<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CLINTRIALS RESEARCH INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[CLINTRIALS RESEARCH LOGO]
CLINTRIALS RESEARCH INC.
20 BURTON HILLS BOULEVARD
SUITE 500
NASHVILLE, TENNESSEE 37215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of ClinTrials Research Inc.:
The Annual Meeting of Stockholders of ClinTrials Research Inc., a Delaware
corporation (the "Company"), will be held at SunTrust Center, 5th Floor
Auditorium, 424 Church Street, Nashville, Tennessee, at 9:00 a.m. Central
Daylight Time, on Monday, May 11, 1998 for the following purposes:
(1) To elect eight (8) directors, to hold office for the ensuing year
or until their successors have been duly elected and qualified;
(2) To approve the adoption of the Company's 1998 Nonqualified Stock
Option Plan for Directors;
(3) To approve an amendment to the Company's 1989 Stock Option Plan
(the "1989 Stock Option Plan") increasing the number of shares available
for grant by 600,000; and
(4) To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
The proxy statement and form of proxy accompanying this Notice are being
mailed to stockholders on or about April 10, 1998. Only stockholders of record
at the close of business on March 16, 1998 are entitled to notice of and to vote
at the meeting or any adjournment or postponement thereof.
Your attention is directed to the Proxy Statement accompanying this notice
for a more complete statement regarding the matters to be acted upon at the
meeting.
We hope very much that you will be able to be with us. If you do not plan
to attend the meeting in person, you are requested to complete, sign and date
the enclosed proxy and return it promptly in the enclosed addressed envelope,
which requires no postage if mailed in the United States.
By Order of the Board of Directors
William C. O'Neil, Jr.
Executive Chairman of the Board
April 10, 1998
<PAGE> 3
CLINTRIALS RESEARCH INC.
20 BURTON HILLS BOULEVARD
SUITE 500
NASHVILLE, TENNESSEE 37215
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement and enclosed Proxy are being furnished to stockholders
of ClinTrials Research Inc., a Delaware 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 Stockholders (the "Annual Meeting") of
the Company to be held at 9:00 a.m. Central Daylight Time on Monday, May 11,
1998, at SunTrust Center, 5th Floor Auditorium, 424 Church Street, Nashville,
Tennessee and at any adjournments or postponements thereof. The cost of
soliciting proxies in the accompanying form will be borne by the Company. The
persons named as proxies were selected by the Board of Directors of the Company
and are executive officers of the Company.
This Proxy Statement and enclosed Proxy were initially mailed or delivered
to stockholders on or about April 10, 1998. The Company's Annual Report,
including financial statements for the fiscal year ended December 31, 1997, is
being concurrently mailed or delivered with this Proxy Statement to stockholders
entitled to vote at the Annual Meeting. The Annual Report is not to be regarded
as proxy soliciting material.
The Company has fixed the close of business on March 16, 1998 as the record
date for determining the holders of its common stock, $.01 par value (the
"Common Stock") who will be entitled to notice of and to vote at the meeting. On
that date, the Company had issued and outstanding 18,184,916 shares of Common
Stock which are the only outstanding shares of capital stock of the Company.
Holders of the Company's Common Stock are entitled to one vote for each share
owned of record. A majority of shares entitled to vote constitutes a quorum. A
share, once represented for any purpose at the meeting, is deemed present for
purposes of determining a quorum for the meeting (unless the meeting is
adjourned and a new record date is set for the adjourned meeting), even if the
holder of the share abstains from voting with respect to any matter brought
before the meeting.
If properly executed and returned in time for the Annual Meeting, the
enclosed Proxy will be voted in accordance with the choices specified thereon.
Where a signed Proxy is returned, but no choice is specified, the shares will be
voted "for" the election of each director nominee, "for" the approval of the
adoption of the 1998 Director Option Plan, "for" the amendment to the 1989 Stock
Option Plan, and in the discretion of the proxies on such other matters as may
properly come before the meeting. Any stockholder who executes and returns a
Proxy may revoke it in writing at any time before it is voted at the Annual
Meeting by executing and delivering a later-dated proxy, or by appearing at the
meeting and voting in person. Abstentions and broker non-votes will not be
counted as affirmative votes on matters to be voted upon, but will be counted
for purposes of determining the presence or absence of a quorum. They have no
legal effect on the election of directors, which are elected by a plurality of
votes. On the approval of the adoption of the 1998 Director Option Plan and the
amendment to the 1989 Stock Option Plan and other matters requiring a majority
vote for approval, abstentions have the effect of negative votes.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is authorized to issue 50,000,000 shares of Common Stock. As of
March 16, 1998, there were 18,184,916 shares issued and outstanding.
The following table sets forth as of December 31, 1997, information with
respect to the beneficial ownership of the Company's outstanding Common Stock by
(i) each director of the Company, (ii) each of the executive officers named in
the Summary Compensation Table, (iii) all directors and executive officers of
the Company as a group, and (iv) each stockholder known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock.
Except as otherwise indicated, the persons or entities listed below have sole
voting and investment power with respect to all shares of Common Stock owned by
them, except to the extent such power may be shared with a spouse.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED(1)
----------------------
NAME AND ADDRESS NUMBER PERCENT
- ---------------- ---------- --------
<S> <C> <C>
Richard J. Eskind**......................................... 1,709,632 9.4%
104 Lynnwood Blvd.
Nashville, TN
Herbert J. Schulman, M.D.................................... 1,330,745 7.3
109 Westhampton Place
Nashville, TN
Irwin B. Eskind, M.D.**..................................... 1,328,064 7.3
541 Jackson Blvd.
Nashville, TN
Dimensional Fund Advisors Inc.(2)........................... 1,285,000 7.1
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
William C. O'Neil, Jr.(3)**................................. 1,239,467 6.7
20 Burton Hills Blvd.
Suite 500
Nashville, TN
Thomas G. Cigarran(4)**..................................... 131,465 *
Edward G. Nelson(5)**....................................... 88,711 *
Albert J. Siemens(6)........................................ 62,175 *
Paul J. Ottaviano(7)........................................ 56,250 *
Barry B. Kanarek, M.D.(8)................................... 23,500 *
Roscoe R. Robinson, M.D.(9)**............................... 10,000 *
Michael F. Ankcorn(10)...................................... 5,063 *
Jerry R. Mitchell, M.D., Ph.D. **........................... 0 *
William U. Parfet ***....................................... 0 *
All directors and executive officers as group (15
persons)(11).............................................. 4,671,028 24.9
</TABLE>
- ---------------
* Less than 1%
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<PAGE> 5
** Director
*** Director nominee
(1) Based on 18,181,765 shares of Common Stock outstanding at December 31,
1997. Pursuant to the rules of the Securities and Exchange Commission,
certain shares of the Company's Common Stock which a beneficial owner has
the right to acquire within 60 days of December 31, 1997 pursuant to the
exercise of stock options are deemed to be outstanding for the purpose of
computing the percentage ownership of such owner but are not deemed
outstanding for the purpose of computing percentage ownership of any other
person.
(2) Share ownership data obtained solely from Schedule 13G filed in February
1998.
(3) Includes 84,467 shares owned by Mr. O'Neil's wife. Mr. O'Neil disclaims
beneficial ownership of these shares. Also includes 382,500 shares issuable
upon the exercise of vested options.
(4) Includes 500 shares owned by Mr. Cigarran's wife. Mr. Cigarran disclaims
beneficial ownership of these shares. Also includes 10,000 shares issuable
upon the exercise of vested options.
(5) Includes 3,000 shares owned by Mr. Nelson's wife. Mr. Nelson disclaims
beneficial ownership of such shares. Also includes 65,964 shares held by
Nelson Capital Corp. and certain of its affiliates, beneficial ownership of
which Mr. Nelson disclaims. Mr. Nelson is the principal stockholder and
president of Nelson Capital Corp. Includes 10,000 shares issuable upon the
exercise of vested options.
(6) Includes 50,251 shares issuable upon the exercise of vested options. Dr.
Siemens resigned from the Company effective January 31, 1998.
(7) Includes 56,250 shares issuable upon the exercise of vested options.
(8) Includes 1,000 shares owned jointly with spouse. Also includes 22,500
shares issuable upon the exercise of vested options. Dr. Kanarek resigned
from the Company effective April 2, 1998.
(9) Includes 10,000 shares issuable upon the exercise of vested options.
(10) Includes 5,063 shares issuable upon the exercise of vested options.
(11) Includes 562,765 shares issuable upon the exercise of vested options.
PROPOSAL 1. ELECTION OF DIRECTORS
All directors hold office until the next Annual Meeting of the Company's
stockholders and until their successors are duly elected and qualified. The
Company's executive officers are appointed annually by the Board of Directors
and serve at the discretion of the Board.
