<PAGE> 1
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
Commission File Number 0-22510
CLINTRIALS RESEARCH INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1406017
(State of incorporation) (I.R.S. Employee Identification Number)
11000 WESTON PARKWAY
CARY, NORTH CAROLINA 27513
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (919) 460-9005
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $.01 par value Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant was $93,116,000 as of April 14, 1999. The number of Shares of Common
Stock outstanding as of April 14, 1999 was 18,017,172.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
directors of the Company.
NAME AGE POSITION
- ---- --- --------
Jerry R. Mitchell, M.D., Ph.D. 57 Chairman; President and
Chief Executive Officer
Irwin B. Eskind, M.D. 74 Director
Richard J. Eskind 68 Director
Edward G. Nelson 67 Director
Roscoe R. Robinson, M.D. 68 Director
William U. Parfet 52 Director
INFORMATION ABOUT DIRECTORS
Jerry R. Mitchell, M.D., Ph.D., 57 years of age, joined the Company in
January 1998 as its Chief Executive Officer and President and was named Chairman
of the Board in May 1998. Prior to joining the Company, Dr. Mitchell served on
the Board of Directors of ILEX Oncology, Inc. of San Antonio, Texas, and in
1996, co-founded MPILEX Partners, L.P, a joint venture with ILEX to develop
oncology drugs. He also co-founded MPI Research, a drug safety and
pharmaceutical development company with Mr. Parfet, also a director of the
Company, in 1995, and continues to serve on MPI's Board of Directors. From 1993
to 1995, Dr. Mitchell served as Vice Chairman of the Board of the Upjohn Company
after serving as the President of Upjohn Pharmaceutical Laboratories from 1990
to 1993. Dr. Mitchell has also served as Section Chief at the National Heart,
Lung and Blood Institute of the National Institutes of Health, and as Director
of the Center for Experimental Therapeutics and as Professor of Medicine and
Pharmacology at Baylor Medical College. Dr. Mitchell has served on a number of
national science committees and is a member of numerous professional
organizations, and was recently elected to lead the American Society of
Pharmacology and Experimental Therapeutics (ASPET) as its President from
1998-2000. He is the author of numerous research publications and was designated
in 1990 as a "Citation Superstar" in "The Scientist" newspaper. Dr. Mitchell
received his M.D. and Ph.D. degrees from Vanderbilt University.
Irwin B. Eskind, M.D., 74 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, 68 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, 67 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 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.
Roscoe R. Robinson, M.D., 68 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.
1
<PAGE> 3
William U. Parfet, 52 years of age, became a consultant to the Company
in January 1998 and was named Director of Business Planning and Analysis of the
Company in October 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 1998, is composed
of Dr. Irwin 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 1998, is composed of Mr. Parfet 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.
INFORMATION ABOUT EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company, other than Dr. Mitchell, whose information is
set forth above.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Paul J. Ottaviano 52 Executive Vice President - Worldwide Operations
S. Colin Neill 52 Senior Vice President and Chief Financial
Officer
William L. Shaw, MB, ChB 52 President - Europe/Asia Pacific
Neil M. Frazer, MB, ChB, FRCA 43 President - The Americas
Michael F. Ankcorn 55 Chairman, President and Chief Executive
Officer, ClinTrials BioResearch Ltd.
</TABLE>
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.
S. Colin Neill has served as Senior Vice President and Chief Financial
Officer of the Company since October 1998. Prior to joining the Company, Mr.
Neill served as a financial consultant to a variety of companies from October
1997 to October 1998. Mr. Neill served from July 1996 to October 1997 as Vice
President, Chief Financial Officer of Continental Health Affiliates, Inc. and
its majority owned subsidiary Infu-Tech, Inc., a network of health care
companies focused on home care, long term care, assisted living and managed
care. Mr. Neill's career experience has included that of Acting
2
<PAGE> 4
Vice President - Finance, Chief Financial Officer of Pharmos Corporation, a
biopharmaceutical company in the business of developing novel drug technologies
from January 1995 to July 1996; Vice President - Finance, Chief Financial
Officer of BTR Inc., the US subsidiary of BTR plc, a British diversified
manufacturing company with US revenues of approximately $3.5 billion from 1992
to December 1994; and Vice President - Financial Services of The BOC Group,
Inc., a British industrial gases company with substantial operations in the
health care industry. He began his career in public accounting with Arthur
Andersen LLP in Ireland as a Senior Auditor and later with Price Waterhouse LLP
in New York City as a Senior Manager.
