<PAGE>
PROX.LTR
CBL
Chesapeake Biological Laboratories, Inc.
1111 South Paca Street
Baltimore, Maryland 21230
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of Chesapeake
Biological Laboratories, Inc. will be held on Tuesday, August 12, 1997, at 10:00
AM at the Company's corporate offices located at 1111 South Paca Street,
Baltimore, Maryland 21230 for the following purposes:
1. To elect seven (7) directors to serve until the next annual
meeting of stockholders and until their successors are duly
elected and qualified;
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 20, 1997 will be
entitled to receive notice of and to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors
Thomas C. Mendelsohn
Secretary
Baltimore, Maryland
June 20, 1997
IMPORTANT
Please mark, date and sign the enclosed proxy and return it at your earliest
convenience in the enclosed postage-prepaid return envelope so that if you are
unable to attend the Annual Meeting, your shares may be voted.
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
1111 South Paca Street
Baltimore, MD 21230
<PAGE>
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Chesapeake Biological Laboratories, Inc. to be held on
Tuesday, August 12, 1997 at the Company's corporate offices located at 1111
South Paca Street, Baltimore, Maryland 21230.
At the Annual Meeting you will be asked to consider and vote upon the
election of seven directors of the Company. The enclosed Proxy Statement more
fully describes the details of the business to be conducted at the Annual
Meeting.
After careful consideration, the Company's Board of Directors
recommends that you vote "FOR ALL NOMINEES" nominated for election as directors
of the Company.
After reading the Proxy Statement, please mark, date, sign and return,
by no later than August 6, 1997, the enclosed proxy card in the accompanying
reply envelope. If you decide to attend the Annual Meeting, please notify the
Secretary of the Company that you wish to vote in person and, if you attend and
vote in person, your proxy will not be voted. YOUR SHARES CANNOT BE VOTED UNLESS
YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY, OR ATTEND THE ANNUAL MEETING IN
PERSON.
A copy of the Chesapeake Biological Laboratories, Inc. 1997 Annual
Report is also enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
William P. Tew, Ph.D.
Chairman and Chief Executive Officer
Baltimore, Maryland
June 20, 1997
<PAGE>
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
PROXY STATEMENT
GENERAL
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of Chesapeake Biological Laboratories, Inc. ("CBL" or
the "Company") of proxies to be voted at the Annual Meeting of Stockholders to
be held on Tuesday, August 12, 1997, at 10:00 AM at the Company's corporate
office, 1111 S. Paca Street, Baltimore, Maryland 21230, or at any adjournment
thereof. The purpose for the meeting and the matters to be voted upon are set
forth in the accompanying Notice of Annual Meeting of Stockholders. This proxy
statement and the accompanying form of proxy are being sent or given to the
stockholders on or about July 10, 1997, together with an Annual Report to
Stockholders.
By completing and returning the accompanying proxy, the stockholder
authorizes William P. Tew and John C. Weiss, III, or either of them, to act as
proxies with full power of substitution. All returned proxies which are properly
signed will be voted as the stockholder directs. If no direction is given, the
executed proxies will be voted "FOR ALL NOMINEES" with respect to Proposal No. 1
(Election of Directors). The affirmative vote of a plurality of all votes cast
at the meeting at which a quorum is present is necessary for the election of a
director. For purposes of Proposal No. 1 (Election of Directors), abstentions
will not be counted as votes cast and will have no effect on the result of the
vote, although they will count toward the presence of a quorum. A proxy may be
revoked by a stockholder at any time before it is voted at the annual meeting by
giving notice of revocation to the Company in writing or by attending and voting
at the meeting.
The Company bears the cost of soliciting proxies. In addition to
soliciting proxies by use of the mails, officers and regular employees of the
Company may solicit proxies by telephone, telegraph or personal interview. Hill
and Knowlton, Inc. has been retained to assist in soliciting proxies at a fee of
approximately $3,000, plus expenses. The Company may reimburse custodians,
nominees and other fiduciaries for reasonable out-of-pocket and clerical
expenses in forwarding proxy materials to their principals.
