SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIOWHITTAKER, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
BIOWHITTAKER, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/_/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ 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:
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2) Aggregate number of securities to which transaction applies:
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/_/ 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: _________________________________________________
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4) Date filed: _____________________________________________________________
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*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
BioWhittaker, Inc. o 8830 Biggs Ford Road o Walkersville, MD 21793
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 14, 1997
The Annual Meeting of Stockholders of BioWhittaker, Inc. will be held at
Corporate Headquarters, 8830 Biggs Ford Road, Walkersville, Maryland, on Friday,
March 14, 1997 at 9:30 A.M., for the following purposes:
1) To elect Rudiger Erckel and Noel L. Buterbaugh as directors to serve
for a term of three years;
2) To consider and act upon a proposal to ratify the appointment of Ernst
& Young LLP as the Company's independent auditors for the fiscal year
ending October 31, 1997; and
3) To consider and act upon such other business as may come properly
before the meeting.
The Board of Directors has fixed the close of business on January 20, 1997
as the record date for the purpose of determining stockholders entitled to
notice of, and to vote at, said meeting.
All stockholders are cordially invited to attend the meeting in person. TO
ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE AND PROMPTLY MAIL
YOUR PROXY IN THE RETURN ENVELOPE PROVIDED. This will not prevent you from
voting in person, should you so desire, but will help to secure a quorum and
will avoid added solicitation costs.
By Order of the Board of Directors
F. DUDLEY STAPLES, JR.
Secretary
Walkersville, Maryland
February 12, 1997
<PAGE>
BioWhittaker, Inc. o 8830 Biggs Ford Road o Walkersville, MD 21793
PROXY STATEMENT
Annual Meeting of Stockholders, March 14, 1997
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
BioWhittaker, Inc. (the "Company") for use at the Annual Meeting of Stockholders
to be held on March 14, 1997 and at any and all adjournments or postponements
thereof. It is anticipated that such proxy, together with this Proxy Statement,
will be first transmitted to the Company's stockholders on or about February 12,
1997. All shares represented by each properly executed, unrevoked proxy received
in time for the meeting will be voted. Any proxy given may be revoked at any
time prior to its exercise by filing with the Secretary of the Company an
instrument revoking it or a duly executed proxy bearing a later date, or by
attending the meeting and voting in person.
In addition to use of the mails, proxies may be solicited, in person and by
telephone, by regular employees of the Company, who will not receive any
additional compensation for such solicitation. The Company has also engaged The
First National Bank of Boston to assist in the solicitation of proxies. This
firm will be paid a fee of $3,000 and will be reimbursed for expenses incurred
in connection with such engagement. The cost of solicitation of proxies will be
borne by the Company.
EQUITY SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record at the close of business on January 20, 1997 (the
"Record Date") will be entitled to vote at the Annual Meeting of Stockholders to
be held on March 14, 1997. As of the Record Date, there were 10,759,199 shares
of Common Stock outstanding. Each share of Common Stock is entitled to one vote
on all matters expected to be presented at the Annual Meeting of Stockholders.
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock for (i) each of the Company's directors and
nominees, each of the Company's executive officers named in the Summary
Compensation Table below (see "Executive Compensation and Other Information"),
and all directors, nominees and executive officers of the Company as a group,
and (ii) each person known by the Company to own more than 5% of the Company's
Common Stock as of the Record Date, except where another date is indicated
below.
"Beneficial ownership" is determined in accordance with Rule 13d-3(d)(1) of
the Securities Exchange Act of 1934 and includes (as indicated in the footnotes
to the table below) as to each officer of the Company (i) the number of shares
allocated to such person's account as of the Record Date in the BioWhittaker
Savings and Stock Investment Plan (the "BSSIP") and (ii) any options to purchase
shares of Company Common Stock which are exercisable within 60 days of the
Record Date.
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Amounts and Percent of
Nature Outstanding
Name and Address of Ownership Shares
---------------- ------------ ------
Directors, Nominees and Officers
Joseph F. Alibrandi 706,052(1) 6.6%
c/o Whittaker Corporation
1955 N. Surveyor Avenue
Simi Valley, CA 93063
Noel L. Buterbaugh 364,963(2) 3.3%
Rudiger Erckel 2,097,043(3) 19.5%
c/o Boehringer Ingelheim KG
D 55216 Ingelheim/Rhein
Federal Republic of Germany
John L. Sever 8,500(4) *
Stanley M. Lemon 8,000(4) *
Thomas R. Winkler 214,243(5) 2.0%
Philip L. Rohrer, Jr. 150,553(6) 1.4%
F. Dudley Staples, Jr. 108(7) *
All Directors, Nominees and Executive
Officers as a group(9 persons) 3,577,043(8) 31.1%
Other 5% Stockholders
Anasco GmbH 2,097,043(9) 19.5%
D 6507 Ingelheim am Rhein
Federal Republic of Germany
Pioneering Management Corporation 1,072,000(9) 10.0%
60 State Street
Boston, MA 02109
Marcus Schloss & Co., Inc. 855,700(9) 8.0%
One Whitehall Street
New York, NY 10004
- ----------
* Less than one percent of the outstanding shares of Common Stock.
(1) Includes options to purchase 5,000 shares of Common Stock.
(2) Includes 24,221 shares in the BSSIP and options to purchase 335,722 shares
of Common Stock.