William L. Shaw, MB, ChB, joined the Company in January 1998 as
President--Europe/Asia Pacific. Prior to joining the Company, 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, from 1996 through 1997;
as Chief Operating Officer for HLS Ltd., a pre-clinical contract research
organization, from 1995 through 1996; as a Director for LCRC Ltd., a Phase I
contract research organization, from 1993 through 1996; and as Managing Director
for HRC Ltd., a pre-clinical contract research organization, from 1993 through
1995.
Neil M. Frazer, MB, ChB, FRCA has served as President - Americas since
July 1998, after serving as Senior Director of Medical and Regulatory Affairs
when he joined the Company in October 1997. Prior to joining the Company, Dr.
Frazer had served for ten years as research physician, head of clinical
pharmacology, and a director of medical affairs for Glaxo Wellcome.
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.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Dr. Mitchell,
Mr. Ottaviano, Mr. Neill, Dr. Shaw and Mr. Ankcorn.
The employment agreement for Mr. Ottaviano commenced on January 1, 1999
and ends on December 31, 1999. The employment agreement for Dr. Mitchell
commenced on February 1, 1999 and ends on January 31, 2000. The employment
agreement for Dr. Shaw commenced on December 29, 1998 and ends on December 28,
1999. The employment agreement for Mr. Neill commenced on October 22, 1998 and
ends on October 21, 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. Ottaviano, $240,000; for Dr.
Shaw, approximately $235,000; for Mr. Neill, $225,000.
The agreements (other than Mr. Ankcorn's, which is described separately
below) provide for periodic increases in the base salaries at the discretion of
the Board of Directors. The named employees are also entitled to benefits such
as medical insurance, expense reimbursement, vacation and participation in the
Company's 401(k) savings plan or supplemental retirement plan and, in some
cases, incentive bonuses. The agreements contain a non-compete clause providing
that during the term of employment, and for a period of either six months or one
year following the date of termination of employment (for any reason), the
employee may not engage in certain activities competitive with the Company. The
agreements also provide for severance compensation upon termination of
employment, with the amount and type of compensation contingent upon the context
of the termination. For example, if employment is terminated by the Company
other than "for cause" (as defined in the agreement), the employee is entitled
to a lump sum payment of twelve months of the then-current base salary,
continued benefits coverage for twelve months and vesting of any stock options
held for exercise within twelve months. If the employment is instead terminated
by the Company "for cause", the employee is entitled only to compensation and
benefits earned or vested as of the date of termination. And if the employee
terminates the agreement with notice, he or she is entitled to an amount equal
to one month's base salary and continuation of benefits coverage for three
months.
3
<PAGE> 5
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 or
termination of employment, he may not carry on or be engaged in any endeavor in
competition, in whole or in part, with the Company. In the event of termination
by the Company other than "for cause," Mr. Ankcorn is entitled to three years
severance compensation, including a lump sum salary payment and continued
benefits coverage. If the Company fails to renew the agreement, he is entitled
to a lump sum payment of his most recent annual base salary.
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, 1998, 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 as discussed below.
Mr. Kevin Duffy, an officer of the Company during 1998, and his wife
made purchases of the Company's common stock and failed to timely report these
holdings. Mr. Duffy did update his holdings on Form 5 in February 1999. Dr.
Robinson, a director of the Company did not report a purchase of the Company's
common stock by his wife during 1998. Dr. Robinson made the required filing in
April 1999.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or
other compensation during fiscal years ended December 31, 1998, 1997 and 1996
for the Company's Chief Executive Officers and the persons who, at December 31,
1998, were the other four most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers").