Only holders of record of the Class A Common Stock, one cent ($0.01)
par value (the "Class A Common Stock"), of the Company at the close of business
on June 20, 1997 are entitled to notice of and to vote at the meeting or any
adjournment thereof. On June 13, 1997, there were 5,119,558 shares of the Class
A Common Stock outstanding; each such share is entitled to one vote on each
matter to be presented for a vote at the meeting. The holders of a majority of
the outstanding shares of Class A Common Stock present in person or by proxy
will be entitled to vote, and will constitute a quorum at the meeting.
1
<PAGE>
PROPOSAL 1:
ELECTION OF DIRECTORS
At the Annual Meeting, seven (7) directors (constituting the entire
Board of Directors of the Company) are to be elected. Unless otherwise
specified, the nominees named below will be elected to serve until the next
annual meeting of stockholders and until their respective successors are duly
elected and qualified. Each nominee named below is now a director of the
Company. In the event any of these nominees shall be unable to serve as a
director, the Board of Directors may designate a replacement. All nominees have
consented to be named and have indicated their intent to serve if elected. The
Board of Directors has no reason to believe that any of the nominees will be
unable to serve or that any vacancy on the board of Directors will occur.
Information with Respect to Nominees
Set forth below is information regarding the nominees, including
information furnished by them as to their principal occupation at present and
for the last five years, certain other directorships held by them, the year in
which each became a director of the Company, and their ages as of March 31,
1997:
William P. Tew, Ph.D., age 50, is a founder of the Company and has been
a Director and Chairman of the Board of the Company since operations began in
1980 and Chief Executive Officer since 1988. Presently, Dr. Tew holds an
appointment as Research Associate in the Department of Biological Chemistry at
The Johns Hopkins University School of Medicine.
John C. Weiss, III, age 48, has been a director of the Company since
1986, and was appointed President of the Company in May 1996. From 1994 to 1996,
Mr. Weiss was the Managing General Partner of Anthem Capital, L.P., a
Baltimore-based venture capital firm. From 1990 to 1994, Mr. Weiss was the
Managing Director of The Maryland Venture Capital Trust and from 1984 to 1990,
Mr. Weiss was the Managing Director of the Baltimore office of Arete Ventures
Inc., a venture capital firm. Mr. Weiss currently serves on the Board of
Visitors of the University of Maryland at Baltimore and for the past three years
has chaired the Investment Committee of the Foundation Board of St. Agnes
Hospital.
Narlin B. Beaty, Ph.D., age 47, joined the Company in 1983 and
currently serves as Chief Technical Officer. He served as President of the
Company from 1991 until May 1996, and has been a director of the Company since
1989. Dr. Beaty also served as Acting President of the Company from 1989 to 1991
and as Director of Development for the Company from 1985 to 1988.
Thomas C. Mendelsohn, age 52, joined the Company in 1991 and serves as
Vice President of New Business Development and Corporate Secretary. Mr.
Mendelsohn has been a director of the Company since 1991. From 1966 to 1991, Mr.
Mendelsohn served on the Board of Directors and was an officer of Barre-National
Inc., a pharmaceutical company located in Maryland. From 1979 to 1991, he served
as Senior Vice President of Sales and Marketing of Barre-National, Inc.
Regis F. Burke, age 49, was elected a director of the Company in 1995.
Mr. Burke is a Certified Public Accountant in practice on his own since 1988.
Mr. Burke specializes in corporate transaction consulting, business planning,
business valuation and litigation support services. Prior to 1988, Mr. Burke was
a partner with Touche Ross & Co., an international accounting firm.
2
<PAGE>
Harvey L. Miller, age 57, was elected a director in 1996. Since 1980,
Mr. Miller has been Chairman of G.S.I Corporation, a manufacturer of high-tech
wire assemblies. Since 1986, Mr. Miller has been president of DM Realty
Corporation, a developer of commercial real estate sites. Mr. Miller was elected
a director of Maryland Midland Railway, Inc. in March 1997.
