SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X) Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EMBREX, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) 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: N/A
2) Form, Schedule, or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
EMBREX, INC.
1035 Swabia Court
Durham, North Carolina 27703
__________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
__________________________________________________
To Be Held on May 15, 1997
To Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of Embrex, Inc. (the "Company") which will be held on Thursday,
May 15, 1997 at 9:00 a.m., local time, at the North Carolina Biotechnology
Center, 15 Alexander Drive, Research Triangle Park, North Carolina, for the
following purposes:
(1) To elect a Board of Directors of the Company for the ensuing
year.
(2) To ratify the action of the Board of Directors in appointing
Ernst & Young LLP as independent accountants for the
fiscal year ending December 31, 1997.
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournments of the meeting.
Shareholders of record at the close of business on March 21,
1997 are entitled to notice of and to vote at the Annual Meeting and any and
all adjournments of the meeting.
IT IS DESIRABLE THAT YOUR SHARES OF STOCK BE REPRESENTED AT THE
MEETING REGARDLESS OF THE NUMBER OF SHARES YOU MAY HOLD. EVEN THOUGH YOU MAY
PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING YOU MAY REVOKE
YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors
/s/ Don T. Seaquist
Don T. Seaquist
Secretary
Durham, North Carolina
April 23, 1997
<PAGE>
EMBREX, INC
1035 Swabia Court
Durham, North Carolina 27703
--------------------
PROXY STATEMENT
--------------------
Annual Meeting of Shareholders to be held May 15, 1997
SOLICITATION AND VOTING RIGHTS
This Proxy Statement and the accompanying proxy card are being mailed
to shareholders on or about April 23, 1997, in connection with the solicitation
of proxies by the Board of Directors of Embrex, Inc. (the "Company") for use at
the Annual Meeting of Shareholders (the "Annual Meeting") to be held at the
North Carolina Biotechnology Center, 15 Alexander Drive, Research Triangle Park,
North Carolina, on May 15, 1997 at 9:00 a.m., local time, and at all
adjournments of the meeting. All expenses incurred in connection with this
solicitation, including postage, printing, handling, and the actual expenses
incurred by custodians, nominees, and fiduciaries in forwarding proxy material
to beneficial owners, will be paid by the Company. In addition to solicitation
by mail, certain officers, directors, and employees of the Company, who will
receive no additional compensation for their services, may solicit proxies by
telephone, personal communication or other means. Corporate Election Services
has been engaged by the Company to tabulate the proxy voting. In addition, Hill
and Knowlton, Inc. will solicit delinquent proxies or request resubmission of
proxies which are received by the Company unsigned or improperly completed. The
aggregate fees to be paid to Corporate Election Services and Hill and Knowlton,
Inc. are not expected to exceed $7,500.
The purposes of the Annual Meeting are to: (1) elect six nominees to
the Board of Directors; (2) ratify the action of the Board of Directors in
appointing Ernst & Young LLP as independent accountants for the fiscal year
ending December 31, 1997; and (3) transact such other business as may properly
come before the Annual Meeting or any adjournments of the meeting. The Board of
Directors knows of no other matters other than those stated above to be brought
before the Annual Meeting or any adjournments of the meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted by filing with the Secretary of
the Company written notice of revocation, provided such notice is actually
received prior to the vote of shareholders, by duly executing and filing a
subsequent proxy with the Secretary of the Company before the vote of
shareholders, or by attending the Annual Meeting and voting in person. If the
accompanying proxy card is properly signed and returned, the proxy and the
shares of the Company represented by the proxy will be voted in the manner
directed in the proxy card. If no direction is made, the proxy and such shares
will be voted in favor of the proposals set forth in the accompanying proxy card
and described in this Proxy Statement and in such manner as the proxyholders
named on the accompanying proxy card in their discretion determine upon such
other business as may properly come before the meeting or any adjournment
thereof.
The Board of Directors has fixed the close of business on March 21,
1997 as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Annual Meeting and all adjournments of the
meeting. As of the close of business on February 28, 1997, there were 8,047,054
shares of Common Stock of the Company outstanding and entitled to vote. On all
matters to come before the Annual Meeting, each holder of Common Stock will be
entitled to one vote for each share held. The presence at the Annual Meeting, in
person or by proxy, of the holders of a majority of the shares entitled to vote
at the meeting will constitute a quorum.