4
<PAGE> 6
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
LONG-TERM
COMPENSATION
AWARDS
-------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SARS(#)(1) COMPENSATION(2)
- --------------------------- ---- ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Mitchell, M.D., Ph.D. 1998 $252,083 $ 0 $ 0 600,000 $114,257
Chairman of the Board, 1997 N/A N/A N/A N/A N/A
President and Chief 1996 N/A N/A N/A N/A N/A
Executive Officer
William C. O'Neil, Jr. 1998 103,125 0 0 0 700,194
Chairman of the Board, 1997 275,000 0 0 10,000 14,213
President and Chief 1996 250,000 50,000 0 0 14,291
Executive Officer(3)
Paul J. Ottaviano 1998 240,000 0 0 15,000 12,375
Executive Vice President - 1997 240,000 0 0 15,000 12,102
Worldwide Operations 1996 220,000 30,000 0 0 12,135
William S. Shaw, MB,ChB 1998 240,336 0 0 20,000 125,202
President - Europe/Asia 1997 N/A N/A N/A N/A N/A
Pacific 1996 N/A N/A N/A N/A N/A
Neil M. Frazer, MB, ChB, FRCA 1998 170,000 19,285 0 0 8,280
President, Americas 1997 N/A N/A N/A 20,000 N/A
1996 N/A N/A N/A N/A N/A
Michael F. Ankcorn 1998 166,140 85,020 0 20,250 57,952
ClinTrials BioResearch Ltd. 1997 173,232 72,829 0 20,250 79,340
Chairman, President and 1996 67,494 19,880 0 0 9,238
Chief Executive Officer(4)
</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.
5
<PAGE> 7
(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 overseas
employees, 401(k) plan Company matching contributions at 33% of U.S.
participant's voluntary deduction, severance, and car allowances. The
amounts represented by each of those forms of compensation for 1998 are
as follows:
<TABLE>
<CAPTION>
PROFIT SHARING
401(K)/
INSURANCE PENSION PLAN CAR
PREMIUM CONTRIBUTIONS RELOCATION SEVERANCE ALLOWANCE
------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Jerry R. Mitchell, M.D. $ 1,969 $ 8,954 $103,334 $ 0 $ 0
William C. O'Neil, Jr. 1,316 3,300 0 695,578 0
Paul J. Ottaviano 1,575 10,800 0 0 0
William L. Shaw, MB, ChB 7,296 64,397 33,364 0 20,145
Neil M. Frazer, MB, ChB, FRCA 780 7,500 0 0 0
Michael F. Ankcorn 4,163 44,590 0 0 9,199
</TABLE>
(3) Effective February 1, 1998, Mr. O'Neil resigned as President and Chief
Executive Officer. Effective May 11, 1998, Mr. O'Neil resigned as
Chairman of the Board of Directors but remained a Director. Effective
February 17, 1999, Mr. O'Neil resigned as a Director.
(4) ClinTrials BioResearch Ltd. was acquired by the Company on July 31,
1996. Mr. Ankcorn's 1996 compensation information includes compensation
from that date forward.
6
<PAGE> 8
The tables below provide 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, 1998.
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/ EXERCISE MARKET PRICE APPRECIATION FOR
OPTIONS/ SARS GRANTED OF BASE PRICE ON OPTIONS TERM(2)(3)
SARS TO EMPLOYEES IN PRICE DATE OF EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) GRANT DATE 5% 10%
- ---- ---------- ----------- --------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry R, Mitchell, M.D., Ph.D.(4)(5) 300,000 --% $3.25 $3.25 1/30/04 $ 245,421 $ 594,346
250,000 -- 3.25 3.25 1/30/08 423,691 1,102,232
50,000 -- 3.25 3.25 9/08/08 122,557 291,405
------- ---- --------- ---------
Total 600,000 41.0 791,669 1,987,983
======= ==== ========= =========
Paul J. Ottaviano 15,000 1.0 5.00 5.00 7/30/08 47,167 119,531
William L. Shaw, MB, ChB 20,000 1.4 6.81 6.81 1/06/08 85,693 217,163
Michael F. Ankcorn 20,250 1.4 5.00 5.00 7/30/08 63,676 161,366
</TABLE>
(1) All options granted to the Named Executive Officers are exercisable in
four equal annual installments beginning one year after the date of
grant. This per share exercise price represents the fair market value
of the Common Stock on the date of grant except for the grants that
represent repriced options for which the exercise price is $3.25 (see
Note 4 below).
(2) Potential realizable value is calculated from a stock price equal to
the exercise or base price of the options granted.
