PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to General Instruction G(3) of Form 10-K, the following
information with respect to directors is included in Part III of this Report.
The following is a list of directors of Cambridge Biotech Corporation,
their ages, positions, offices and business experience, as of March 1, 1995:
John S. Scott, 68, has served as a Director since May 1989 and as
Chairman of the Board since December 1989. Mr. Scott is the retired Chairman
(1987) of Richardson-Vicks, Inc., a diversified consumer products subsidiary of
The Procter & Gamble Company. He served as President and Chief Executive
Officer of Richardson-Vicks, Inc. from 1975 until being named Chairman in 1986.
He was a director of Richardson-Vicks, Inc. from 1975 until his retirement in
1987 and of Procter & Gamble from 1986 until his retirement. Mr. Scott holds
a B.A. degree from Brown University. He is a director of Fleet Financial
Group, Inc., The Perkin-Elmer Corporation, The Stanley Works, and Creative
Products Resource, Inc. Mr. Scott serves as a member on the Company's
compensation committee and as a member on the Company's nominating committee.
Jeffrey T. Beaver, 57, has served as President and Chief Executive
Officer of the Company since May 1994. Mr. Beaver has also served as a
director since January 1983. From January 1991 to May 1994, Mr. Beaver was an
independent consultant in the health care sector. From September 1986 to
December 1990, Mr. Beaver was Senior Vice President and Head of the Corporation
Finance Group of IBJ Schroder Bank and Trust Company. Prior to September 1986,
Mr. Beaver was a Managing Director of J. Henry Schroder Corporation (a
subsidiary of Schroder Venture Managers, Inc.) where he was engaged in
providing corporate financial advisory services. Mr. Beaver is a member of the
Institute of Chartered Financial Analysts. He received his B.A. degree from
Princeton University and his M.B.A. degree from New York University.
C. Arnold Kalman, 75, has served as a director since March 1989. Mr.
Kalman has worked for the consulting firm of Booz Allen & Hamilton since 1950,
becoming a partner in the firm in 1956 and has retired as Senior Vice President
of the firm. Mr. Kalman's clients were primarily in industry with
technology-based products. Mr. Kalman received his B.S. from the Massachusetts
Institute of Technology. Mr. Kalman is a former director of several public
companies including AXIA Incorporated, and Electronic Memories & Magnetics
Corp. Mr. Kalman is chairman of the Company's nominating committee and a
member of the audit committee.
John H. Kellogg, 71, has served as a director since January 1983. Mr.
Kellogg retired from the practice of law and resigned from Kellogg & George,
P.C., on September 1, 1994, where he had been a partner since 1977. Mr.
Kellogg specializes in small business development, finance and acquisitions.
He has been a founder in the following technology-based manufacturing
companies: Thermal Circuits, Inc., Kittiwake Corp., Tadco, Inc. and Astron,
Inc., all based in New England. Additionally, he is a partner in small
partnerships which own and operate industrial real estate; these include: Tor
Co., Gimlet Realty, and Jefferson Realty. Mr. Kellogg received his B.S. degree
in Mechanical Engineering at the Massachusetts Institute of Technology and a
J.D. degree from Harvard Law School. Mr. Kellogg is chairman of the Company's
compensation committee.
John M. Nelson, 63, has served as a director since January 1987. Mr.
Nelson was elected, in May of 1991, Chairman and Chief Executive Officer of
Wyman-Gordon Company, a manufacturer of technically advanced forgings,
investment castings and composites principally for aircraft structures and jet
engines. From January 1988 until September 1990, Mr. Nelson was Chairman and
Chief Executive Officer of Norton Company, a manufacturer of abrasives,
ceramics, plastics, and chemical process products. From 1979 to September
1990, he was a director of Norton. Prior to becoming Chief Executive Officer
of Norton, Mr. Nelson was President and Chief Operating Officer of Norton from
1986 to 1988, and, for more than five years, was President and Chief Executive
Officer of its subsidiary, Norton Christensen, Inc. Mr. Nelson holds a B.A.
degree from Wesleyan University and a M.B.A. from Harvard Business School. He
is a director of Brown & Sharpe Manufacturing Company, Stocker & Yale, Inc.,
Commerce Holdings, Inc., and The TJX Companies, Inc. Mr. Nelson serves on the
Company's compensation and nominating committees.
W. Samuel Nisbet, 59, has served as a director since September 1990.
From 1965 to December 31, 1994, when he retired, Mr. Nisbet's principal
occupation or employment was with SIGNET Bank/Maryland where he was a Vice
President. Mr. Nisbet serves on the Company's audit committee.
