terms and provisions of Incentives, subject
to the Plan. In making such determinations, the Committee may take into account
the nature of the services rendered and to be rendered by such persons, their
present and potential contributions to the Corporation and any other factors
which the Committee deems relevant. Subject to the provisions of the Plan, the
Committee shall have full and conclusive authority to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective agreements related to
Incentives provided for herein (which need not be identical); to determine the
restrictions on transferability of Stock acquired hereunder (which restrictions
need not be identical); and to make all other determinations necessary or
advisable for the proper administration of the Plan.
4. Options.
(a) Eligibility and Limits. Options may be granted to such persons as
are selected by the Committee. ISOs may, however, only be granted to
employees of the Corporation and its present or future subsidiaries. For
purposes of ISOs, the term "employee" shall be defined as any person who at
the
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time the ISO is granted to such person hereunder, is employed, as such term
is used in section 422 of the Code and described in Treasury Regulation
section 1.421-7(h)(1), by the Corporation or any Subsidiary of the
Corporation. The aggregate fair market value (determined as of the time an
ISO is granted) of the Stock with respect to which ISOs are exercisable by
an individual for the first time during any calendar year, taking into
account ISOs granted under this Plan and under all other plans of the
Corporation and its parent or Subsidiary corporations, shall not exceed the
limit provided in Section 422 of the Code (currently $100,000).
(b) Option Agreements. The terms and conditions of each Option
granted under the Plan shall be specified by the Committee and set forth in
a written option agreement ("Option Agreement"). At the time any Option is
granted under the Plan, the Committee shall determine whether said Option
is to be an ISO or a NQSO and the Option Agreement shall reflect the
Option's status as an ISO or a NQSO. The number of shares for which ISOs
and NQSOs shall be granted shall be determined by the Committee in its sole
discretion and set forth in the Option Agreement, subject to the provisions
of Section 4(a) above with respect to the aggregate fair market value of
the Stock for which an ISO may become exercisable in any calendar year and
subject to the provisions of Section 2 above as to the total number of
shares which may be granted under the Plan. At the time any ISO granted
under this Plan is exercised, the certificates representing the shares of
Stock purchased pursuant to said ISO shall be clearly identified by legend
as representing shares purchased upon exercise of an ISO.
(c) Option Price.
(i) ISOs. With respect to an ISO, the option price per share shall
in no event be less than 100% of the fair market value per share of the
Stock (as determined in good faith by the Committee) on the date the ISO
is granted. If the employee owns more than 10% of the total combined
voting power of all classes of the Corporation's stock or of the stock
of its parent or Subsidiary, the option price per share shall not be
less than 110% of the fair market value per share of the Stock (as
determined in good faith by the Committee) on the date the ISO is
granted.
(ii) Non-Qualified Options. With respect to a NQSO the option
price per share of a NQSO shall not be less than 80% of the fair market
value per share of the Stock (as determined in good faith by the
Committee) on the date the Option is granted.
(d) Date of Grant. For purposes of this section 4, the date the
Option is granted shall be the date on which the Committee has approved the
terms and conditions of a Option Agreement evidencing the Option and has
determined the recipient of the Option and the number of shares covered by
the Option and has taken all such other action as is necessary to complete
the grant of the Option.
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(e) Option Term.
(i) ISOs. No ISO shall be exercisable after the expiration of ten
years from the date it is granted. No ISO granted to an employee who at
the time of grant owns more than 10% of the total combined voting powers
of all classes of the Corporation's stock or of the stock of its parent
or subsidiary shall be exercisable after the expiration of five years
from the date it is granted.
(ii) NQSOs. The term of any NQSO shall be set by the Committee and
set forth in each Option Agreement.
(f) Payment. Payment for all Stock purchased pursuant to the exercise
of an Option shall be made in cash or, if approved by the Committee either
at the time of grant or at the time of exercise, by delivery of Stock of
the Corporation at its fair market value on the date of delivery, or a
combination of cash and Stock. Such payment shall be made at the time that
the Option or any part thereof is exercised, and no Stock shall be issued
until full payment therefor has been made. The holder of an Option shall,
as such, have none of the rights of a stockholder.
(g) Nontransferability of Options. Options shall not be transferable
or assignable except by will or the laws of descent and distribution and
shall be exercisable, during the holder's lifetime, only by him.