(3) The potential realizable values illustrate values that might be
realized upon exercise immediately prior to the expiration of the term
of these options using 5% and 10% appreciation rates, as required by
the Securities and Exchange Commission, compounded annually. These
values do not, and are not intended to, forecast possible future
appreciation, if any, of the Company's stock price. Additionally, these
values do not take into consideration the provisions of the options
providing for vesting over a period of years or termination of options
following termination of employment.
(4) Grants represent the Company's repricing of previously granted options
or warrants. The repricing was effective September 4, 1998 (see Item
13, "CERTAIN TRANSACTIONS").
(5) Consists of warrants to purchase shares with terms similar to options
(see Item 13, "CERTAIN TRANSACTIONS").
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SECURITIES OPTIONS/SARS /SARS
UNDERLYING VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
OPTIONS/SARS REALIZED --------------------------- ---------------------------
NAME EXERCISED(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Mitchell, M.D., Ph.D. 0 $ 0 0 600,000 $ 0 $ 412,800
William C. O'Neil, Jr.(2) 0 0 388,750 11,250 1,345,500 0
Paul J. Ottaviano 0 0 63,750 33,750 8,735 0
William L. Shaw, MB, ChB 0 0 0 20,000 0 0
Neil M. Frazer, MB, ChB, FRCA 0 0 5,000 15,000 0 0
Michael F. Ankcorn 0 0 10,126 30,374 0 0
</TABLE>
(1) This amount represents the aggregate of the number of options
multiplied by the difference between $3.94, the fair market value of
the Common Stock at December 31, 1998, and the exercise price for that
option.
(2) Effective February 1, 1998, Mr. O'Neil resigned as President and Chief
Executive Officer. Effective May 11, 1998, Mr. O'Neil resigned as
Chairman of the Board of Directors but remained a Director. Effective
February 17, 1999, Mr. O'Neil resigned as a Director.
7
<PAGE> 9
COMPENSATION OF DIRECTORS
Non-employee directors owning less than 5% of the Company's outstanding
Common Stock (Mr. Nelson 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.
On February 6, 1998, the Company's board of directors approved the
adoption of the Company's 1998 Non Qualified Stock Option Plan for Directors
(the "1998 Director Option Plan"). The 1998 Director Option Plan was approved by
the Company's shareholders on May 11, 1998. The 1998 Director Option Plan is a
formula plan under which options to acquire 10,000 shares of the Company's
common stock are to be initially granted to each director of the Company who is
not an employee and does not beneficially own more than 2.5% of the Company's
outstanding stock upon the date of initial election to the board of directors.
Directors are automatically eligible to receive annual grants of options to
acquire 1,000 shares of the Company's common stock. At December 31, 1998, there
were 18,000 options outstanding under this plan, all of which were granted in
1998 at exercise prices between $2.81 and $3.63. At December 31, 1998, there
were 182,000 shares available for grant.
OPTION REPRICING
In September 1998, the Board of Directors voted to reduce the exercise
price of the options and warrants held by Dr. Mitchell due to the general
decline in the stock market and the decline in the market price of the Company's
Common Stock. The options and warrants originally had exercise prices ranging
from $7 to $13 per share and the exercise price on all of them was reduced to
$3.25 per share, the closing price from the Common Stock on the date of
repricing. The Board felt that the market price of the Company's Common Stock
had fallen to a point so far below the average exercise price of the options and
warrants that they were no longer serving as compensatory or incentive tools.
The Board also felt that the reduction in the market price of the Company's
Common Stock was more a result of general economic trends and was not the fault
of Dr. Mitchell. The Board believed that the repricing of the options and
warrants was in the best interest of the Company and will serve to retain and
motivate Dr. Mitchell.
The following table sets forth information concerning options or
warrants granted to any executive officer of the Company for which the exercise
price was adjusted since the Company's incorporation in 1989. The repricing was
unanimously approved by the Board of Directors, except for Dr. Mitchell and Mr.
Parfet, who each abstained from voting.
TEN-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES OPTION
UNDERLYING MARKET PRICE EXERCISE TERM
OPTIONS/ OF STOCK AT PRICE REMAINING
SARS TIME OF AT TIME OF NEW AT DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
- ---- ---- ---------- ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Mitchell, M.D., Ph.D. 9/4/98 300,000 $3.25 $7 to $13 $3.25 3.4 years
Chairman of the Board,
President and Chief
Executive Officer
Jerry R. Mitchell, M.D., Ph.D. 9/4/98 250,000 3.25 7.00 3.25 9.4 years
Michael F. Ankcorn 4/18/97 20,250 7.63 22.00 8.38 9.3 years
ClinTrials BioResearch Ltd.
