SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
For Annual and Transition Reports Pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended MARCH 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _________ to
___________
Commission File Number: 1-12748
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1176514
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
1111 S. PACA STREET, BALTIMORE, MARYLAND 21230 2834
(Address of principal executive offices) (ZIP CODE) (SIC)
(410) 843-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class: Class A Common Stock, $.01 par value per share.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of June 8, 1999 the aggregate market value of the outstanding shares of
the Registrant's Class A Common Stock, par value $.01 per share, held by
non-affiliates of the Registrant was approximately $16,100,000 based on the
closing sale price of the Class A Common Stock on June 8, 1999.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of June 8, 1999:
Class A Common Stock, $.01 per share - 5,590,101 shares
Class B Common Stock, $.01 per share - none
Item 11 of the Registrant's Form 10-K is hereby amended to read as follows:
ITEM 11. EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY OF COMPENSATION
The following table sets forth the compensation earned by the
Company's Chief Executive Officer and the Company's four other highest
compensated executive officers for services rendered in all capacities to the
Company for the fiscal years ended March 31, 1999, 1998, and 1997.
SUMMARY COMPENSATION
-------------------------------------------------------------
ANNUAL COMPENSATION
------------------------------------
SALARY AND INCENTIVE LONG TERM COMPENSATION
COMPENSATION -------------------------------
------------------------------------- OTHER ANNUAL STOCK
YEAR ($) BONUS($) COMPENSATION($) OPTIONS(#)
---- -------------- -------- --------------- ----------
William P. Tew, Ph.D....................... 1999 $174,818 $51,353(4)(1) 154,089
Chairman (A) 1998 $194,428 $ 849(1) 30,130
1997 $187,219 $ 270(1) 75,000
Thomas P. Rice............................. 1999 $ 34,134(2)(6) $ 8,271(3) 253,000(5)
President and Chief 1998 --- $ 9,600(3) 3,000(3)
Executive Officer 1997 --- $ 1,600(3) 8,000(3)
Narlin B. Beaty, Ph.D...................... 1999 $143,601 --- ---
Chief Technical Officer 1998 $150,053 --- 13,786
1997 $145,434 --- 30,000
John T. Janssen............................ 1999 $141,521 --- ---
Chief Financial Officer and Treasurer 1998 $147,880 $4,000 --- 13,786
1997 $141,299 --- 20,000
Robert J. Mello, Ph.D...................... 1999 $138,566 --- ---
Secretary and Vice President 1998 $144,792 --- 13,786
Quality and Regulatory Affairs 1997 $138,698 --- 30,000
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(A) Dr. Tew resigned as Chairman effective June 30, 1999.
(1) Represents amounts paid by the Company for life insurance premiums on
behalf of Dr. Tew.
(2) Represents a partial fiscal year. Mr. Rice was appointed President of
the Company in January 1999, after a two-year tenure on the Board of
Directors.
(3) Represents fees and options given to Mr. Rice as a non-employee director
and life insurance premiums paid on behalf Mr. Rice between January 11,
1999 and March 31, 1999
(4) Includes $50,000 paid in January 1999 as part of management realignment.
(5) Includes 3,000 options given Mr. Rice as an outside director and 250,000
upon joining CBL.
(6) Includes $17,067 of deferred compensation.
EMPLOYMENT AGREEMENT
William P. Tew, Ph.D., modified his employment agreement of November
1996 as a result of the January
1999 management realignment. In exchange for Dr. Tew canceling his employment
agreement he was retained as Chairman through June 30, 1999, at a monthly
salary of $10,416. Beginning July 1, 1999 through June 30, 2000, Dr. Tew will
serve as a consultant to the Company at a monthly retainer of $20,416 through
December 31, 1999 and $20,000 per month through June 30, 2000. Dr. Tew also
received a non-qualified stock option to purchase 125,000 shares at an
exercise price of $3.8125 per share, which expires in December 2008.
Mr. Rice entered into an agreement with the Company on January 11,
1999. Upon joining the Company as President and Chief Executive Officer, Mr.
Rice will receive an annual salary of $150,000 of which $75,000 is deferred
until January 2000. The agreement continues through December 31, 2000 and is
automatically renewed for one year periods unless Mr. Rice or the Company
give 90 day written notice of non-renewal. Mr. Rice was granted qualified
stock options for 50,000 shares of which 50% vest on December 2, 2000 and are
100% vested January 1, 2001 and had an exercise price of $3.75 per share,
which was the market at the day of the grant. Mr. Rice also received
non-qualified stock options for 200,000 shares at $1.00 per share, which was
below the then $2.50 market price. 100,000 of these shares vested upon grant.
