<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
KENDLE INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
Kendle Logo
KENDLE INTERNATIONAL INC.
700 CAREW TOWER
441 VINE STREET
CINCINNATI, OHIO 45202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1998
TO THE SHAREHOLDERS OF KENDLE INTERNATIONAL INC.:
The annual meeting of shareholders of Kendle International Inc. will be
held on Thursday, May 21, 1998 at 10:00 a.m., Eastern Time, at The Omni
Netherland Plaza, 35 W. Fifth Street, Cincinnati, Ohio 45202, for the following
purposes:
1. To elect five directors to hold office for the ensuing year or until
their respective successors are elected and qualified;
2. To approve the 1998 Employee Stock Purchase Plan authorizing the
issuance of 500,000 shares;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
public accountants for the Company for the year ending December 31,
1998; and
4. To consider and act upon any other matters that may properly come before
the meeting or any adjournment thereof.
The Board of Directors of the Company has designated the close of business
on March 31, 1998 as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting or any adjournment thereof.
Only shareholders of record of the Company's Common Stock at the close of
business on that date will be entitled to vote.
You are cordially invited to attend the meeting. However, whether or not
you plan to be personally present at the meeting, please complete, date and sign
the enclosed proxy and return it promptly in the enclosed envelope. If you later
desire to revoke your proxy, you may do so at any time before it is exercised.
By Order of the Board of Directors,
Candace K. Bryan
Chairman of the Board and
Chief Executive Officer
DATED: APRIL 14, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN AND
PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED
BY WRITTEN NOTICE OF REVOCATION, THE SUBMISSION OF A LATER PROXY, OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE> 3
KENDLE INTERNATIONAL INC.
700 CAREW TOWER
441 VINE STREET
CINCINNATI, OHIO 45202
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
The Board of Directors of Kendle International Inc. is requesting your
proxy for use at the Annual Meeting of Shareholders on May 21, 1998, and at any
adjournment thereof, pursuant to the foregoing Notice. This Proxy Statement and
the accompanying proxy card are being mailed to shareholders with the Company's
1997 Annual Report on or about April 14, 1998.
VOTING AT THE ANNUAL MEETING
GENERAL
Shareholders may vote in person or by proxy at the Annual Meeting. Proxies
given may be revoked at any time by filing with the Company either a written
revocation or a duly executed proxy card bearing a later date, or by appearing
at the Annual Meeting and voting in person. Shares not voted for any reason,
including broker non-votes, will have no effect on the outcome of any vote taken
at the Annual Meeting. Abstentions will have no effect on the election of
directors but will be treated as "no" votes for all other matters voted on at
the Annual Meeting.
As of March 31, 1998, the record date for determining shareholders entitled
to notice of and to vote at the Annual Meeting, the Company had 8,604,425 shares
of Common Stock outstanding. Each share is entitled to one vote. Only
shareholders of record at the close of business on March 31, 1998 will be
entitled to vote at the Annual Meeting.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of
February 27, 1998 by (i) each shareholder known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director, (iii) each executive officer and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ---------- -------
<S> <C> <C>
Candace K. Bryan(2)(3)...................................... 1,368,716 15.9%
Christopher C. Bergen(3).................................... 1,060,784 12.3%
Kendle Stock Trust(3)....................................... 620,500 7.2%
Philip E. Beekman(4)........................................ 13,261 *
Charles A. Sanders(4)....................................... 15,161 *
Timothy M. Mooney(5)........................................ 136,550 1.6%
All executive officers and Directors as a group (5
persons)(6)............................................... 2,594,472 29.6%
</TABLE>
- ---------------
* Less than 1%
(1) Based on 8,602,425 shares of Common Stock outstanding. Shares of the
Company's Common Stock which a beneficial owner has the right to acquire
within 60 days of December 31, 1997 pursuant to the exercise of stock
options are deemed to be outstanding for the purpose of computing the
percentage ownership of such
<PAGE> 4
owner but are not deemed outstanding for the purpose of computing percentage
ownership of any other person.
