<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHRYSALIS INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CHRYSALIS INTERNATIONAL CORPORATION
575 ROUTE 28
RARITAN, NEW JERSEY 08869
TELEPHONE: (908) 722-7900
April 30, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders (the "Annual Meeting") of Chrysalis International Corporation (the
"Company") to be held on June 26, 1997, at 10:00 a.m., at the Somerset Hills
Hotel, 200 Liberty Corner Road, Warren, New Jersey.
This year, your Board of Directors is recommending that you elect two
Directors for a new three-year term and approve the appointment of the
independent certified public accountants of the Company for the current fiscal
year.
A notice of the Annual Meeting form of proxy and proxy statement
containing information about the matters to be acted upon at the Annual Meeting
are enclosed herewith. In addition, we have enclosed the Annual Report on Form
10-K of the Company (the "Form 10-K") for the fiscal year ended December 31,
1996. These materials are being mailed to stockholders commencing on or about
April 30, 1997. If you would like another copy of the Form 10-K, please contact
Investor Relations at the Company's executive offices at the above address and
telephone number.
Please read the enclosed information carefully before completing and
returning the proxy card. Returning your proxy card as soon as possible will
assure your representation at the meeting, whether or not you plan to attend.
We are very excited about the future of the Company and are looking
forward to the 1997 Annual Meeting of Stockholders.
Sincerely,
PAUL J. SCHMITT
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE> 3
CHRYSALIS INTERNATIONAL CORPORATION
575 ROUTE 28
RARITAN, NEW JERSEY 08869
NOTICE OF ANNUAL MEETING
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of
Chrysalis International Corporation (the "Company") will be held on June 26,
1997, at 10:00 a.m., at the Somerset Hills Hotel, 200 Liberty Corner Road,
Warren, New Jersey, for the purpose of:
1. Electing two (2) Directors for a new three-year term;
2. Approving the appointment of the independent certified public
accountants of the Company for the current fiscal year; and
3. Transacting such other business as may properly come before
the Annual Meeting.
The Company's Board of Directors has fixed the close of business on
April 4, 1997 as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting or any adjournment thereof.
JOHN G. COOPER
Secretary
April 30, 1997
------------------
The Company's Annual Report on Form 10-K for the year ended December
31, 1996 is enclosed. The Annual Report on Form 10-K contains financial and
other information about the Company, but is not incorporated into the Proxy
Statement.
------------------
PLEASE PROMPTLY FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
IF YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
<PAGE> 4
CHRYSALIS INTERNATIONAL CORPORATION
575 ROUTE 28
RARITAN, NEW JERSEY 08869
PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 26, 1997
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Chrysalis International Corporation, a Delaware
corporation (the "Company"), of proxies to be used at the annual meeting of
stockholders of the Company to be held at 10:00 a.m. at the Somerset Hills
Hotel, 200 Liberty Corner Road, Warren, New Jersey on June 26, 1997, (the
"Annual Meeting"). This Proxy Statement and the accompanying form of proxy are
being mailed to stockholders commencing on or about April 30, 1997.
If a stockholder properly executes and returns the enclosed form of
proxy it will be voted as directed on all matters properly coming before the
Annual Meeting or any adjournments or postponements thereof. The proxy may be
revoked at any time prior to its use by: (1) delivering to the Secretary of the
Company at the address noted above a signed notice of revocation or a later
dated signed proxy; (2) attending the Annual Meeting and voting in person; or
(3) giving notice of revocation of the proxy at the Annual Meeting. Attendance
at the Annual Meeting will not in and of itself constitute revocation of a
proxy.
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation provides that the Board of
Directors will be divided into three classes of Directors, with each class to be
as nearly equal in number of Directors as possible. At each annual stockholders'
meeting, Directors are elected for a term of three years and hold office until
their successors are duly elected and qualified or until their earlier removal
or resignation. The Board of Directors has nominated Mr. Paul J. Schmitt and Dr.
J. Christian Jensen to be elected as Class III Directors for a term of office
which will expire at the 2000 annual meeting of stockholders. If the nominees
become unavailable to serve for any reason or should a vacancy occur before the
election (which events are not anticipated), the persons named on the enclosed
proxy card may substitute another individual as a nominee. Class I consists of
Dr. Barbut, Mr. Paulson and Dr. Thompson and their term of office will expire at
the 1998 annual meeting of stockholders. Class II consists of Mr. John K. Clarke
and Mr. Desmond H. O'Connell and their term of office will expire at the 1999
annual meeting of stockholders.