(3) All such shares are owned by Anasco, a member of the Boehringer Ingelheim
Group. See "Relationship Between Company and the Boehringer Ingelheim
Group". Because Dr.Erckel is the current designee of Anasco on the
Company Board of Directors, he may be deemed to own such shares benefic-
ially. Dr. Erckel, however, disclaims beneficial ownership of such shares.
See note 10.
(4) Includes options to purchase 8,000 shares of Common Stock.
(5) Includes 8,953 shares in the BSSIP and options to purchase 204,790 shares
of Common Stock.
(6) Includes 9,069 shares in the BSSIP and options to purchase 139,584 shares
of Common Stock.
(7) Includes 108 shares in the BSSIP.
(8) Includes 45,457 shares allocated to the accounts of the officers in the
BSSIP and options to purchase 726,096 shares of Common Stock.
(9) The holder has advised the Company that it holds sole voting power and in-
vestment power as to theseshares.
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The Company has no reason to believe that the officers and directors of the
Company did not have sole voting power and sole investment power with respect to
the foregoing securities, except (i) with respect to 45,457 shares of Common
Stock beneficially owned under the BSSIP pursuant to which the trustee under the
plan has the power to vote shares, subject to each participant's direction on
voting, and (ii) as to which beneficial ownership, voting power or investment
power is disclaimed or shared, as described in footnote (3) above.
ELECTION OF DIRECTORS
The Company's Board of Directors is a classified board presently consisting
of six directors. Directors are divided into three classes, each consisting of
one-third of the total number of directors. Class I, Class II, and Class III
directors hold office for "staggered" terms of three years which expire,
respectively, in 1998, 1999, and 1997, in each case at the annual meeting of
stockholders to be held in each such year or when their respective successors
are duly elected and qualified.
Shares represented by the enclosed proxy are intended to be voted, unless
authority is withheld, for the election of Rudiger Erckel and Noel L.
Buterbaugh, who currently serve as Class III directors, at the Annual Meeting of
Stockholders to be held on March 14, 1997. Messrs. Erckel and Buterbaugh have
informed the Company that they will be available to serve as directors. Dr.
Erckel is the nominee of Anasco GmbH to serve as their designee on the Board.
See "Relationship Between the Company and the Boehringer Ingelheim Group --
Purchase of Company Common Stock, Board Representation and Voting Arrangements".
The other members of the Board of Directors who are not currently standing for
election continue to be available to serve.
Director Class of
Name Age Since Director Recent Business Experience
---- --- ----- -------- --------------------------
Joseph F. Alibrandi 68 1991 II Mr. Alibrandi has served as Chairman
of the Board of Directors of the
Company since October 1991 and served
as Chief Executive Officer of the
Company from September 1991 until
September 1992. He has served as
Chairman of the Board of Directors of
Whittaker since 1985, as its Chief
Executive Officer from 1974 until
1995 and again from October 1996 to
the present. He served for the second
time as President of Whittaker from
October 1991 until August 1993.
Noel L. Buterbaugh 64 1991 III Mr. Buterbaugh, who has been with the
Company since 1952, has served as
Chief Executive Officer since Sept-
ember 1992 and as President since
1979. From October 1991 until
September 1992 he was the Chief
Operating Officer of the Company.
Rudiger Erckel 49 1995 III Dr. Erckel has served as Managing
Director for the Chemicals Division
of Boehringer Ingelheim KG, since
1994. Prior to joining Boehringer
Ingelheim, Dr. Erckel held a variety
of senior executive positions with
Hoechst AG.
3
<PAGE>
Director Class of
Name Age Since Director Recent Business Experience
---- --- ----- -------- --------------------------
Stanley M. Lemon 49 1993 II Dr. Lemon is Professor of Medicine and
Microbiology and Immunology (since 1989)
and Associate Chairman for Research in
the Department of Medicine(since 1990)
at the University of North Carolina at
Chapel Hill.
John L. Sever 64 1991 I Dr. Sever is a medical doctor who has
been a Professor of Pediatrics, Obste-
trics and Gynecology, Microbiology and
Immunology at George Washington
University Children's National Medical
Center since 1988.
Thomas R. Winkler 54 1993 I Mr. Winkler joined the Company in 1981
and served as Vice President and General
Manager responsible for cell culture and
endotoxin detection products from 1984
until his appointment as Executive Vice
President and Chief Operating Officer in
September 1993.
Information as to the directors' beneficial ownership of Common Stock is
set forth above, under "Equity Securities and Certain Holders Thereof."
The directors serve on the boards of directors of other publicly held
companies as follows: Mr. Alibrandi - Catellus Development Corporation, Jacobs
Engineering Group, Inc., Santa Fe Pacific Corporation, BankAmerica Corporation,
and Whittaker; Mr. Buterbaugh - First Bank of Frederick; and Mr. Winkler -
Farmers and Mechanics National Bank.
During fiscal year 1996, directors received annual fees of $20,000 for
serving on the Board of Directors and annual fees of $2,000 per Committee for
serving on various Committees. Directors received an additional fee of $750 per
day for participation in meetings of the Board and its Committees, except for
telephonic meetings for which they received a fee of $500 per meeting for
meetings lasting longer than 30 minutes. Directors who are employees of the
Company receive no additional compensation for their services as Directors.
Directors are reimbursed for travel and other expenses related to their
attendance at Board and Committee meetings. Non-employee directors who are not
the designee of any stockholder of the Company also receive automatic annual
grants of stock options in accordance with the terms of the BioWhittaker, Inc.
1994 Stock Option Plan for Non-Employee Directors. For fiscal year 1996, grants
to purchase 1,000 shares of the Company's common stock were awarded to each
eligible, non-employee director on January 2, 1996. The Board held eleven
meetings in fiscal 1996 (including regularly scheduled and special meetings).
