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 ' 240.14a-12
CARRINGTON LABORATORIES, 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):
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[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
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filing by registration statement number, or the Form or
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1) Amount Previously Paid: ________________________________________
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4) Date Filed: _____________________________________________________
<PAGE>
CARRINGTON LABORATORIES, INC.
2001 Walnut Hill Lane
Irving, Texas 75038
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On May 18, 2000
NOTICE is hereby given that the annual meeting of shareholders of
CARRINGTON LABORATORIES, INC. (the "Company") will be held on May 18, 2000,
at 8:30 a.m., local time, at the Las Colinas Country Club, 4900 North
O'Connor Boulevard, Irving, Texas 75062, for the following purposes:
(1) To elect three persons to serve as directors of the Company for a
term expiring at the annual meeting of shareholders in 2003;
(2) To approve the appointment of Ernst & Young LLP as independent public
accountants for the Company for the fiscal year ending December 31,
2000; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 7, 2000
are entitled to notice of and to vote at the meeting or any adjournment
thereof. A record of the Company's activities during 1999 and financial
statements for the fiscal year ended December 31, 1999 are contained in the
accompanying 1999 Annual Report.
You are urged, whether or not you plan to attend the meeting in person,
to mark, sign and date the enclosed proxy and return it promptly in the
accompanying envelope. If you do attend the meeting in person, you may
withdraw your proxy and vote in person. The prompt return of proxies will
assure the representation of sufficient shares to take the actions described
above and save your Company the expense of further solicitation.
By Order of the Board of Directors
George DeMott
Chairman of the Board
Irving, Texas
April 17, 2000
<PAGE>
CARRINGTON LABORATORIES, INC.
2001 Walnut Hill Lane
Irving, Texas 75038
(972) 518-1300
PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held On May 18, 2000
This Proxy Statement is furnished to the shareholders of Carrington
Laboratories, Inc., a Texas corporation (the "Company"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use
at the annual meeting of shareholders to be held on May 18, 2000. Proxies
in the form enclosed will be voted at the meeting if properly executed,
returned to the Company prior to the meeting and not revoked. A proxy may
be revoked at any time before it is voted by giving written notice or a duly
executed proxy bearing a later date to the President of the Company, or by
voting in person.
The approximate date on which this Proxy Statement and the accompanying
proxy are first being sent to shareholders is April 17, 2000.
OUTSTANDING CAPITAL STOCK
The record date for the determination of shareholders entitled to notice
of and to vote at the annual meeting is April 7, 2000 (the "Record Date").
At the close of business on the Record Date, the Company had 9,577,587
shares of Common Stock, $.01 par value ("Common Stock"), issued and
outstanding and entitled to vote at the meeting.
ACTION TO BE TAKEN AT THE MEETING
Shares represented by a validly executed proxy in the accompanying form,
unless the shareholder otherwise specifies in the proxy, will be voted (i)
for the election of the persons named as nominees under the caption
"Election of Directors" as directors of the Company, (ii) for the approval
of the appointment by the Company's Board of Directors of Ernst & Young LLP
as the Company's independent public accountants for the fiscal year ending
December 31, 2000, and (iii) at the discretion of the proxy holders, on any
other matter that may properly come before the meeting or any adjournment
thereof.
Where shareholders have appropriately specified how their proxies are to
be voted, they will be voted accordingly. If any other matter or business
is brought before the meeting, the proxy holders may vote the proxies at
their discretion.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding as of the Record Date is necessary to
constitute a quorum at the annual meeting. In deciding all questions, a
holder of Common Stock is entitled to one vote, in person or by proxy, for
each share held in such holder's name on the Record Date.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 31, 2000,
unless otherwise indicated, with respect to the shareholders known by the
Company to own beneficially more than five percent of the outstanding shares
of Common Stock of the Company, based on the information available to the
Company on such date. Except as otherwise indicated, each shareholder named
in the table has sole voting and investment power with respect to all shares
indicated as being beneficially owned by such shareholder.
Shares of
Common Stock Owned Percent
Beneficial Owner Beneficially of Class
---------------- ------------ --------
Thomas J. Marquez 829,940 (1) 8.6%
c/o Carrington Laboratories, Inc.
2001 Walnut Hill Lane
Irving, Texas 75038
Dimensional Fund Advisors 601,700 (2) 6.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
(1) Includes 39,300 shares held in a trust controlled by Mr. Marquez and
42,600 shares that he has the right to acquire pursuant to options
exercisable within 60 days after March 31, 2000.
(2) Based on a report on Schedule 13G filed by Dimensional Fund Advisors
Inc. ("DFA") with the Securities and Exchange Commission on February 3,
2000. DFA, a registered investment advisor, furnishes investment advice
to four registered investment companies and serves as investment manager
to certain other commingled group trusts and separate accounts.
Collectively, those investment companies, trusts and accounts own
601,700 shares of the Company's Common Stock, but to DFA's knowledge no
one of them owns more than 5% of the class. In its role as investment
adviser or manager, DFA possesses sole voting and/or investment power
with respect to such shares, but it disclaims beneficial ownership.
The Company knows of no arrangements the operation of which may at a
subsequent date result in a change of control of the Company.