INFORMATION CONCERNING DIRECTORS
Information regarding the continuing Directors and the nominees is set
forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul J. Schmitt(3) 45 Chairman of the Board of Directors;
President and Chief Executive Officer
Jack Barbut (3) 44 Vice Chairman of the Board of Directors
John K. Clarke(1)(2)(3) 43 Director
Desmond H. O'Connell, Jr.(1)(2)(3) 61 Director
Photios T. Paulson (1)(2) 58 Director
W. Leigh Thompson 58 Director
J. Christian Jensen 46 Director
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
<PAGE> 5
DIRECTOR NOMINEES
PAUL J. SCHMITT, CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND
CHIEF EXECUTIVE OFFICER. Mr. Schmitt has served as Chairman of the Board of
Directors since October 1994. Mr. Schmitt joined the Company as President and
Chief Executive Officer and was elected as a Director of the Company in November
1988. From May 1986 to October 1988, Mr. Schmitt was President of Biolectron,
Inc., a medical device company. Prior to joining Biolectron, Mr. Schmitt was
with the BOC Group, PLC, an industrial gas and health care company, where, from
October 1981 until May 1986, he served as Vice President and General Manager in
BOC's health care group. Mr. Schmitt received his B.S. degree in finance from
Lehigh University and his M.B.A. degree from Rutgers University.
J. CHRISTIAN JENSEN, PH.D., DIRECTOR, PRESIDENT, INTERNATIONAL
SERVICES. In December 1996, in connection with the acquisition of the clinical
services business, Dr. Jensen was appointed as President, International Services
of the Company, with worldwide responsibility for business development,
integrated project management and information systems, and was elected to the
Board of Directors of the Company. Dr. Jensen joined the clinical services
business in 1991 and served as Chief Operating Officer and as President of its
European operations. Dr. Jensen served as Human Pharmacology Expert from 1989 to
1991 and Pharmacological and Medical Expert from 1986 to 1989 at Sandoz Pharma
Ltd. From 1981 to 1986 he was a pharmacologist and toxicologist at the
University of Bonn Medical Clinics. In 1986, Dr. Jensen became an associate
professor of Clinical Pharmacology at the University of Bonn and received his
B.S. degree in Biology from Baker University and a Ph.D. degree in Pharmacology
and Toxicology from the University of Kansas.
CONTINUING DIRECTORS
CLASS I
PHOTIOS T. PAULSON, DIRECTOR. Mr. Paulson has served as a Director
since August 1995. Mr. Paulson is a Vice President of bioMerieux Alliance S.A.,
a French holding company whose businesses include Clinical Laboratory
Diagnostics and Biotechnology Research in Genetic Therapy. From 1991 to 1995, he
was Chairman of bioMerieux Vitek, Inc., a diagnostics systems company. Between
1987 and 1991, Mr. Paulson was Senior Advisor of Health Care Industry for
Prudential Securities Inc. Prior to 1987, Mr. Paulson had a long career with
Becton Dickinson and Company where he served last as Executive Vice President
and Chief Operating Officer. Mr. Paulson received his B.S. and M.S. degrees from
Stevens Institute of Technology. Mr. Paulson's current three-year term as a
Director will expire in 1998.
W. LEIGH THOMPSON, PH.D., M.D., DIRECTOR. Dr. Thompson has served as a
Director since December 1995. Dr. Thompson is Chief Executive Officer of
Profound Quality Resources, Ltd., a consulting firm and a director of various
privately held companies. From 1982 to 1994, Dr. Thompson was an employee of Eli
Lilly and Company holding positions including Executive Vice President of Lilly
Research Laboratories and corporate Chief Scientific Officer. He is a Fellow of
the American College of Physicians and the American College of Critical Care
Medicine and served as President of the Society of Critical Care Medicine. Dr.
Thompson received his M.S. and Ph.D. (Pharmacology) degrees and an honorary
Sc.D. from the Medical University of South Carolina. Dr. Thompson's current
three-year term as a Director will expire in 1998.
JACK BARBUT, SC.D., DIRECTOR, VICE CHAIRMAN OF THE BOARD OF DIRECTORS
AND PRESIDENT, CLINICAL SERVICES. In December 1996, in connection with the
acquisition of the clinical services business, Dr. Barbut was appointed as Vice
Chairman of the Board of Directors and President, Clinical Services of the
Company and was elected to the Board of Directors of the Company. Dr. Barbut
founded the clinical services business in 1979 and oversaw its operations
thereafter. Dr. Barbut received his Sc.D. degree in systems engineering from The
Polytechnic Institute in Lausanne, Switzerland. Dr. Barbut's current three-year
term as a Director will expire in 1998.
CLASS II
JOHN K. CLARKE, DIRECTOR. Mr. Clarke has served as a Director of the
Company since March 1988. He is a General Partner in DSV Management, the general
partner of DSV Partners IV, a professional venture capital partnership. He has
been associated with DSV Management since 1982. Mr. Clarke is a Director of
Alkermes, Inc. and several privately held companies. Mr. Clarke received his
B.A. degree from Harvard College and his M.B.A. degree from the Wharton School,
University of Pennsylvania. Mr. Clarke's current three-year term as a Director
will expire in 1999.