It is intended that proxies received in response to this solicitation will
be voted in favor of the election of the nominees named herein to be directors
of the Company until the next Annual Meeting and until their successors are
elected and qualified, unless authority to vote is withheld.
If any of the nominees should become unable to accept election or declines
to serve, neither of which the Board anticipates, it is intended, in the absence
of contrary direction, that the proxies will be voted for the balance of those
named below and for substitute nominee(s) as the Board may designate, unless the
Board has taken prior action to reduce its membership. The proxies will in no
event be voted for a greater number of nominees than eight.
During 1997, the Board of Directors held twelve meetings. Each incumbent
director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all committees on which the individual director served. There are two committees
of the
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<PAGE> 6
Board of Directors which assist the Board in discharging its responsibilities.
These committees, their members and functions are discussed below.
INFORMATION ABOUT NOMINEES FOR DIRECTORS
William C. O'Neil, Jr., 63 years of age, founded the Company in September
1989 and has served as the Chairman of the Board since its organization. Mr.
O'Neil served as President and Chief Executive Officer from 1989 until February
1, 1998. He served as President and Chief Executive Officer of International
Clinical Laboratories, Inc., a clinical laboratory testing company, from 1977
until it was acquired in 1988 by SmithKline Beckman Corporation. From January
1989 to May 1989, he served as President and Chief Executive Officer of
Biotherapeutics, Inc. (now known as Response Oncology, Inc.) a cancer services
company. Mr. O'Neil serves as a director of each of ATRIX Laboratories, Inc., a
drug delivery company; Sigma Aldrich Chemical Company, a manufacturer of
research chemicals; American Healthcorp, Inc., a specialty healthcare service
company; Advocat Inc., a long-term care company; and Central Parking
Corporation, a parking services company.
Jerry R. Mitchell, M.D., Ph.D., 56 years of age, joined the Company in
February 1998 as its Chief Executive Officer and President. Prior to joining the
Company, Dr. Mitchell was Section Chief at the National Heart, Lung and Blood
Institute of the National Institutes of Health and subsequently was Director of
the Center for Experimental Therapeutics and Professor of Medicine and
Pharmacology at Baylor College of Medicine. In 1990, he became President of
Upjohn Pharmaceutical Laboratories and in 1993 was promoted to Vice Chairman of
the Board for The Upjohn Company. Dr. Mitchell left Upjohn in 1995 and
co-founded MPI Research, a drug safety and pharmaceutical development company.
Dr. Mitchell has served on a number of national science committees for the
National Academy of Sciences, the Food and Drug Administration, and the
Association of Professors of Medicine-Industry Roundtable. He received both his
M.D. and Ph.D. degrees from Vanderbilt University.
Thomas G. Cigarran, 56 years of age, has served as a director of the
Company since February 1992. From September 1981 through August 1988, Mr.
Cigarran served as President and Chief Operating Officer of American Healthcorp,
Inc., a specialty health care company. In September 1988, Mr. Cigarran became
the Chairman, President and Chief Executive Officer of American Healthcorp, Inc.
Mr. Cigarran also serves as Chairman of AmSurg Corp, a practice based surgery
center company and as a director of Corporate Family Solutions, Inc., a child
care company.
Irwin B. Eskind, M.D., 73 years of age, has been a director of the Company
since February 1992. Dr. Eskind engaged in the private practice of internal
medicine from 1954 until his retirement in January 1996. Dr. Eskind is the
brother of Richard J. Eskind, also a director of the Company.
Richard J. Eskind, 67 years of age, has served as a director of the Company
since February 1992. Mr. Eskind has served since October 1986 as Vice
President -- Investments of A.G. Edwards & Sons, Inc., a broker-dealer firm. Mr.
Eskind is the brother of Irwin B. Eskind, M.D., also a director of the Company.
Edward G. Nelson, 66 years of age, has been a director of the Company since
November 1990. Mr. Nelson formed Nelson Capital Corp., a merchant banking firm,
in 1984, and has served as the President and Chairman of the Board of such firm
since its organization. Mr. Nelson serves as a director of Berlitz
International, Inc., a language services company; Central Parking Corporation, a
parking services company; and Advocat Inc., a long-term care company.
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<PAGE> 7
Roscoe R. Robinson, M.D., 67 years of age, has served as a director of the
Company since December 1997. Dr. Robinson served as Vice Chancellor for Health
Affairs for Vanderbilt University from 1981 until 1997 and has served as a
professor of medicine at Vanderbilt University since 1981. Dr. Robinson has been
a member of the Board of Directors of First American Corporation since 1992 and
a Trustee of Duke University since 1994.
William U. Parfet, 51 years of age, became a consultant to the Company in
February 1998. Mr. Parfet was with The Upjohn Company from 1985 until 1993 where
he held various positions, including Executive Vice President, President and
Vice Chairman of the Board of Directors. From 1993 to 1996, Mr. Parfet served as
President and Chief Executive Officer of Richard Allan Medical, a Michigan world
wide manufacturer of surgical products. Mr. Parfet currently serves as
Co-Chairman of MPI Research. Mr. Parfet also serves as a director of the Stryker
Corporation, a specialty surgical and medical products company; CMS Energy, a
public utilities company; Sybron International, a laboratory and dental products
company; Pharmacia & Upjohn, Inc., a pharmaceutical company; Flint Ink, Inc., a
printing and color imaging company; and as a Commissioner of the Michigan
Department of Natural Resources.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two committees of the Company's Board of Directors: the
Compensation and Stock Option Committee and the Audit Committee. The
Compensation and Stock Option Committee, which met once during 1997, is composed
of Dr. Eskind, Mr. Nelson and Dr. Robinson and is responsible for the approval
of remuneration arrangements for executive officers of the Company, the review
of the Company's compensation plans and the general review of the Company's
employee compensation policies. The Audit Committee, which met once during 1997,
is composed of Mr. Cigarran and Mr. Richard Eskind, and is responsible for the
engagement of independent auditors, the review of audit fees, the supervision of
matters relating to audit functions, the review and setting of internal policies
and procedures regarding audit, accounting and other financial controls and the
review of related party transactions.
COMPENSATION OF DIRECTORS
Non-employee directors owning less than 5% of the Company's outstanding
Common Stock (Mr. Nelson, Mr. Cigarran and Dr. Robinson) are compensated $15,000
annually. Non-employee directors owning 5% or more of the company's outstanding
Common Stock (Dr. Eskind and Mr. Eskind) receive no compensation. In addition,
upon the adoption of the 1998 Director Option Plan, non-employee directors
owning 2.5% or less of the Company's outstanding Common Stock will receive
certain options. See Proposal 2: Adoption of 1998 Nonqualified Stock Option Plan
for Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE PROPOSED NOMINEES TO THE BOARD OF DIRECTORS. THE AFFIRMATIVE VOTE OF A
PLURALITY OF THE VOTES CAST ON PROPOSAL 1, IN PERSON OR BY PROXY, IS NECESSARY
FOR THE ELECTION OF THE NOMINEES NAMED HEREIN TO BE DIRECTORS OF THE COMPANY.
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<PAGE> 8
PROPOSAL 2. ADOPTION OF 1998 NONQUALIFIED STOCK OPTION PLAN FOR DIRECTORS
On February 6, 1998, the Board of Directors approved the adoption of the
Company's 1998 Nonqualified Stock Option Plan for Directors ("1998 Director
Option Plan"), under which nonqualified options to purchase shares of the
Company's Common Stock will be available for grant to eligible directors of the
Company. Upon the plan's adoption by the shareholders, four eligible directors
will participate in the 1998 Director Option Plan. The 1998 Director Option Plan
will allow for the issuance of options to purchase up to 200,000 shares of
Common Stock.
The 1998 Director Option Plan is a formula plan under which options to
acquire 10,000 shares of Common Stock are to be granted to each director of the
Company who is not an employee and who does not beneficially own more than 2.5%
of the Company's outstanding Common Stock ("Eligible Director") upon the date of
his or her initial election to the Board after the adoption of the 1998 Director
Option Plan and its approval by the Company's stockholders. Additionally, each
Eligible Director who serves on the board on the last day of each fiscal year of
the Company and who has served in such capacity for at least six (6) months
during such calendar year will be entitled to receive annual grants of options
to acquire 1,000 shares of Common Stock. If the Company's fiscal year changes,
directors will be eligible to receive an annual option to acquire 1,000 shares
in the interim fiscal period so long as such interim period is at least six
months long.
The term of options granted under the 1998 Director Option Plan is 10
years. No options granted pursuant to the 1998 Director Option Plan may be
exercised until the holder will have served as a director of the Company
continuously for at least three months from the date of grant. Shares subject to
options granted under the plan which expire, terminate or are canceled without
having been exercised in full will become available again for grants.
An option's exercise price per share will be equal to the closing price of
the Common Stock as reported on the trading day prior to the date of grant.