Thomas T. Taylor, 52, has served as a director since September 1990.
Mr. Taylor has been President and a director of Chesapeake Securities Research
Corporation (formerly known as Offutt & Taylor, Inc.), an investment banking
firm located in Towson, Maryland, since 1983. From 1983 to November 1984, Mr.
Taylor was Co-Director of the Chesapeake Research Division of Baker, Watts &
Co. and from 1979 to 1983, Mr. Taylor served as Co-Director of the Mid-Atlantic
Research Division of Legg Mason Wood Walker, Inc. Mr. Taylor holds a B.A.
degree from the University of Virginia and a M.B.A. degree from Loyola College,
Baltimore, Maryland. Mr. Taylor became a Chartered Financial Analyst in 1976.
Mr. Taylor serves on the Company's compensation and audit committees.
Douglas Yee, 39, has served as a Director since September 1990. He has
been an Associate Professor of Medicine, Division of Medical Oncology, at the
University of Texas Health Science Center at San Antonio since September 1993.
He was an Assistant Professor from July 1989 to August 1993. From August 1988
to June 1989, he was an Instructor in the Department of Medicine at the
Georgetown University Medical Center. Dr. Yee received a B.S. degree from the
University of Michigan and an M.D. degree from the University of Chicago. Dr.
Yee serves on the Company's Nominating Committee.
There are no family relationships between any of the above individuals
or between any of the above individuals and any director of the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "Act")
requires the Company's directors and executive officers and persons who own
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of common stock of the Company.
These persons are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports furnished to the Company and written
representations that no other reports are required during the fiscal year ended
December 31, 1994, one report covering a transaction was filed late by Mr.
Leonard and one report covering a transaction was filed late by James C. Bass.
Item 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information as to the annual and
long-term compensation for services to the Company for the Company's last three
completed fiscal years of the Company's Chief Executive Officers and one other
most highly compensated executive officer of the Company as of December 31,
1994 (collectively the "Named Executive Officers").
Long-Term
Annual Compensation Compensation
AWARDS
Other Restric- All
Annual ted Other
Name and Principal Compen- Stock Options Compen-
Position Year Salary Bonus sation Award(s) /SARs(1) sation(2)
Patrick J. Leonard 1994 $140,574 $0 --- 0 0 $1,748
President/CEO and 1993 302,961 0 --- 0 0 4,497
Director (3) 1992 274,845 0 --- 0 0 3,888
Jeffrey T. Beaver 1994 97,231 0 0 0 80,000 ---
President/CEO, 1993 0 --- 0 5,000
Treasurer 1992 0 --- 0 5,000
and Director (4)
Gary E. Long 1994 125,000 0 --- 0 15,000 1,875
Vice President - 1993 125,029 19,500 --- 0 0 1,872
Operations 1992 118,817 0 --- 0 0 1,916
(1) Although the Company's 1989 Stock Award and Option Plan permits
grants of stock appreciation rights, no awards of SARs have been made.
(2) The amounts shown for each of the Named Executive Officers represent
contributions by the Company to the Company's Savings Plan for the
benefit of the respective Named Executive Officer.
(3) Dr. Leonard was terminated on May 9, 1994.
(4) Mr. Beaver was appointed President and Chief Executive Officer on
May 9, 1994.
OPTION/SAR GRANTS - LONG TERM INCENTIVE PLAN AWARDS
Individual Grants
Name Number of Percent Exercise Expira- Potential Alternative
(a) Securities of Total of Base tion Date Realizable Value (f) and (g)
underlying Options/ Price (e) at Assumed Grant Date
option/SARs SARs ($/Sh.) Annual Rates Value
Granted Granted to (d) of Stock Price
(#) Employees Appreciation
(b) in Fiscal for Option Term
Year
(c) 5% ($) 10% ($) Grant Date
(f) (g) Present
Value $
(h)
Patrick J. --- --- --- --- --- -----
Leonard
Jeffrey 5,000 --- 2.44 1/4/2004 7,650 19,443 --
T. Beaver 75,000 --- 1.1687 6/2/2005 55,124 139,695 --
Gary E. 15,000 --- 3.3125 2/1/2004 31,248 79,189 --
Long
Fiscal Year End Option/SAR Value Table
The following chart shows the number and value of unexercised options
held by each of the Named Executive Officers at the end of the Company's
last fiscal year. The value shown for each option is equal to the
difference between the exercise price of the option and the fair market
value of the underlying stock at fiscal year end. The Company has never
awarded any stock appreciation rights to any of its employees, and thus
none are outstanding. None of the Named Executive Officers exercised
any options during the Company's last fiscal year.