The vesting of the remaining shares vest at 20,000 shares per year over the
next five years or based upon the achievement of certain milestones, which if
achieved would result in accelerated vesting.
The Company has also entered into employment agreements with Dr.
Beaty, Mr. Janssen and Dr. Mello. These agreements generally provide for
payment of a base salary, together with incentive compensation in an amount
to be determined by the Board of Directors or Compensation Committee from
time to time. Base salaries established in the employment agreements for Dr.
Beaty, Mr. Janssen and Dr. Mello are $131,200, $129,300, and $126,000,
respectively. The base salary applicable to any executive officer may be
changed through action of the Compensation Committee or Board of Directors.
The employment agreements provide, in the case of Dr. Beaty, for an
initial term of three years, with successive three-year renewal terms; and,
in the case of Mr. Janssen and Dr. Mello, for an initial term of two years,
with successive two-year renewal terms. The initial term of each employment
agreement commenced July 1, 1995. Pursuant to the employment agreements, each
of the executive officers is required to devote substantially all of his
business time to Company related matters and has agreed not to solicit
clients or customers of the Company for a period following termination of
employment.
The employment agreements also provide for severance payments to the
executive officers of the Company in certain circumstances. Drs. Beaty and
Mello and Mr. Janssen are each entitled to receipt of severance payments in
an amount equal to approximately one-half of their respective annual
compensation upon termination of their employment following a breach by the
Company of their respective employment agreements or for good reason by the
employee.
STOCK OPTION GRANTS
Stock options were granted during the fiscal year to the officers
listed below:
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL
% OF TOTAL APPRECIATION
OPTIONS EXERCISE FOR OPTION TERM
SHARES GRANTED PRICE EXPIRATION -------------------------
GRANTED IN FISCAL 99 PER SHARE DATE 5%($) 10%($)
------- ------------ --------- ---------- ----------- ----------
William P. Tew 29,098(1) 5.8% $7.750 07/09/08 $145,900 $384,900
125,000(1) 24.9% $3.813 12/22/08 $313,800 $827,900
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Thomas P. Rice 50,000(2) 10.0% $3.750 01/11/09 $121,300 $320,062
200,000(3) 39.8% $1.000 12/31/08 $323,500 $863,500
3,000(4) 0.6% $8.125 07/09/08 $15,800 $ 41,600
(1) Options were fully exercisable when granted.
(2) 50% of these options vest December 2, 2000 and are 100% vested on January
1, 2001
(3) Non-qualified options. 100,000 were vested upon grant and were issued at
$1.00 compared to $2.50 market on date of grant. The balance of the shares
vest over a five year period or upon a qualifying event.
(4) Granted as an outside director prior to becoming an officer.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent the Company's estimate of the
future market price of the Common Stock.
STOCK OPTION EXERCISES AND HOLDINGS
The table below sets forth information concerning the exercise of
options during the 1999 fiscal year and unexercised options held as of the end
of the fiscal year by the Company's Chief Executive Officer and the Company's
four other most highly compensated executive officers.
AGGREGATED OPTION EXERCISES IN THE 1999 FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FISCAL AT FISCAL
ACQUIRED VALUE YEAR-END (#) YEAR-END ($)(1)
ON EXERCISE REALIZED EXERCISABLE (E) EXERCISABLE (E)/
NAME (#) ($) UNEXERCISABLE(U) UNEXERCISABLE (U)
- ---- -------------- ------------ ----------------------------------
William P. Tew, Ph.D. --- --- 202,969 (E) ---
--- --- 56,250 (U) ---
Thomas P. Rice --- --- 107,000 (E) $87,500 (E)
--- --- 157,000 (U) $87,500 (U)
Narlin B. Beaty, Ph.D. --- --- 36,286 (E) $ 5,625 (E)
27,500 (U) $ 1,875 (U)
John T. Janssen --- --- 23,786 (E) $ 1,875 (E)
--- --- 25,000 (U) $ 3,750 (U)
Robert J. Mello, Ph.D. 5,000 $28,125 26,286 (E) $ 2,187 (E)
32,500 (U) $ 4,687 (U)
- -------------------------
(1) Assumes, for all unexercised in-the-money options, the difference between
fair market value and the exercise price. The fair market value on March 31,
1999 was $1.875 per share.
Robert J. Mello, Ph.D., Secretary and Vice President of Quality and
Regulatory Affairs exercised options
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on April 21, 1998 to purchase 5,000 shares at $1.50 which had been granted
November 30, 1995.