Payment for shares of Common Stock to be issued upon exercise of an option may
be made in either cash, Common Stock or any combination thereof, at the
discretion of the option holder. Options are nontransferable, other than (i) by
will, (ii) by laws of descent and distribution, (iii) pursuant to certain
domestic relations orders, (iv) to a member of the option holder's immediate
family, (v) to a family partnership or trust, or (vi) to a charity.
In the event the option holder's services as a director are terminated by
reason of disability or death, the holder or his or her representative may
exercise an option for a period of 12 months following such termination. If the
service of the option holder is terminated as a director for "cause," as defined
in the 1998 Director Option Plan, an unexercised option will expire. In the
event the service of the option holder as a director is terminated for any other
reason, the holder may exercise his or her options for a period of three (3)
months following termination, to the extent the option has vested, unless
extended by the Board of Directors or an appropriate committee in its sole
discretion; provided, however, that no option may be exercised more than ten
years after the date of grant.
No federal income tax consequences occur to either the Company or the
optionee upon the Company's grant or issuance of a non-qualified option under
the 1998 Director Option Plan so long as the option does not have a readily
ascertainable fair market value at the date of the grant. Generally, an option
has to be traded on an established market or have a value that can otherwise be
determined with reasonable accuracy to have a readily ascertainable fair market
value. Upon an optionee's exercise of a non-qualified option not taxed at grant,
the optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the stock purchased pursuant to the exercise of
the option and the exercise price of the option. However, if the stock purchased
upon exercise of the option is not transferable or is subject to a substantial
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risk of forfeiture, then the optionee will not recognize income until the stock
becomes transferable or is no longer subject to such a risk of forfeiture
(unless the optionee makes an election under Code Section 83(b) to recognize the
income in the year of exercise, which election must be made within 30 days of
the option exercise). The Company will be entitled to a deduction in an amount
equal to the ordinary income recognized by the optionee in the year in which
such income is recognized by the optionee. Upon a subsequent disposition of the
stock, the optionee will recognize capital gain to the extent the sales proceeds
exceed the optionee's cost of the stock plus the previously recognized ordinary
income.
In the event of the dissolution or sale of substantially all the assets of
the Company, or a merger or consolidation in which the Company is not the
surviving corporation, each outstanding option will terminate, unless there is
an express assumption of the option by the surviving corporation. However, as to
any option which is to so terminate, each holder will have the right immediately
prior to the dissolution, sale, merger or consolidation to exercise his or her
option, in whole or in part.
A copy of the proposed 1998 Director Option Plan is attached hereto as
Exhibit A.
THE BOARD OF DIRECTORS HAS APPROVED THE ADOPTION OF THE 1998 DIRECTOR
OPTION PLAN AND RECOMMENDS THAT ALL SHAREHOLDERS VOTE IN FAVOR OF ADOPTION OF
THE PLAN. A MAJORITY OF THE VOTES CAST FOR SHARES OF COMMON STOCK PRESENT OR
REPRESENTED BY PROXY AT THE ANNUAL MEETING OF SHAREHOLDERS AND ENTITLED TO VOTE
IS REQUIRED TO ADOPT THE 1998 DIRECTOR OPTION PLAN.
PROPOSAL 3. INCREASE IN SHARES AVAILABLE FOR GRANT UNDER 1989 STOCK OPTION PLAN
The Board of Directors has approved, and recommends that its stockholders
approve, an amendment to the Company's 1989 Stock Option Plan to increase the
number of shares of Common Stock available for grant under the 1989 Stock Option
Plan by 600,000 shares. Currently, the Company's 1989 Stock Option Plan provides
for the grant of incentive stock options, non-qualified stock options
(collectively "Options") and stock appreciation rights ("SARs") with respect to
up to 2,025,000 shares of Common Stock.
Options or SARs under the 1989 Stock Option Plan may be granted to
individuals performing services for the Company, including officers, key
employees, directors and consultants, as selected by the Board of Directors or
the Compensation and Stock Option Committee, except that incentive stock options
may only be granted to employees of the Company or its subsidiaries. The
exercise price of non-qualified options may not be less than 80% of the fair
market value of the Common Stock on the date of grant. The minimum exercise
price of incentive stock options is 100% (110% in the case of owners of more
than 10% of the Company's Common Stock) of the fair market value of the Common
Stock on the date of grant. An SAR entitles the grantee to receive, upon
exercise, cash equal to the excess of the fair market value of the shares of
Common Stock covered by the SAR at the time of exercise over a base price, which
can be no less than 80% of the fair market value of the stock at the time the
SAR is granted. The maximum term of any Option is ten years (for incentive stock
options, five years in the case of owners of more than 10% of the Company's
Common Stock). No SAR shall be exercisable more than 11 years after it is
granted. Options and SARs are generally non-transferrable, except upon the
holder's death.
The 1989 Stock Option Plan provides that Options shall become fully vested
in the event of a tender offer for the Company's stock or the approval of a
merger agreement pursuant to which the Company will not survive or will survive
only as a subsidiary of another corporation, or a definitive agreement for the
sale or
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<PAGE> 10
disposition of all or substantially all of the Company's assets, or upon any
person or group becoming the holder of 35% or more of the outstanding shares of
Common Stock of the Company. Payment for all shares purchased pursuant to the
exercise of an Option must be made in cash or, if approved by the Stock Option
Committee either at the time of grant or at the time of exercise, by delivery of
Stock of the Company at its fair market value on the date of delivery, or a
combination of cash and stock. The Company is authorized to guarantee or make
loans to the holder of an Option to enable him or her to exercise the Option.
Options and SARs to employees terminate within the 12 month period following
termination of employment, the exact period depending upon the circumstances of
the termination. The 1989 Stock Option Plan expires in December 1999.
Neither the grant nor the exercise of an incentive stock Option will result
in taxable income to the employee. The tax treatment on the sale of Common Stock
acquired upon exercise of an incentive stock Option depends on whether the
holding period requirement is satisfied. The holding period is met if the
disposition by the employee occurs (i) at least two years after the date the
Option is granted, and (ii) at least one year after the date the shares were
transferred to the employee. In the case of a deceased employee, the incentive
stock Option may be exercised by the deceased employee's legal representative to
the extent the deceased employee would have been entitled to do so at the time
of death. The 1989 Stock Option Plan permits the legal representative of any
deceased employee to exercise an option for up to one year following the death
of the employee. If the holding period is satisfied, the excess of the amount
realized upon sale of the Common Stock over the price paid for these shares will
be treated as a long-term capital gain. If the employee disposes of the Common
Stock before the holding period is met (a "disqualifying disposition"), the
excess of the fair market value of the shares on the date of exercise or, if
less, the fair market value on the date of disposition, over the exercise price
will be taxable as ordinary income to the employee at the time of disposition,
and the Company will be entitled to a corresponding deduction. The balance of
the gain, if any, will be a capital gain to the employee. Any capital gain
realized by the employee will be a long-term capital gain if the employee's
holding period for the Common Stock at the time of disposition is more than one
year, otherwise it will be short-term.
Although the exercise of an incentive Stock Option will not result in
taxable income to the employee, the excess of the fair market value of the
shares on the date of exercise over the exercise price will be included in the
employee's "alternative minimum taxable income" under Section 56 of the Internal
Revenue Code of 1986, as amended (the "Code"). This inclusion might subject the
employee to, or increase his liability for, the alternative minimum tax under
Section 55 of the Code.
No federal income tax consequences occur to either the Company or the
optionee upon the Company's grant or issuance of a non-qualified Option under
the 1989 Stock Option Plan so long as the Option does not have a readily
ascertainable fair market value at the date of the grant. Generally, an option
has to be traded on an established market or have a value that can otherwise be
determined with reasonable accuracy to have a readily ascertainable fair market
value. Upon an optionee's exercise of a non-qualified Option not taxed at grant,
the optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the stock purchased pursuant to the exercise of
the Option and the exercise price of the Option. However, if the stock purchased
upon exercise of the Option is not transferable or is subject to a substantial
risk of forfeiture, then the optionee will not recognize income until the stock
becomes transferable or is no longer subject to such a risk of forfeiture
(unless the optionee makes an election under Code Section 83(b) to recognize the
income in the year of exercise, which election must be made within 30 days of
the Option exercise). The Company will be entitled to a deduction in an amount
equal to the ordinary income recognized by the optionee in the year in which
such income is recognized by the optionee. Upon a subsequent
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<PAGE> 11
disposition of the stock, the optionee will recognize capital gain to the extent
the sales proceeds exceed the optionee's cost of the stock plus the previously
recognized ordinary income.