2
<PAGE> 6
DESMOND H. O'CONNELL, JR., DIRECTOR. Mr. O'Connell has served as a
Director of the Company since April 1991. He is also a Director of Abiomed, Inc.
From December 1992 until December 1993, he served as the Chairman, Management
Committee of Chrysalis Preclinical Services. During 1991, he briefly served as
Chairman of the Board and Chief Executive Officer of Osteotech, Inc., a medical
products company. Since September 1990, he has been an independent management
consultant. Prior to 1990, Mr. O'Connell's career focused on the Health Care
industry and included ten years (1980-1990) at BOC Health Care, his last
position being President and CEO, and ten years (1970-1980) at Baxter
Laboratories, Inc., where his responsibilities included Vice President,
Corporate Development, President, Hyland Division and President, International
Division. Mr. O'Connell received a B.S. degree from the University of Notre Dame
and received an M.B.A. degree from Harvard University. Mr. O'Connell's current
three-year term as a Director will expire in 1999.
DIRECTORS MEETINGS AND COMMITTEES
The Audit Committee recommends to the Board of Directors, subject to
stockholder approval, the selection of the Company's independent certified
public accountants. The Audit Committee discusses with the Company's management
and the Company's independent certified public accountants the overall scope and
specific plans for the accountants' audit. The Audit Committee meets annually
with the Company's senior management and independent public accountants to
discuss the results of the accountants' examination and the Company's systems,
controls and reporting. The Audit Committee held one meeting in 1996.
The Compensation Committee reviews executive compensation, fixes
compensation of the executive officers and incentive compensation, recommends
the adoption of and administers executive benefit plans and grants stock
options. The Compensation Committee held six meetings in 1996.
The Nominating Committee considers and reviews the qualifications of
potential nominees for Directors and nominates a slate of nominees for election
as Directors at each annual meeting of stockholders and, when in certain
circumstances vacancies occur, candidates for election by the Board of
Directors. The Nominating Committee held one meeting in 1996. The Nominating
Committee is normally able to identify from its own resources the names of
qualified nominees, but it will accept from stockholders recommendations of
individuals to be considered as nominees. Any such nominations should be
submitted in writing to the Company at 575 Route 28, Raritan, New Jersey 08869,
Attention: Corporate Secretary.
The Board of Directors held ten meetings in 1996. During the period
that each Director served as such, all of the Directors attended at least
seventy-five percent (75%) of the total meetings held by the Board of Directors
and by the Committees on which they served during 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Jesse Treu, Chairman of the Compensation Committee until his
resignation in December 1996, also served as an executive officer of the Company
as a result of being the Chairman of the Board of Directors until October 1994.
Dr. Treu was not an employee of the Company, was not paid a retainer for his
services as Chairman of the Board of Directors and was not involved in the
day-to-day management of the Company.
COMPENSATION OF DIRECTORS
The Directors of the Company do not receive annual retainers, meeting
fees or other cash compensation of any kind for their service as Directors, but
are reimbursed for their travel expenses in attending meetings. Prior to the
adoption of the 1996 Stock Option Plan in December 1996, Directors who were not
employees of the Company or any of its subsidiaries ("Nonemployee Directors")
received certain automatic grants of stock options under the Company's 1991
Stock Option Plan as follows: (i) each Nonemployee Director elected to the Board
of Directors on or after August 18, 1995 would receive options to purchase
30,000 shares with the option price set at the fair market value of the
underlying shares on the date of election to the Board of Directors; (ii) each
Nonemployee Director elected to the Board of Directors prior to August 18, 1995
would receive options to purchase 30,000 shares with the option price set at
$3.50 per share, the closing price of the Common Stock on August 18, 1995; (iii)
every three years subsequent to the date of the initial grant of 30,000 options,
each Director who remains on the Board of Directors would receive an additional
30,000 options with the option price set at the fair market value of the
underlying shares on the date of the grant; and (iv) immediately following the
fifth annual meeting of the Company's stockholders that is held following the
commencement of a Nonemployee Director's continuous service as such, he will be
automatically granted an option to purchase 7,000 shares of Common Stock. Upon
adoption of the 1996 Stock Option Plan in December 1996, Nonemployee Directors
will receive automatic grants of stock options, as described above, pursuant to
the Company's 1996 Stock Option Plan.
3
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file with the Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Company's Common Stock and other equity securities of the
Company. The rules promulgated by the Commission under Section 16(a) of the
Exchange Act require those persons to furnish the Company with copies of all
reports filed with the Commission pursuant to Section 16(a).