Thomas P. Rice, age 47, was elected a director in 1997. Mr. Rice is a
Certified Public Accountant. In 1996, Mr. Rice founded Columbia Investments, LLC
to make selective investments, primarily in the health care industry. From 1993
to 1996, Mr Rice was Executive Vice President, Chief Operating and Financial
Officer and a member of the Board of Directors of Circa Pharmaceuticals, Inc., a
publicly-held pharmaceutical firm. From 1991 to 1993, Mr. Rice was a principal
of Competitive Advantage, a Baltimore-based management consulting firm. From
1985 to 1990, Mr. Rice was Vice President of Administration and Finance of
PharmaKinetics Laboratories, Inc., Baltimore, Maryland.
Board Committees and Meetings
The Board of Directors has three standing committees; a Compensation
Committee, an Audit Committee and a Stock Option Committee. The current members
of each committee are Messrs. Burke, Miller and Rice. The Compensation Committee
makes recommendations concerning salaries and incentive compensation for
employees of and consultants to the Company. The Audit Committee reviews the
results and scope of the audit and other services provided by the Company's
independent public accountants. The Stock Option Committee administers and
grants stock options and awards pursuant to the Company's Incentive Stock Option
Plans.
The Audit Committee, which includes the outside directors, met with the
Company's outside accountants, both before and after the year-end audit.
During the fiscal year ended March 31, 1997, the Board of Directors
held eight meetings. Each Director attended all of the meetings of the Board of
Directors held during the period in which he served as a Director.
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. In addition, in
recognition of his long service as a member of the Board of Directors, in 1995,
Mr. Weiss was granted an additional option to purchase 8,000 shares of Common
Stock at an exercise price of $1.50 per share. Each of these respective options
is evidenced by a Director's Agreement and 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
3
<PAGE>
the issuance of a non-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. Options 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 of the standing
committee through that date. An aggregate of 25,000 shares of Common Stock have
been reserved for issuance pursuant to the Directors' Plan, but no options have
been granted to date under the Directors' Plan.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends that stockholders vote
FOR each of the nominees set forth above. Proxies solicited by the Board of
Directors will be so voted unless stockholders specify otherwise on the
accompanying proxy.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 20, 1997, 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.
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Percentage Beneficially
Beneficial Owner Owned(1) Owned
------------------- ------------------ -----------------------
<S> <C> <C>
William P. Tew, Ph.D. 382,038 7.4%
1111 South Paca Street
Baltimore, MD 21230
Joanne W. Tew 260,250 5.1%
911 Arran Road
Baltimore, MD 21239
Regis F. Burke 9,900(3) 0.2%
6 Kincaid Court
Baldwin, MD 21013
Harvey L. Miller 40,000 0.8%
200 Village Square
Cross Keys
Baltimore, MD 21210
- - ------------------------------ ---------------- --------------
Thomas P. Rice 10,000 0.2%
10500 Little Patuxtent Parkway
Columbia, MD 21044
Narlin B. Beaty, Ph.D. 163,505 3.2%
10706 West Castle Place
Cockeysville, MD 21030
Thomas C. Mendelsohn 88,115(2) 1.7%
2117 Burdock Road
Baltimore, MD 21209
John C. Weiss, III 17,770(3) 0.3%
5907 Charlesmead Ave.
Baltimore, MD 21212
All directors and officers as a 824,915(4) 16.0%
group (9 persons)
- - ------------------------------ ---------------- --------------
- - ------------------------------ ---------------- --------------
</TABLE>
(1) Unless otherwise noted, all shares indicated are held with sole voting and
sole investment power.
(2) Includes 37,500 shares purchasable under option exersicable within 60 days
of June 20, 1997.
(3) Includes 2,000 shares purchasable under option exercisable within 60 days
of June 20, 1997.
(4) Includes 79,000 shares purchasable under option exercisable within 60 days
of June 20, 1997.
5
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Executive Officers of the Company
In addition to those individuals identified above as nominees for
election to the Board of Directors of the Company and who are also Executive
Officers of the Company (Drs. Tew and Beaty and Messrs. Weiss and Mendelsohn),
John T. Janssen has served as Treasurer and Chief Financial Officer of the
Company since joining the Company in January 1993 and Robert J. Mello, Ph.D. has
served as Vice President of Quality and Regulatory Affairs since rejoining the
Company in 1994.