<PAGE>
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of February 28,
1997, regarding shares of Common Stock of the Company owned of record or known
to the Company to be owned beneficially by each director and nominee for
director, each executive officer named in the Summary Compensation Table herein,
and all directors and such executive officers as a group. Except as indicated in
the footnotes to this table, each of the persons named in the table has sole
voting and investment power with respect to the shares beneficially owned by
such person. The address of the directors, nominees and executive officers is
the Company's address.
SHARES
NAME BENEFICIALLY OWNED(1) PERCENT OF CLASS
Randall L. Marcuson 134,064(2) 1.6%
Charles E. Austin 82,467(3) 1.0%
Lester M. Crawford, DVM, Ph.D. 16,500(4) *
Stephen Hartogensis 19,500(5) *
Kenneth N. May, Ph.D. 26,000(6) *
Arthur M. Pappas 29,500(7) *
Don T. Seaquist 549 *
Rick L. Ryan, Ph.D. 200 *
Catherine A. Ricks, Ph.D. 52,500(8) *
Brian V. Cosgriff 6,467(9) *
All Directors and Executive Officers 367,747(10) 4.4%
as a Group (10 Persons)
- - ---------------------------
*Less than one percent
(1) The shares of Common Stock and voting rights owned by each person or by
all directors and executive officers as a group, and the shares
included in the total number of shares of Common Stock outstanding used
to determine the percentage of shares of Common Stock owned by each
person and such group, have been adjusted in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended, to reflect the
ownership of shares issuable upon exercise of outstanding options,
warrants or other common stock equivalents which are exercisable within
60 days. As provided in such Rule, such shares issuable to any holder
are deemed outstanding for the purpose of calculating such holder's
beneficial ownership but not any other holder's beneficial ownership.
(2) Includes 662 shares of Common Stock owned jointly by Mr. Marcuson and
his children, and 132,395 shares of Common Stock subject to
exercisable options.
(3) Includes 20,000 shares of Common Stock subject to exercisable options.
(4) All shares subject to exercisable options.
(5) Includes 11,500 shares of Common Stock subject to exercisable options.
(6) Includes 15,000 shares of Common Stock subject to exercisable options.
(7) Includes 11,500 shares of Common Stock subject to exercisable options.
(8) Includes 52,300 shares of Common Stock subject to exercisable options
owned by Dr. Ricks, and 100 shares of Common Stock owned by Dr. Ricks'
spouse.
2
<PAGE>
(9) Includes 6,250 shares of Common Stock subject to exercisable options.
(10) Includes 239,870 shares of Common Stock subject to exercisable options.
In addition, the following table sets forth certain information as to
each person known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock as of February 28, 1997.
NAME AND ADDRESS OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
Mohamed Abdulmohsin Al Kharafi 629,500(1) 7.8%
& Sons W.L.L.
P.O. Box 886 Safat
13009 Safat Kuwait
- - ------------------------------
(1) The Company received a Schedule 13D from Mohamed Abdulmohsin Al Kharafi
& Sons W.L.L. ("Kharafi") dated May 15, 1996 which indicated that
between February 26, 1996 and May 14, 1996 Kharafi had sold an
aggregate of 138,000 shares, reducing its holdings to 629,500 shares.
Kharafi indicated in the Schedule 13D that it holds the Company's
Common Stock as an equity investment.
MANAGEMENT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
<S> <C> <C>
Randall L. Marcuson 48 President, Chief Executive Officer and Director
Don T. Seaquist 48 Vice President, Finance and Administration
Rick L. Ryan, Ph.D. 48 Vice President, Global Commercial Development
Catherine A. Ricks, Ph.D. 50 Vice President, Research and Development
Brian V. Cosgriff 44 Vice President, Sales and Marketing
V. Hayes Fenstermacher 61 Vice President, Manufacturing Services
David M. Baines, Ph.D. 49 Vice President (also, Managing Director, Embrex
Europe Limited)
</TABLE>
RANDALL L. MARCUSON joined the Company on January 1, 1990 as President
and Chief Executive Officer and a director. Prior to coming to the Company, Mr.
Marcuson was Vice President, Animal Health Products for the International
Agricultural Division of American Cyanamid. Mr. Marcuson joined American
Cyanamid in 1984 after 10 years of domestic and international marketing
experience with Monsanto Agricultural Products Company. Mr. Marcuson holds a
B.A. degree in international relations from the University of Kansas.