Reports received by the Company indicate that Dr. Jensen and Dr. Barbut
failed to timely file a Form 5 in 1996.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of January 1, 1997, by (i)
each of those persons known to the Company to be a beneficial owner of more than
five percent of the Common Stock, (ii) each of the Company's Directors and the
Named Executive Officers (as defined in "Compensation of Executive
Officers--Summary Compensation Table") and (iii) all Directors and executive
officers of the Company as a group. All information with respect to beneficial
ownership by the Directors, executive officers and beneficial owners has been
furnished by the respective Director, executive officer or beneficial owner, as
the case may be. Unless otherwise indicated below, the persons named below have
sole voting and investment power with respect to the number of shares set forth
opposite their names. The information contained herein regarding share ownership
of persons beneficially owning five percent or more of the Common Stock other
than executive officers and Directors was obtained from required filings of such
persons with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK
NAMES AND ADDRESSES OF COMMON BENEFICIALLY
BENEFICIAL OWNER STOCK(1) OWNED
---------------- -------- -----
<S> <C> <C>
Alec Hackel 955,294(9) 8.41%
Flueliweg 3
6045 Meggen
Switzerland
John K. Clarke 33,573(2) *
Desmond H. O'Connell 53,090(3) *
Photios T. Paulson 20,397(4) *
W. Leigh Thompson Ph.D., M.D. 12,027(5) *
Paul J. Schmitt 352,605(6) 3.01%
Jack Barbut, Sc.D. 955,294(9) 8.41%
John G. Cooper 174,119(7) 1.51%
J. Christian Jensen 636,862(9) 5.61%
Leif Modeweg, D.V.M. 101,746(8) *
All Directors and executive officers
as a group (9 persons) 2,339,712(10) 19.41%
</TABLE>
- ------------------
* Less than one percent.
(1) Shares identified in the footnotes below which are subject to
exercisable options were deemed to be outstanding as of January 1, 1997
for purposes of Rule 13d-3 under the Exchange Act.
(2) Includes 3,676 shares of Common Stock owned by DSV Partners IV. Mr.
Clarke is a general partner of DSV Management Ltd., the sole general
partner of DSV Partners IV. Mr. Clarke is one of four general partners
who share
4
<PAGE> 8
voting and investment control over DSV Management. Mr. Clarke disclaims
beneficial ownership of such shares. Also includes 29,897 shares of
Common Stock which Mr. Clarke had the right to acquire upon the
exercise of stock options within 60 days after January 1, 1997.
(3) Includes 17,870 shares of Common Stock which Mr. O'Connell had the
right to acquire upon the exercise of stock options within 60 days
after January 1, 1997.
(4) Includes 15,397 shares of Common Stock which Mr. Paulson had the right
to acquire upon the exercise of stock options within 60 days after
January 1, 1997.
(5) Includes 12,027 shares of Common Stock which Dr. Thompson had the right
to acquire upon the exercise of stock options within 60 days after
January 1, 1997.
(6) Includes 348,787 shares of Common Stock which Mr. Schmitt had the right
to acquire upon the exercise of stock options within 60 days after
January 1, 1997.
(7) Includes 170,589 shares of Common Stock which Mr. Cooper had the right
to acquire upon the exercise of stock options within 60 days after
January 1, 1997.
(8) Includes 101,746 shares of Common Stock which Dr. Modeweg had the right
to acquire upon the exercise of stock options within 60 days after
January 1, 1997.
(9) Pursuant to a Schedule 13D filed on December 19, 1996 as amended April
21, 1997, Mr. Hackel, Dr. Barbut and Dr. Jensen disclosed that they
intend to vote all shares beneficially owned by them together as a
"group".
(10) Includes 696,313 shares of Common Stock which all Directors and
executive officers, as a group, had the right to acquire upon the
exercise of stock options within 60 days after January 1, 1997.
5
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for developing and making recommendations to the
Board with respect to the Company's executive compensation policies. In
addition, the Compensation Committee, pursuant to authority delegated by the
Board of Directors, determines on an annual basis the compensation to be paid
to the Chief Executive Officer ("CEO") and each of the other executive officers
of the Company. The Compensation Committee is composed of Mr. Clarke, Mr.
O'Connell and Mr. Paulson. Mr. O'Connell serves as the Chairman of the
Compensation Committee. Each member of the Compensation Committee is a
Nonemployee Director.
This Report sets forth policies used by the Compensation Committee in
determining the compensation paid by the Company to its executive officers,
including the Named Executive Officers (as defined in "Summary Compensation
Table").
COMPENSATION PHILOSOPHY AND OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION
PROGRAMS:
The overall compensation philosophy of the Company is to ensure that
executive officer compensation, both in the short and long term, will promote
the long-term objectives of the Company by attracting and retaining superior
talent and rewarding performance. The Company's compensation is structured to
create a mutuality of interest between executive officers and long-term
stockholders through programs that share the rewards and risks of strategic
decision making.