Mr. Janssen, age 58, a Certified Public Accountant, has over
thirty-five (35) years of diversified financial management experience and,
during the twelve (12) years prior to joining the Company, was a member of the
Board of Directors and was Chief Financial Officer of both Barre National, Inc.
of Baltimore, Maryland and Genesee Brewing Co. of Rochester, New York.
Dr. Mello holds a bachelor of science degree in biology and a Ph.D.
degree in Biochemistry from The Johns Hopkins University School of Medicine and
had been with the Company for ten (10) years before joining Lederle Laboratories
in 1992 as Manager, Validation Services. At Lederle he established, coordinated
and monitored validation programs at four sites. During his ten (10) years with
the Company, Dr. Mello served originally as Director of Research and Development
and then as Director, Quality Assurance and Regulatory Affairs, and as Corporate
Secretary.
Officers of the Company are elected annually and serve at the
discretion of the Board of Directors.
Compensation Committee Report
As members of the Compensation Committee of the Chesapeake Biological
Laboratories Board of Directors, it is our duty to exercise the power and
authority of the Board of Directors with respect to the compensation of the
Company's executive officers.
General Compensation Policy
Under the supervision of the Compensation Committee, the Company has
developed a compensation policy which is designed to attract and retain
qualified key executives critical to the Company's success and to provide such
executives with performance-based incentives tied to the growth and
profitability of the Company. It is our objective to have a portion of each
officer's compensation contingent upon the Company's performance as well as upon
the individual's contribution to the success of the Company as measured by
personal performance. Accordingly, each executive officer's compensation package
is fundamentally comprised of three elements: (i) base salary which reflects
individual performance and expertise; (ii) an incentive compensation tied to the
Company's profit, payable as an adjustment to base salary, and (iii) long-term
stock-based incentive awards through the Company's Employee Incentive Stock
Option Program which strengthen the mutuality of interests between the executive
officers and the Company's stockholders.
Factors
Because the Company is in the growth stage, the use of traditional
standards (such as profit levels and return on equity) are not appropriate as
the sole factor in evaluating the performance of its executive officers. Several
of the more important factors which were
6
<PAGE>
considered in establishing the components of each executive officer's
compensation package for the 1997 fiscal year are summarized below. Additional
factors were also taken into account, and we may at our discretion apply
entirely different factors, particularly different measures of performance, in
setting executive compensation for future fiscal years, but all compensation
decisions will be designed to further the general compensation policy indicated
above.
Base Salary
Base compensation is established through negotiation between the
Company and the executive at the time the executive is first hired, and then
subsequently when the executive's base compensation is subject to review or
reconsideration. When establishing or reviewing base compensation levels for
each executive officer, the Compensation Committee considers numerous factors,
including the qualifications of the executive and the amount of relevant
individual experience the officer brings to the Company, strategic goals for
which the executive has responsibility, compensation levels at companies at a
comparable stage of development who compete with the Company for business and
executive talent and the incentives which are necessary to attract and retain
qualified management.
Incentive Compensation
In addition to the base salary, the Board of Directors has adopted an
Incentive Compensation Program whereby the annual base salary of specified
Company executives may be increased based on the profit of the Company at the
end of each fiscal year. The base salaries of 7 executives were increased during
the year to reflect the adjustments specified under the Incentive Compensation
Program. No cash bonuses were granted to the Company's executive officers in the
fiscal year ended March 31, 1997.
Long-Term Compensation
Each executive officer of the Company is eligible for stock option
awards under the Company's Employee Incentive Stock Option Program which is
designed to give the recipient a significant equity stake in the Company and
thereby closely align their interests with those of the Company's stockholders.
Factors considered include the executive's or key employee's position in the
Company, his or her performance and responsibilities, and the extent to which he
or she already holds an equity stake in the Company. During the fiscal year
ended March 31, 1997, grants at the market price on the date of grant were
issued to: W. Tew - 75,000 shares at $3.44 per share; J. Weiss - 40,000 shares
at $1.625 per share and 30,000 shares at $3.125 per share; N. Beaty - 30,000
shares at $3.125 per share; J. Janssen and T. Mendelsohn - 20,000 shares each at
$3.125 per share; and R. Mello - 20,000 shares at $3.125 per share and 10,000
shares at $1.75 per share.