REQUIRED AFFIRMATIVE VOTE AND VOTING PROCEDURES
With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee. The three nominees who receive a plurality
of the votes cast by shareholders present or represented by proxy at the
annual meeting, and entitled to vote on the election of directors, will be
elected as directors of the Company. Thus, any abstentions, "broker non-
votes" (shares held by brokers or nominees as to which they have no
discretionary authority to vote on a particular matter and have received no
instructions from the beneficial owners or persons entitled to vote thereon)
or other limited proxies will have no effect on the election of directors.
<PAGE>
The Company's Bylaws provide that the vote required to approve matters
other than the election of directors is the affirmative vote of the holders
of a majority of the shares entitled to vote on, and voted for or against,
the matter at a meeting at which a quorum is present. Abstentions may be
specified on all proposals except the election of directors. Under
applicable law and the Company's Bylaws, abstentions and shares represented
by broker non-votes or other limited proxies for a particular proposal will
be counted as present for purposes of determining the existence of a quorum
at the meeting but will be excluded entirely from the voting tabulation for
that proposal. Therefore, abstentions, broker non-votes and other limited
proxies will have no effect on the outcome of the proposal to approve the
appointment of independent public accountants.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Company's operations will be
governed by the Board of Directors, which is elected by the shareholders.
The Company's Board of Directors is divided into three classes with
staggered three-year terms. All directors of one class hold their positions
until the annual meeting of shareholders at which the terms of the directors
in such class expire and their respective successors are elected and
qualified, or until their earlier death, resignation, disqualification or
removal from office. The Company's Bylaws provide that the number of
directors shall not be less than five nor greater than nine, and the exact
number of directors that shall constitute the Board of Directors shall be
fixed from time to time by resolution of the Board. The Board of Directors
has determined that the number of directors will be seven.
At the meeting, three directors will be elected. One Board position
will remain vacant after the meeting. The Board has not named anyone to
succeed James T. O'Brien, who resigned as a director at the time of the 1999
annual meeting of shareholders, but the Board is still searching for a
qualified candidate to fill that position. The Board has the power to fill
the vacant position without any requirement for approval or ratification by
the shareholders. However, if the Board fills the vacant position, the
Board expects that such action will be presented to the shareholders for
ratification at a subsequent annual meeting.
All duly submitted and unrevoked proxies will be voted for the nominees
selected by the Board of Directors, except where authorization to so vote
is withheld. If any nominee should become unavailable for election for any
presently unforeseen reason, the persons designated as proxies will have
full discretion to vote for another person designated by the Board.
The Board of Directors has nominated George DeMott, Robert A. Fildes,
Ph.D., and Carlton E. Turner, Ph.D., D.Sc., for election as directors at the
annual meeting, to serve three-year terms expiring in 2003. Mr. DeMott, Dr.
Fildes and Dr. Turner are currently directors of the Company, with terms
expiring at the 2000 annual meeting, and each has consented to serve as a
director if elected.
The Board of Directors recommends that shareholders vote FOR the
election of George DeMott, Robert A. Fildes, Ph.D. and Carlton E. Turner,
Ph.D., D.Sc. as directors of the Company.
The other three directors of the Company have been elected to terms that
do not expire at the 2000 annual meeting. Thomas J. Marquez and Selvi
Vescovi are currently serving terms expiring in 2001, and R. Dale Bowerman
is currently serving a term expiring in 2002.
<PAGE>
Information about all six directors of the Company, including the
current nominees, is set forth in the following paragraphs.
R. DALE BOWERMAN, 60, has served as a director of the Company since
January 1991. Mr. Bowerman was President and Chief Executive Officer of
Southwest Health Alliances, L.L.C. from May 1994 until his retirement in
October 1997. From 1973 to April 1994, he was Chief Financial Officer of
High Plains Baptist Health Systems, a nonprofit hospital system. Mr.
Bowerman is also a director of Sunrise Technologies, Inc., a publicly traded
company.
GEORGE DEMOTT, 67, has served as a director of the Company since May
1990 and Chairman of the Board since April 1995. He has been an independent
business consultant since 1987. From 1963 to 1987, Mr. DeMott held various
positions with American Home Products Corporation, a worldwide marketer of
pharmaceuticals, over-the-counter drugs and household products, serving as
Group Vice President from 1978 to 1987. From 1964 to 1978, Mr. DeMott was
with the Whitehall Laboratories Division of that corporation, and he served
as President of that division from 1974 until 1978.
ROBERT A. FILDES, Ph.D., 61, has served as a director of the Company
since March 1991 and, on an independent contractor basis, as the Company's
interim Executive Vice President, Research and Development, since October 1,
1997. Since January 1998 he has served as president of SB2 Inc., a
biopharmaceutical company, and from June 1998 to December 1998 he served as
Chief Executive Officer of Atlantic Pharmaceuticals, a biopharmaceutical
company. From February 1993 to August 1997, he was Chairman of the Board
and Chief Executive Officer of Scotgen Biopharmaceuticals, Inc., a
biotechnology company. From August 1990 to January 1993, he was an
independent business consultant in the pharmaceutical industry. Dr. Fildes
was President and Chief Executive Officer of Cetus Corporation, a
biopharmaceutical company, from 1982 to 1990. From 1980 to 1982, he was
President of Biogen, Inc., the United States subsidiary of Biogen, N.V.,
Geneva, Switzerland. Prior to joining Biogen, Dr. Fildes was Vice President
of Operations for the Industrial Division of Bristol-Myers Company. Dr.