(2) Includes 18,980 shares held directly by Hazel Kendle, mother of Dr. Bryan.
(3) The business address of the above individuals/trust is 700 Carew Tower, 441
Vine St. Cincinnati, OH 45202.
(4) Includes 10,000 shares issuable upon the exercise of vested options.
(5) Includes 135,050 shares issuable upon the exercise of vested options.
(6) Includes 155,050 shares issuable upon the exercise of vested options.
ELECTION OF DIRECTORS
The Board is nominating for re-election all of the current directors,
namely Candace K. Bryan, Christopher C. Bergen, Timothy M. Mooney, Philip E.
Beekman and Charles A. Sanders.
All directors elected at the Annual Meeting will be elected to hold office
until the next Annual Meeting and until their successors are elected and
qualified.
Proxies will be voted in favor of election of the nominees named herein
unless authority to vote is withheld.
If any of the nominees should become unable to accept election or declines
to serve, neither of which the Board anticipates, it is intended, in the absence
of contrary direction, that the proxies will be voted for the balance of those
named above and for substitute nominees as the Board may designate, unless the
Board has taken prior action to reduce its membership. The proxies will in no
event be voted for a greater number of nominees than five.
During 1997, the Board of Directors held five meetings. Each incumbent
director attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors and the total number of meetings held by all
committees on which the individual director served. There are two committees of
the Board of Directors which assist the Board in discharging its
responsibilities. These committees, their members and functions are discussed
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR.
INFORMATION ABOUT NOMINEES
CANDACE K. BRYAN, PHARM. D., 51, co-founded the Company in 1981 and has
served as Chief Executive Officer and Chairman of the Board since its
incorporation. From 1979-1981, Dr. Bryan served as Clinical Associate Professor
of Pediatrics at University of Pennsylvania School of Medicine; Clinical
Assistant Professor at Philadelphia College of Pharmacy and Sciences; and
Director, Department of Pharmacy, The Children's Hospital of Philadelphia. From
1974-1978, Dr. Bryan served in a variety of positions at the University of North
Carolina School of Pharmacy and School of Medicine. Dr. Bryan has published more
than 15 scientific articles and was recently elected as a director of H.J. Heinz
Company, a food products manufacturer. Dr. Bryan is the wife of Christopher C.
Bergen, President and Chief Operating Officer of the Company.
CHRISTOPHER C. BERGEN, 47, co-founded the Company in 1981 and has served as
President and Chief Operating Officer since 1981 and has served as a director of
the Company since its incorporation. From 1977 through 1981, Mr. Bergen served
in various capacities at The Children's Hospital of Philadelphia, most recently
as Associate Vice President. Mr. Bergen is the husband of Candace K. Bryan,
Chief Executive Officer of the Company.
TIMOTHY M. MOONEY, 50, joined the Company in May 1996 and was elected to
the Board of Directors in January 1997. Prior to joining the Company as Vice
President-Finance, Chief Financial Officer and Treasurer, Mr. Mooney was the
Vice President, Chief Financial Officer and Treasurer of The Future Now, Inc., a
computer reseller. From May 1988 to July 1994, Mr. Mooney served as Senior Vice
President and Chief Financial Officer of Hook-SupeRx, Inc., a retail drugstore
chain. Mr. Mooney was previously a partner with Coopers & Lybrand
2
<PAGE> 5
L.L.P. Mr. Mooney serves as a director of Winton Financial Corporation, a
unitary savings and loan holding company.
PHILIP E. BEEKMAN, 66, was elected a Director of the Company in January
1997. Mr. Beekman is the President of Owl Hollow Enterprises, a consulting and
investment company. Prior to July 1994, Mr. Beekman served as Chairman of the
Board and Chief Executive Officer of Hook-SupeRx, Inc. Mr. Beekman is a director
of Consolidated Cigar Holdings, Inc., a tobacco products company; the National
Association of Chain Drug Stores; General Chemical Group Inc., a supplier of
soda ash and other chemicals; B.T. Office Products International, a distributor
of commercial office supply products; Linens 'N Things, a retail chain of home
furnishings; the Ladies Professional Golf Association; and the National
Organization on Disability.