3
<PAGE>
CATHERINE A. RICKS, PH.D. joined the Company in 1989 as Vice President,
Research and Development. Prior to joining the Company, Dr. Ricks was Manager of
Animal Industry Discovery and Biotechnology for American Cyanamid. During her 10
years with American Cyanamid she managed a variety of research programs directed
at increasing livestock productivity. She holds a B.S. in botany and an M.S. in
plant physiology from London University, London, England, and a Ph.D. in dairy
science from Michigan State University, and is an Adjunct Professor in animal
science at Rutgers University and in poultry science at North Carolina State
University.
DON T. SEAQUIST joined the Company in September 1996 as Vice President,
Finance and Administration. Prior to joining the Company, Mr. Seaquist was Vice
President and Treasurer of Greyhound Lines, Inc. from February 1990 to January
1995. Previously, Mr. Seaquist was Managing Director of Trinity Litchfield
Group, an investment firm, Vice President and Treasurer of Horsehead Industries,
an international manufacturing company, and Manager of International Corporate
Finance for United Technologies Corporation. Mr. Seaquist holds a B.S.B.A. in
Management from Georgetown University and an MBA in Finance and Marketing from
Columbia University.
RICK L. RYAN, PH.D. joined the Company in September 1996 as Vice
President, Global Commercial Development. Previously, Dr. Ryan was Director,
International Markets for a unit of Monsanto Company. While at Monsanto, from
December 1981 to August 1996, Dr. Ryan also held positions as Manager of
Research and Development, Product Development Director, Commercial Development
Director, and Director Strategic Planning. Dr. Ryan holds a Ph.D. in
Biochemistry from the University of Illinois and an MBA from Washington
University (St. Louis).
BRIAN V. COSGRIFF joined the Company in September 1995 as Vice
President, Sales and Marketing. Prior to joining the Company, Mr. Cosgriff was
with SmithKline Beecham for approximately nine years, where he served in various
capacities, including Director of Strategic Product Development for that firm's
Animal Health business, Director of Business Development and Planning in the
United States, and as Sales Director in Australia. Mr. Cosgriff has also worked
for Monsanto Australia, Ltd. and Merck Sharp & Dohme, New Zealand. Mr. Cosgriff
holds a B.S. degree in biology and economics from the University of Canterbury,
Christchurch, New Zealand and an advanced degree in marketing from the
University of New South Wales in Sydney, Australia.
V. HAYES FENSTERMACHER was appointed Vice President, Manufacturing
Services in July 1996. He joined the Company in 1991 as Director of Engineering.
Prior to coming to the Company, Mr. Fenstermacher was Director of Manufacturing
Services for The Cooper Tools Division of Cooper Industries. He holds a B.S.
degree in metallurgy from the University of Delaware. Prior to joining Cooper,
Mr. Fenstermacher held various positions with Bethlehem Steel.
DAVID M. BAINES, PH.D. was appointed Vice President of Embrex, Inc. in
June 1995. Dr. Baines joined the Company as Managing Director of Embrex Europe
Limited in April 1993, and continues to serve the Company in this capacity as
well. Prior to this, Dr. Baines served as a consultant to the Company. Before
his affiliation with Embrex, Dr. Baines had a 23-year career with Rhone Merieux,
a subsidiary of Rhone-Poulanc. Dr. Baines served as Chief Executive of Rhone
Merieux's United Kingdom animal health subsidiary, and before that as General
Manager of its operations in New Zealand. Dr. Baines began his career as a
development and senior research scientist for Rhone Merieux, and holds a B.Sc.
degree in Zoology from Reading University and a Ph.D. degree in Entomology from
London University.
4
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the authority granted by the Company's bylaws, the Board of
Directors of the Company has established the number constituting the Board of
Directors for the ensuing year to be six. The proxies cannot be voted for a
greater number of persons than the number of nominees named, and any seat not
filled at the Annual Meeting may be filled as a vacancy by the Board of
Directors. Each of the nominees currently serves as a director of the Company.
The nominees for election as directors are named and certain other information
is provided below:
<TABLE>
<CAPTION>
FIRST YEAR ELECTED
NAME POSITION WITH COMPANY AGE DIRECTOR
<S> <C> <C> <C>
Randall L. Marcuson President, Chief Executive Officer, 48 1990
and Director
Charles E. Austin (1) Chairman of the Board of 69 1986
Directors
Lester M. Crawford, DVM, Ph.D.(2) Director 59 1993
Stephen Hartogensis (2) Director 65 1995
Kenneth N. May, Ph.D.(1) Director 66 1989
Arthur M. Pappas (1)(2) Director 49 1995
</TABLE>
- - ------------------------------
(1) Member of the Compensation Committee of the Board.