For calendar year 1997, consistent with the trend toward making director
compensation more related to company performance, the annual fee paid to
non-employee directors has been reduced to $10,000 and the grants of stock
options to non-employee directors has been increased to options for 5,000 shares
of the Company's common stock.
The Audit Committee reviews and acts or reports to the Board with respect
to various auditing and accounting matters, including the selection of the
Company's independent auditors, the scope of audit procedures, the nature of
4
<PAGE>
services to be performed for the Company by, and the fees to be paid to, the
independent auditors, the performance of the Company's independent auditors and
the accounting practices of the Company. The Audit Committee held three meetings
in fiscal 1996. The members of the Audit Committee are Drs. Sever and Lemon.
The Compensation Committee has been delegated the functions of the Board
with respect to the compensation of executive officers and the administration of
the Company's 1991 Long-Term Stock Incentive Plan, pursuant to which stock-based
awards, including stock options and restricted stock, may be made. The
Compensation Committee held two meetings in fiscal 1996. The members of the
Compensation Committee are Drs. Sever, Lemon and Erckel.
The Nominating Committee recommends nominees for election as directors at
annual meetings of stockholders and to fill vacancies that may occur between
annual meetings. The Committee considers as potential nominees persons
recommended by stockholders. Recommendations should be submitted to the
Nominating Committee in care of the Secretary of the Company. The Nominating
Committee met once in fiscal 1996. The members of the Nominating Committee are
Drs. Sever, Lemon and Erckel.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation Committee Report
The Compensation Committee is composed entirely of non-employee Directors.
The Committee is responsible, among other things, for setting the compensation
of the executive officers, including any stock- based awards to them under the
Company's 1991 Long-Term Stock Incentive Plan (the "Company's Stock Plan").
In fiscal 1995, the Compensation Committee asked a nationally recognized
independent consulting firm to review the compensation of its executives and to
assist the Committee in more formally articulating and refining its compensation
guidelines. Following discussions with these consultants, the Committee adopted
the following principal compensation objectives: to enable the Company to
attract highly qualified executives and management talent from within the
diversified biotechnology and life sciences industries, to retain top performers
and ensure future management continuity, to reward achievement of the Company's
strategic goals and financial targets, and to provide compensation that is
consistent with marketplace competitiveness, performance and stockholder
returns.
Compensation of executives generally comprises the following four elements,
weighted to provide the most significant rewards if the Company achieves or
exceeds its strategic and financial goals: salary, an annual performance-based
cash incentive, long-term incentives and certain other benefits, including
retirement programs. Base salaries are measured by reference to the median (50th
percentile) of salaries paid to similarly situated executives in the diversified
biotechnology and life sciences industries. Annual bonuses are designed to
reward achievement of certain financial and strategic Company objectives at a
level measured by reference to the 75th percentile of such payments for
companies within the industry. The Compensation Committee retains the discretion
to modify compensation awards for its top executive officers to conform to the
best interests of the stockholders and reflect actual individual contribution
and Company performance. The Common Stock Performance Graph below provides stock
performance information for groups of companies that include some, but not all,
of the companies considered in compensation surveys considered by the
Compensation Committee.
5
<PAGE>
In fiscal 1995, the Company also implemented a supplemental executive
retirement plan for certain executives, including Mr. Buterbaugh, designed to
provide them with amounts to which they would otherwise have been entitled under
the existing pension plan, but for certain IRS limitations imposed as a result
of their income levels, and to replace certain benefits lost as a result of the
spin-off of the Company from Whittaker Corporation in 1991.
An important component of the compensation of executive officers is the
long-term incentive provided by stock options. Options are granted at the
closing stock price on the date of grant and cannot be exercised until the
earlier to occur of (i) the attainment of designated targets of pre-tax net
income ("PTNI") for the Company, (ii) the expiration of five years following the
date of the grant, or (iii) a change in control of the Company. Options for
25,000 shares were awarded to Mr. Staples in fiscal 1996 in connection with his
joining the company.
Recently proposed regulations limit the allowable tax deduction for certain
covered compensation paid to the Company's officers to $1 million per year per
executive. The regulations presently exclude from covered compensation awards
made under the Company's Stock Plan. Given the current levels of compensation
paid to its officers, the Company does not believe that the regulations
presently would limit the deductibility of compensation paid to its officers.
For fiscal 1996, the Committee set salaries in December 1995. Mr.
Buterbaugh's 1996 salary (reflected in the Summary Compensation Table below) was
increased by approximately $13,900 over his salary in fiscal 1995 as a result of
the Committee's comparison of his salary to that of other comparably situated
executives in the biotechnology and life sciences industries and his efforts in
fiscal 1995 and 1996, including the sale of the clinical diagnostic test kit
product line and the acquisition of Clonetics. The salaries of the other
executive officers (other than Mr. Alibrandi) were individually evaluated by the
Committee, with the advice of Messrs. Alibrandi and Buterbaugh, in light of each
individual's responsibility for fiscal 1996, his performance during fiscal 1995
and an assessment of salaries of executives similarly situated in the
diversified biotechnology and life sciences industries. The Committee referred
to the report of its independent compensation consultants in reaching its
conclusions. Mr. Alibrandi's salary (which has not been increased since 1991)
was set pursuant to the terms of his employment contract with the Company. See
"--Employment Contract."