Fildes is also a director of the following biopharmaceutical companies: La
Jolla Pharmaceutical Co., a publicly traded company; Cytovax
Biotechnologies, Orbon Corporation and SB2 Inc., each a private company.
THOMAS J. MARQUEZ, 62, has served as a director of the Company since
August 1987. In addition, from August 1987 until May 1990, Mr. Marquez was
Chairman of the Board and Chief Executive Officer of the Company. From 1965
to 1979, Mr. Marquez was an officer of Electronic Data Systems, Inc., a
computer services company, and he served as a director of that corporation
from 1965 to 1984. Since his resignation as an officer of Electronic Data
Systems, he has been engaged primarily in personal investment activities and
a number of public service projects. Mr. Marquez is also a director of
Aquinas Funds, Inc.
<PAGE>
CARLTON E. TURNER, Ph.D., D.Sc., 59, has served as a director of the
Company since May 1989 and as President and Chief Executive Officer of the
Company since April 1995. In addition, from January 1994 to November 1994,
Dr. Turner was Executive Vice President of the Company, and from November
1994 to April 1995, he was Chief Operating Officer of the Company. He was
President and Chief Executive Officer of Princeton Diagnostic Laboratories
of America, Inc., a biomedical and pharmaceutical testing laboratory, from
1987 through May 1993. He also served as a director of that corporation
from 1987 to January 1994. From 1981 through 1987, he was Director of the
Drug Abuse Policy Office of the White House, President Reagan's principal
advisor on drug abuse policy. From 1970 to 1981, Dr. Turner was a research
professor and director of the Research Institute of Pharmaceutical Sciences
at the University of Mississippi School of Pharmacy. Dr. Turner has been
nominated to serve as a director of Tutogen Medical, Inc., a publicly traded
company. The election will be held at the annual meeting of Tutogen
shareholders on April 27, 2000.
SELVI VESCOVI, 69, has served as a director of the Company since May
1989. Mr. Vescovi served as Chairman of the Board from May 1990 to April
1995. In addition, Mr. Vescovi served as interim President and Chief
Executive Officer of the Company from March 1995 to April 1995. He was
employed by The Upjohn Company ("Upjohn"), a manufacturer of human
pharmaceuticals and pharmaceutical chemicals, in various capacities from
1954 until his retirement in 1988 from his positions as Corporate Vice
President of Upjohn, a position he had held since 1977, and President and
General Manager of Upjohn International, Inc., the subsidiary of Upjohn
responsible for international operations. He had held the latter position
since 1985. Following his retirement, Mr. Vescovi served as Adjunct
Professor, International Management, at Western Michigan University from
1988 to 1993 and as a member of the Advisory Board of the College of
Business Administration of the University of South Carolina from 1988 to
1994. Mr. Vescovi is also a director of Centaur Pharmaceutical, Inc., a
private company.
The business and affairs of the Company are managed by the Board of
Directors, which exercises all corporate powers and establishes corporate
policies. The Board has established an Executive Committee which may
exercise all (except in certain cases) the authority and powers of the Board
of Directors in the business and affairs of the Company when the Board of
Directors is not in session. The current members of the Executive Committee
are Selvi Vescovi (Chairman), George DeMott and Carlton E. Turner, Ph.D.,
D.Sc. The Board has established an Audit Committee for the purposes of
reviewing the results and scope of, and the fees for, the annual audit,
reviewing the financial statements and any significant transactions or
events and any changes in accounting principles and practices with the
independent auditors, and reviewing the internal controls and audit
procedures of the Company. The current members of the Audit Committee are
Robert A. Fildes, Ph.D. (Chairman), Selvi Vescovi and R. Dale Bowerman. The
Board does not have a standing nominating committee. The Compensation and
Stock Option Committee serves as a compensation committee and makes
recommendations to the Board with respect to compensation of executive
officers of the Company. The current members of the Compensation and Stock
Option Committee are R. Dale Bowerman (Chairman), George DeMott and Selvi
Vescovi. During fiscal 1999, the Board of Directors held eight meetings,
the Executive Committee held six meetings, the Audit Committee held three
meetings, and the Compensation and Stock Option Committee held one meeting.
All incumbent directors attended at least 75% of the meetings held by the
Board and the committees on which they served during 1999.
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are Carlton E. Turner, Ph.D.,
D.Sc., Kenneth M. Yates, D.V.M., Robert W. Schnitzius and Robert A. Fildes,
Ph.D. Biographical information for Dr. Turner and Dr. Fildes is set forth
under "Election of Directors" above.