(h) Termination of Employment or Death. Except as provided below, an
Option may not be exercised by a holder who was an employee upon receipt of
the Option unless he is then, and continually after the grant of the Option
has been, an employee of the Corporation or one of its subsidiaries. Upon
any termination of employment of the holder by reason of disability, within
the meaning of section 422(c)(7) of the Code, the holder may not exercise
an Option later than twelve months after the date of such termination of
employment. If the holder of an Option dies, such Option may be exercised
(to the extent that the holder shall have been entitled to do so at the
date of his death) by a legatee or legatees of the holder under this last
will, or by his personal representative or distributees, at any time during
the twelve-month period following his death. Notwithstanding this
subparagraph (h), no NQSO may be exercised after the expiration of the term
provided for in section 4(e) and specified in the Option Agreement relating
to that particular NQSO and no ISO may be exercised more than ten years
after the date on which it was granted. For purposes of this subparagraph
(h), employment of a holder of an Option shall not be deemed terminated so
long as the holder is employed by a parent or Subsidiary of the Corporation
or by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the Option of the holder in a
transaction to which section 424(a) of the Code is applicable.
(i) Limited Right of Exercise. An Option may be exercised during the
Option term as to the full number of shares covered by the Option if: (1) a
tender offer or exchange offer has been made for shares of Stock, provided
that the corporation, person or other entity making such offer purchases or
otherwise acquires shares of Stock pursuant to such offer; (2) the
stockholders of the Corporation have approved a definitive agreement (the
"Agreement") to merge or consolidate with or into another corporation
pursuant to which the Corporation will not survive or will survive only as
a subsidiary of another corporation, or to sell or otherwise dispose of all
or substantially all of its assets; or (3) any person or group (as such
terms are defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Act")), becomes the holder of 50% or more of the
outstanding shares of Stock. If any of the events specified in this
subparagraph (i) have occurred, the Option shall be fully exercisable: (x)
in the event of (1) above, during the term of the tender or exchange offer;
(y) in the event of (2) above, within a 30-day period commencing on the
date of approval by the shareholders of the Agreement; or
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(z) in the event of (3) above, within a 30-day period commencing on the
date upon which the Corporation is provided a copy of Schedule 13(d) (filed
pursuant to Section 13(d) of the Act and the rules and regulations
promulgated thereunder) indicating that any person or group has become the
holder of 50% or more of the outstanding shares of Stock or, if the
Corporation is not subject to Section 13(d) of the Act, within a 30-day
period commencing on the date upon which the Corporation receives written
notice that any person or group has become the holder of 50% or more of the
outstanding shares of Stock.
(j) Guarantees and Loans. The Corporation is hereby authorized to
guarantee or make loans to the holder of an Option to enable him to
exercise such Option. Any loan made or guaranteed herein shall be in such
amount as determined by the Committee but shall not exceed the exercise
price of the Options being exercised by the holder. Any loans made or
guaranteed shall be with full recourse against the borrower, shall be
secured by the Stock received from exercise of the related Option, shall
provide for a market rate of interest and shall contain such other terms
and conditions acceptable to the Committee. The determination of whether
loans are to be made or guaranteed shall be made by the Committee.
(k) Construction of ISOs. All ISOs to be granted hereunder are
intended to comply with section 422 and 424 of the Code, and all provisions
of this Plan and all ISOs granted hereunder shall be construed in such
manner as to effectuate that intent.
(l) Other Provisions. The Option Agreements authorized under this
Plan shall contain such other provisions, including, without limitation,
restrictions on the exercise of Options, as the Committee may deem
advisable. Any Option Agreement related to ISO's shall contain such
limitations and restrictions upon the exercise of such ISOs as shall be
necessary in order that such ISOs will be Incentive Stock Options as
defined in section 422 of the Code, or to conform to any change in the law,
which provisions shall control any inconsistent or contradictory provision
of the Plan.
5. Stock Appreciation Rights.
(a) Eligibility. A SAR may be granted to such persons as are
determined by the Committee.
(b) SAR Agreements. Each SAR shall be evidenced by a SAR agreement
("SAR Agreement"). Each SAR Agreement shall provide that an SAR shall
entitle the grantee to receive upon exercise the excess of (a) the fair
market value of a specified number of shares of the Stock at the time of
exercise over (b) a specified price which shall be determined by the
Committee and set forth in each SAR Agreement but in no event shall it be
less than 80% of the fair market value of the Stock at the time the SAR is
granted. The determination of the fair market value of shares of Stock at
the time of grant of a SAR shall be made by the Committee in good faith.
The determination of the fair market value of shares of Stock at the time
of exercise of a SAR shall be made in accordance with rules adopted by the
Committee or, in the absence of such rules, by the Committee in good faith.
A SAR may be granted in connection with all or any portion of a previously
or contemporaneously granted Option or not in connection with an Option.