In December 1996, the Committee approved payments to executive officers of
cash bonuses accrued for fiscal year 1996 under the BioWhittaker Bonus Plan (the
"Bonus Plan"). Awards to officers under the Bonus Plan are based primarily on
the achievement of certain pre-established levels of PTNI. Those levels are
established annually by the Committee, based on the recommendation of the Chief
Executive Officer and the Committee's independent review of the Company's budget
and plans for the coming year and for the next five years. The bonus payable to
each officer in the event that 100% of the target is achieved is determined in
advance. An officer will earn no bonus until 85% of the targeted PTNI is
achieved, will earn a prorated bonus if 85% to 100% of the target is achieved,
and can earn in excess of his predetermined amount if the target is exceeded.
Mr. Buterbaugh's bonus for 1996 reflected the level of achievement of the
Company's targeted PTNI for fiscal 1996 and the sale to Carter-Wallace of the
clinical diagnostic test kit product line. The bonuses paid under the Bonus Plan
to each officer are reflected in the Summary Compensation Table set forth below.
Rudiger Erckel
John L. Sever
Stanley M. Lemon
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
Rudiger Erckel, who serves as a member of the Compensation Committee, is an
employee of Boehringer Ingelheim KG, a member of the Boehringer Ingelheim Group.
Anasco GmbH (which is a member of the Boehringer Ingelheim Group) was the owner,
as of the Record Date, of 2,097,043 shares of the Company's Common Stock (see
"Equity Securities and Certain Holders Thereof"). In addition, the Company has
an agreement with the Boehringer Ingelheim Group to distribute certain Company
products throughout Europe, the former Soviet Union, and parts of North Africa
and the Middle East. The Company also has a right, by agreement and under
certain conditions, to reacquire a 50% interest in its former manufacturing and
distribution joint venture with the Boehringer Ingelheim Group. See
"Relationship Between the Company and the Boehringer Ingelheim Group".
Cash Compensation
Cash compensation which was earned for services in all capacities for the
1994, 1995 and 1996 fiscal years, and which the Company and its subsidiaries
paid to or accrued for each of the persons who served as executive officers of
the Company during the last fiscal year is set forth in the following table.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
------
Annual Compensation (1) Number of All Other
----------------------- Securities Compensa-
` Fiscal Underlying tion
Name & Principal Position Year Salary($)(2) Bonus($)(3) Options(#) ($) (4)
- ------------------------- ---- ----------- ---------- ---------- ---------
Noel L. Buterbaugh 1996 $261,054 $172,147 -- $ 71,969
President and Chief 1995 247,113 163,914 -- 11,165
Executive Officer 1994 215,398 89,348 100,000 26,706
Thomas R. Winkler 1996 182,737 118,351 -- 52,172
Vice President and Chief 1995 171,532 117,082 -- 10,071
Operating Officer 1994 142,709 63,820 100,000 20,783
Philip L. Rohrer, Jr. 1996 126,348 76,390 -- 17,419
Vice President and 1995 119,726 65,566 -- 9,917
Chief Financial Officer 1994 108,857 35,739 50,000 7,950
Joseph F. Alibrandi 1996 124,987 -- -- --
Chairman of the 1995 131,243 -- -- --
Board of Directors 1994 157,518 54,247 -- --
F. Dudley Staples, Jr. 1996 99,237 26,898 25,000 796
General Counsel 1995 9,616 -- -- --
and Secretary(5) 1994 -- -- -- --
- ----------
(1) Does not include perquisites and other personal benefits, securities or
property where the aggregate amount of such compensation to an executive
officer is the lesser of either $50,000 or 10% of annual salary and bonus.
(2) Includes salary deferrals under the BioWhittaker Savings and Stock Invest-
ment Plan ("BSSIP"), in 1994, 1995 and 1996.
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<PAGE>
(3) Comprises bonuses under the Company's Bonus Plan, in 1994, 1995 and 1996,
which were accrued during the fiscal year indicated but were paid or will
be paid during the following fiscal year.
(4) Includes matching contributions made by the Company in 1994, 1995 and 1996
under the BSSIP and in 1996 under the BioWhittaker Deferred Compensation
Plan ("BDCP") included in the Supplemental Executive Retirement Plan. Under
the BSSIP, the Company makes matching contributions to participating
employees' accounts on the basis of three-quarters of the first 2% of the
compensation contributed by the employee, five-eighths of the second 2% of
the compensation contributed by the employee and one-half of the third 2%
of compensation contributed by the employee. Employees' salary deferral
contributions above 6% of compensation are not matched by the Company.
Under the BDCP, deferrals made by eligible executive officers of up to 15%
of total eligible compensation are matched by the Company. Also includes
allocations to the BioWhittaker, Inc. Retirement Plan, a defined
contribution plan. The fiscal 1996 matching contributions paid by the
Company under the BSSIP, and BDCP and the 1996 allocations to the
retirement plan are as follows:
Retirement
BSSIP BDCP Plan
Contribution Contribution Allocation
------------ ------------ ----------
Mr. Buterbaugh ........ $ 5,625 $57,904 $ 8,440
Mr. Winkler ........... 5,625 40,884 5,663
Mr. Rohrer ............ 5,141 7,830 4,448
Mr. Alibrandi ......... -- -- --
Mr. Staples ........... 274 -- 522
(5) Mr. Staples joined the Company in September 1995.