At December 31, 1997 a total of 1,336,579 shares of Common Stock were
subject to Options granted under the 1989 Stock Option Plan. To date, no SARs
have been granted under the 1989 Stock Option Plan. All employees are eligible
to participate in the 1989 Stock Option Plan. Information with respect to
Options held by certain individuals is shown in the "Aggregated Option/SAR"
table located elsewhere in this Proxy Statement. As of December 31, 1997, all
current executive officers as a group have received 680,500 Options; and all
employees, including all current officers who are not executive officers, and
consultants, as a group have received 714,425 Options. The market value of the
Common Stock underlying the Options as of December 31, 1997 was $10,992,000. The
proposal to amend the 1989 Stock Option Plan to add 600,000 shares will provide
the flexibility to award additional options and will enable the Company to
continue its policy of granting Options to new management employees as well as
providing incentive awards to existing employees. The Company believes that
Options are a valuable incentive in attracting and retaining quality
individuals. No provision has been made for the granting of any of the 600,000
additional shares under 1989 Stock Option Plan.
A copy of the proposed amendment to the 1989 Stock Option Plan is attached
hereto as Exhibit B.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
INCREASE IN SHARES ELIGIBLE FOR GRANT UNDER THE 1989 STOCK OPTION PLAN. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST ON PROPOSAL 3, IN PERSON OR BY
PROXY, IS NECESSARY TO INCREASE THE SHARES ELIGIBLE FOR GRANT UNDER THE 1989
STOCK OPTION PLAN.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company, other than Mr. O'Neil and Dr. Mitchell, whose
information is set forth above.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Paul J. Ottaviano......................... 51 Executive Vice President -- Worldwide
Operations
Mary A. Chaput............................ 48 Vice President -- Chief Financial Officer
William L. Shaw........................... 51 President -- Europe/Asia Pacific
Kenneth G. Hebel.......................... 56 Vice President and General Manager -- The
Americas
J. Scott Grainger......................... 49 Vice President -- Information Systems
Michael F. Ankcorn........................ 55 Chairman, President and Chief Executive
Officer, ClinTrials BioResearch Ltd.
Kevin D. Duffy............................ 39 Vice President -- Worldwide Clinical
Business Development
</TABLE>
9
<PAGE> 12
Paul J. Ottaviano has served the Company as Executive Vice
President -- Worldwide Operations since December 1995 after serving as Executive
Vice President -- U.S. Operations since July 1992. From May 1989 until joining
the Company in July 1992, he was President and Chief Executive Officer of
National Psychopharmacology Laboratories, Inc., a specialty laboratory company.
Mr. Ottaviano was Chief Operating Officer of Med Inc. (later ImageAmerica,
Inc.), a medical imaging company, from April 1988 through May 1989. From July
1987 until April 1988, Mr. Ottaviano was the Vice President -- Operations and
President -- ICL East of International Clinical Laboratories, Inc. From January
1987 until July 1987, Mr. Ottaviano served as a Division President of
International Clinical Laboratories, Inc.
Mary A. Chaput has served as Vice President and Chief Financial Officer of
the Company since December 1996. From October 1993 until its merger with PPD,
Inc. in September 1996, Ms. Chaput served Pharmaco International, Inc., a
division of Applied BioScience International, Inc., in a variety of senior
financial assignments with responsibilities ranging from worldwide pre-clinical
operations, including toxicology, analytical laboratories and Phase I, to Vice
President -- Finance of European operations. From January 1990 to September 1992
Ms. Chaput served as finance manager for General Electric Company in Rockville,
MD and Schenectady, NY.
William L. Shaw, M.D., joined the Company in January 1998 as
President -- Europe Asia/Pacific. Prior to joining the Company, Dr. Shaw served
as Managing Director for HRC Ltd., a pre-clinical contract research
organization, from 1993 through 1995, as a Director for LCRC Ltd., a Phase I
contract research organization, from 1993 through 1996, and as Chief Operating
Officer for HLS Ltd., a pre-clinical contract research organization, from 1995
through 1996. From 1996 through 1997 Dr. Shaw served as Chief Executive Officer
- -- Europe, Asia and Pacific Rim for Pharmaco International Ltd. and as a
Director for APBI Holdings Ltd., a life and environmental sciences research and
consulting company.
Kenneth G. Hebel joined the Company in January 1998 as Vice President and
General Manager -- The Americas. Prior to joining the Company, Mr. Hebel served
in various positions for PPD Pharmaco, since October 1993, including Vice
President, Phase I Lab Operations. Mr. Hebel formerly served as President for
Applied Bioscience.
J. Scott Grainger has served as Vice President -- Information Systems of
the Company since July 1995. Mr. Grainger served as Director of laboratory
information systems for Corning Clinical Labs from July 1990 until joining the
Company.
Michael F. Ankcorn has served as President of ClinTrials BioResearch Ltd.
since its acquisition by the Company in August 1996. From 1979 to July 1996 Mr.
Ankcorn served as President and Chief Executive Officer of Bio-Research
Laboratories Ltd. From 1977 to 1979 he served as Assistant Vice President for
the Canada Development Corporation.
Kevin D. Duffy joined the Company in March 1998 as Vice
President -- Worldwide Clinical Business Development. From January 1995 to March
1998, Mr. Duffy served Imagyn Medical Technologies, a medical device company, in
various sales positions including most recently as Vice President of Sales. From
November 1981 to November 1994, Mr. Duffy served Johnson & Johnson, a medical
products company, with responsibilities ranging from sales, senior sales
management, marketing, and new product development.
10
<PAGE> 13
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or other
compensation during fiscal years ended December 31, 1995, 1996 and 1997 for the
Company's Chief Executive Officer and the persons who, during 1997, were the
other four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (#)(1) COMPENSATION(2)
- --------------------------- ---- -------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. O'Neil, Jr. 1997 $275,000 $ 0 $ 0 10,000 $14,213
Chairman of the Board, 1996 250,000 50,000 0 0 14,291
President and Chief Executive 1995 230,000 35,000 0 15,000 14,059
Officer(3)
Paul J. Ottaviano 1997 240,000 0 0 15,000 12,102
Executive Vice President -- 1996 220,000 30,000 0 0 12,135
Worldwide Operations 1995 190,000 25,000 0 30,000 11,253
Barry B. Kanarek, M.D., Ph.D. 1997 205,109 0 0 45,000 23,662
Vice President -- Strategic 1996 N/A N/A N/A N/A N/A
Medical Services and 1995 N/A N/A N/A N/A N/A
Chief Scientific Officer(4)
Albert J. Siemens, Ph.D. 1997 195,000 0 0 11,750 12,135
Executive Vice President(5) 1996 190,000 15,000 0 0 12,075
1995 175,000 12,000 0 15,000 11,989
Michael F. Ankcorn 1997 173,232 72,829 0 20,250 79,340
ClinTrials BioResearch Ltd. 1996 67,494 19,880 0 22,500 9,238
Chairman, President and Chief 1995 N/A N/A N/A N/A N/A
Executive Officer(6)
</TABLE>
- ---------------
(1) Although the Company's existing Stock Option Plan permits the grant of stock
appreciation rights, no such rights have been granted to date.
(2) Amounts represent life insurance premium payments, profit sharing
contributions at 5% of the U.S. participant's base salary (subject to
limitations), supplemental retirement plan contributions for Mr. Ankcorn,
401(k) plan Company matching contributions at 33% of U.S. participant's
voluntary deduction, COBRA payments, and car allowances for Dr. Kanarek and
Mr. Ankcorn. The amounts represented by each of those forms of compensation
for 1997 are as follows:
<TABLE>
<CAPTION>
PROFIT
SHARING/ 401(K)
INSURANCE PENSION PLAN MATCHING COBRA CAR
PREMIUM CONTRIBUTIONS CONTRIBUTION PAYMENTS ALLOWANCE
--------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
William C. O'Neil, Jr................ $3,578 $ 7,500 $3,135 $ 0 $ 0
Paul J. Ottaviano.................... 1,467 7,500 3,135 0 0
Barry B. Kanarek..................... 1,260 3,062 1,617 9,648 8,075
Albert J. Siemens.................... 1,500 7,500 3,135 0 0
Michael F. Ankcorn................... 1,735 71,675 0 0 5,930
</TABLE>
11
<PAGE> 14
(3) Effective February 1, 1998, Mr. O'Neil resigned as President and Chief
Executive Officer. Mr. O'Neil remains Executive Chairman of the Board.
(4) Dr. Kanarek joined the Company effective February 24, 1997 Dr. Kanarek
resigned effective April 2, 1998 and received one year's salary as severance
in accordance with his employment agreement.
(5) Dr. Siemens resigned from the Company effective January 31, 1998.
(6) ClinTrials BioResearch Ltd. was acquired by the Company on July 31, 1996.
Mr. Ankcorn's 1996 compensation information includes compensation from that
date forward.