CHARLES A. SANDERS, M.D., 66, was elected a Director of the Company in
January 1997. From 1989 to 1994, Dr. Sanders was Chief Executive Officer of
Glaxo Inc., and he served as Chairman of that company from 1992 to 1995. Prior
to joining Glaxo Inc., Dr. Sanders spent eight years with Squibb Corp. where he
held a number of senior positions including Vice Chairman. Previously, Dr.
Sanders was general director of Massachusetts General Hospital and Professor of
Medicine at Harvard Medical School. He is currently a member of the Institute of
Medicine of the National Academy of Sciences, a trustee of the University of
North Carolina at Chapel Hill, chairman of Project HOPE and chairman of the
Commonwealth Fund. Dr. Sanders serves as a director of StaffMark, Inc., a
provider of diversified staffing services to businesses, healthcare providers
and government agencies; and of Magainin Pharmaceuticals, Inc., Vertex
Pharmaceuticals Incorporated, Pharmcopeia, Inc., Scios, Inc. and Trimeris, Inc.
, all biopharmaceutical companies engaged in the development of medicines for
serious diseases.
COMMITTEES OF THE BOARD OF DIRECTORS
There are two committees of the Company's Board of Directors: the
Compensation Committee and the Audit Committee. The Compensation Committee,
which met twice during 1997, is composed of Mr. Beekman (Chairman), Dr. Sanders
and Dr. Bryan and is responsible for the approval of remuneration arrangements
for executive officers of the Company, the review of the Company's compensation
plans and the general review of the Company's employee compensation policies.
The Audit Committee, which met once during 1997, is composed of Dr. Sanders
(Chairman), Mr. Beekman and Mr. Bergen, and is responsible for the engagement of
independent auditors, the review of audit fees, the supervision of matters
relating to audit functions, and the review and setting of internal policies and
procedures regarding audit, accounting and other financial controls.
The Company does not have a nominating committee or executive committee.
COMPENSATION OF DIRECTORS
In August 1997, the Company adopted a policy to compensate each
non-employee director of the Company $1,000 for each directors' meeting attended
and $500 per committee meeting attended. Such compensation for meetings is
reduced by 50% if the director participates in the meeting by telephone. The
foregoing compensation is paid quarterly, in arrears, in the form of Company
Common Stock. Under the Company's 1997 Stock Option and Stock Inventive Plan
(the "Stock Option Plan"), each non-employee director was granted a
non-qualified option to purchase 10,000 shares of Common Stock at the time of
the Company's initial public offering and will be granted a non-qualified option
to purchase 5,000 shares of Common Stock if elected as a director at the Annual
Meeting. Non-employee directors are subsequently entitled to similar options for
1,000 shares of Common Stock upon each annual election as a director thereafter.
The option price for all such options equals the fair market value (as defined
in the Stock Option Plan) of Common Stock on the grant date. Directors who are
employees of the Company are not separately compensated for serving as
directors.
3
<PAGE> 6
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid for
the last three fiscal years to the Company's Chief Executive Officer and the two
other executive officers (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------------------
NAME AND --------------------------- SECURITIES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION(1)
------------------ ---- -------- ------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Candace K. Bryan.............. 1997 $153,444 $70,000 2,250 0
Chairman of the Board of 1996 122,400 0 0 2,291
Directors and Chief Executive 1995 123,754 0 0 2,099
Officer
Christopher C. Bergen......... 1997 145,944 56,000 2,000 0
President and Chief Operating 1996 122,400 0 0 2,291
Officer 1995 123,129 0 0 2,099
Timothy M. Mooney(2).......... 1997 134,671 42,000 1,650 0
Vice President-Finance, Chief 1996 72,035 0 135,050 0
Financial Officer and
Treasurer
</TABLE>
- ---------------
(1) Represents insurance premium payments.
(2) Mr. Mooney joined Kendle in May 1996.