(2) Member of the Audit Committee of the Board.
RANDALL L. MARCUSON'S biographical information is included under
MANAGEMENT in this Proxy Statement.
CHARLES E. AUSTIN has served as a director of the Company since 1986.
Prior to his retirement in January 1988, Mr. Austin was with American Cyanamid
Company for 25 years, the last 10 years as a corporate officer. He served in a
variety of senior management positions including responsibility for American
Cyanamid's worldwide agricultural business. Mr. Austin serves as a director of
MGI Pharma, Inc., Cytogen Corporation, and Hyal Pharmaceutical Corporation and
as a board member or advisor to other private biotechnology companies. He is on
the advisory council of Domain Partners, L.P. and Founders Court, a leveraged
buy-out firm. He received his B.S. and M.S. degrees in agronomy at the
University of Illinois.
LESTER M. CRAWFORD, DVM, PH.D. became a director of the Company on
January 28, 1993. Dr. Crawford has been Executive Director for the Association
of American Veterinary Medical Colleges since August 1993 and was Executive Vice
President for Scientific Affairs of the National Food Processors Association
from August 1991 until July 1993. From 1987 to 1991 he was Administrator of the
Food Safety and Inspection Service, U.S. Department of Agriculture (USDA). Prior
to joining the USDA, Dr. Crawford served as Director of the Center for
Veterinary Medicine, Food and Drug Administration and in various positions at
the University of Georgia, including Head, Department of
Physiology-Pharmacology. Early in his career he worked in research and
development for American Cyanamid and in private veterinary practice. Dr.
Crawford holds a Doctor of Veterinary Medicine degree from Auburn University, a
Ph.D. in Pharmacology from the University of Georgia and received an honorary
doctorate from Budapest University in 1987. He was elected a member of the
French Academy of Veterinary Medicine in 1984.
5
<PAGE>
STEPHEN HARTOGENSIS has served as a director of the Company since July
1995. Mr. Hartogensis currently serves as a senior consultant to FINCOM, Inc., a
Philadelphia-area mergers and acquisitions advisory firm. Mr. Hartogensis
retired from SmithKline Beecham in 1992, where he served as Chief Financial
Officer of that firm's Animal Health Division for 10 years. Mr. Hartogensis also
served in other capacities, including as Vice President, International, at
SmithKline's Branson Sonic Power Company business unit and as Group Controller
at SmithKline Ultrasonic Products. Mr. Hartogensis holds a B.S. degree in
finance from Lehigh University.
KENNETH N. MAY, PH.D. has served as a director of the Company since
1989. Dr. May retired in August 1989 as Chairman, Chief Executive Officer and a
director of Holly Farms Foods, Inc., completing 19 years with that company. Dr.
May began his career with Holly Farms as Director of Research and Quality
Assurance and subsequently became Vice President of that function. Prior to
joining Holly Farms, Dr. May held positions as Professor of Poultry Science at
Mississippi State University and the University of Georgia. He holds B.S. and
M.S. degrees in poultry science from Louisiana State University and a Ph.D. in
food technology from Purdue University. He also holds an honorary doctorate of
agriculture from Purdue University. Dr. May is a scientific advisor for and a
director of Hudson Foods, Inc. and is a technical advisor and consultant to the
National Broiler Council on food safety matters. Dr. May also is a director of
Alcide Corporation. Dr. May has been active in the Poultry and Egg Institute,
the Poultry Science Association, and the National Broiler Council and has served
on various committees for the USDA.
ARTHUR M. PAPPAS has been a director of the Company since September
1995. Mr. Pappas is Chairman and Chief Executive Officer of A.M. Pappas &
Associates, Inc., an international management and consulting services company
and investor in high technology and life science industries. Mr. Pappas
previously served as a director on the Board of Glaxo Holdings plc with
executive and Board responsibilities for operations in Asia Pacific, Latin
America and Canada. Mr. Pappas has served as a director of Quintiles
Transnational Corp. and GeneMedicine since September 1994 and January 1995,
respectively. Mr. Pappas' 25 years of experience in the health care industry
also includes positions with Merrell Dow Pharmaceuticals and Abbott Laboratories
International, Inc. Mr. Pappas received a B.S. degree in Biology from Ohio State
University and an M.B.A. in Finance from Xavier University.