The Compensation Committee believes that the Company's executive
compensation program provides an overall level of compensation that is
competitive within the health care industry, primarily the Contract Research
Organization ("CRO") sector, and recognizes the increasing responsibility of
executive officers as the Company grows. In establishing base salaries, cash
bonuses and incentive compensation programs, the Compensation Committee assesses
periodic compensation surveys. The executive officers' compensation is compared
to peer executive groups surveyed as a guideline for compensation levels.
Although the Compensation Committee uses the average compensation levels
reported in the surveys as targets, actual compensations levels may be greater
or less than average competitive levels in surveyed companies based on the
performance of the Company and the individual.
The Company's basic executive officer compensation package is comprised
of base salary, cash bonuses, long-term incentive compensation in the form of
stock options, and various other benefits which are generally available to
employees of the Company.
Compensation decisions are determined in a structured annual review by
the Compensation Committee with input from the CEO in all determinations other
than his own. This annual review considers the decision making responsibilities
of each position and the individual's experience, work performance and progress
toward Company objectives. The Compensation Committee weighs the Comparative
Stock Performance Graph below in its decisions on compensation. However, because
of the strategic transition of the Company from a transgenic biotechnology
company to a worldwide CRO, the Compensation Committee believes the Company
stock performance should not be the dominant factor in determining compensation.
The Compensation Committee believes the factors cited above are equally
important in determining the basis by which compensation should be measured. See
"Comparative Stock Performance Graph."
The Compensation Committee has reviewed the proposed regulations under
the federal income tax legislation adopted during 1993 that limits the
deductibility of certain executive compensation in excess of $1 million and has
determined that any nondeductible payments under the Company's existing
compensation programs would be highly unlikely.
6
<PAGE> 10
BASE COMPENSATION:
The Compensation Committee is cognizant and responsive to growing
levels of executive responsibility as the size and complexity of the Company
increases. Since the base salary is a critical component of the Company's
success in attracting and retaining key executives, the Compensation Committee
seeks to maintain base compensation levels competitive to average compensation
levels for executive peer groups within the health care industry, primarily the
CRO sector.
In 1996, the average base salaries of the Named Executive Officers
other than the CEO, when translated where appropriate, increased 3.6%. Such
increase was impacted by the translation of Dr. Modeweg's base compensation from
French Francs to U.S. dollars. Excluding the impact of translation, Dr.
Modeweg's compensation increased 9.6% due to the assignment of additional
responsibilities primarily relating to managing growth opportunities for
Chrysalis DNX Transgenic Sciences. Mr. Cooper's compensation increased 8.9%,
primarily due to his promotion to Senior Vice President and the assumption of
increased operational responsibilities.
CASH BONUSES:
The Compensation Committee adopted a bonus plan for the executive
officer group for 1996 performance with payout determinations under such plan
primarily based on the achievement of financial performance targets and
secondarily on individual performance objectives - both focused on increasing
stockholder value. No bonus payments under the 1996 plan have been made to date
as the Compensation Committee will meet to consider any possible payouts in the
second quarter of 1997.
Additionally, a formal bonus plan for key management of the Company was
established for the 1996 fiscal year with payout determinations based on the
achievement of the Company's financial targets and individual performance
objectives. The Compensation Committee will meet to consider any possible
payouts in the second quarter of 1997.
LONG-TERM INCENTIVE COMPENSATION:
The Compensation Committee utilizes stock options as its primary
long-term incentive compensation mechanism for executive officers. The objective
of the program is to align executive and stockholder long-term interests by
creating a strong and direct link between executive pay and long-term
stockholder return, thereby enabling executives to develop and maintain a
significant, long-term stock ownership position in the Company's Common Stock.
The Company established a four-year vesting schedule for options
granted to executives in order to focus the efforts of executive officers on the
long-term strategy of the Company.
The Compensation Committee conducts a formal review from time to time
of the stock option holdings and vesting status of each executive officer. The
Compensation Committee makes stock option grants to the Named Executive Officers
based on such factors as the strategic development of the Company, growth and
performance of the Company, individual performance contribution, total stock
options and related vesting positions for each executive officer of the Company,
and length of service. Based on its consideration of these factors, the
Compensation Committee granted options on January 22, 1996 under the 1991 Stock
Option Plan to Mr. Cooper to purchase 10,000 shares of Common Stock and on June
7, 1996 under the Company's 1988 and 1991 Stock Option Plans to Mr. Schmitt to
purchase 60,000 and to Mr. Cooper to purchase 32,500 shares of Common Stock and
on December 18, 1996 under the 1991 Stock Option Plan to Dr. Barbut and Dr.