The tables below provides certain information with respect to grants of
stock options to the Named Executive Officers pursuant to the Company's 1989
Stock Option Plan during the year ended December 31, 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF ANNUAL RATE OF STOCK
UNDERLYING TOTAL OPTIONS/ MARKET PRICE APPRECIATION FOR
OPTIONS/ SARS GRANTED EXERCISE OR PRICE ON OPTION TERM(2)(3)
SARS TO EMPLOYEES IN BASE PRICE DATE OF EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) GRANT DATE 5% 10%
- ---- ---------- --------------- ----------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William C. O'Neil
Jr.(4).............. 10,000 1.21% $7.63 $7.63 4/18/07 $47,954 $121,523
Paul J. Ottaviano..... 15,000 1.82 7.63 7.63 4/18/07 71,930 182,284
Barry B. Kanarek(5)... 45,000(6) 5.45 8.38 7.63 4/18/07 182,039 513,103
Albert J.
Siemens(7).......... 5,000 0.60 7.63 7.63 4/18/07 23,977 60,761
Albert J.
Siemens(7).......... 6,750(6) 0.82 8.38 7.63 4/18/07 27,306 76,965
------ ----- ------- --------
11,750 1.42 51,283 137,726
Michael F. Ankcorn.... 20,250(6) 2.45 8.38 7.63 4/18/07 81,918 230,896
</TABLE>
- ---------------
(1) All options granted to the Named Executive Officer are exercisable in four
equal annual installments beginning one year after the date of grant except
for Dr. Kanarek's shares which vest in two equal annual installments
beginning one year after the date of grant. The per share exercise price
represents the fair market value of the Common Stock on the date of grant
except for those grants that represent repriced options for which the
exercise price is $8.38 (see Note 6 below).
(2) Potential realizable value is calculated from a base stock price equal to
the exercise price of the options granted.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
(4) Mr. O'Neil resigned as President and Chief Executive Officer effective
February 1, 1998. Mr. O'Neil remains Executive Chairman of the Board.
(5) Dr. Kanarek resigned from the Company effective April 2, 1998.
(6) Grants represent the Company's repricing of previously granted options. The
repricing was effective April 18, 1997.
(7) Dr. Siemens resigned from the Company effective January 31, 1998.
12
<PAGE> 15
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES OPTIONS/SARS /SARS
UNDERLYING VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
OPTIONS/SARS REALIZED --------------------------- ---------------------------
NAME EXERCISED (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. O'Neil,
Jr.(2).................. 0 $0 382,500 17,500 2,821,875 2,500
Paul J. Ottaviano......... 0 0 52,500 30,000 78,576 12,812
Barry B. Kanarek(3)....... 0 0 22,500 22,500 0 0
Albert J. Siemens(4)...... 0 0 46,501 13,999 176,948 5,859
Michael F. Ankcorn........ 0 0 5,063 15,187 0 0
</TABLE>
- ---------------
(1) This amount represents the aggregate of the number of options multiplied by
the difference between $7.88, the fair market value of the Common Stock at
December 31, 1997, and the exercise price for that option.
(2) Mr. O'Neil resigned as President and Chief Executive Officer effective
February 1, 1998. Mr. O'Neil remains Executive Chairman of the Board.
(3) Dr. Kanarek resigned from the Company effective April 2, 1998.
(4) Dr. Siemens resigned from the Company effective January 31, 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Mr. O'Neil, Dr.
Shaw, Mr. Ottaviano, Ms. Chaput, Mr. Hebel, Mr. Grainger, Mr. Ankcorn and Dr.
Mitchell.
The employment agreements for Mr. Ottaviano, Ms. Chaput and Mr. Grainger
commenced on January 1, 1998 and end on December 31, 1998. The employment
agreements for Mr. O'Neil and Dr. Mitchell commenced on February 1, 1998 and end
on January 31, 1999. The employment agreement for Dr. Shaw commenced on December
29, 1997 and ends on December 28, 1998. The employment agreement for Mr. Hebel
commenced on January 18, 1998 and ends on January 18, 1999. Each of the
agreements are automatically renewed for additional and successive one year
periods unless the Company provides 90 days notice prior to any anniversary date
to the individual employee of its intent not to renew the employment agreement.
The annual base salary under the agreement for Dr. Mitchell is $275,000; for Mr.
O'Neil, $275,000; for Mr. Ottaviano, $240,000; for Ms. Chaput, $150,000; for Mr.
Grainger, $155,000; for Dr. Shaw, approximately $235,000; for Mr. Hebel,
$195,000. These agreements provide for periodic increases in the base salaries
at the discretion of the Board of Directors. The named individuals are entitled
to benefits such as medical insurance, expense reimbursement, vacation and
participation in the Company's 401(k) savings plan or supplemental retirement
plan. The employment agreements contain a non-competition clause providing that
during the term of employment, and for six to twelve months following the date
of the expiration or termination of employment, each named individual may not,
without the prior express written approval of the Board, directly or indirectly
own or hold any proprietary interest in or be employed by or receive
compensation from any party engaged in the same or any similar business in the
same geographic areas in which the Company does business. As consideration for
this non-competition clause, the individual is entitled to a lump sum payment of
six to twelve months of the then current base salary after termination by the
Company other
13
<PAGE> 16
than for cause. If the Company fails to renew the agreement, the individual is
entitled to a lump sum payment of six to twelve months of his or her then
current base salary. In the event there is a "change in control" of the Company
and the individual is terminated as a result, he or she is entitled to a lump
sum payment for his or her then current annual base salary and any Stock Options
granted will be fully vested upon such change. If the individual terminates the
employment agreement with 90 days written notice to the Company, he or she is
entitled to an amount equal to one month's base salary, and remains bound by the
non-competition clause.
The employment agreement for Mr. Ankcorn commenced on July 31, 1996 and
ends on July 31, 2001. The agreement is automatically renewed for an additional
five year period unless the Company provides six months notice prior to the
fifth anniversary date to Mr. Ankcorn of its intent not to renew the employment
agreement. The annual base salary under the agreement for Mr. Ankcorn is
Canadian $220,000. The agreement provides for periodic increases in the base
salary at the discretion of the Board of Directors. Mr. Ankcorn is entitled to
the standard benefits offered at ClinTrials BioResearch. The employment
agreement contains a non-competition clause providing that during the term of
employment, and for thirty-six months following the date of the expiration of
termination of employment, he may not carry on or be engaged in any endeavor in
competition, in whole or in part, with the Company. As consideration for this
non-competition clause or a "change in control" which results in his
termination, he is entitled for a period of three years to his then current
annual base salary and bonus after termination by the Company other than for
cause. If the Company fails to renew the agreement, he is entitled to a lump sum
payment of his most recent annual base salary.
CERTAIN TRANSACTIONS
On January 30, 1997, the Company loaned Mary Chaput $100,000 pursuant to a
demand note. The note was payable upon demand from the Company at any time after
April 7, 1997 and bore interest at a rate of 6% per annum. As of December 31,
1997, the entire amount of the demand note had been paid in full.
On January 30, 1998, the Company entered into an option agreement (the
"Option") with MPI Research, LLC ("MPI") and its shareholders, Jerry R.
Mitchell, M.D., Ph.D. and William U. Parfet. Dr. Mitchell is the President and
Chief Executive Officer of the Company. Pursuant to the Option, the Company paid
$1,500,000 in cash in exchange for an exclusive option to purchase all of the
outstanding stock of MPI at its fair market value at any time on or prior to
March 31, 2000. The shareholders of MPI have the right to cancel the Option at
any time after March 31, 1999, by returning the $1,500,000 cash without
interest, provided they give the Company written notice of their intent to
cancel the option and the Company does not exercise the Option within twenty
business days of receipt of such notice.
On January 30, 1998, the Company granted four separate warrants to purchase
75,000 shares (300,000 shares in the aggregate) of common stock of the Company
to Dr. Jerry R. Mitchell, the Chief Executive Officer of the Company at exercise
prices of $7.00, $9.00, $11.00 and $13.00 per share. Each 75,000 share warrant
vests ratably over a period of four years. If there is a change in control of
the Company (as defined in the warrants) or Dr. Mitchell should die or become
disabled, all warrants shall become immediately exercisable. Each warrant
expires on January 30, 2004. Each warrant provides that in the event Dr.
Mitchell no longer serves on the board of directors of the Company, as an
officer of the Company or as a consultant to the Company, other than as a result
of his death or disability (in which case all warrants shall remain exercisable
until the expiration date), all unexercisable warrants shall remain
unexercisable; provided, however, that in the event Dr. Mitchell no longer
serves in the capacity of officer, director or consultant other than as a result
of the termination by the Company for cause (as defined in the warrants) or the
resignation by
14
<PAGE> 17
Dr. Mitchell other than for "good reason" (as defined in the warrants), then 50%
of the warrants not then exercisable shall become exercisable.
On January 30, 1998, the Company granted four separate warrants to purchase
75,000 shares (300,000 shares in the aggregate) of common stock of the Company
to William U. Parfet at exercise prices of $7.00, $9.00, $11.00 and $13.00 per
share. Each 75,000 share warrant vests ratably over a period of four years. If
there is a change in control of the Company (as defined in the warrants) or Mr.