The Board of Directors has no reason to believe that the persons named
above as nominees for directors will be unable or will decline to serve if
elected. However, in the event of death or disqualification of any nominee or
refusal or inability of any nominee to serve, it is the intention of the
proxyholders named in the accompanying proxy card to vote for the election of
such other person or persons as the proxyholders determine in their discretion.
In no circumstance will the proxy be voted for more than six nominees. Properly
signed and returned proxies, unless revoked, will be voted as directed by the
shareholder or, in the absence of such direction, will be voted in favor of the
election of the recommended nominees.
Under North Carolina law, directors are elected by a plurality of the
votes cast by the holders of the Common Stock of the Company at a meeting at
which a quorum is present. "Plurality" means that the individuals who receive
the largest number of votes cast, even if less than a majority, are elected as
directors up to the maximum number of directors to be chosen at the meeting.
Consequently, any shares not voted (whether by abstention, broker nonvote or
otherwise) have no impact in the election of directors except to the extent the
failure to vote for an individual results in another individual receiving a
larger number of votes. All directors hold office until the next annual meeting
of the Company's shareholders and until the election and qualification of their
successors.
6
<PAGE>
DIRECTOR ATTENDANCE AND BOARD COMMITTEES
During the last fiscal year, the Board of Directors met six times. Each
director who served as a director during the last fiscal year attended all of
the Board meetings and the committee meetings of the Board of which the director
was a member, except that Dr. Crawford was unable to attend the Board and
committee meetings in November 1996.
The Board of Directors has two standing committees, an Audit Committee
and a Compensation Committee. The members of these committees are identified in
the table above.
The Audit Committee is responsible for reviewing the scope, results and
effectiveness of the Company's internal accounting controls and the audits by
the Company's independent public accountants. Also, the Audit Committee
recommends to the Board the engagement of independent auditors. During 1996, the
Audit Committee held three meetings.
The Compensation Committee recommends to the Board of Directors
compensation arrangements for certain employees and directors and is responsible
for the administration of certain of the Company's compensation plans.
Specifically, the Compensation Committee administers the Company's incentive and
nonstatutory stock option plans and employee stock purchase plan. During 1996,
the Compensation Committee held three meetings.
The Company does not have a nominating committee of the Board of
Directors. The Board performs the functions that might be performed by such a
committee. Presently, the Board of Directors does not have a policy or procedure
restricting or limiting shareholder recommendations for nominees to the Board.
COMPENSATION OF DIRECTORS
Non-officer directors receive a $6,000 annual retainer, payable $1,500 each
calendar quarter, and $750 per Board of Directors or committee meeting attended,
plus expenses. No compensation is paid for committee meetings held on the same
day as or on days contiguous to the date of a Board of Directors meeting.
Non-officer directors also are eligible to receive nonstatutory stock option
grants pursuant to the Company's Incentive Stock Option and Nonstatutory Stock
Option Plan (June 1993), and 1989 and 1991 Nonstatutory Stock Option Plans.
During the fiscal year ended December 31, 1996, each non-officer director of the
Company received options to purchase 5,000 shares of Common Stock at an exercise
price of $6.875.
7
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth a summary of compensation earned by or
paid to the Company's Chief Executive Officer and the next four most highly
compensated executive officers of the Company who served in such capacities on
December 31, 1996, for services rendered during the fiscal years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL LONG TERM COMPENSATION
PRINCIPAL POSITION COMPENSATION (1)(2) SECURITIES UNDERLYING OPTIONS (#)
YEAR SALARY
<S> <C> <C> <C>
Randall L. Marcuson 1996 $185,000 35,000
President and Chief 1995 $175,000 51,000
Executive Officer 1994 $160,000 25,100
Don T. Seaquist 1996 $135,000(3) 34,500
Vice President, Finance
and Administration
Rick L. Ryan, Ph.D. 1996 $130,000(4) 33,000
Vice President, Global
Commercial Development
Catherine A. Ricks, Ph.D. 1996 $125,500 12,500
Vice President, Research 1995 $122,500 7,000
and Development 1994 $117,500 12,100
Brian V. Cosgriff 1996 $125,000 10,000
Vice President, Sales and 1995 $125,000 25,000
Marketing
</TABLE>
- - -------------
(1) No executive officer of the Company received any personal benefits
other than those benefits available to all employees through
participation in employee benefit plans.
(2) Includes compensation that has been deferred under the Company's 401(k)
Retirement Savings Plan.
(3) Mr. Seaquist joined the Company in 1996, and the salary indicated is
the annual compensation rate. The actual amount of salary paid to
Mr. Seaquist in 1996 was $42,321.