Kenneth (Bill) M. Yates, D.V.M., 49, was elected Vice President of
Research and Development in January 1999. Dr. Yates initially served as a
consultant to the Company beginning in 1989 and became a full-time employee
in 1990. He has served in various capacities for the Company in Research
and Development during the last nine years, including Product Development
Coordinator for Wound Care. Since 1992, Dr. Yates has served as an Adjunct
Assistant Professor, Department of Comparative Medicine, University of Texas
Southwestern Medical School.
Robert W. Schnitzius, 43, has been Chief Financial Officer and Treasurer
of the Company since November 1997 and Secretary of the Company since May
1998. From 1996 to 1997, Mr. Schnitzius was the Corporate Controller for
Medeva Americas, Inc., a U.S. subsidiary of Medeva PLC. From 1991 to 1996,
Mr. Schnitzius served with Medeva Pharmaceuticals, also a subsidiary of
Medeva PLC, first as Controller (1991 to 1993) and then as Director of
Finance (1994 to 1996). From 1983 to 1991, Mr. Schnitzius served as
Controller for Shoreline Products, Inc., a boat trailer manufacturer, and
from 1978 to 1983, he served as Treasurer of Texas Testing Laboratories, an
engineering testing laboratory.
All executive officers of the Company are elected annually by the
Board of Directors to serve until their respective successors are chosen and
qualified or until their earlier death, resignation or removal from office.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 2000, the beneficial
ownership of Common Stock of the Company by each director of the Company,
each named executive officer listed in the Summary Compensation Table
included elsewhere in this Proxy Statement and all directors and executive
officers as a group. Except as otherwise indicated, each person named in
the table below has sole voting and investment power with respect to all
shares indicated as being beneficially owned by him.
Common Stock
Beneficially Owned
------------------
Number Percent
Name of Shares of Class
Directors ---------- --------
R. Dale Bowerman 51,000 (1) *
George DeMott 17,500 (2) *
Robert A. Fildes, Ph.D. 25,000 (3) *
Thomas J. Marquez 829,940 (4) 8.6%
Carlton E. Turner, Ph.D., D.Sc. 153,655 (5) 1.6%
Selvi Vescovi 23,500 (6) *
Named Executive Officers (excluding
any director named above) and Group
Robert W. Schnitzius 36,472 (7) *
Kenneth M. Yates, D.V.M. 40,776 (8) *
All current directors and executive
officers as a group (8 persons) 1,177,843 (9) 12.0%
* Less than one percent.
(1) Includes 15,000 shares that Mr. Bowerman has the right to acquire
pursuant to options and warrants exercisable within 60 days after March
31, 2000.
(2) Includes 12,500 shares that Mr. DeMott has the right to acquire pursuant
to options exercisable within 60 days after March 31, 2000.
(3) Includes 15,000 shares that Dr. Fildes has the right to acquire pursuant
to options exercisable within 60 days after March 31, 2000.
(4) Includes 39,300 shares held in a trust controlled by Mr. Marquez and
42,600 shares that he has the right to acquire pursuant to options
exercisable within 60 days after March 31, 2000.
(5) Includes 97,937 shares that Dr. Turner has the right to acquire pursuant
to options exercisable within 60 days after March 31, 2000.
(6) Includes 15,000 shares that Mr. Vescovi has the right to acquire
pursuant to options exercisable within 60 days after March 31, 2000.
(7) Includes 28,333 shares that Mr. Schnitzius has the right to acquire
pursuant to options exercisable within 60 days after March 31, 2000.
(8) Includes 37,798 shares that Dr. Yates has the right to acquire pursuant
to options exercisable within 60 days after March 31, 2000.
(9) Includes 264,168 shares that current directors and executive officers
have the right to acquire pursuant to options exercisable within 60 days
after March 31, 2000.
<PAGE>
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed the accounting firm of
Ernst & Young LLP as the Company's independent public accountants for the
fiscal year ending December 31, 2000. Shareholders will be asked to approve
the appointment of Ernst & Young LLP at the annual meeting. If the
appointment is not approved by the holders of a majority of the shares of
Common Stock present or represented and voted for or against such approval
at the meeting, the Board will reconsider its appointment of independent
public accountants of the Company. Representatives of Ernst & Young LLP are
expected to be present at the annual meeting and will be given an
opportunity to make a statement, if they so desire. They will also be
available to respond to appropriate questions addressed to them.
The Company's Board of Directors recommends that shareholders vote FOR
the approval of the appointment of Ernst & Young LLP as the Company's
independent public accountants for fiscal 2000.
EXECUTIVE COMPENSATION
The report of the Compensation and Stock Option Committee of the Board
of Directors set forth below and the information under the heading
"Performance Graph" shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission (the "SEC") or subject
to the SEC's proxy rules, other than those rules requiring disclosure
herein, or to the liability of Section 18 of the Securities Exchange Act of
1934 (the "Exchange Act"), and such information shall not be deemed to be
incorporated by reference into any filing made by the Company under the
Securities Act of 1933 or the Exchange Act.
Compensation Committee Interlocks and Insider Participation
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee"). During 1999, the Committee was composed of James T. O'Brien,
Chairman, George DeMott and Selvi Vescovi, until May 20, 1999, when Mr.