Number of Value of
Unexercised Unexercised
Options/SARs at In-the-Money
Name Fiscal Year-End Options/SARs at
Fiscal Year-End
Exercisable/ Exercisable/
Unexercisable Unexercisable
Patrick J. Leonard 0 $0.00
Jeffrey T. Beaver 126,750/8,250 $0.00
Gary E. Long 80,626/105,000 $0.00
The Directors' fees, which includes retainer fees that are paid quarterly
and fees for attendance at the regular meetings of the Board of Directors, for
fiscal year end December 31, 1994 were as follows: John S. Scott - $93,500.00
(deferred payment of $66,000.00, paid $27,500.00); Jeffrey T. Beaver -
23,625.86 (deferred payment <PAGE>
of $23,625.86); C. Arnold Kalman - $24,643.14
(deferred payment of $24,634.14); John H. Kellogg - $19,500.00 (deferred
payment of $19,500.00); John M. Nelson - $20,000.00 (deferred payment of
$20,000.00); W. Samuel Nisbet - $19,000.00 (deferred payment of $19,000.00);
Thomas T. Taylor - $24,634.14 (deferred payment of $24,634.14); and Douglas
Yee - $15,000.00 (deferred payment of $15,000.00). The directors have agreed
to defer payment of the director fees until the earlier to occur of the date
on which the Company emerges from bankruptcy or January 1996.
The Company entered into employment contracts with several of its officers
as described below.
Ms. Arntsen entered into an employment agreement with the Company on July
20, 1993 which was to terminate on July 20, 1995. Ms. Arntsen resigned as of
January 1, 1995.
Dr. Leonard entered into an employment agreement with the Company on July 1,
1993 which was terminated on May 9, 1994.
Mr. Long entered into an employment agreement with the Company on April 23,
1991, with a salary of $114,500.00, subject to review on an annual basis.
Board Compensation Committee Report on Executive Compensation
Traditionally, the Company's compensation for its executive officers,
including its chief executive officer, has consisted of three key elements:
base salary, discretionary annual bonus, and periodic grants of stock
options or other long-term compensation. The Company's compensation
committee (the "Committee") has historically made judgements as to the
components of compensation based upon its review of the Company's results
and each individual's performance. The Committee's goal has been to provide
an appropriate balance between base salary and incentive compensation awarded
upon achievement of long-term goals.
As has been pointed out elsewhere in this Annual Report, 1994 was a
difficult and unusual year for the Company. In May of 1994, the Company's
chief executive officer was terminated, and its chief financial officer and
its general counsel resigned. On July 7, 1994 the Company filed for protection
under Chapter 11 of the United States Bankruptcy Code. Thus the Committee was
not working in a normal operating environment and in many respects was unable
to play its traditional role of establishing consistent long-term performance-
based compensation goals.
Dr. Leonard's base salary of $303,000 was determined under the terms of
an employment contract effective May 18, 1993. The Committee had limited
discretion with respect to base salaries of other executive officers, all of
whom are under employment contracts; but with respect to those executive
officers for whom the Committee had the option to increase base pay the
Committee elected not to grant any increases. The Committee also determined
not to pay any cash bonuses under the Company's 1993 bonus plan except a
bonus to one former executive officer which was required by contract and two
bonuses of $5,000 each payable in restricted stock to former executive
officers. The shares of restricted stock have been returned to the Company
pursuant to the terms of the restriction.
In March of 1994, the Compensation Committee established certain
parameters for a management bonus plan for 1994 under which Dr. Leonard, the
Company's former chief executive officer and the Company's other executive
officers were eligible for discretionary bonuses. The plan provided for
discretionary bonus awards as a percentage of salary based upon the attainment
of certain specified goals both individual and corporate, including the
achievement of corporate financial performance targets. The CEO was eligible
for a bonus of up to 50% of his base salary with the other executive officers
being eligible for bonuses up to 35% of their respective base salaries. No
awards were granted under this bonus plan, and the bonus plan was not
implemented due to the occurrence of subsequent events which have been
previously described.
The Committee felt it appropriate to award long-term incentives to
executive officers and the CEO with the goal of tying the executives
compensation to an increase in long-term shareholder value. The Committee
granted two of its executive officers options to purchase 35,000 shares in
the aggregate vesting over a three year period. The committee granted Dr.
Leonard an option to purchase 100,000 shares early in 1994 which option
was exercisable only upon the achievement of certain performance standards
which were not met. The option has expired due to Dr. Leonard's leaving the
employ of the Company.