(4) Dr. Ryan joined the Company in 1996, and the salary indicated is
the annual compensation rate. The actual amount of salary paid to
Dr. Ryan in 1996 was $47,333.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth stock options granted by the Company to the named
executive officers in the past fiscal year. No stock appreciation rights were
granted. The table also sets forth the hypothetical potential realizable values
that would exist for the options at the end of their ten-year terms, at assumed
rates of stock price appreciation of 5% and 10%. The actual value of the options
will depend on the market value of the Company's Common Stock. No gain to the
option holders is possible without an increase in the stock price, which will
benefit all shareholders proportionately. These potential realizable values,
based on 5% and 10% appreciation rates prescribed by the Securities and Exchange
Commission, are not intended to forecast possible future appreciation, if any,
of the Company's stock price.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM
------------------------------------------------------- -----------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE PER EXPIRATION
NAME GRANTED YEAR SHARE DATE 5%($) 10% ($)
- - ---- ------- ---- ----- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Don T. Seaquist 31,500 (2) 28.13% $6.250 9/9/06 $123,814 $313,768
Rick L. Ryan, Ph.D. 30,000 (2) 26.79% $6.375 8/26/06 $120,276 $304,803
</TABLE>
- - ------------------
(1) Historically, the Company has granted options to its executive officers
during the last quarter of the year. However, in 1996, the Company
changed this custom and did not grant any options in the last quarter
of 1996, but did grant options to executive officers in January 1997;
and the Company anticipates that for the foreseeable future any such
options will be granted in January, rather than the last quarter of the
year.
(2) The options granted are incentive stock options and become exercisable
25% per year commencing one year from the date of grant and are fully
exercisable four years from the date of grant. Payment of the exercise
price must be in cash, or at the discretion of the Compensation
Committee, in capital stock of the Company, by a note bearing interest
and payable in installments, or by any other lawful means. Generally,
the options granted must be exercised within 10 years from the date of
grant, but must be exercised within three months after termination of
the option holder's employment (for reasons other than disability or
death) and within one year after the option holder's disability or
death. These stock options include a provision that would accelerate
the vesting of the options upon a "change in control" of the Company.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (2)
<S> <C> <C>
Randall L. Marcuson 131,667/58,228 $318,088/$0
Don T. Seaquist 0/31,500 $0/$0
Rick L. Ryan, Ph.D. 0/30,000 $0/$0
Catherine A. Ricks, Ph.D. 52,300/13,000 $130,313/$0
Brian V. Cosgriff 6,250/18,750 $3,906/$0
</TABLE>
- - ----------------
(1) No options were exercised by executive officers in the last fiscal
year.
(2) Options are "In-the-Money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The value of the
options is calculated by subtracting the exercise price from $6.50, the
closing market price of the underlying Common Stock as of December 31,
1996.
EMPLOYMENT AGREEMENTS
All employees of the Company, including the executive officers named in the
above tables, have entered into employment agreements with the Company. Each
employment agreement provides for merit-based salary increases at the Board of
Directors' sole discretion and includes confidentiality and non-competition
provisions, as well as an ownership provision in the Company's favor for
techniques, discoveries and inventions arising during the term of employment.
Each employment agreement provides that the named executive officer serves at
the pleasure of the Company and does not state a term of employment. Each
agreement also provides that if the Company terminates the officer's employment
without cause, the officer will be entitled to receive an amount ranging from
one to one and one-half times the officer's annual compensation.
Each of the executive officers of the Company has entered into a Change in
Control Severance Agreement with the Company. Each of these agreements provides
that after a change in control of the Company, the officer will be entitled to
receive certain payments and benefits, including a payment equal to 2.9 times
the officer's annual compensation, if within two years the Company terminates
the officer's employment for reasons other than cause, disability or death or if
the employee terminates his employment for good reason, for example a change in
the employee's position, responsibilities, or salary. Also under such
circumstances, all stock options held by such officers immediately vest.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based on a
review of the report forms that were filed, the Company believes that during
1996 all filing requirements applicable to its executive officers and directors
were complied with.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
GENERAL
The Compensation Committee (the "Committee") reviews and makes recommendations
to the full Board of Directors regarding the overall compensation structure and
program of the Company including employee benefit and stock option plans. The
Committee serves also as the Stock Option Committee and approves (or recommends
to the full Board of Directors at its discretion) the grant of stock options
from the Company's various stock option plans. The Committee is composed
entirely of non-officer and non-employee directors.