O'Brien resigned and was succeeded as Chairman of the Committee by R. Dale
Bowerman. All of the persons who served on the Committee during 1999 were
and, with the exception of Mr. O'Brien, still are outside directors of the
Company. Mr. Vescovi served as interim President and Chief Executive
Officer of the Company in March and April 1995.
Report of the Compensation Committee
The following is a report submitted by the current members of the
Committee, addressing the Company's compensation policy as it related to the
named executive officers, including the President and Chief Executive
Officer (the "CEO"), for fiscal 1999.
Compensation Philosophy
The Company's executive compensation program is designed to align
executive compensation with financial performance, business strategies and
Company values and objectives. To achieve these objectives, the Committee
has developed and implemented an executive compensation program which
provides executives with compensation opportunities that are competitive
with companies of comparable size in the pharmaceutical industry.
<PAGE>
In applying this philosophy, the Committee has established a program to
accomplish the following objectives:
* attract and retain executives of outstanding abilities who are
critical to the long-term success of the Company;
* reward executives for achievement of internal Company goals as well
as for Company performance relative to industry performance levels;
and
* reward executives for long-term strategic management and the
enhancement of shareholder value by providing equity ownership in the
Company.
Through these objectives, the Company integrates its executive
compensation program with its annual and long-term strategic planning.
Against the foregoing background, the Company's executive compensation
policies integrate annual base salary compensation with a bonus award system
which is based upon both corporate and individual performance levels.
Fiscal 1999 Compensation
For fiscal 1999, the Company's executive compensation program consisted
of (i) base salary, adjusted from the prior year, (ii) bonus payable in cash
or a combination of cash and stock, and (iii) stock options. With respect
to base salary, the Company considers published executive compensation data
of comparable companies in the industry and utilizes surveys to establish
base salaries that are within the range of those paid to persons holding
comparably responsible positions at such companies. In addition, the
Committee considers evaluations by the CEO of the individual performance of
each executive, other than the CEO, in setting such executive's salary for
the year. The performance of the CEO is evaluated by the Executive
Committee of the Board of Directors in collaboration with the Committee.
The Committee determined that current salary levels for key Company
executives are competitive within the industry and basically rank in the
average range.
<PAGE>
Bonuses may be granted to executives based upon criteria established by
the Company's 1995 Management Compensation Plan (the "Compensation Plan")
adopted by the Company's Board of Directors and approved by its shareholders
in 1995. Under the Compensation Plan, executives of the Company are
eligible to receive incentive compensation in the form of annual bonuses
payable 50% in cash and 50% in Common Stock of the Company. An executive's
bonus under the Compensation Plan consists of a target bonus multiplied by a
performance component. The target bonus is a specified percentage of the
executive's base salary, with the percentage being dependent on the
executive's position grade. The maximum target bonus for the highest
position grade is currently 35% of the executive's base salary. The
performance component is a percentage rate measuring results achieved in
comparison to the Company's Annual Operating Budget. Performance is judged
on the basis of three scenarios: (i) sales at Annual Operating Budget; (ii)
profit at Annual Operating Budget; and (iii) achievement of remaining bonus
criteria and individual goals as established by the Committee. These goals
are designed to achieve the Company's short-term and long-term objectives.
Following determination by the Committee of the amounts of bonus payable, if
any, to executives, 50% of the bonus is paid in cash and 50% is paid in
shares of the Company's Common Stock. The number of shares is determined by
dividing 50% of the total bonus by the fair market value of the Common Stock
on the date of certification of payment of the bonus by the Committee.
No incentive bonuses were paid to executive officers in 1999 based upon
the Compensation Plan criteria set forth above. Pursuant to authority
delegated to the Committee by the Board of Directors to grant cash bonuses
on a discretionary basis outside of the Compensation Plan, the Committee
authorized bonuses of $7,700 to be paid to Robert W. Schnitzius and $7,100
to Dr. Kenneth M. Yates for 1999 based on the performance of the operations
under their responsibility, as well as the bonus to Dr. Carlton E. Turner
described below.
Stock Option Grants
The Committee has discretion to grant stock options to executive
officers under the Company's 1995 Stock Option Plan. The Committee grants
stock options with the goal of providing compensation and incentive to work
toward the long-term success of the Company. In determining the time and
date of grant and the number of shares subject thereto, the Committee may
take into account the nature of the services rendered, the executive's
potential contributions to the success of the Company's business, and such
other facts as the Committee in its discretion deems appropriate. Each of
the 1999 option awards to executive officers of the Company was made in
accordance with the Company's 1995 Stock Option Plan.
CEO Compensation
Carlton E. Turner, Ph.D., D.Sc., was promoted to President and Chief
Executive Officer of the Company as of April 26, 1995. Dr. Turner's 1999
base pay was determined by the Committee on the basis of its overall
assessment of Dr. Turner's responsibilities, his past performance with the
Company, and competitive market data on salary levels for pharmaceutical
companies of similar size.
<PAGE>
In December 1999, the Committee granted Dr. Turner an incentive stock
option to purchase 30,000 shares of Common Stock pursuant to the Company's
1995 Stock Option Plan. This option becomes exercisable with respect to
one-third of the underlying shares in each year in the three-year period
beginning one year after the date of grant. This award was made based on
the Committee's evaluation of Dr. Turner's overall performance. Dr. Turner
was paid a bonus of $21,300 for 1999 based on 19% growth in revenues to a
record level and profits earned before clinical expenses and a one time
reserve.