(c) Term. The term of each SAR shall be determined by the Committee
and shall be specified in each SAR Agreement.
(d) Termination of Employment or Death. Except as provided below,
SARs granted to an individual who is an employee on the date of grant will
be exercisable only during his employment by the Corporation or one of its
Subsidiaries. Upon any termination of employment by a grantee by reason of
disability within the meaning of subparagraph 4(h) hereof, the grantee may
not exercise the SAR later than twelve months after the date of such
termination of employment. If the grantee of a SAR dies, the
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grantee's legal successor shall have the right to exercise the SAR during
the lesser of its term and a period of twelve months commencing on the
death of the grantee. SAR may contain such other limitations with respect
to the time when such rights may be exercised as the Committee may
determine, and such limitations may vary.
(e) Nontransferability of SARs. SARs shall not be transferable or
assignable except by will or the laws of descent and distribution, and
shall be exercisable, during the grantee's lifetime, only by him.
(f) Payment. Upon exercise of a SAR, payment shall be made in cash or
Stock (at fair market value on the date of exercise) as provided in the SAR
Agreement or, in the absence of such provision, as the Committee may
determine.
(g) Other Provisions. The SAR Agreements authorized under this Plan
shall contain such other provisions, including, without limitation,
restrictions on the exercise of SARs, as the Committee may deem advisable.
6. Restricted Stock.
(a) Eligibility. Restricted Stock may be granted to such persons as
determined by the Committee.
(b) Awards. An award of Restricted Stock shall consist of Stock
granted and issued to and registered in the name of a employee and subject
to the terms of a stock restriction agreement ("Stock Restriction
Agreement"). For purposes of determining the number of Shares subject to a
stock award, the Committee may value the Shares at a discount to reflect
the various restrictions and limitations set forth in the Plan and the
applicable Stock Restriction Agreement.
(c) Vesting; Lapse of Restrictions.
(i) An employee shall vest in any Shares awarded and the
restrictions on the transferability of any Shares awarded shall lapse,
in accordance with the schedule determined by the Committee and set
forth in each Stock Restriction Agreement or, if earlier, on the date of
the death, disability or retirement of the employee. Notwithstanding the
foregoing, the Committee may accelerate (i) the vesting of any stock
award or (ii) the lapse of restrictions on any Shares awarded.
(ii) Unless otherwise determined by the Committee, upon termination
of an employee's employment with the Company or any Subsidiary for any
reason other than death, disability or retirement, all Shares awarded to
an employee as to which the vesting requirements have not been satisfied
shall be forfeited and shall not be delivered by the Company. The date
of an employee's termination of employment for any reason shall be
determined in the sole discretion of the Committee.
(d) Certain Restrictions. Each employee awarded Restricted Stock
shall be the beneficial owner of any Shares issued by the Company in
connection with an award of Restricted Stock. Except for the risk of
forfeiture and the restrictions on transfer which may apply to certain
Shares (including restrictions relating to any dividends or other rights),
the employee shall be entitled to all rights of ownership, including,
without limitation, the right to vote such Shares and to receive cash or
stock dividends thereon.
(e) Other Provisions. The Restricted Stock Agreements authorized
under this Plan shall contain such other provisions as the Committee may
deem advisable.
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7. Performance Shares.
(a) Eligibility. Performance Shares may be granted to such persons as
determined by the Committee.
(b) Award. Awards under this Plan shall be granted to an employee in
the form of Performance Shares and such awards shall be subject to the
terms of a Performance Share Agreement ("Performance Share Agreement").
Each Performance Share shall be deemed to be equivalent in value to one
share of Stock. The award of Performance Shares under the Plan shall not
entitle the recipient to any dividend or voting rights or any other rights
of a shareholder with respect to such Performance Shares. The Committee may
substitute other forms of awards (such as restricted shares) for
Performance Shares in its discretion.
(c) Right to Payment of Performance Shares. An employee shall have no
right to receive payment for any part of his Performance Shares and all of
his Performance Shares shall be forfeited unless he remains in the
employment of the Corporation at all times from the date of grant of the
awards through (1) the time period determined by the Committee as set forth
in the Performance Share Agreement; (2) his or her normal retirement, (3)
death or (4) total disability, whichever may come earlier. The Committee
may, if in the opinion of the Committee circumstances warrant such action,
approve payment of any or all of Performance Shares which would otherwise
be forfeited as a result of an employee failing to remain in the employment
of the Corporation for the required period.