Employment Contract
Mr. Alibrandi had an Employment Agreement with the Company, dated as of
October 31, 1991 (the "Employment Agreement") pursuant to which he was paid
$125,000 per year for services rendered to the Company. Due to other
commitments, Mr. Alibrandi requested that the agreement be terminated effective
December 31, 1996. Mr. Alibrandi will thereafter be compensated as a
non-employee director.
Supplemental Executive Retirement Plan
Three of the executive officers in the Summary Compensation Table, Messrs.
Buterbaugh, Winkler and Rohrer, participate in a nonqualified supplemental
retirement plan which provides an annual retirement benefit payable for the life
of the participant, equal to up to 55% of the participant's average covered
compensation for the highest five out of the last seven years preceding
retirement. The plan also includes a separate deferred compensation plan (See
"Executive Compensation and Other Information --Summary Compensation Table
(footnote 4)."
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<PAGE>
The following table sets forth approximate annual retirement benefits for
retirement at age 65 which would be payable under the Company's supplemental
retirement plan, without reflecting reductions for the offset of pension and
Social Security benefits and without reflecting compensation under the separate
deferred compensation plan.
Years of Service
Average Annual Covered ----------------------------------------------------
Compensation 15 20 25 30 35
------------ -- -- -- -- --
$125,000 $51,563 $68,750 $68,750 $68,750 $68,750
150,000 61,875 82,500 82,500 82,500 82,500
175,000 72,188 96,250 96,250 96,250 96,250
200,000 82,500 110,000 110,000 110,000 110,000
225,000 92,813 123,750 123,750 123,750 123,750
250,000 103,125 137,500 137,500 137,500 137,500
300,000 123,750 165,000 165,000 165,000 165,000
400,000 165,000 220,000 220,000 220,000 220,000
450,000 185,625 247,500 247,500 247,500 247,500
500,000 206,250 275,000 275,000 275,000 275,000
Credited years of service and current compensation covered by the plan for
the participants are as follows: Mr. Buterbaugh, 45 years and $339,000; Mr.
Winkler, 16 years and $239,000; Mr. Rohrer, 19 years and $157,000. The covered
compensation consists of salary and bonus. The benefits shown above are subject
to deduction for Social Security benefits and amounts received from certain
pension plans.
Option Grants
The following table shows, as to each person named in the Summary
Compensation Table, the options to purchase Common Stock granted by the Company
under the Company's Stock Plan in fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
Number of Percentage of
Securities Total Options Grant
Underlying Granted to Exercise Expira- Date
Options Granted Employees in Price Per tion Present
Name (Shares) Fiscal 1996 Shares Date Value(1)
- -------------- --------- ----------- -------- ----- --------
Noel L. Buterbaugh.... -- -- -- -- --
Thomas R. Winkler..... -- -- -- -- --
Philip L. Rohrer, Jr.. -- -- -- -- --
Joseph F. Alibrandi.. -- -- -- -- --
F. Dudley Staples, Jr. 25,000 92.6% $6.75 12/11/05 $98,000
- ----------
(1) Based upon the Black-Scholes option valuation model. Per option value is
determined using the Black- Scholes option pricing model to be $3.92, with
a Black-Scholes ratio value of 0.5881, using the following assumptions:
stock volatility of 0.3527; annualized risk-free rate of 5.71%, 10-year
option term; and 0.00% dividend yield for the stock. The actual value, if
any, an executive may realize will depend on the excess of the stock price
over the exercise price on the date the option is exercised and there is no
assurance that the value realized will be at or near the value estimated by
the Black-Scholes model.
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(2) This option is non-qualified, non-transferable other than by will or the
law of descent and distribution, becomes fully exercisable upon the earlier
to occur of (i) the attainment of designated targets of PTNI for the
Company, (ii) the expiration of five years following the date of grant or
(iii) a change in control of the Company and is exercisable for a term of
10 years unless terminated sooner in the event of death, disability,
retirement, or other termination of employment.
Fiscal 1996 Stock Option Exercises and Year-End Option Values
The following table shows, as to the individuals named in the Summary
Compensation Table above, information concerning exercises of stock options in
the last fiscal year and 1996 fiscal year-end option values.
FISCAL 1996 STOCK OPTION EXERCISES AND YEAR-END OPTION VALUES
Value of Unex-
Shares Number of Securities ercised In-the
Acquired on Value Underlying Unexercised Money Options
Exercise Realized Options at Fiscal at Fiscal
Name (Shares) ($) Year End(#) Year End ($)(1)
----- ---------- ----- ------------------ ------------------
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
------- ------- -------- -------
Noel Buterbaugh ...... -- -- 335,722 58,333 $285,397 $45,833
Thomas Winkler ....... -- -- 204,790 52,083 151,378 45,833
Philip Rohrer, Jr .... -- -- 139,584 35,416 45,834 22,916
F.Dudley Staples, Jr.. -- -- -- 25,000 -- --
Joseph Alibrandi ..... -- -- -- -- -- --
(1) Based upon an assumed fair market value of $7.375 per share.
10
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Performance Graph
In accordance with current Securities Exchange Act of 1934 regulations, the
following performance graph compares the performance of the Company's Common
Stock to the New York Stock Exchange Market Value Index and to the Media General
Industry Group Stock Index 231 for Medical Instrumentation and Supplies Com-
panies (a published index which includes the Company and approximately 200
manufacturers of medical supplies and instruments). The graph assumes that the
value of the investment in the Company's Common Stock and each index was $100 at
October 31, 1991 and that all dividends were reinvested. The measurement period
is limited to that period during which the Company's Common Stock has been
registered under Section 12 of the Securities Exchange Act of 1934 (i.e., since
the Distribution).