Summary
The Committee believes that linking executive compensation to corporate
performance results in a better alignment of compensation with corporate
goals and shareholder interests. As performance goals are met or exceeded,
resulting in increased value to shareholders, executives are awarded
commensurately. The Committee believes that compensation levels during
fiscal 1999 adequately reflected the Company's compensation goals and
policies.
Dated: March 30, 2000
By the Members of the Committee:
/s/
--------------------------
R. Dale Bowerman, Chairman
George DeMott
Selvi Vescovi
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<PAGE>
EXECUTIVE COMPENSATION TABLES
The following table sets forth certain summary information regarding
compensation awarded to, earned by or paid to the Chief Executive Officer of
the Company and each other executive officer of the Company whose combined
salary and bonus for the fiscal year ended December 31, 1999 exceeded
$100,000 (collectively, the "named executive officers") for the years
indicated.
<TABLE>
Table 1
Summary Compensation Table
--------------------------
Long-Term
Compensation
------------
Annual Compensation Awards
--------------------------------------------- ------------
Other Securities
Annual Underlying All Other
Name and Fiscal Compen- Options (No. Compen-
Principal Position Year Salary Bonus (1) sation of Shares) sation
------------------ ---- ------- ------ ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Carlton E. Turner, Ph.D., 1999 $258,770 $21,300 - 30,000 -
D.Sc., President and Chief 1998 $225,000 - - 138,125 (3) -
Executive Officer (2) 1997 $225,000 $10,000 - 30,000 -
Robert W. Schnitzius, 1999 $128,100 $ 7,700 - 10,000 -
Chief Financial Officer (4) 1998 $120,000 - - 30,000 (3) -
1997 $ 11,538 - - 20,000 -
Kenneth M. Yates, D.V.M., 1999 $123,900 $ 7,100 - 10,000 -
Vice President, 1998 $108,700 $ 9,800 - 44,930 (3) -
Research & Development(5) 1997 $ 98,491 - - 33,000 -
(1) Each bonus for 1999, 1998 and 1997 was paid in cash.
(2) Dr. Turner was promoted to President and Chief Executive Officer of the
Company in April 1995. Dr. Turner was first elected as an executive
officer of the Company in January 1994.
(3) Represents options granted in exchange for the surrender of previously
granted options covering an equal number of shares. Each new option has
an exercise price of $4.8125 per share.
(4) Mr. Schnitzius was first elected as an executive officer of the Company
on November 17, 1997.
(5) Dr. Yates was first elected as an executive officer of the Company on
January 14, 1999.
</TABLE>
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<PAGE>
The following table sets forth certain information relating to options
granted under the Company's 1995 Stock Option Plan to the named executive
officers in fiscal year 1999.
<TABLE>
Table 2
Options Granted During Year Ended December 31, 1999
---------------------------------------------------
Potential
Realizable Value at
Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term (1)
--------------------------------------------------- -------------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to Price
Granted Employees in Per Expiration
Name (No. of Shares) Fiscal Year Share Date 5% 10%
---- ------------- ----------- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Carlton E. Turner, 30,000 (2) 8.7% $2.0625 12/16/09 $38,913 $98,613
Ph.D., D.Sc.
Robert W. Schnitzius 10,000 (2) 2.9% $2.0625 12/16/09 $12,971 $32,871
Kenneth M. Yates, 10,000 (2) 2.9% $2.0625 12/16/09 $12,971 $32,871
D.V.M.
(1) The assumed five percent and ten percent rates of stock price
appreciation are specified by the SEC's proxy rules and do not reflect
expected actual appreciation. The amounts shown represent the assumed
values of the stock options (less the exercise prices) at the end of the
ten-year periods beginning on the dates of grant and ending on the
option expiration dates.
(2) Incentive stock option with a term of 10 years and an exercise price
equal to the fair market value of the Company's Common Stock on the date
of grant. Option becomes exercisable with respect to one-third of the
shares covered thereby in each year in the three-year period beginning
one year after the date of grant.
</TABLE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
<PAGE>
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock of the Company during the year
ended December 31, 1999, and outstanding options held at such date, by the
named executive officers. For purposes of this table, the "value" of an
outstanding option is the difference between the market price at December
31, 1999 of the shares of Common Stock underlying the option and the
aggregate exercise price of such option. The unexercisable portions of such
options have been valued as if such portions were exercisable in full on
December 31, 1999, in accordance with SEC rules.
<TABLE>
Table 3
Aggregated Option Exercises in Fiscal Year
Ended December 31, 1999 and Fiscal Year-End Option Values
---------------------------------------------------------
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
on Options at 12/31/99 In-the-Money
Exercise (No. of Shares) Options at 12/31/99
(No. of Value -------------------------- -------------------------
Name Shares) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carlton E. Turner, - - 63,406 153,594 - -
Ph.D., D.Sc.
Robert W. Schnitzius - - 20,833 39,167 - -
Kenneth M. Yates, - - 25,565 51,365 - -
D.V.M.