(d) Performance Criteria. The extent to which an employee receives
payment of all or part of the Performance Shares in an award grant shall be
determined by the Committee based on performance criteria set forth in the
Performance Share Agreement. The extent to which any of the performance
criteria will affect an employee's payment may vary according to his
assigned responsibilities during the award term. However, a portion of the
payment of an award for every employee will depend on performance against
the Corporation's objectives. The Committee shall have the right to approve
different performance criteria for each Agreement.
(e) Form and Timing of Payment. No payments will be made to employees
prior to the end of a time period set forth in the Performance Share
Agreement (except in the case of termination of employment through death,
retirement, total disability, or under such circumstances as the Committee
deems acceptable). Payments shall be made to the holder of Performance
Shares wholly in cash or wholly in an equal number of Shares, or partly in
cash and partly in shares in such proportion as the Committee deems
appropriate.
(f) Other Provisions. The Performance Share Agreements authorized
under this Plan shall contain such other provisions as the Committee may
deem advisable.
8. Performance Units.
(a) Eligibility. A Performance Unit may be granted to such persons as
are determined by the Committee.
(b) Award. A Performance Unit may be exercised in whole or in part as
provided in the performance unit agreement ("Performance Unit Agreement")
and, subject to the provisions of the Performance Unit Agreement, a
Performance Unit shall entitle an Employee to receive, without any payment
to the Company (other than required tax withholding amounts), cash, Stock
or a combination of cash and Stock, based on the degree to which
performance standards established by the Committee
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and specified in the Performance Unit Agreement have been achieved. Such
performance standards shall cover such period as may be specified by the
Committee. The performance standards may be based on earnings or earnings
growth, return on assets, equity or investment, regulatory compliance,
improvements of financial ratings, achievement of balance sheet or income
statement objectives, or any other objective goals established by the
Committee, as the case may be, and may be absolute in their terms or
measured against or in relationship to other companies comparably,
similarly or otherwise situated. Each Performance Unit Agreement shall
specify the number of Performance Units granted.
(c) Exercise. The time and method of exercise of Performance Units
shall be determined by the Committee and specifically set forth in the
Agreement, provided, however a Performance Unit will expire no later than
the earlier of ten years from the date of grant.
(d) Compliance with Securities Laws. To the extent required by Rule
16b-3(e) under the Exchange Act or otherwise provided in the Agreement, the
Committee shall have sole discretion to consent to or disapprove the
election of any Employee to receive cash in full or partial settlement of a
Performance Unit. In cases where an election of settlement in cash must be
consented to by the Committee, the Committee may consent to, or disapprove,
such election at any time after such election, or within such period for
taking action as is specified in the election, and failure to give consent
shall be disapproval. Consent may be given in whole or as to a portion of
the Performance Unit surrendered by the Employee. If the election to
receive cash is disapproved in whole or in part, the Performance Unit shall
be deemed to have been exercised for Stock, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent
the election to receive cash is disapproved.
(e) Other Provisions. The Restricted Stock Agreements authorized
under this Plan shall contain such other provisions as the Committee may
deem advisable.
9. Adjustments.
(a) Adjustment Upon Stock Dividend. The number of shares of Stock
which may be granted under an Option, SAR, Restricted Stock, Performance
Share or Performance Unit Agreement, the number of shares covered by each
outstanding Option, SAR, Restricted Stock or Performance Share Agreement,
and the price per share in each outstanding Option or used in determining
the amount of payment upon exercise of each outstanding SAR or Performance
Share, shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in shares of Stock
to holders of outstanding shares of Stock or any other increase or decrease
in the number of such shares effected without receipt of consideration by
the Corporation.
(b) Adjustments upon Merger. If the Corporation shall be the
surviving corporation in any merger or consolidation, recapitalization,
reclassification of shares or similar reorganization, the holder of each
outstanding Option shall be entitled to purchase, at the same times and
upon the same terms and conditions as are then provided in the Option, the
number and class of shares of Stock or other securities to which a holder
of the number of shares of Stock subject to the Option at the time of such
transaction would have been entitled to receive as a result of such
transaction, and a corresponding adjustment shall be made in connection
with determining the value of each outstanding SAR and Performance Shares.
Upon a merger or consolidation in which the Corporation is not the
surviving corporation, the surviving corporation shall substitute another
Option with equivalent value for an outstanding Option in a transaction to
which section 424(a) of the Code is applicable and shall substitute another
SAR,
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Restricted Stock, Performance Share with equivalent value for an
outstanding SAR, Restricted Stock, Performance Share.