Chairman of the Board,
President and Chief
Executive Officer
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
</TABLE>
(1) Dr. Kanarek resigned from the Company effective April 2, 1998.
(2) Dr. Siemens resigned from the Company effective January 31,
1998.
8
<PAGE> 10
The foregoing report on option repricing is provided by the Board of
Directors:
Edward G. Nelson Irwin B. Eskind, M.D.
Roscoe R. Robinson, M.D. Richard J. Eskind
COMPENSATION COMMITTEE REPORT
Recommendations on compensation for the Company's executive officers
are made to the Company's Board of Directors by the Compensation and Stock
Option Committee (the "Committee"). 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 contract research organization ("CRO") industry,
pharmaceutical industry, and other 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 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 1998
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 its local markets, the CRO industry, the pharmaceutical industry, and other
related health service industries. In determining base compensation for the
executive officers for fiscal 1998, 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 contribution of each executive. For
9
<PAGE> 11
those executive officers with employment agreements, the base salaries were
determined according to the terms of the respective employment agreements. In
addition, Mr. Anckorn's base salary is set in terms of Canadian dollars and is
accordingly subject to change annually as expressed in U.S. dollars based on
fluctuation in currency exchange rates.
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 1989 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.
Stock options are granted to executive officers by the Board of Directors 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 1998, 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
1998 (subject to certain limitations). Mr. Ankcorn and Dr. Shaw are the sole
participants in separate supplemental retirement plans, for which contributions
are actuarially determined.
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 1999.
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.
Dr. Mitchell was hired as CEO in January of 1998, and his compensation
package for 1998 was the result of negotiation between Dr. Mitchell and the
Company in connection with his retention by the Company. For 1998, Dr. Mitchell
received a base salary of $252,083. Dr. Mitchell also received warrants to
purchase 300,000 shares of the Company's common stock at an exercise price
(after re-pricing) of $3.25 per share, and stock options to purchase 300,000
shares of the Company's common stock pursuant to the Company's 1989 Stock Option
Plan. Finally, Dr. Mitchell received other compensation valued at $114,257.
In approving Dr. Mitchell's compensation package, the Board of
Directors considered factors such as the compensation package of its outgoing
CEO, compensation packages for CEOs of comparable companies, and, most
importantly, its judgment as to Dr. Mitchell's anticipated value to the Company
based on his business experience and expertise in the industry.
10
<PAGE> 12
The foregoing report on executive compensation is provided by the
following directors, who constituted the Compensation and Stock Option Committee
during 1998:
Edward G. Nelson, Chairman of Committee
Irwin B. Eskind, M.D.
Roscoe R. Robinson, M.D.
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.
COMPANY PERFORMANCE
The following graph sets forth the yearly percentage change in
cumulative total stockholder return during the preceding five years ended
December 31, 1998 on (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.
[CHART]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
ClinTrials Research 100.0 73.5 158.8 267.6 92.6 46.3
Nasdaq Stock Market (US Companies) 100.0 97.8 138.3 170.0 208.6 293.2
Nasdaq Health Services Stocks 100.0 107.3 136.1 135.9 138.5 118.8
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ClinTrials is authorized to issue 50,000,000 shares of common stock. As
of March 31, 1999, there were 18,017,172 shares issued and outstanding.
The following table sets forth as of March 31, 1999, information with
respect to the beneficial ownership of ClinTrials' outstanding common stock by
(i) each director of ClinTrials, (ii) each named executive officer, (iii) all
directors and executive officers as a group, and (iv) each stockholder known by
ClinTrials to be the beneficial owner of more than 5% of its 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.