</TABLE>
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth for the years indicated the cumulative
total shareholder return for the Company's Common Stock, the Nasdaq Stock
Market - U.S. Index, a Company-constructed New Peer Group(2), and a Company-
constructed Old Peer Group(3). The information reflected in the graph was
provided to the Company by Research Holdings, Ltd. of San Francisco,
California.
The Company believes that the New Peer Group more accurately reflects
the Company's peers and provides a better basis for comparison than the Old
Peer Group. The New Peer Group contains companies that are more similar to
the Company in size, based on revenues, scope and types of business
(biopharmaceutical, nutraceutical and wound care) than the companies in the
Old Peer Group, a majority of which are very large, multinational
pharmaceutical companies. Performance data for the Old Peer Group has been
provided for comparative purposes but is not expected to be included in
subsequent years' proxy statements.
[ PERFORMANCE GRAPH APPEARS HERE ]
<PAGE>
<TABLE>
Cumulative Total Return (1)
---------------------------------------------
11/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
<S> <C> <> <C> <C> <C> <C>
Carrington Laboratories, Inc. 100 359 90 50 25 23
New Peer Group(2) 100 137 133 119 72 119
Old Peer Group (3) 100 158 195 302 448 390
Nasdaq Stock Market - U.S. 100 142 174 214 301 544
(1) Total return assuming reinvestment of dividends. Assumes $100 invested
on November 30, 1994 in the Company's Common Stock, The Nasdaq Stock
Market - U.S. Index, a new Company-constructed peer group (the New Peer
Group), and a Company-constructed peer group used in prior years (the
Old Peer Group). During 1995, the Company changed its fiscal year end
from November 30 to December 31. Thus, the total return for fiscal year
1995 includes the thirteen-month period from December 1, 1994 through
December 31, 1995.
(2) The New Peer Group comprises the following companies: Anesta Corp.,
Atrix Labs Inc., Axys Pharmaceuticals Inc., Cell Therapeutics Inc.,
Cellegy Pharmaceuticals Inc., Collagenex Pharmaceuticals Inc., Columbia
Labs Inc., Cubist Pharmaceuticals Inc., Depomed Inc., Draxis Health
Inc., Duramed Pharmaceuticals Inc., Dusa Pharmaceuticals Inc., Immulogic
Pharmaceutical Corp., Immunogen Inc., Insite Vision Inc., Kos
Pharmaceuticals Inc., Matrix Pharmaceutical Inc., Microcide
Pharmaceuticals Inc., Nastech Pharmaceutical Inc., Natures Sunshine
Products Inc., Neotherapeutics Inc., Noven Pharmaceuticals Inc., Onyx
Pharmaceuticals Inc., Pharmaceutical Res Inc., Quigley Corp., Regeneron
Pharmaceuticals, Sciclone Pharmaceuticals Inc., Sheffield
Pharmaceuticals Inc., Titan Pharmaceuticals Inc., Trega Biosciences
Inc., Viropharma Inc. and Weider Nutrition International, Inc.
(3) The Old Peer Group comprises the following companies: Abbott
Laboratories, Allergan, Inc., Allou Health & Beauty Care, Inc., Alpharma
Inc., Alza Corporation, American Home Products Corp., Barr Laboratories
Inc., Bergen Brunswig Corporation, Bristol-Myers Squibb Company,
Carrington Laboratories, Inc., Carter-Wallace, Inc., Columbia
Laboratories Inc., Elan Corporation, PLC, Escagenetics Corporation,
Forest Laboratories, Inc., Genentech, Inc., Glaxo Wellcome PLC, ICN
Pharmaceuticals, Inc., Ivax Corporation, Johnson & Johnson, KV
Pharmaceutical Company, Eli Lilly and Company, McKesson Corporation,
Medco Research Inc., Medeva PLC, Merck & Co. Inc., Moore Medical Corp.,
Mylan Laboratories Inc., Natural Alternatives International, Novo
Nordisk A/S, Pfizer Inc., Pharmaceutical Resources Incorporated, Polydex
Pharmaceuticals Ltd., Schering-Plough Corporation, United Guardian Inc.
and Warner-Lambert Company.
</TABLE>
<PAGE>
Compensation of Directors
The Company pays each outside director a quarterly retainer of $1,500
and $1,500 for each day or portion thereof spent attending Board meetings.
Outside directors who are members of the Executive Committee receive $1,500
for each Executive Committee meeting that they attend. Outside directors
who are members of the Compensation and Stock Option or Audit Committee each
receive $1,000 for each committee meeting that they attend, unless the
meeting is held on the same day as a Board meeting, in which case the amount
paid is $500. The Company also reimburses each outside director who does
not live in the Dallas, Texas area for travel expenses incurred in attending
Board and committee meetings.