COMPENSATION OF BOARD OF DIRECTORS
Executive Officers of the Company who also serve on the Board of
Directors receive no additional compensation for their service as such.
Members of the Board of Directors who are not also employed by the Company
receive annual compensation of $9,600 per year for their service on the Board
of Directors. In addition, the Company grants to each director, upon that
individual's initial appointment or election to the Board of Directors, an
option to purchase 8,000 shares of Common Stock at the then current market
price. Accordingly, Mr. Burke was granted an option to purchase 8,000 shares
of Common Stock at $1.50 per share in November 1995, Mr. Miller was granted
an option to purchase 8,000 shares of Common Stock at $3.125 per share in
November 1996, and Mr. Rice was granted an option to purchase 8,000 shares of
Common Stock at an exercise price of $5.1875 per share in March 1997. Each of
these respective options is evidenced by a Director's Agreement and a related
Option Agreement by and between the Company and the director and becomes
exercisable based on a vesting schedule over a four-year period measured from
the date of grant.
In addition, in March 1997, the Board of Directors approved the 1997
Directors' Stock Option Plan of the Company (the "Directors' Plan"). The
Directors' Plan provides for the issuance of a qualified stock option to
purchase 3,000 shares of Common Stock to each director of the Company who is
not an officer and who is serving as chairperson of any standing committee of
the Board of Directors at the date of grant. Options under the Directors'
Plan are automatically granted annually at the first meeting of the Board of
Directors following the Annual Meeting of the Stockholders at an exercise
price equal to the then current market price of the Common Stock.
Accordingly, on August 12, granted under the Directors' Plan generally vest
on the first anniversary of the date of grant, provided that the director is
deemed under the Directors' Plan to have served as chairperson. In accordance
with the 1997 Directors' Stock Option Plan on July 9, 1998, options to
purchase 3,000 shares each were issued to Messrs. Burke, Miller and Rice
exercisable at $8.125, the then current market price.
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Item 12 of the Registrant's Form 10-K is hereby amended to read as follows:
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 1, 1999, with
respect to the number of shares owned by each person who is known by the
Company to own beneficially 5% or more of its Class A Common Stock, each
director of the Company and all directors and officers of the Company as a
group.
SHARES BENEFICIALLY
NAME AND ADDRESS OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED(1) OWNED
- ------------------------- ------------------- ----------
William P. Tew, Ph.D. 530,818(2) 7.5%
1111 South Paca Street
Baltimore, MD 21230
Regis F. Burke 73,200(3) 1.0%
6 Kincaid Court
Baldwin, MD 21013
Harvey L. Miller 102,500(4) 1.4%
200 Village Square
Cross Keys
Baltimore, MD 21210
Thomas P. Rice 162,500(5) 2.3%
4209 Buckskin Wood Drive
Ellicott City, MD 21042
Narlin B. Beaty, Ph.D. 167,791(6) 2.4%
13406 Blythenia Road
Phoenix, MD 21131
Corporate Opportunities 798,458(8) 11.2%
Fund (Institutional) L.P.
126 East 56th Street
New York, NY 10022
Corporate Opportunities Fund L.P. 147,427(9) 2.1%
126 East 56th Street
New York, NY 10022
All directors and officers 1,214,042(7) 17.1%
as a group
(7 PERSONS)
- --------------------
(1) Unless otherwise noted, all shares indicated are held with sole voting and
sole investment power.
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(2) Includes 173,880 shares purchasable under option exercisable within 60
days of June 1, 1999; does not include 10,000 shares owned by Pamela
Maupin, wife of Dr. Tew, with respect to which shares Dr. Tew disclaims
beneficial ownership.
(3) Includes 22,000 shares purchasable under option exercisable within 60
days of June 1, 1999.
(4) Includes 20,000 shares purchasable under option exercisable within 60
days of June 1, 1999.
(5) Includes 110,000 shares purchasable under option exercisable within 60
days of June 1, 1999.
(6) Includes 36,286 shares purchasable under option exercisable within 60
days of June 1, 1999.
(7) Includes 475,827 shares purchasable under option exercisable within 60
days of June 1, 1999.
(8) Includes the common stock equivalent of Series A Preferred Stock
purchased May 20, 1999.
(9) Includes the common stock equivalent of Series A Preferred Stock
purchased May 20, 1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
By: /S/ JOHN T. JANSSEN
--------------------------------
John T. Janssen
Treasurer and Chief Financial Officer