CEO Compensation
The annual base salary review of William P. Tew, Ph.D., the Company's
Founder and Chief Executive Officer was completed as of July 1, 1996, when it
was set at $170,000. Dr. Tew's total cash compensation (base plus incentive) for
the fiscal year ended March 31, 1997 was $187,219. In setting Dr. Tew's base
salary, we determined that he had made significant achievements over the past
several years which were important to the Company's future growth and could
assist the Company in enhancing stockholder value.
7
<PAGE>
We conclude our report with the acknowledgement that no member of the
Compensation Committee is a former or current officer or employee of the
Company.
Compensation Committee, March 31, 1997
Thomas P. Rice, Committee Chairman
Regis F. Burke
Harvey L. Miller
8
<PAGE>
Stock Performance Graph
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on March 31, 1992, along with the composite prices of
companies listed on the NASDAQ Biotech Index and AMEX Value Index.
Comparison of Five-Year Cumulative
Total Return Among CBL, AMEX Value Index,
NASDAQ Biotech Index
FISCAL YEAR END
Chesapeake Biological Laboratories, Inc.
AMEX Value Index
NASDAQ Pharmaceutical Index
<TABLE>
<CAPTION>
3/31/92 3/31/93 3/31/94 3/31/95 3/31/96 3/31/97
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Chesapeake $100.00 $130.00 $280.00 $190.04 $120.00 $400.00
Bio. Labs. Inc.
AMEX Value
Index $100.00 $107.19 $112.14 $117.56 $144.64 $147.06
NASDAQ
Biotech Index $100.00 $71.39 $71.51 $52.66 $92.90 $89.69
</TABLE>
The Company believes the NASDAQ Biotech Index is a reasonable peer
group comparison.
9
<PAGE>
Summary of Cash and Certain Other Compensation
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the Company's five other highest paid executive
officers for services rendered in all capacities to the Company for the fiscal
years ended March 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Summary Compensation
Annual Compensation Long Term Compensation
Name Other
and Annual
Principal Salary Compensation Stock
Position Year ($) ($) Options (#)
- - --------- ---- ------ ----------- -------
<S> <C> <C> <C> <C>
William P. Tew, Ph.D ..................................................... 1997 187,219 270(1) 75,000
Chairman and Chief ....................................................... 1996 177,916 1,232(1) --
Executive Officer ........................................................ 1995 166,357 1,910(1) --
John C. Weiss, III(2) ...................................................... 1997 102,917 2,400(3) 70,000
President ................................................................ 1996 -- 11,100(3) 8,000(3)
1995 -- 15,600(3) --
Narlin B. Beaty, Ph.D .................................................... 1997 145,434 -- 30,000
Chief Technical .......................................................... 1996 141,106 -- 20,000
Officer .................................................................. 1995 131,938 -- --
John T. Janssen .......................................................... 1997 141,299 20,000
Chief Financial .......................................................... 1996 130,546 -- 20,000
Officer .................................................................. 1995 105,625 -- --
Thomas C. Mendelsohn ..................................................... 1997 136,654 20,000
Vice President New ....................................................... 1996 131,983 -- 20,000
Business Development ..................................................... 1995 123,907 -- --
Robert J. Mello, Ph.D .................................................... 1997 138,698 30,000
Vice President Quality ................................................... 1996 123,959 -- 20,000
and Regulatory Affairs ................................................... 1995 110,853 -- --
</TABLE>
(1) Represents amounts paid by the Company for life insurance premiums on
behalf of Dr. Tew
(2) Mr. Weiss was appointed President of the Company in May 1996, after a ten
year tenure on the Board of Directors
(3) Represents fees and options given to Mr. Weiss as a non-employee director.
All employees of the Company are eligible to receive stock option
awards through the Company's Employee Incentive Stock Option Program. The
granting of such stock option awards is made at the sole discretion of the Stock
Option Committee of the Board of Directors. It is the Company's philosophy to
encourage equity ownership of the Company by its employees, thereby aligning
their interest with those of the Company's stockholders. Factors considered in
granting stock options include the employee's position in the Company, his or
her performance and responsibilities, and the extent the employee already holds
an equity stake in the Company.