EXECUTIVE COMPENSATION
The Company's policy is to pay its executives and other employees at rates
competitive with the national or local markets in which it must recruit to
enable the Company to maintain a highly competent and productive staff. The
Company competes for management personnel with many larger and more profitable
companies.
Compensation of executives consists of the same components as the compensation
of other Company employees: monthly salary, company paid fringe benefits
(consisting principally of group health and other insurance) and stock options.
Executives are paid salaries within a range established for their position.
Salary ranges for executive positions are established using the same process as
for other positions and job levels within the Company, i.e., by systematically
evaluating the position and assigning a salary range based on comparisons with
pay scales for similar positions in reasonably comparable companies using
regional and national salary surveys. Companies included in these salary surveys
will vary and are not necessarily the same as the companies used for purposes of
the performance graph included in this Proxy Statement. Presently, stock option
awards are the principal means for rewarding executives for good performance.
Adjustments to executive salaries are generally made annually along with
adjustments to other employee salaries. Adjustments to executive salaries other
than the Chief Executive Officer ("CEO") are recommended to the Committee by the
CEO based on an executive's performance during the preceding year, the
executive's salary relative to the salary range for the position, and the
competitive situation. That performance is measured based on the executive's
success in achieving goals established at the beginning of the year. Where
achievement of these goals cannot readily be measured objectively, the Committee
will exercise its subjective judgment in determining the degree to which goals
are achieved. Corporate performance also is considered by the Committee,
although it is not determinative of executive compensation because corporate
performance is best measured over longer periods of time.
CEO COMPENSATION
The CEO's compensation is recommended by the Committee to the full Board of
Directors based on the Committee's knowledge of the level appropriate to enable
the Company to remain competitive and retain top management.
In addition, the compensation of Mr. Randall L. Marcuson, President and Chief
Executive Officer, has been and is based on the Committee's subjective
assessment of his progress toward achieving Company objectives of profitability,
developing the INOVOJECT(R) egg injection system and other products, commercial
introduction of those products to the global poultry industry, establishing a
commercial presence in international markets, overall organizational
development, and enhancing long term shareholder value. In reaching this year's
recommendation, particular weight was given to the fact that the Company had
significantly increased its number of INOVOJECT(R) placements, strongly
increased revenues, and generated net income.
11
<PAGE>
STOCK OPTION GRANTS
Stock options are intended to enhance the long term proprietary interest in the
Company on the part of employees and others who can contribute to the Company's
overall success and to increase the value of the Company to its shareholders.
Generally all employees of the Company are eligible to receive annual stock
option grants. Guidelines are established for ranges of option grants based on
the salary ranges of various position levels within the Company. Guideline
ranges for stock option grants increase relative to cash compensation as
position levels increase, since the Committee believes that employees at higher
levels in the organization have a greater opportunity to influence and
contribute to shareholder value. The Committee may decide to award stock options
greater than the guideline amounts or more frequently than annually, if it
believes the recipient has made an exceptional contribution to the Company's
progress.
Stock options are also awarded upon hiring employees to fill certain senior
positions in the Company. The size of those awards are determined based on the
guidelines for annual awards for the position to be occupied by the new employee
and the competitive situation.
The process for determining amounts of stock option awards is based on the same
criteria as those used for determining adjustments to cash compensation,
although success in achieving performance goals is weighed more heavily in
determining stock option awards.
This report is submitted by the following members of the Compensation Committee
of the Board of Directors:
Charles E. Austin
Kenneth N. May, Ph.D.
Arthur M. Pappas
12
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the cumulative total shareholder return on the
Company's Common Stock over the five-year period ended December 31, 1996, with
the cumulative total return for the same period on the Nasdaq Composite (US)
Index and a peer group selected by the Company on a line-of-business basis (the
"Peer Group"). The companies in the Peer Group Index are the 17 companies
identified by BioCentury Publications Inc. in its "BioCentury, The Bernstein
Report on BioBusiness" under the industry grouping of
agbio/veterinary/environmental, as follows: Biosys Inc., Calgene Inc., Cantab
Pharmaceuticals plc, CytRx Corp., Dekalb Genetics Corp., DNAP Holding Corp.,
Draxis Health, Inc., Ecogen Inc., Ecoscience Corp., Energy Biosystems Inc.,
Envirogen Inc., Epitope Inc., Idexx Labs Inc., ImmuCell Corp., Mycogen Corp.,
Oxis International Inc., as well as the Company. Because certain companies in
the peer group used by the Company in the prior fiscal year have been acquired
or are otherwise no longer publicly traded or in existence, the Company has
selected this new Peer Group Index. The graph assumes that at the beginning of
the period indicated $100 was invested in the Company's Common Stock and the
stock of the companies comprising the Nasdaq Composite (US) Index and the Peer
Group Index, and that all dividends, if any, were reinvested.