Jensen to each purchase 50,000 shares of Common Stock.
CHIEF EXECUTIVE OFFICER COMPENSATION:
It is the Compensation Committee's philosophy that compensation for the
CEO should be directly linked to the achievement of the specific business
objectives established to accomplish the long-term goal of the Company. The
compensation programs for the CEO integrate with the Company's annual and
long-term business objectives and strategy,
7
<PAGE> 11
and focus the CEO's efforts and energies on the fulfillment of those objectives.
Through this strategy, the Company believes the CEO's compensation is directly
aligned with the long-term interests of stockholders.
It is also the Compensation Committee's philosophy that to attract and
retain a qualified individual for this critical executive position, compensation
for the CEO must be competitive with his peer group in the industry.
The CEO's compensation is comprised of the same elements as other
executive officers; base salary, cash bonuses, long-term incentives in the form
of stock options, and various benefits which are generally available to
employees of the Company.
In considering the compensation for the CEO for 1996, the Compensation
Committee conducted a review of the CEO's performance and compared the CEO's
compensation levels with his peer group within related industries.
The Compensation Committee is pleased with Mr. Schmitt's performance in
1995, and feels he managed the Company well through a particularly challenging
period including managing the negotiation leading to the sale of the Company's
30% interest in Nextran and continuing the Company's strategic objective to
become a leading drug development services business. The Compensation Committee
determined that Mr. Schmitt's base salary should be adjusted from $242,000 to
$260,000 effective June 1, 1996.
DESMOND H. O'CONNELL, JR., Chairman
JOHN K. CLARKE
PHOTIOS T. PAULSON
Members of the Compensation Committee
8
<PAGE> 12
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the NASDAQ
Stock Market (U.S.) Index (the "NASDAQ Index"), and (ii) the NASDAQ Health
Services Index (the "Health Services Index"), assuming an investment of $100 on
December 31, 1991, in each of the Common Stock of the Company, the stocks
comprising the NASDAQ Index and the stocks comprising the Health Services Index.
<TABLE>
<CAPTION>
Measurement Period NASDAQ Health
(Fiscal Year Covered) DNX Corporation NASDAQ Services
<S> <C> <C> <C>
Dec-91 88 110 112
Dec-92 52 128 116
Dec-93 31 147 134
Dec-94 36 144 144
Dec-95 28 204 184
Dec-96 34 251 183
</TABLE>
9
<PAGE> 13
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
for the Company's CEO and each of the two other most highly compensated
executive officers, other than the CEO, who were serving as executive officers
at the end of the Company's last completed fiscal year (collectively, the "Named
Executive Officers"), as well as the total compensation paid to each of these
individuals for the Company's previous two fiscal years.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -------
RESTRICTED SECURITIES
STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS OTHER ANNUAL AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) COMPENSATION ($) (#) ($) ($)
------------------ ---- ------ ------ ------------ -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Schmitt 1996 251,625 -- -- -- 60,000 -- 8,013(1)
Chairman of the Board 1995 241,865 -- -- -- 50,000 -- 7,862(2)
of Directors, President 1994 234,808 48,120 -- -- -- -- 7,847(3)
and Chief Executive
Officer
Dr. Modeweg(4) 1996 167,685 12,600 -- -- -- -- --
President, Chrysalis 1995 168,830 -- -- -- 50,000 -- --
Preclinical Services, 1994 138,929 -- -- -- 25,000 -- --
Vice President
Mr. Cooper(5) 1996 146,026 -- -- -- 42,500 -- 5,650(6)
Senior Vice President, 1995 134,065 -- -- -- 50,000 -- 5,215(7)
Chief Financial Officer, 1994 125,423 36,264 -- -- -- -- 5,498(8)
Treasurer and Secretary
</TABLE>
- ------------------
(1) Includes $4,750 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $413 of group term life insurance premiums paid by the
Company and $2,850 of long-term disability insurance premiums paid by
the Company.
(2) Includes $4,620 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $392 of group term life insurance premiums paid by the
Company and $2,850 of long-term disability insurance premiums paid by
the Company.
(3) Includes $4,620 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $377 of group term life insurance premiums paid by the
Company and $2,850 of long-term disability insurance premiums paid by
the Company.
(4) Dr. Modeweg's salary and other cash compensation is paid in French
Francs. Dr. Modeweg received total compensation in French Francs of
922,824 in 1996, 841,618 in 1995, and 770,570 in 1994. The salary
amounts contained in this table have been translated to U.S. dollars
based on an average exchange rate for 1996 of 5.1187 French Francs per
U.S. dollar, an average exchange rate for 1995 of 4.985 French Francs
per U.S. dollar and an average exchange rate for 1994 of 5.5465 French
Francs per U.S. dollar.