Comparison of Five - Year Cumulative Return Shown on Above Graph
Fiscal Year Ending
---------------------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
BioWhittaker............ $100.00 $ 83.65 $ 46.15 $ 54.81 $ 57.69 $ 54.81
Media General Index..... $100.00 $101.84 $ 86.88 $ 97.51 $145.69 $161.92
NYSE Market Value Index. $100.00 $106.81 $126.71 $131.42 $154.28 $188.39
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SECTION 16A BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
One report on Form 4 reflecting the acquisition by Mr. Staples of an option
to purchase Company Stock was inadvertently filed late.
RELATIONSHIP BETWEEN THE COMPANY AND
THE BOEHRINGER INGELHEIM GROUP
In October, 1991, the Company sold to Anasco GmbH ("Anasco"), an affiliate
of Boehringer Ingelheim International GmbH ("Boehringer Ingelheim"), newly
issued Common Stock of the Company then representing 19.9% of the outstanding
Common Stock of the Company after such sale. Boehringer Ingelheim is one of a
group of several closely held corporations which, along with their affiliates
and subsidiaries, are sometimes collectively referred to herein as the
"Boehringer Ingelheim Group." A subsidiary of the Company entered into a joint
venture and partnership agreement (the "Joint Venture Agreement") with another
member of the Boehringer Ingelheim Group, to manufacture cell culture products
in Belgium for distribution throughout Europe, the former Soviet Union, and
parts of North Africa and the Middle East (the "Territory"). In April 1995, the
Company terminated its interest in the joint venture, with the right to
repurchase its interest under certain conditions. In the meantime, the joint
venture (the "BI Joint Venture Affiliate"), now wholly-owned by the Boehringer
Ingelheim Group, will continue its operation in the Territory. The Boehringer
Ingelheim Group is in the process of merging certain subsidiaries into the BI
Joint Venture Affiliate, including the subsidiaries described in "Relationship
Between the Company and the Boehringer Ingelheim Group -- Other Relationships
- --Distribution Arrangements". The Company has entered into an exclusive
distribution arrangement with the BI Joint Venture Affiliate for the
distribution and sale of the Company's products in the Territory. The Company
has agreed otherwise not to compete with the joint venture's business in the
Territory during such time as the Company has the right to repurchase its
interest in the BI Joint Venture Affiliate or for two years after the
termination of the Company's right to repurchase its interest in the BI Joint
Venture Affiliate in the event that the Company experiences a change of control
or in certain other circumstances.
Joint Venture; Distribution in Europe
On October 31, 1991, BioWhittaker International, Inc. ("BWI"), a subsidiary
of the Company, entered into the Joint Venture Agreement with Boehringer
Ingelheim Bioproducts, Inc. ("BIBI"), a member of the Boehringer Ingelheim
Group, pursuant to which the BI Joint Venture Affiliate was created to
manufacture cell culture products in a facility since constructed in Belgium,
and to distribute such products throughout the Territory. The Company and the
Boehringer Ingelheim Group each had a 50% interest in the BI Joint Venture
Affiliate, which also distributed certain products manufactured by the Company.
On April 30, 1995, the Company entered into an agreement (the "JV Sale
Agreement") with Boehringer Ingelheim International GmbH ("Boehringer") pursuant
to which the Company sold to Boehringer 100% of the stock of BWI, which held the
Company's 50% interest in the BI Joint Venture Affiliate, and 100% of the stock
of BioWhittaker France S.A.R.L. In connection with these transactions, the
Company entered into a five-year agreement with the BI Joint Venture Affiliate
to provide technical assistance and support for certain products and pursuant to
which the BI Joint Venture Affiliate will pay the Company $362,000 annually.
Under the terms of the JV Sale Agreement, the Company has the right to reacquire
on certain specified terms and conditions a 50% interest in the BI Joint Venture
Affiliate until the earlier of April 28, 2000, such time as the BI Joint Venture
Affiliate has demonstrated operating profit for three consecutive fiscal
quarters, or, in certain instances, such time as the Company experiences a
change of control.
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The BI Joint Venture Affiliate and certain other distribution affiliates of
the Boehringer Ingelheim Group (see "Other Relationships --Distribution
Arrangements" below) distribute in the Territory cell culture products that are
manufactured in the Belgian facility using Company technology, as well as LAL
and cell culture products manufactured by the Company and sold to these parties
as distributors for the Company. In connection with the JV Sale Agreement, the
Company entered into an exclusive distribution arrangement with the BI Joint
Venture Affiliate and these other affiliates for Company products sold within
the Territory. The distribution arrangement is for a term ending two years after
the Company's option to purchase its interest in the BI Joint Venture Affiliate
ends. The BI Joint Venture Affiliate and the other affiliates agreed to purchase
certain minimum annual quantities of products from the Company. In fiscal 1996,
the Company sold products to the BI Joint Venture Affiliate in the aggregate
amount of $814,000.
Purchase of Company Common Stock
On October 31, 1991, the Company pursuant to a stock purchase agreement
dated as of September 24, 1991 (the "Stock Purchase Agreement") sold to Anasco,
a member of the Boehringer Ingelheim Group, a number of authorized but unissued
shares of Company Common Stock (the "Shares") that represented 19.9% of the
shares of Company Common Stock outstanding after such issuance. The following is
a summary of certain provisions contained in the Stock Purchase Agreement.