11
<PAGE> 13
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED (1)
----------------------
NAME AND ADDRESS NUMBER PERCENT
---------------- ------ -------
<S> <C> <C>
Richard J. Eskind**.......................................................... 1,709,632 9.5%
104 Lynwood Blvd.
Nashville, TN
Herbert J. Schulman, M.D..................................................... 1,330,745 7.4
109 Westhampton Place
Nashville, TN
Irwin B. Eskind, M.D.**...................................................... 1,328,064 7.4
541 Jackson Blvd.
Nashville, TN
Dimensional Fund Advisors Inc.(2)............................................ 1,286,200 7.1
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
William C. O'Neil, Jr. (3)................................................... 1,248,217 6.8
5035 Hill Place Drive
Nashville, TN 37205
Jerry R. Mitchell, M.D., Ph.D. ** (4)........................................ 137,500 *
Edward G. Nelson ** (5)...................................................... 97,211 *
William U. Parfet ** (6)..................................................... 75,000 *
Paul J. Ottaviano (7)........................................................ 71,250 *
Roscoe R. Robinson, M.D. **(8)............................................... 23,668 *
Michael F. Ankcorn (9)....................................................... 10,126 *
Neil M. Frazer, MB, ChB, FRCA(10)............................................ 5,000 *
William L. Shaw, MB, ChB (11)................................................ 5,000 *
All directors and executive officers as group (10 persons) (12).............. 3,462,451 18.9
.
</TABLE>
- ----------------
* Less than 1%
** Director
(1) Based on 18,017,172 shares of common stock outstanding at March 31,
1999. For purposes of this table, a person or group of persons is
deemed to have "beneficial ownership" of any shares as of March 31,
1999 that such person or group has the right to acquire within 60 days
after such date, or with respect to which such person otherwise has or
shares voting or investment power. For purposes of computing beneficial
ownership and the percentages of outstanding shares held by each person
or group of persons on a given date, shares which such person or group
has the right to acquire within sixty days after such date are shares
for which such person has beneficial ownership and are deemed to be
outstanding for purposes of computing the percentage for such person,
but are not deemed to be outstanding for the purpose of computing the
percentage of any other person.
(2) Share ownership data obtained solely from Schedule 13G filed in
February 1999.
(3) Includes 84,467 shares owned by Mr. O'Neil's wife. Mr. O'Neil disclaims
beneficial ownership of these shares. Also includes 391,250 shares
issuable upon the exercise of vested options.
(4) Includes 137,500 shares issuable upon the exercise of warrants and
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. Also includes 18,500
shares issuable upon the exercise of vested options.
(6) Includes 75,000 shares issuable upon the exercise of vested warrants.
(7) Includes 71,250 shares issuable upon the exercise of vested options.
(8) Includes 2,168 shares owned by Dr. Robinson's wife. Dr. Robinson
disclaims beneficial ownership of these shares. Also includes 21,500
shares issuable upon the exercise of vested options.
(9) Includes 10,126 shares issuable upon the exercise of vested options.
(10) Includes 5,000 shares issuable upon the exercise of vested options.
(11) Includes 5,000 shares issuable upon the exercise of vested options.
(12) Includes 343,876 shares issuable upon the exercise of warrants and
vested options.
12
<PAGE> 14
ITEM 13. CERTAIN TRANSACTIONS
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, and Mr. Parfet is a director 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. Mitchell at exercise prices of $7.00, $9.00, $11.00 and $13.00
per share. On September 4, 1998, all of these warrants were repriced at $3.25
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 (see Item 11,
"Option Repricing"). 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 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 Mr. Parfet at exercise prices of $7.00, $9.00, $11.00 and $13.00 per
share. On September 4, 1998, all of these warrants were repriced at $3.25 per
share (see Item 11, "Option Repricing"). 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.
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CLINTRIALS RESEARCH INC.
By: /s/ JERRY R. MITCHELL April 27, 1999
Jerry R. Mitchell, M.D., Ph.D.
President and Chief Executive Officer, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934 this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
NAME TITLE DATE
- --------------------------------------------------------------------------------
/s/ S. COLIN NEILL Senior Vice President and April 27, 1999
S. Colin Neill Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ EDWARD G. NELSON Director April 27, 1999
Edward G. Nelson
/s/ RICHARD J. ESKIND Director April 27, 1999
Richard J. Eskind
/s/ IRWIN B. ESKIND Director April 27, 1999
Irwin B. Eskind, M.D.
/s/ ROSCOE R. ROBINSON Director April 27, 1999
Roscoe R. Robinson, M.D.
/s/ WILLIAM U. PARFET Director April 27, 1999
William U. Parfet
14