Parfet should die or become disabled, all warrants shall become immediately
exercisable. Each warrant expires on January 30, 2004. Each warrant provides
that in the event Mr. Parfet no longer serves on the board of directors of the
Company, as an officer of the Company or as a consultant to the Company, other
than as a result of his death or disability (in which case all warrants shall
remain exercisable until the expiration date), all unexercisable warrants shall
remain unexercisable; provided, however, that in the event Mr. Parfet no longer
serves in the capacity of officer, director or consultant other than as a result
of the termination by the Company for cause (as defined in the warrants) or the
resignation by Mr. Parfet other than for "good reason" (as defined in the
warrants), then 50% of the warrants not then exercisable shall become
exercisable.
COMPENSATION COMMITTEE REPORT
Recommendations on compensation for the Company's executive officers are
made by the Compensation and Stock Option Committee (the "Committee") to the
Company's Board of Directors. Each member of the Committee is a non-employee
director. It is the responsibility of the Committee to determine whether in its
judgment the executive compensation policies are reasonable and appropriate,
meet their stated objectives and effectively serve the best interests of the
Company and its stockholders.
EXECUTIVE COMPENSATION POLICY
The Committee believes that the primary objectives of the Company's
executive compensation policy should be:
- to attract and retain talented executives critical to both the short-term
and long-term success of the Company by providing compensation that is
highly competitive with compensation provided to executives of comparable
position at companies in the Clinical Research Organization ("CRO") and
related health services industries, while maintaining compensation levels
that are consistent with the Company's financial objectives and operating
performance; and
- to reinforce strategic financial and operating performance objectives
through the use of appropriate annual incentive programs; and
- to create mutuality of interest between executive officers and
stockholders by providing long-term incentive compensation.
The Committee believes that the Company's executive compensation policy
should be reviewed annually in relation to the Company's financial performance,
annual budgeted financial goals and its position in the CRO industry. The
compensation of individuals should then be reviewed annually by the Committee in
light of its executive compensation policy for that year.
The Committee believes that in addition to corporate performance, it is
appropriate to consider in setting and reviewing executive compensation the
level of experience and responsibilities of each executive as well as the
personal contributions a particular individual may make to the success of the
Company. Such factors as
15
<PAGE> 18
leadership skills, analytical skills and organizational development are deemed
to be important qualitative factors to take into account in considering levels
of compensation. No relative weight is assigned to these qualitative factors,
which are applied subjectively by the Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The Committee believes that the compensation of executive officers should
be comprised of base compensation, annual incentive compensation, and long-term
incentive compensation, and has applied this policy to fiscal 1997 compensation
for executive officers as described below.
Base Compensation. The Committee's approach to base compensation for
executive officers of the Company is to offer competitive salaries in comparison
to local market, CRO industry, pharmaceutical industry and other related health
service industry practices. In determining whether an increase in base
compensation for the executive officers was appropriate for fiscal 1997, the
Committee reviewed salary ranges recommended by management, consulted with the
CEO, and took into account each executive's experience in business generally and
with the Company specifically and what it viewed to be appropriate levels of
base compensation after taking into consideration the contributions of each
executive. The average increase in the base salaries for those executive
officers which appear on the Summary Compensation Table, other than Mr. O'Neil,
was 6.9% in 1997 with specific increases ranging from 2.6% to 9.1%. The
Committee believes its executives are compensated in the mid-range of comparable
companies. Mr. O'Neil's increase in base salary is described below under
"Compensation of Chief Executive Officer."
Annual Incentive Programs. The Committee believes that incentive
compensation for the executive officers of the Company should be primarily
linked to operating performance. To achieve this goal, the Committee relies on
cash bonuses. Cash bonuses are awarded to executive officers of the Company
based primarily upon the actual earnings of the Company during the fiscal year
compared to the earnings targets approved by the Board of Directors through the
annual financial budget and subsequent financial projections.
Long-Term Incentive Compensation. The Stock Option Plan is the only plan
currently in place as a long-term compensation incentive for the Company's
executive officers. There are two types of stock options available for grant:
incentive stock options and non-qualified options. Incentive and non-qualified
stock options are generally granted with an exercise price at not less than the
fair market value of the underlying stock at the date of grant. To date there
have been no grants of stock appreciation rights to the executive officers of
the Company. Stock options are granted to executive officers by the Board of
Directors of the Company based primarily upon the financial performance of the
Company as compared to budgeted and projected earnings, as well as actual or
potential contributions to the growth of the Company.
The Company has a 401(k) profit sharing plan in which all U.S. employees,
including executive officers, have equal participation eligibility. The
Committee annually establishes the Company matching portion of the 401(k)
deposits made to employees' 401(k) accounts. The matching percentage is the same
for executive officers and all employees. For 1997, the matching amount was 33%
of the amount withheld by each participant, not to exceed the maximum
contribution allowed under Section 415 of the Internal Revenue Code (the "Code")
for a qualified plan. The profit sharing payments made by the Company to the
executive officer's 401(k) and profit sharing account are a percentage of the
officer's base pay determined annually by the Committee. The percentage is the
same for executive officers and all employees and was 5% of base pay for fiscal
1997 (subject to certain limitations). Mr. Ankcorn and Dr. Shaw are the sole
participants in separate supplemental retirement plans for which contributions
are actuarially determined.
16
<PAGE> 19
Section 162(m) of the Code generally disallows a tax deduction to public
companies for executive compensation in excess of $1 million. It is not
anticipated that the Company will pay any of its executives compensation in
excess of $1 million in 1998.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee believes that compensation of the Chief Executive Officer is
consistent with the policies concerning executive compensation and appropriately
reflects the Company's financial objectives and operating performance. Awards of
long-term incentive compensation of the Chief Executive Officer are considered
concurrently with awards to other executive officers.
In reviewing and approving Mr. O'Neil's fiscal 1997 compensation package,
the Committee took into account the 64% increase in 1996 net revenues, income
from operations of $8.4 million in 1996 versus income from operations of $5.5
million in 1995, and diluted earnings per share of $.40 in 1996 versus $.26 in
1995. Mr. O'Neil's 1997 compensation package was subject to the same specific
quantitative performance criteria as other executive officers of the Company.
Mr. O'Neil received a $25,000 base compensation increase to $275,000 in 1997
from $250,000 in 1996, which the Committee determined on a subjective basis to
be appropriate considering market and competitive compensation levels.
OPTION REPRICING
On April 18, 1997, the Board of Directors approved a stock option repricing
program (the "Program"). The Board decided to implement the Program in order to
improve employee morale, increase the incentive of key employees, and to reduce
turnover in this key group of people. Except for Mr. O'Neil and Mr. Ottaviano,
the Program offered all employees currently holding options with an exercise
price of $12.00 or higher the option to receive repriced stock options to
replace all such options currently outstanding. The stock options were repriced
at the closing price of the Common Stock on April 18, 1997 ($7.63 per share)
plus a premium of $0.75. The repricing of options was offered to each option
holder on an all or none basis and the option holders were required to accept
options to purchase ninety percent (90%) of the number of shares covered by the
replaced options. The new repriced options have the same vesting provisions of
the replaced options.
17
<PAGE> 20
The following table sets forth information concerning options granted to
any executive officer of the Company for which the exercise price was adjusted
since the Company's incorporation in 1989. The Company has issued no stock
appreciation rights.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION
SECURITIES MARKET PRICE TERM
UNDERLYING OF STOCK AT EXERCISE PRICE REMAINING
OPTIONS/SARS TIME OF AT TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED (#) AMENDMENT ($) AMENDMENT ($) PRICE ($) AMENDMENT
- ---- ------- ------------ ------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Barry B. Kanarek(1).... 4/18/97 45,000 $7.63 $22.00 $ 8.38 9.7 years
Albert J. Siemens(2)... 4/18/97 6,750 7.63 12.92 8.38 8.7 years
Michael F. Ankcorn..... 4/18/97 20,250 7.63 22.00 8.38 9.3 years
</TABLE>
- ---------------
(1) Dr. Kanarek resigned from the Company effective April 2, 1998.
(2) Dr. Siemens resigned from the Company effective January 31, 1998.
The above Compensation Committee Report is not deemed to be part of a
document filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is not to be deemed
incorporated by reference in any documents filed under the Securities Act or the
Exchange Act, without the express written consent of the Company.
Edward G. Nelson, Chairman
Irwin B. Eskind, M.D.
Roscoe R. Robinson, M.D.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC"). Such executive officers,
directors and greater than 10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon the Company's review of copies of the Section 16(a) forms
furnished to the Company for the fiscal year ended December 31, 1997, the
Company believes that, during such fiscal year, its executive officers,
directors and greater than 10% stockholders complied with applicable Section
16(a) filing requirements, except that Dr. Kanarek was late in filing his Form
5.