(5) On May 29, 1996, Mr. Cooper was elected as Senior Vice President of the
Company. Prior to such time, Mr. Cooper had been Vice President of the
Company.
(6) Includes $4,628 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $128 of group term life insurance premiums paid by the
Company and $894 of long-term disability insurance premiums paid by the
Company.
(7) Includes $4,210 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $111 of group term life insurance premiums paid by the
Company, and $894 of long-term disability insurance premiums paid by
the Company.
(8) Includes $4,620 of Company matching contributions under Chrysalis
International Corporation Employee Savings Plan, which were paid in
Common Stock, $100 of group term life insurance premiums paid by the
Company and $778 of long-term disability insurance premiums paid by the
Company.
10
<PAGE> 14
STOCK OPTIONS
The following table contains information concerning grants of stock
options made during 1996 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPLICATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------------- ---------------
PERCENT OF
TOTAL
OPTIONS/
NUMBER OF SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OF
OPTION/SARS IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mr. Schmitt 60,000(1) 12.68 7.25 06-07-06 273,569 693,278
Mr. Cooper 10,000(2) 2.11 4.44 01-22-06 27,910 70,730
32,500(1) 6.87 7.25 06-07-06 148,183 375,526
</TABLE>
- ------------------
(1) These stock options become exercisable to the extent of 25 percent of
the shares of Common Stock covered thereby on June 1, 1997, the first
anniversary of the date on which vesting commenced, and are exercisable
at a per diem rate over the next three years thereafter for so long as
the optionee remains in the continuous employ of the Company or a
subsidiary.
(2) These stock options became exercisable to the extent of 25 percent of
the shares of Common Stock covered thereby on January 22, 1997, the
first anniversary of the date on which vesting commenced, and are
exercisable at a per diem rate over the next three years thereafter for
so long as the optionee remains in the continuous employ of the Company
or a subsidiary.
OPTION EXERCISES AND HOLDINGS
The following table contains information concerning the exercise of
stock options during 1996 by the Named Executive Officers and unexercised
options held by them at the end of 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END YEAR-END
SHARES VALUE -------- --------
ACQUIRED ON REALIZED EXERCISABLE(E)/ EXERCISABLE(E)/
NAME EXERCISE ($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ---- -------- --- ---------------- ----------------
<S> <C> <C> <C> <C>
Mr. Schmitt 0 0 344,609(E) $722,962(E)
100,891(U) 13,776(U)
Dr. Modeweg 0 0 95,479(E) 8,091(E)
54,521(U) 10,659(U)
Mr. Cooper 0 0 162,842(E) 260,629(E)
79,658(U) 16,246(U)
</TABLE>
11
<PAGE> 15
EMPLOYMENT AGREEMENTS
Messrs. Schmitt and Cooper and Dr. Modeweg, Dr. Barbut and Dr. Jensen
are parties to employment agreements with the Company (or, in Dr. Modeweg's
case, Chrysalis International Preclinical Services Corporation, ["Chrysalis
Preclinical Services"]). See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Chrysalis Preclinical Services entered into an employment agreement
with Dr. Modeweg in 1993 that provides that in the event that Dr. Modeweg is
terminated for reasons other than reckless or gross misconduct, Chrysalis
Preclinical Services and Dr. Modeweg will enter into a consulting agreement.
Such consulting agreement would provide for the continued services of Dr.
Modeweg for a term, at the option of Chrysalis Preclinical Services, of one or
two years at compensation levels substantially equivalent to that received by
Dr. Modeweg as President of Chrysalis Preclinical Services. In the event that
Chrysalis Preclinical Services elects a term of two years for the consulting
agreement, Dr. Modeweg would be subject to a non-competition clause for a period
of one year following the effective date of his termination. The agreement is
subject to automatic renewal on a year-to-year basis unless Chrysalis
Preclinical Services provides advance notice of its intent to terminate the
arrangement.
The Company is a party to a letter agreement with Paul J. Schmitt that
provides Mr. Schmitt with a severance package in the event that he is terminated
without cause, as defined in the agreement. The agreement obligates the Company
to provide Mr. Schmitt with pay at his base salary rate and certain benefit
coverage for up to 12 months following his termination, provided that certain
conditions are met. In addition, in the event of a change of control of the
Company, resulting in a change of duties or responsibilities of Mr. Schmitt, he
may, under certain circumstances, treat such change as a termination of
employment and he would be entitled to receive 12 months of salary plus
immediate vesting of all outstanding options. The term of his agreement expires
on June 2, 2000.