10
<PAGE>
At present, the Company does not award cash bonuses, nor offer any
other long-term incentive compensation. The Company established a 401K-Profit
Sharing Plan for all full-time CBL employees with six months service with the
Company. Employees may contribute up to 10% of their salary to the plan, and the
Company may match the first 3% of salary the employee contributes to the plan.
The original entry date for the 401K plan for all eligible employees was October
1, 1993. The Company suspended the matching of employee contributions as of July
31, 1994.
The Company may, at its option, contribute a variable percentage of
eligible employee salaries to the employee's account in the plan. For the years
ended March 31, 1997 and 1996, the Company chose not to contribute to this plan.
Stock Option Grants
Stock options were granted during the fiscal year to the officers
listed below:
<TABLE>
<CAPTION>
% of Total
Options Potential Realizable Value at
Shares Generated Price Expiration Assumed Annual Rates of Stock
Granted(1) in Fiscal 97 Per Share Date Price Appreciation For Option Term
---------- ------------- ---------- ----------- -----------------------------------
5%($) 10%($)
----- ------
<S> <C> <C> <C> <C> <C> <C>
William P. Tew, Ph.D. 75,000 25.0% $3.44 11/18/06 $162,300 $411,300
John C. Weiss, III 40,000 13.3% $1.625 05/15/01 $17,900 $39,700
30,000 10.0% $3.125 11/18/06 $69,000 $149,400
Narlin B. Beaty, Ph.D. 30,000 10.0% $3.125 11/18/06 $59,000 $149,400
John T. Janssen 20,000 6.7% $3.125 11/18/06 $39,300 $99,600
Robert J. Mello, Ph.D. 10,000 3.3% $1.75 06/25/01 $ 4,800 $10,700
20,000 6.7% $3.125 11/18/06 $39,300 $99,600
Thomas C. Mendelsohn 20,000 6.7% $3.125 11/18/06 $39,300 $99,600
</TABLE>
(1) All options disclosed above become exercisable two (2) years after
being granted, at the rate of 25% a year, through year five (5) when
the options are fully exercisable.
11
<PAGE>
Stock Option Exercises and Holdings
The table below sets forth information concerning the exercise of
options during the 1997 fiscal year and unexercised options held as of the end
of the fiscal year by the Company's Chief Executive Officer and the Company's
five other most highly paid executive officers.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
at Fiscal at Fiscal
Acquired Value Year-End (#) Year-End ($)(1)
on Exercise Realized Exercisable (E)/ Exercisable (E)/
Name (#) ($) Unexercisable (U) Unexercisable (U)
- - ----- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
William P. Tew, Ph.D. --- --- 75,000 (U) $117,000 (U)
John C. Weiss, III 6,250 $5,938 2,000 (E) $ 7,000 (E)
76,000 (U) $212,250 (U)
Narlin B. Beaty, Ph.D. --- --- 50,000 (U) $126,250 (U)
John T. Janssen --- --- 37,500 (E) $117,188 (E)
52,500 (U) $146,563 (U)
Robert J. Mello, Ph.D. --- --- 50,000 (U) $140,000 (U)
Thomas C. Mendelsohn --- --- 37,500 (E) $117,188 (E)
52,500 (U) $146,563 (U)
</TABLE>
(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, 1997 was $5.00 per share.
John C. Weiss, III, President and Director of the Company, exercised
after May 15, 1996 an option to purchase 6,250 shares of the Company's Class A
Common Stock at $.80 per share, pursuant to a 1986 Director's Agreement. The
Company has a right of first refusal to purchase the shares so acquired, in the
event Mr. Weiss wishes to sell the shares in the future.
Employment Contracts and Termination of Employment Agreements
The Company has entered into employment agreements with each of its
executive officers. 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. The base
salaries established in the employment agreements for Dr. Tew, Mr. Weiss and Dr.