18
<PAGE> 21
COMPANY PERFORMANCE
The following graph compares the total stockholder return of $100 invested
on November 24, 1993 (the effective date of the Company's initial public
offering) in (a) the Company, (b) the Center for Research in Security Prices
("CRSP") Index for Nasdaq Stock Market (U.S. Companies) ("Nasdaq U.S. Stock
Index") and (c) the CRSP Index for Nasdaq Health Services Stocks ("Nasdaq Health
Services Index"), assuming the reinvestment of all dividends.
<TABLE>
<CAPTION>
Nasdaq Stock
Measurement Period ClinTrials Research Market (US Nasdaq Health
(Fiscal Year Covered) Inc. Companies) Services Stocks
<S> <C> <C> <C>
11/24/93 100.0 100.0 100.0
12/31/93 136.0 103.2 106.4
12/30/94 100.0 100.8 114.2
12/29/95 216.0 142.6 145.1
12/31/96 364.0 175.4 145.3
12/31/97 126.0 215.3 147.9
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 11/24/93.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young LLP has been selected by the
Board of Directors to serve as the Company's independent public accountants
for the fiscal year ending December 31, 1998. A representative of that firm
will be present at the meeting and will have the opportunity to make a
statement if he so desires and to respond to questions.
19
<PAGE> 22
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting must be received by the Company not later than December 11, 1998
for inclusion in its Proxy Statement and form of proxy relating to that
meeting. Any such proposals, as well as any questions relating thereto,
should be directed to Mary A. Chaput, Vice President and Chief Financial
Officer, 20 Burton Hills Boulevard, Suite 500, Nashville, Tennessee 37215.
MISCELLANEOUS
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, stockholders who do not expect to attend in person are
urged, regardless of the number of shares of stock owned, to date, sign and
return the enclosed proxy promptly.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997 MAY BE OBTAINED, WITHOUT CHARGE, BY ANY STOCKHOLDER
TO WHOM THIS PROXY STATEMENT IS SENT, UPON WRITTEN REQUEST TO MARY A.
CHAPUT, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 20 BURTON HILLS
BOULEVARD, SUITE 500, NASHVILLE, TENNESSEE 37215.
Date: April 10, 1998.
20
<PAGE> 23
EXHIBIT A
CLINTRIALS RESEARCH INC.
1998 NONQUALIFIED
STOCK OPTION PLAN FOR
DIRECTORS
1. The Purpose of the Plan. This Plan is intended to provide an
opportunity for individuals serving as non-employee directors of the Corporation
to acquire shares of the Corporation's Common Stock, providing an equity
interest in the Corporation and additional compensation based on appreciation of
the value of such stock. The Plan provides for the grant of stock options, which
are not incentive stock options as defined in Section 422 of the Code, as an
incentive to service or continued service to the Corporation in order to aid the
Corporation in obtaining and retaining directors of outstanding ability.
2. Definitions. For purposes of this Plan, the following terms will be
defined as indicated:
(a) "Board" means the Board of Directors of the Corporation or such
committee as it may constitute in accordance with Rule 16b-3.
(b) "Cause" means habitual drug use or drunkenness, embezzlement of
Corporation funds, conduct which is injurious to the Corporation, or
conviction of a felony, all as determined in good faith by the Board
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the common stock of the Corporation, $.01 par
value.
(e) "Corporation" means ClinTrials Research, Inc., a Delaware
corporation.
(f) "ERISA" means the Employee Retirement Income Security Act, as
amended from time to time, or any successor statute.
(g) "Fair Market Value" means the closing price of the Common Stock,
as reported by the NASDAQ, the New York Stock Exchange or by any other
national securities market on which the Common Stock is traded. In the
event the Common Stock is not listed on an exchange or traded in the
over-the-counter market, then the Board will determine Fair Market Value,
which determination will be made in good faith and will be binding.
(h) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
(i) "Option" means a non-qualified option granted pursuant to the
Plan.
(j) "Option Agreement" means a contract evidencing the terms of an
Option.
(k) "Plan" means the Corporation's 1998 Nonqualified Stock Option Plan
for Directors described herein.
(l) "Rule 16b-3" means Rule 16b-3 as promulgated under the Exchange
Act, as the rule may be amended from time to time, or any successor rule or
other comparable regulatory requirements.
(m) "Subsidiary" means any person or entity which is controlled by the
Corporation.
3. Stock Subject to the Plan. There will be reserved for issuance upon the
exercise of Options 200,000 shares of Common Stock, which will be authorized and
unissued Common Stock. If an Option expires or
A-1
<PAGE> 24
terminates for any reason without being exercised in full, the shares subject
thereto which have not been purchased will again be available for purposes of
the Plan. The number of shares as to which Options may be granted under the Plan
will be proportionately adjusted, to the nearest whole share, in the event of
any stock dividend, stock split, share combination or similar recapitalization
involving the Common Stock, any merger, consolidation or reorganization, or any
spin-off, spin-out or other significant distribution of assets of stockholders
for which the Corporation receives no consideration. In the event that there is
an insufficient number of authorized shares of Common Stock available to allow
exercise of the Options on the date of any grant hereunder, such Options will
not be exercisable until there are sufficient shares of Common Stock authorized
for issuance.
4. Eligibility. Subject to the other terms of this Plan, Options may be
granted to directors of the Corporation who are not also employees of the
Corporation, whether or not they receive other remuneration from the Corporation
or its subsidiaries as directors, consultants or in any other capacity.
5. Terms and Conditions of Options. All Options will be granted as
provided below and will be subject to the following terms and conditions:
(a) Grant of Options. An Option to acquire 10,000 shares will be
granted to each director of the Corporation who is not an employee and who
does not beneficially own more than 2.5% of the Corporation's outstanding
common stock ("Eligible Director") upon the date of his or her initial
election to the Board after the adoption of the Plan and its approval by
the Corporation's shareholders. Additionally, each Eligible Director
serving on the Board on the last day of the Corporation's fiscal year who
has served on the Board for at least six (6) months during such fiscal year
will be granted an Option to acquire 1,000 shares on the last day of such
fiscal year. All options shall be vested on the date of grant.
If the Corporation's fiscal year is changed, individuals will be
eligible to receive an annual Option to acquire 1,000 shares for the
Corporation's interim fiscal period, so long as such interim period is at
least six (6) months long and the individual satisfies the service
requirements set forth immediately above.
(b) Option Price. The Option price per share will be equal to the
Fair Market Value of the Common Stock on the trading day next preceding the
date the Option is granted.
(c) Option Term. No Option will be exercisable after the expiration
of ten (10) years from the date the Option is granted.
(d) Payment and Withholding. Payment for all shares purchased
pursuant to exercise of an Option will be made (i) in cash, (ii) by
delivery of unrestricted shares of Common Stock at Fair Market Value on the
date of exercise, or (iii) a combination of (i) and (ii). The payment will
be made at the time the Option or any part thereof is exercised, and no
shares will be issued until full payment therefor has been made. Payment in
currency or by check, bank draft, cashier's check, postal money order or
wire transfer will be considered payment in cash. In addition to the Option
price, the Corporation will have the right, if applicable, to require the
holder of an Option to satisfy any federal, state or local withholding tax
liability prior to the delivery of any certificate or certificates for
shares issuable upon exercise of the Option by remitting to the Corporation
an amount in cash sufficient to satisfy same or by authorizing the
Corporation to withhold from the number of shares delivered that number of
shares whose Fair Market Value equals (as closely as possible in whole
shares) the amount of such tax.
(e) Conditions to Exercise of an Option. No Option may be exercised
to any extent until the holder will have served as a director of the
Corporation continuously for at least three (3) months from the date of
grant. Except as provided in subparagraph (f) below, an Option may not be
exercised by the
A-2
<PAGE> 25
holder unless he is then, and continuously after the grant of the Option
has been, a director of the Corporation. No Option may be exercised by a
holder with respect to fractional shares.
(f) Transferability of Options. An Option will be transferable or
assignable only (i) by will, (ii) by the laws of descent and distribution,
(iii) pursuant to a qualified domestic relations order as defined by the
Code, Title I of ERISA or the rules thereunder, (iv) to a member of the
Option holder's immediate family, (v) to a family partnership or trust, or
(vi) to a charity.