(Graph appears here; data points are as set forth below)
COMPARISON OF CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
Embrex, Inc. $100.00 $106.90 $ 82.76 $ 84.48 $ 81.03 $ 89.66
Peer Group $100.00 $ 90.72 $ 85.36 $ 64.34 $104.14 $110.54
NASDAQ Composite (US) $100.00 $116.38 $133.59 $130.59 $184.67 $227.14
</TABLE>
13
<PAGE>
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Ernst & Young LLP has served as the independent accounting firm of the Company
since its inception. Pursuant to the recommendation of the Audit Committee, the
Board of Directors has appointed Ernst & Young LLP as independent accountants
for the fiscal year ending December 31, 1997. Although the selection and
appointment of independent accountants are not required to be submitted to a
vote of the shareholders, the Board of Directors desires to obtain shareholder
ratification of this appointment. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting and to be available to respond to
appropriate questions, and will be afforded an opportunity to make a statement.
MISCELLANEOUS
Upon written request made by any shareholder to Don T. Seaquist, Vice President
Finance and Administration and Corporate Secretary, Embrex, Inc., Post Office
Box 13989, Research Triangle Park, North Carolina 27709, a copy of the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, including the
financial statements, will be provided without charge.
SUBMISSION OF SHAREHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of shareholders at
the 1998 Annual Meeting of Shareholders and which such shareholders desire to
have included in the Company's proxy statement and form of proxy relating to
that meeting must be sent to the Company's principal executive offices, marked
to the attention of the Secretary of the Company, and received by the Company at
such offices on or before December 15, 1997. Proposals received after December
15, 1997 will not be considered for inclusion in the Company's proxy materials
for its 1998 Annual Meeting.
By Order of the Board of Directors
/s/ Don T. Seaquist
Don T. Seaquist
Secretary
April 23, 1997
14
<PAGE>
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APPENDIX
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<PAGE>
EMBREX, INC.
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1997
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Randall L. Marcuson and Don
T. Seaquist and each of them as attorney and proxy of the undersigned, each with
full power of substitution, to represent the undersigned and to vote all of the
shares of Common Stock in Embrex, Inc. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Company to be held
at the North Carolina Biotechnology Center, 15 Alexander Drive, Research
Triangle Park, North Carolina, on Thursday, May 15, 1997, at 9:00 a.m., local
time, and any adjournments of the meeting.
WHEN PROPERLY EXECUTED AND RETURNED, THIS PROXY AND THE SHARES REPRESENTED
HEREBY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO
DIRECTION IS MADE, THIS PROXY AND SUCH SHARES WILL BE VOTED FOR PROPOSALS 1 AND
2 SET FORTH BELOW AND DESCRIBED IN THE PROXY STATEMENT. THE UNDERSIGNED FURTHER
GIVES THE ABOVE-NAMED ATTORNEYS AND PROXIES THE AUTHORITY TO VOTE IN THEIR
DISCRETION UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING AND ANY ADJOURNMENTS OF THE MEETING. THIS PROXY MAY BE REVOKED PRIOR TO
ITS EXERCISE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS LISTED BELOW.
1. Election of Board of Directors:
<TABLE>
<S> <C>
[ ]FOR all nominees listed below (except as marked to the [ ]WITHHOLD AUTHORITY to vote for all nominees listed
contrary below). below.
</TABLE>
Charles E. Austin; Lester M. Crawford, DVM, Ph.D.; Stephen Hartogensis;
Randall L. Marcuson; Kenneth N. May, Ph.D.; Arthur M. Pappas
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
2. Ratify the action of the Board of Directors in appointing Ernst & Young LLP
as independent accountants for the Company for the fiscal year ending
December 31, 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, the Proxy Statement for such meeting, and the Annual Report to
Shareholders for 1996.
<PAGE>
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. Dated: , 1997
(Be sure to date proxy)
Signature and title, if
applicable
Signature if held jointly
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign the full corporate name
by the President or other authorized officer. If a partnership, please sign in
the partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