With the departure of Dr. Leonard, Mr. Beaver was elected as CEO of the
Company. The Committee, taking into account the uncertainty of the Company's
position, set Mr. Beaver's base salary at $160,000 and granted him an option
to purchase 75,000 shares of the Company's common stock at a price equal to
110% of the fair market value on the day of the grant. It is not expected
that any of the stock options granted prior to the Company's bankruptcy will
have any material value in a reorganized Company.
As part of a cost-cutting plan initiated after filing of the bankruptcy
petition, members of senior management, including the Company's executive
officers and Mr. Beaver, took salary reductions of from 5% to 20% of their
base salary. In order to provide incentive to employees including senior
management, the Committee recommended submission to the bankruptcy court
for approval of an incentive plan payable in stock in the Company as
reorganized. The incentive plan, which has been approved by the bankruptcy
court, gives each participant stock in the reorganized Company on the
effective date of the Company's reorganization plan. The amount of stock
received is calculated using varying percentages of base salary based on
performance.
Performance Graph
The following graph shows a comparison over a five-year period ending at
the end of the Company's last fiscal year of the cumulative total return to
the Company's shareholders with the cumulative total return of the Standard
& Poor's 500 Composite Index and the NASDAQ Pharmaceutical Index and assumes
an investment of $100 on December 31, 1989.
NASDAQ
S&P 500 PHARMACEUTICAL
JANUARY 31, CAMBRIDGE BIOTECH COMPOSITE INDEX INDEX
1989 100.00 100.00 100.00
1990 40.00 96.90 119.95
1991 156.00 126.42 318.78
1992 114.00 136.05 265.53
1993 40.00 149.76 236.63
1994 4.00 151.74 178.40
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as to the Company's
common stock owned by management of the Company as of March 1, 1995 based upon
information supplied by the Company's directors and executive officers. All
directors and executive officers have sole voting and sole investment power in
shares reported as beneficially owned by them except as may be noted. The
State of Wisconsin Investment Board owns more than five percent (5%) of the
outstanding shares of the Company's common stock.
Name and Address of Number Percent
Beneficial Owner of Shares (1) of Class
John S. Scott 161,150 *
1191 Smith Ridge Road
New Canaan, CT 06840
Patrick J. Leonard (2) 261,119 *
365 Plantation Street
Worcester, MA 01605
Jeffrey T. Beaver (3) 129,583 *
225 Warren Street
Brooklyn, NY 11201
C. Arnold Kalman 45,950 *
9 Conant Place
Darien, CT 06820
John H. Kellogg 65,250 *
27 Ledge Rock Road
Concord, MA 01742
John M. Nelson 59,750 *
7 Massachusetts Ave.
Worcester, MA 01609
W. Samuel Nisbet 33,865 *
3025 DuBarry Lane
Brookville, MD 20833
Thomas T. Taylor 31,750 *
3015 D. Oak Green Circle
Ellicott City, MD 21043
Douglas Yee (4) 173,700 *
314 Branch Oak Way
San Antonio, TX 78230
Gary E. Long 85,418 *
26 Wayside Road
Westborough, MA 01581
Karen M. Meenan 1,750 *
10 Lantern Lane
Amherst, MA 01002
Keith D. Jones 17,625 *
365 Plantation Street
Worcester, MA 01605
Susan R. Arntsen 70,981 *
4 Polar Bear Road
Westford, MA 01886
Directors and Executive 1,162,891
Officers as a Group
State of Wisconsin 2,505,000 9.45%
Investment Board
____________
* Less than 1%
(1) The shares reported as owned by the directors and executive officers are
shares that are available for purchase by them under stock options, as
follows: Mr. Scott - 149,150 shares, Mr. Beaver - 126,750 shares, Mr.
Kalman - 40,950 shares, Mr. Kellogg - 51,750 shares, Mr. Nelson - 51,750
shares, Mr. Nisbet - 31,750 shares, Mr. Taylor - 26,750 shares, Dr. Yee -
31,750 shares, Mr. Long - 80,626 shares, Ms. Meenan - 1,750 shares, Mr.
Jones - 17,625 shares and Ms. Arntsen - 64,076 shares.
(2) Includes 2,200 shares held jointly with his wife and 625 shares held by
his wife alone.
(3) Includes 1,000 shares held as custodian for one daughter and 1,000 shares
held as custodian for another daughter. Mr. Beaver disclaims beneficial
ownership of the shares held as custodian for his daughters.
(4) Includes 138,475 shares held by him alone and 3,475 shares held by his
wife alone.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE BIOTECH CORPORATION
April 28, 1995 By: /s/ Alison Taunton-Rigby
President and Chief Executive Officer