Pursuant to the Company's 1995 Stock Option Plan, as amended,
nonqualified options to purchase shares of the Company's Common Stock may be
granted to outside directors from time to time. Each option granted to an
outside director has a term of four years, is exercisable in whole or in
part at any time during its entire term and remains effective during its
entire term, regardless of whether the optionee continues to serve as a
director. The purchase price per share of Common Stock covered by each such
option is fixed by the Board of Directors or the Compensation and Stock
Option Committee and must be equal to or greater than the fair market value
per share of Common Stock on the date of grant. In 1999, each of the five
outside directors received an option to purchase 2,500 shares of Common
Stock at an exercise price of $2.94 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
For the fiscal year ended December 31, 1999, Dr. Carlton E. Turner filed
one late report on Form 4 relating to one transaction that occurred during
December 1999; Robert W. Schnitzius filed a late report on Form 5 relating
to one transaction that occurred during December 1999; and Dr. Kenneth M.
Yates filed a late report on Form 5 relating to one transaction that
occurred during December 1999. In making this disclosure, the Company has
relied solely on written representations of its directors and executive
officers and copies of the reports filed by them with the SEC.
SHAREHOLDER PROPOSALS
The 2001 annual meeting of the shareholders of the Company is
tentatively scheduled to be held on May 17, 2001. Shareholder proposals
intended to be included in the Company's proxy statement for the 2001 annual
meeting must be received by the Company no later than December 18, 2000, in
accordance with Rule 14a-8 under the Exchange Act.
With respect to shareholder proposals which are not intended to be
included in the Company's proxy statement, the Bylaws of the Company provide
that notice of any such shareholder proposal nominating persons for election
to the Board of Directors of the Company must be received at the Company's
principal executive office not later than 90 days prior to the annual
meeting; and all other shareholder proposals must be received not later than
60 days in advance of the annual meeting if the meeting is to be held within
30 days preceding the anniversary of the previous year's annual meeting, or
90 days in advance of the meeting if it is to be held on or after the
anniversary of the previous year's meeting.
<PAGE>
ANNUAL REPORT
The Company has provided without charge to each person whose proxy is
solicited hereby a copy of the Company's 1999 Annual Report. Additional
copies of the 1999 Annual Report may be obtained without charge upon written
request to Robert W. Schnitzius, Chief Financial Officer, Carrington
Laboratories, Inc., 2001 Walnut Hill Lane, Irving, Texas 75038.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing
the form of proxy and the material used in the solicitation thereof will be
borne by the Company. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone, telefacsimile and telegram by
directors, officers, and employees of the Company, who will receive no
additional compensation for such activities. Arrangements may also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held
of record by such persons, and the Company may reimburse them for reasonable
out-of-pocket expenses incurred by them in connection therewith.
By order of the Board of Directors
/s/ George DeMott
---------------------
George DeMott
Chairman of the Board
Irving, Texas
April 17, 2000
A copy of the Company's Form 10-K Annual Report for the fiscal year
ended December 31, 1999, as filed with the Securities and Exchange
Commission, is available without charge to each person whose proxy is
solicited hereby upon written request directed to Robert W. Schnitzius,
Chief Financial Officer, Carrington Laboratories, Inc., 2001 Walnut Hill
Lane, Irving, Texas 75038.
<PAGE>
CARRINGTON LABORATORIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2000
The undersigned hereby appoints Carlton E. Turner, Ph.D., D.Sc., and
Robert W. Schnitzius as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
designated on the reverse hereof, all the shares of Common Stock of
Carrington Laboratories, Inc. (the "Company") held of record by the
undersigned on April 7, 2000, at the Annual Meeting of Shareholders of the
Company to be held on May 18, 2000, at 8:30 a.m. local time, at the Las
Colinas Country Club, 4900 North O'Connor Boulevard, Irving, Texas 75062,
and at any adjournment(s) thereof. Receipt of the Notice of Annual Meeting
of Shareholders and the Proxy Statement in connection therewith and of the
Company's 1999 Annual Report to Shareholders is hereby acknowledged.
(Continued and to be Signed on Reverse Side)
<PAGE>
1. ELECTION OF DIRECTORS. Nominees:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY George DeMott
at right (except as to vote for all Robert A. Fildes,
marked to contrary below) nominees listed Ph.D.
at right Carlton E. Turner,
Ph.D., D.Sc.
INSTRUCTION: (To withhold authority to vote for any individual
nominee, write that nominee's name on the line below.)
-----------------------------------------------------------------------
2. Approval of the appointment of Ernst & Young LLP as independent public
accountants for the Company for the fiscal year ending December 31,
2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote with respect to
any other matter which may properly come before the meeting or any
adjournment(s) thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS HEREON. IN
THE ABSENCE OF SUCH SPECIFICATIONS, THIS PROXY WILL BE VOTED FOR THE
ELECTION TO THE BOARD OF DIRECTORS OF THE NOMINEES LISTED IN THIS PROXY,
APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
The undersigned hereby revokes any proxy or proxies heretofore given to
represent or vote such Common Stock and hereby ratifies and confirms all
actions that the proxies named herein, their substitutes, or any of them,
may lawfully take in accordance with the terms hereof.
Dated: , 2000
----------------- -----------------------------------------
Signature*
-----------------------------------------
Signature of joint owner*
* NOTE: When signing on behalf of a corporation, partnership, estate,
trust or in any representative capacity, please sign name and title.
To vote shares held jointly, each joint owner must sign.