The Company is a party to a letter agreement with John G. Cooper that
provides Mr. Cooper with a severance package in the event that he is terminated
without cause, as defined in the agreement. The agreement obligates the Company
to provide Mr. Cooper with pay at his base salary rate and certain benefit
coverage for up to 12 months following his termination, provided that certain
conditions are met. In addition, in the event of a change of control of the
Company, resulting in a change of duties or responsibilities of Mr. Cooper, he
may, under certain circumstances, treat such change as a termination of
employment and he would be entitled to receive 12 months of salary plus
immediate vesting of all outstanding options. The term of his agreement expires
on May 28, 2001.
The Company entered into employment agreements with Dr. Barbut and Dr.
Jensen on December 18, 1996. Pursuant to these employment agreements, Dr. Barbut
and Dr. Jensen are compensated and provided other benefits comparable to other
senior executives of the Company and commensurate with their duties and
responsibilities. The employment agreements provide for severance payments to
Dr. Barbut and Dr. Jensen in the event that they are terminated without cause,
as defined therein. The employment agreements also contain standard non-compete
and non-solicitation provisions. The term of each employment agreement expires
December 18, 1998.
APPROVAL OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors recommends a vote for the approval of the
appointment of KPMG Peat Marwick LLP as the independent certified public
accountants of the Company and certain of its subsidiaries to audit the books
and accounts for the Company and certain of its subsidiaries for the year ended
December 31, 1997. It is expected that representatives of KPMG Peat Marwick LLP
will attend the Annual Meeting, with the opportunity to make a statement if they
so desire, and will be available to answer appropriate questions.
SUBMISSION OF STOCKHOLDERS' PROPOSALS
Proposals of stockholders intended to be eligible for inclusion in the
Company's proxy statement and proxy card relating to the Company's next annual
meeting should be received at the Company's executive offices on or before July
15, 1997. Such proposals should be submitted by certified mail, return receipt
requested.
OTHER MATTERS
The Company will bear the costs of soliciting proxies from its
stockholders. In addition to the use of the mails, proxies may be solicited by
the Directors, officers and employees of the Company by personal interview,
telephone or telegram. Such Directors, officers and employees will not be
additionally compensated for such solicitation, but may be reimbursed for
out-of-pocket expenses incurred in connection therewith. Arrangements will also
be made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of Common Stock
held
12
<PAGE> 16
of record by such persons, and the Company will reimburse such brokerage houses,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
It is not anticipated that any other matters will be brought before the
Annual Meeting for action; however, if any such other matters shall properly
come before the Annual Meeting or any adjournments or postponements thereof, it
is intended that the persons authorized under proxies may, in the absence of
instructions to the contrary, vote or act thereon in accordance with their best
judgment.
RECORD DATE; VOTING
The Board of Directors has fixed the close of business on April 4, 1997
as the record date (the "Record Date") for determining the holders of Common
Stock entitled to notice of and to vote at the Annual Meeting. As of the Record
Date, there were outstanding 11,384,807 shares of the Common Stock, all of one
class, and all of which are entitled to be voted at the Annual Meeting. Holders
of issued and outstanding shares of Common Stock are entitled to one vote for
each share held. In accordance with General Corporation Law of the State of
Delaware, the Company's Certificate of Incorporation and the Company's Bylaws,
the Company may, if necessary, convene and, by a vote of the stockholders,
adjourn the Annual Meeting to a later date or dates, without changing the Record
Date. If the Company were to determine that an adjournment were desirable, the
appointed proxies would use the discretionary authority granted pursuant to the
proxy card to vote in favor of such an adjournment.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote will constitute a quorum for the transaction of business. In
all matters, other than the election of Directors, the affirmative vote of the
holders of a majority of the issued and outstanding shares of Common Stock
present, entitled to vote and actually voting at the Annual Meeting in person or
by proxy on such matter is required to approve each proposal to be considered at
the Annual Meeting or any adjournments or postponements thereof. Directors will
be elected by a plurality of the votes cast in person or by proxy at the Annual
Meeting. At the Annual Meeting, the results of stockholder voting will be
tabulated by the inspector of elections appointed for the Annual Meeting.
Each nominee for Director receiving a plurality vote of all votes cast
at the meeting in person or by proxy shall be elected. All other matters require
for approval the favorable vote of a majority of shares voted at the meeting in
person or by proxy. Abstentions in respect of any proposal and broker non-votes
will not be counted for purposes of determining whether such proposal has
received the requisite approval of the Company's stockholders.
The shares represented by all valid proxies received will be voted in
the manner specified on the proxies. Where specific choices are not indicated on
a valid proxy, the shares represented by such proxies received will be voted:
(1) for the nominees for Director named earlier in this Proxy Statement; and (2)
for approval of the appointment of the independent certified public accountants.
JOHN G. COOPER
Secretary
Raritan, New Jersey
April 30, 1997
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. PLEASE PROMPTLY
FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT
TO BE PRESENT AT THE ANNUAL MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
13