Beaty are $170,000, $130,000 and $131,200, respectively. The base salaries
established in the employment agreements for Messrs. Janssen and Mendelsohn, and
Dr. Mello, are $129,300, $123,300, and $126,600, respectively. The base salary
applicable to any executive officer may be increased through action of the
Compensation Committee or Board of Directors.
The employment agreements provide, in the case of Dr. Tew, for an
initial term of
12
<PAGE>
three years, with successive three-year renewal terms; in the case of Dr. Beaty,
for an initial term of three years, with successive three-year renewal terms;
and in the case of Messrs. Weiss, Mendelsohn and 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, except in the case of
Mr. Weiss whose term commenced in May 1996. 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. Dr. Tew and Mr.
Weiss are entitled to receipt of severance payments of approximately two times
their aggregate annual compensation, in the case of Dr. Tew, upon termination of
his employment either following a change of control of the Company or breach by
the Company of his employment agreement, or for good reason (generally defined
as diminution of title or responsibilities, termination of benefit plans, or
relocation of the Company), and in the case of Mr. Weiss, upon termination of
his employment either following a breach by the Company of his employment
agreement or for good reason. Drs. Beaty and Mello, and Messrs. Janssen and
Mendelsohn, 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.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file a report
of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10% shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, with respect to the
Company's fiscal years 1997 and 1996, all filing requirements applicable to its
officers, directors and greater than ten-percent beneficial owners were complied
with by them.
13
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANT
The Board of Directors has selected Arthur Andersen LLP, independent
public accountants, to audit the financial statements of the Company for the
1998 fiscal year.
Arthur Andersen LLP has served as independent accountants for the
Company since February 21, 1991. A representative of Arthur Andersen LLP will be
present at the meeting, to have an opportunity to make a statement if he desires
to do so, and to respond to appropriate questions from stockholders.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at
the meeting. However, other matters properly brought before the meeting by
stockholders will be considered.
STOCKHOLDER PROPOSALS FOR 1998
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company no later than April 9,
1998 and must otherwise comply with the rules of the Securities and Exchange
Commission for inclusion in the proxy materials relating to that meeting.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUEST SHOULD BE SENT TO CHESAPEAKE
BIOLOGICAL LABORATORIES, INC., 1111 SOUTH PACA STREET, BALTIMORE, MARYLAND
21230, ATTENTION: INVESTOR RELATIONS.
By Order of the Board of Directors
Thomas C. Mendelsohn
Secretary
June 20, 1997
14
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CBL
Chesapeake Biological Laboratories, Inc.
PROXY
This proxy is solicited on behalf of the Board of Directors of Chesapeake
Biological Laboratories, Inc. The undersigned hereby appoints William P. Tew and
John C. Weiss, III, or either of them acting singly, as Proxies, each with the
power to appoint his substitute, and hereby authorizes them to represent and to
vote, as designated below, all the shares of Class A Common Stock of Chesapeake
Biological Laboratories, Inc. held of record by the undersigned as of the close
of business on June 20, 1997, at the Annual Meeting of Stockholders to be held
on August 12, 1997, or any adjournment thereof.
The Board of Directors recommends a vote "FOR ALL NOMINEES" in Proposal No. 1 -
Election of Directors.
Please mark you choice in blue or black ink.
1. PROPOSAL No. 1 - ELECTION OF DIRECTORS:
/ / FOR ALL NOMINEES listed below
(except marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), strike a line through the name of the nominee(s) in the
list below.)
NOMINEES: W.P. Tew, J.C. Weiss, III, N.B. Beaty, T.C. Mendelsohn, R.F.
Burke, H.L. Miller, T.P. Rice
2. In their discretion, the Proxies are hereby authorized to vote upon
such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is given with respect to any matter
or matters, this proxy will be voted "FOR ALL NOMINEES" in Proposal No. 1
Election of Directors . If with respect to Proposal No. 1- Election of
Directors, you withhold authority to vote for any named nominee(s) as a
director, the shares represented by this proxy will be voted for the election of
the remaining nominees as directors.
Please sign exactly as name appears on the label above. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Date:___________________________, 1997 __________________________________
Signature
Please Mark, Sign, Date and
Return this Proxy Letter Promptly __________________________________
Using the Enclosed Envelope. Signature if held jointly