(c) Additional Adjustments. In the event of any such changes in
capitalization of the Corporation, the Committee may make such additional
adjustments in the number and class of shares of Stock or other securities
with respect to which outstanding Options and Stock Appreciation Rights are
exercisable and with respect to which future Options and Stock Appreciation
Rights may be granted as the Committee in its sole discretion shall deem
equitable or appropriate, subject to the provisions of this paragraph 9.
(d) Dissolution or Liquidation. A dissolution or liquidation of the
Corporation shall cause each outstanding Incentive to terminate.
(e) Change in Par Value. In the event of a change of the
Corporation's shares of Stock with par value into the same number of shares
with a different par value or without par value, the shares resulting from
any such change shall be deemed to be the Stock within the meaning of the
Plan.
(f) Limited Rights upon Corporate Restructure. Except as expressly
provided in this paragraph 9, the holder of an Incentive shall have no
rights by reason of any subdivision or combination of shares of Stock of
any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of Stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or distribution to the
Corporation's stockholders of assets or stock of another corporation, and
any issue by the Corporation of shares of Stock of any class, or securities
convertible into shares of Stock of any class, shall not affect, and no
adjustment by reasons thereof shall be made with respect to, the number or
price of shares of Stock subject to the Incentive.
(g) Effect of Incentives on Company's Capital Business Structure. The
existence of the Plan and the Incentives granted pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make or
authorize any adjustment, reclassification, reorganization or other change
in its capital or business structure, any merger or consolidation of the
Corporation, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or
liquidation of the Corporation, any sale or transfer of all or any part of
its business or assets, or any other corporate act or proceeding.
10. Termination and Amendment of the Plan. The Plan shall terminate on the
date ten years after adoption of the Plan by the Board of Directors, and no
Incentive shall be granted under the Plan after that date, but Incentives
granted before termination of the Plan shall remain exercisable thereafter until
they expire or lapse according to their terms. In addition, the Board of
Directors may terminate the Plan at any time. The Plan may be modified and
amended by the Board of Directors, the Committee or the Corporation's
stockholders. Notwithstanding the foregoing, no such termination, modification
or amendment without the consent of the holder of a Incentive shall adversely
affect his right under such Incentive.
11. Indemnification. In addition to and not in limitation of such other
rights of indemnification as they may have as directors or as members of the
Committee, members of the Board of Directors and the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorney's fees and court costs actually and necessarily incurred, in connection
with the defense of any action, suit or proceeding, or in connection with any
appeal thereof, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or any
Incentive granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by
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independent legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee or Board member is liable for negligence or
misconduct in the performance of his or her duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding the Committee
or Board member shall, in writing, offer the Corporation the opportunity, at its
own expense, to handle and defend the same.
12. Rule 16b-3. Notwithstanding any provisions herein to the contrary,
Incentives granted to executive officers or directors of the Corporation shall
be granted in such a manner, shall contain such terms, and shall be exercised as
may be required in order to ensure that such Incentives comply with Rule 16b-3
under the Securities Exchange Act of 1934, as amended.
13. Shareholder Approval. This Plan is subject to the approval of the
holders of the common stock of the Corporation.
A-9
33
PROXY CLINTRIALS RESEARCH INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 22, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints S. Colin Neill and Jerry R. Mitchell, M.D.,
Ph.D., as proxies, with power of substitution, to vote all shares of the
undersigned at the Annual Meeting of Stockholders of ClinTrials Research Inc.,
to be held on Tuesday, June 22, 1999, at 9:00 a.m. Central Daylight Time, at
NationsBank of Tennessee, One NationsBank Plaza, 3rd Floor Board Room,
Nashville, Tennessee, and at any adjournments or postponements thereof, in
accordance with the following instructions:
(1) ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed
below
(INSTRUCTION: To withhold authority to vote for any individual nominee
check the box to vote "FOR" all nominees and strike a line through the
nominee's name in the list below.)
Jerry R. Mitchell, M.D., Ph.D., Irwin B. Eskind, M.D.,
Richard J. Eskind, Edward G. Nelson, Roscoe R. Robinson, M.D.
(2) TO APPROVE THE ADOPTION OF THE COMPANY'S 1999 LONG-TERM INCENTIVE
COMPENSATION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
[ ] FOR DISCRETION [ ] AGAINST DISCRETION [ ] ABSTAIN
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION
OF DIRECTORS, FOR THE ADOPTION OF THE 1999 LONG-TERM INCENTIVE COMPENSATION
PLAN, AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated: , 1999
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Dated: , 1999
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Signature(s) of shareholder(s)
should correspond exactly with
the name(s) printed hereon.
Joint owners should each sign
personally. Executors,
administrators, trustees,
etc., should give full title
and authority.