Unless otherwise specified, the various covenants of the Company and Anasco
in the Stock Purchase Agreement described in the subsections "Limitations on
Purchase of Additional Shares," "Right to Maintain Percentage Voting Interest,"
"Limitation on Transfers of Shares; Right of First Refusal," "Board
Representation and Voting Arrangements," "Restrictions on Certain Other
Actions," and "Registration Rights," below will terminate upon the later of
October 31, 1998 or the termination of the partnership under the Joint Venture
Agreement unless earlier terminated pursuant to a decrease in Anasco's voting
interest in the Company to less than 5% of total voting power.
Limitations on Purchase of Additional Shares. The Stock Purchase Agreement
provides that Anasco and its affiliates may purchase additional voting
securities; provided that if Anasco and its Affiliates intend to purchase 5% or
more of the Company's outstanding voting securities, Anasco will provide 15
days' prior written notice to the Company.
Right to Maintain Percentage Voting Interest. If at any time after October
31, 1991 voting securities are issued pursuant to the exercise of options that
were granted in connection with the Distribution in substitution for options to
purchase Whittaker Common Stock ("Substitute Options"), the Company will pay
Anasco an amount, in cash or voting securities (at the Company's election), or a
combination thereof, equal to 19.9% of the difference between the aggregate
market price (determined as provided in the Stock Purchase Agreement) of the net
voting securities issued by the Company pursuant to the exercise of the
Substitute Options and 19.9% of the aggregate exercise price of the Substitute
Options (or, in the case of an exercise by delivery of voting securities, the
aggregate par value thereof).
Limitation on Transfers of Shares; Right of First Refusal. The Stock
Purchase Agreement provides that Anasco and its affiliates may sell, pledge,
encumber, or otherwise transfer any of the Company's voting securities in
accordance with applicable law; provided that Anasco and its affiliates may not
sell, pledge, encumber or otherwise transfer such securities to an affiliate
unless the affiliate agrees to be bound by the terms of the Stock Purchase
Agreement.
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Under the terms of the Stock Purchase Agreement, Anasco and its affiliates
may not sell 5% or more of the Company's outstanding voting securities in any
transaction or series of related transactions without first giving the Company
an opportunity to purchase such securities at a price equal to the price offered
by the prospective purchaser.
Board Representation and Voting Arrangements. The Stock Purchase Agreement
provides that for so long as Anasco and its affiliates hold voting securities of
the Company representing 10% or more of total voting power, Anasco shall be
entitled to designate a number of nominees for election to the Board of
Directors, and to fill vacancies in the Board, in proportion to the voting
interest of Anasco and its affiliates in the Company but shall not in any event
designate nominees in excess of such proportional number (unless such number is
one). The Company has agreed to include at least one director designated by
Anasco on both the nominating committee and the compensation committee.
Anasco has agreed in the Stock Purchase Agreement that it will vote, or
cause to be voted, all voting securities owned by it and its affiliates for
nominees to the Board who have been recommended by the Board of Directors, and
that its shares will be represented at any stockholder meeting so that they may
be counted for purposes of determining a quorum.
Restrictions on Certain Other Actions. Pursuant to the Stock Purchase
Agreement, Anasco agreed that neither it nor its affiliates will (i) "solicit,"
or become a "participant" in any "solicitation" of, "proxies" (as such terms are
defined in Regulation 14A under the Securities Exchange Act of 1934, as amended)
from any holder of the Company's voting securities in connection with any vote
on any matter, or agree or announce its intention to vote with any person
undertaking a "solicitation"; (ii) form, join, or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934) with respect to any voting securities; or (iii) grant any proxies with
respect to any voting securities to any person (other than members of management
of the Company or representatives of Anasco) or deposit any voting securities in
a voting trust or enter into any other arrangement or agreement with respect to
the voting thereof.
Registration Rights. Pursuant to the terms of the Stock Purchase Agreement,
the Company also granted Anasco registration rights pursuant to which the
Company has agreed that, upon the request of Anasco at any time on or after the
third anniversary of the Distribution, the Company will register, on not more
than two occasions, the sale of the Shares then owned by Anasco under the
Securities Act of 1933, as amended, and applicable state securities laws (a
"Demand Registration"). The Company's obligation is subject to certain
limitations relating to the timing and size of the registration and other
similar matters. The Company is also obligated to offer Anasco the right to
include shares of Company Common Stock owned by it in certain registration
statements filed by the Company (a "Piggyback Registration"). The Company will
indemnify Anasco and its officers, directors, and controlling persons for
securities law liabilities in connection with any such offering, other than
liabilities resulting from information furnished in writing by Anasco. The
Company is obligated to pay all expenses incidental to the first Demand
Registration, while Anasco is obligated to pay all expenses incidental to the
second Demand Registration. Anasco is required to pay only the additional
incremental portion of expenses incurred in connection with a Piggyback
Registration.
Indemnification. The Stock Purchase Agreement provides that the Company
will indemnify Anasco for any damage, loss, liability, or expense of certain
minimum threshold amounts arising out of or based upon the inaccuracy of certain
representations or warranties or breaches of certain covenants contained in the
Stock Purchase Agreement. The indemnification obligations relating to tax
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matters survive indefinitely. The maximum liability of the Company under the
indemnification provisions of the Stock Purchase Agreement is $23,000,000 and,
if the amount of damages exceeds $8,250,000, the Company has the option to
repurchase the Shares at Anasco's purchase price plus interest.
Anasco agreed to indemnify the Company in an amount not to exceed
$23,000,000 for any damage, loss, liability, or expense in excess of certain
threshold amounts arising out of or based upon the inaccuracy of any Anasco
representation or warranty or breach of any Anasco covenant contained in the
Stock Purchase Agreement.