(g) Termination of Service as Director or Death. In the event that a
holder ceases to serve as a director of the Corporation for any reason
other than his death, disability or termination for Cause, such holder will
have the right to exercise an Option at any time within three (3) months
after his termination of service to the extent his right to exercise the
Option has vested and has not previously been exercised at the date of
termination. In the event of termination of service of the holder by reason
of disability, the holder may exercise his Option at any time within twelve
(12) months after the date of such termination. If the holder of an Option
dies while he is serving as a director of the Corporation, his Option may
be exercised (to the extent that the holder would have been entitled to do
so at the date of his death) by a legatee or legatees of the holder under
his last will, or by his personal representatives or distributee, at any
time within twelve (12) months following his death. In the event of
termination of service of the holder for Cause, any and all Options of the
holder shall automatically expire upon such termination. In all of the
cases cited above, the exercise period of one or more Options may be
extended by a vote of a majority of the Directors whose Options are not
being extended; provided, however, that notwithstanding anything in this
subparagraph (g), no Option may be exercised more than ten (10) years after
the date on which such Option was granted. For purposes of this
subparagraph (g), service as a director will not be deemed terminated so
long as the holder is a director of the Corporation or another entity which
has assumed this Option in a transaction to which Section 424(a) of the
Code is applicable.
(h) Changes in Capitalization; Merger; Liquidation. The number of
shares of Common Stock covered by each outstanding Option will be
proportionately adjusted, to the nearest whole share (i) for any increase
or decrease in the number of issued shares of Common Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend
(but only on the Common Stock) or any other increase or decrease in the
number of such shares effected without receipt of consideration by the
Corporation, or (ii) for any spin-off or spin-out of assets to the
Corporation's stockholders or any other significant distribution of assets
by the Corporation to its stockholders without receipt of consideration by
the Corporation. Any such adjustment to an outstanding Option will be made
without changing the total price applicable to the unexercised portion of
the Option, but with a corresponding adjustment in the price for each share
covered by the Option. If the Corporation is the surviving corporation in
any merger or consolidation, each outstanding Option will pertain to and
apply to the securities to which a holder of the number of shares of Common
Stock subject to the Option would have been entitled to receive in such
merger or consolidation. A dissolution or liquidation of the Corporation or
a merger or consolidation in which the Corporation is not the surviving
corporation will cause each outstanding Option to terminate, except for
Options as to which another entity assumes or substitutes another option in
a transaction to which Section 424(a) of the Code is applicable; provided,
however, that as to any Options which are to so terminate, each holder will
have the right immediately prior to such dissolution, liquidation, merger
or consolidation, to exercise his Option in whole or in part, including
with respect to shares as to which the right to exercise had not yet vested
and without regard to any provisions deferring exercise contained herein.
Except as expressly provided in this subparagraph (h), the holder of an
Option will have no rights by reason of any subdivision or combination of
shares of stock of any class, or the payment of any stock
A-3
<PAGE> 26
dividend or any other increase or decrease in the number of shares of stock
of any class, or by reason of any spin-off, spin-out or comparable
distribution of assets to the Corporation's stockholders, or by reason of
any dissolution, liquidation, merger or consolidation or distribution to
the Corporation's stockholders of assets or securities of another entity;
and any issue by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, will not affect,
and no adjustment by reason thereof will be made with respect to, the
number or price of shares of Common Stock subject to the Option. The
existence of the Plan and the Options granted pursuant to the Plan will not
affect in any way the right or power of the Corporation to make or
authorize any adjustment, reclassification, reorganization or other change
in its capital or business structure, any merger or consolidation of the
Corporation, any issue of debt or equity securities having preferences or
priorities as to the Common Stock or the rights thereof, the dissolution or
liquidation of the Corporation, any sale or transfer of all or any part of
the Corporation's business or assets, or any other corporate act or
proceeding.
(i) Each Option will be subject to the requirement that if at any time
the Board determines that the listing, registration or qualification of the
shares subject to the Options upon any securities exchange or under any
state or federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition to or in connection with the granting of the Option or the
issue or purchase of Common Stock thereunder, the Option may not be
exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval will have been effected or obtained free
of any conditions not acceptable to the Board. The holder of the Option
will supply the Corporation with such certificates, representations,
opinions of counsel and information as the Corporation may request,
including, without limitation, an investment letter certifying that all
shares being purchased under an Option are being acquired for investment
and not for the purpose of resale or distribution, and will otherwise
cooperate with the Corporation in obtaining such listing, registration,
qualification, consent or approval.
(j) Notwithstanding any other plan provision, no Option granted
pursuant to the Plan will terminate when a director is on military,
maternity, sick leave or other bona fide leave of absence so long as his
service as a director is continuing pursuant to statute or contract.
6. Rule 16b-3 Compliance. In taking any action or interpretation under the
Plan with respect to a person who files reports under Section 16 of the Exchange
Act, the Corporation will use its best efforts to ensure that such action or
interpretation is taken in compliance with Rule 16b-3.
7. No Rights as Stockholder. A holder of an Option will have no rights as
a stockholder with respect to any Common Stock covered by his Option until the
date of issuance of a stock certificate to him by the Corporation following
exercise, in whole or in part, of the Option.
8. Indemnification of Board Members. In addition to other rights of
indemnification as they may have as members of the Board, each member of the
Board will be indemnified by the Corporation against all costs and expenses
reasonably incurred by him in connection with any action, suit or proceeding to
which he may be party by reason of any action taken or failure to act under or
in connection with the Plan, or any Option granted thereunder, and against all
amounts paid by him in settlement thereof (provided the settlement is approved
by legal counsel selected by the Corporation) or paid by him in satisfaction of
a judgment in any such action, suit or proceeding, except a judgment based upon
a finding of a breach of the duty of loyalty or acts or omissions either not in
good faith or which involve intentional misconduct or a knowing violation of
law. Upon the institution of any such action, suit or proceeding, each Board
member affected will notify the Corporation in writing of the same, giving the
Corporation an opportunity, at its own expense, to defend the same before the
member undertakes to defend it on his own behalf.
A-4
<PAGE> 27
EXHIBIT B
PROPOSED AMENDMENT TO 1989 STOCK OPTION PLAN
AMENDMENT NO. 6 TO
1989 STOCK OPTION PLAN OF
CLINTRIALS RESEARCH INC.
The Board of Directors of ClinTrials Research Inc. (the "Corporation") has
approved and hereby submits to the stockholders for their approval, the
following Amendment No. 6 to the 1989 Stock Option Plan (the "Plan").
The Plan is hereby amended by deleting paragraph 2 thereof in its entirety
and replacing it with the following:
2. Stock Subject to the Plan. The maximum number of shares of common
stock, $0.01 par value of the Corporation (the "Stock") which may be issued
under Incentive Stock Options and Non-Qualified Stock Options granted under
the Plan (the "Options") and made subject to Stock Appreciation Rights
shall be a total of 2,625,000 shares of Stock, which may be either
authorized and unissued Stock or Stock held in the treasury of the
Corporation, as shall be determined by the Board of Directors of the
Corporation. If an Option or Stock Appreciation Right expires or terminates
for any reason without being exercised in full, the unpurchased shares
subject to such Option or shares as to which such Stock Appreciation Right
is not exercised shall again be available for purposes of the Plan. The
number of shares which may be issued under Options and made subject to
Stock Appreciation Rights shall not exceed 2,625,000 in the aggregate
B-1
<PAGE> 28
APPENDIX A
PROXY CLINTRIALS RESEARCH INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 11, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Mary A. Chaput and William C. O'Neil, Jr.,
or either of them, as proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of Stockholders of ClinTrials Research
Inc., to be held on Monday, May 11, 1998, at 9:00 a.m. Central Daylight Time, at
SunTrust Center, 5th Floor Auditorium, 424 Church Street, Nashville, Tennessee,
and at any adjournments or postponements thereof, in accordance with the
following instructions:
(1) ELECTION OF DIRECTORS:
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed
below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee
check the box to vote "FOR" all nominees and strike a line through the
nominee's name in the list below.)
William C. O'Neil, Jr., Jerry R. Mitchell, M.D., Ph.D., Thomas G. Cigarran,
Irwin B. Eskind, M.D.,
Richard J. Eskind, Edward G. Nelson, Roscoe R. Robinson, M.D., William U. Parfet
(2) TO APPROVE THE ADOPTION OF THE COMPANY'S 1998 NONQUALIFIED STOCK OPTION PLAN
FOR DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) TO APPROVE AN AMENDMENT TO INCREASE THE AUTHORIZED NUMBER OF SHARES
AVAILABLE FOR ISSUANCE UNDER THE COMPANY'S 1989 STOCK OPTION PLAN BY 600,000
SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
[ ] FOR DISCRETION [ ] AGAINST DISCRETION [ ] ABSTAIN
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION
OF DIRECTORS, FOR THE ADOPTION OF THE 1998 NONQUALIFIED STOCK OPTION PLAN FOR
DIRECTORS, FOR THE AMENDMENT TO THE COMPANY'S 1989 STOCK OPTION PLAN, AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated: , 1998
------------------
------------------------------
Dated: , 1998
------------------
------------------------------
Signature(s) of shareholder(s)
should correspond exactly with
the name(s) printed hereon.
Joint owners should each sign
personally. Executors,
administrators, trustees,
etc., should give full title
and authority.