Parent Guaranties. In connection with the Stock Purchase Agreement,
Whittaker, former parent of the Company and Boehringer Ingelheim, an affiliate
of Anasco, have entered into guaranties of certain obligations of their
respective affiliates. Whittaker has agreed to guarantee the performance of the
Company's indemnification obligations under the Stock Purchase Agreement (i)
within three months after a final determination of the Company's liability with
respect thereto and after written demand upon the Company for such performance,
or (ii) immediately upon demand on Whittaker in the case of bankruptcy events
relating to the Company. Boehringer Ingelheim has guaranteed the performance by
Anasco of, among other things, Anasco's indemnification obligations under the
Stock Purchase Agreement and under the Buyer Tax Agreement (as defined below)
within three months after a final determination of Anasco's liability with
respect thereto and after written demand upon Anasco for such performance.
Other Relationships--Distribution Arrangements
Ingelheim Diagnostic Y Tecnologia, S.A., a member of the Boehringer
Ingelheim Group, is the exclusive distributor of certain of the Company's
products in Spain and Portugal. Sales by the Company to Ingelheim Diagnostic Y
Tecnologia, S.A. pursuant to such distribution arrangements aggregated
approximately $529,000 in fiscal 1996.
Bender Co. GmbH ("Bender"), a member of the Boehringer Ingelheim Group, is
the Company's exclusive distributor of certain of the Company's products in
Austria, and a non-exclusive distributor in certain East European countries and
the former Soviet Union. Sales by the Company to Bender pursuant to such
distribution arrangements aggregated approximately $38,000 in fiscal 1996.
SERVA Feinbiochemica GmbH & Co. KG ("SERVA"), also a member of the
Boehringer Ingelheim Group, is the exclusive distributor of certain of the
Company's products in Germany and a non-exclusive distributor of certain of the
Company's products in certain East European countries and the former Soviet
Union. Sales by the Company to SERVA pursuant to such distribution arrangements
aggregated approximately $753,000 in fiscal 1996.
BioWhittaker France S.A.R.L., also a member of the Boehringer Ingelheim
Group, is the exclusive distributor of certain of the Company's products in
France. Sales by the Company to BioWhittaker France pursuant to such
distribution arrangements aggregated approximately $840,000 in fiscal 1996.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
In recognition of the important role of the independent auditors, the Board
of Directors has determined that its selection of the independent auditors for
the Company should be submitted to the Company's stockholders for ratification
on an annual basis. The Board of Directors, upon the recommendation of its Audit
Committee, has appointed Ernst & Young LLP to serve as the Company's independent
auditors for the fiscal year ending October 31, 1997, subject to ratification by
the Company's stockholders. Ernst & Young LLP conducted the audit of the
Company's financial statements for the fiscal year ended October 31, 1996. If
the appointment is not ratified, the Board of Directors will appoint another
firm as the Company's independent auditors for the fiscal year ending October
31, 1997. The Board of Directors also retains the power to appoint another
independent auditor for the Company to replace an auditor ratified by the
stockholders in the event the Board of Directors determines that the interests
of the Company require such a change.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting of Stockholders. Such representatives will have the opportunity
to make a statement if they so desire and will be available to respond to
appropriate questions.
The Board of Directors recommends that stockholders vote FOR the
ratification of the appointment of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending October 31, 1997.
VOTE REQUIRED TO APPROVE MATTERS
A quorum for the meeting requires the presence in person or by proxy of the
holders of a majority of the outstanding common stock of the Company entitled to
vote at the meeting.
Assuming the presence of a quorum, the affirmative vote of a plurality of
the votes of the shares present in person or by proxy and entitled to vote on
the election of Directors is required for the election of Directors. The
ratification of the appointment of Ernst & Young LLP as independent auditors of
the Company requires the affirmative vote of a majority of the shares present in
person or by proxy at the meeting and entitled to vote on such ratification.
Votes cast by proxy or in person at the meeting will be tabulated by the
inspector of elections appointed for the meeting. Proxies marked with
abstentions as to any proposal, and abstentions on any proposal by stockholders
present at the meeting, will be treated as present and entitled to vote for
purposes of determining the existence of a quorum and will have the practical
effect of a negative vote as to that proposal. Brokers that do not receive
instructions are entitled to vote on the election of Directors. The New York
Stock Exchange (the "NYSE") determines whether brokers that do not receive
instructions would be entitled to vote on the other proposals contained in this
proxy statement. In the event of a broker non-vote (i.e., a proxy from brokers
marked to indicate that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to the vote on a
particular matter with respect to which the brokers or nominees do not have
discretionary power to vote) with respect to any issue, the proxy will be
counted as present for purposes of determining the existence of a quorum but
will not be deemed as present and entitled to vote as to that issue for purposes
of determining the total number of shares of which a majority is required for
adoption.
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STOCKHOLDER PROPOSAL FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals to be presented at the 1998 Annual Meeting of
Stockholders must be received at the Company's executive offices at 8830 Biggs
Ford Road, Walkersville, Maryland 21793 by October 14, 1997 in order to be
included in the Company's proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy Statement, the Company knows of no business
other than that described herein that will be presented for consideration at the
meeting. If, however, any other business shall come properly before the meeting,
the proxy holders intend to vote the proxies in accordance with their best
judgment.
By: Order of the Board of Directors
F. DUDLEY STAPLES, JR.
Secretary
February 12, 1997
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