STOCK OPTIONS
The table below provides certain information with respect to grants of
stock options to the Named Executives pursuant to the Company's Stock Option
Plan during the year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(2)(3)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR PRICE(/SHARE) DATE 5% 10%
---- ---------- ------------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Candace K. Bryan....... 2,250 0.44% $14.00 08/22/07 $19,810 $50,203
Christopher C.
Bergen............... 2,000 0.39% 14.00 08/22/07 17,609 44,625
Timothy M. Mooney...... 1,650 0.32% 14.00 08/22/07 14,527 36,815
</TABLE>
- ---------------
(1) All options granted to the Named Executives are exercisable in five equal
annual installments beginning one year after the date of grant.
(2) Potential realizable value is calculated from the exercise price of the
options granted.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Stock price.
4
<PAGE> 7
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED SECURITIES IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS OPTIONS AT FISCAL YEAR-
UNDERLYING OPTIONS VALUE AT FISCAL YEAR-END END(1)
NAME EXERCISED REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------------- -------- -------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Candace K. Bryan......... 0 0 0 2,250 $ 0 $6,188
Christopher C. Bergen.... 0 0 0 2,000 0 5,500
Timothy M. Mooney........ 0 0 135,050 1,650 2,098,677 4,538
</TABLE>
- ---------------
(1) Represents the number of shares optioned multiplied by the difference
between $16.75, the fair market value of the Common Stock at December 31,
1997, and the exercise price for that option.
PROTECTIVE COMPENSATION AND BENEFIT AGREEMENTS
The Company has entered into Protective Compensation and Benefit Agreements
with certain employees, including all executive officers of the Company. These
agreements are subject to annual review by the Company's Board of Directors,
expire on December 31, 1999, and will be automatically extended in one year
increments unless canceled by the Company. The agreements provide for specified
benefits, including two years' compensation, in the event of a change in control
as that term is defined in the agreements.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee establishes compensation for executive officers
by setting salaries, approving bonus plans, making bonus awards and awarding
stock options. The Committee also administers the Company's stock related
benefit plans and reviews and consults with Company management regarding other
benefit plans and practices. The Committee meets as necessary each year to
review executive officer compensation, to act on specific recommendations by
management for the grant of stock options and to review the overall compensation
philosophy, policies and practices of the Company.
The Company's overall philosophy on compensation, as adopted by the
Committee, is to provide a competitive compensation package capable of
attracting and retaining talented employees. The components of overall
compensation for each position, including specifically the Company's executive
officers, are set by, among other factors, comparison with the pay practices of
comparable companies. It was on this basis that the Committee established the
annual compensation of Dr. Bryan, Mr. Bergen and Mr. Mooney at a meeting held on
May 14, 1997.
On August 10, 1997, the Committee reviewed and approved stock option grants
to each of the Company's employees to be granted concurrent with the Company's
initial public offering. The grant levels were based upon criteria approved by
the Committee including the employee's length of service and job classification.
The Company granted 5,900 stock options to the Named Executives, as a group, in
1997.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, a
public company may not deduct more that $1 million in compensation paid to any
one of its executive officers, unless the excess amount is performance-based
compensation satisfying certain rules. The Company's Stock Option Plan is
designed to qualify under the compensation requirements of this provision. Due
to current salary levels and anticipated bonus targets, the Committee believes
that it is unlikely that application of Section 162(m) will prevent the Company
from claiming a deduction for the amount of compensation paid to senior
executive officers.
Compensation Committee of the Board of Directors
Philip E. Beekman, Chairman
Charles A. Sanders
Candace K. Bryan
5
<PAGE> 8
CERTAIN TRANSACTIONS
In 1997, the Company paid $397,000 to a construction company owned by a
relative of Dr. Bryan for construction and renovations at its principal
executive offices. Such work is continuing. Management believes that payments to
the construction company are on terms no less favorable than those that could
have been negotiated with unaffiliated third parties.
PERFORMANCE GRAPH
The following graph shows cumulative total shareholder returns for the
period beginning August 22, 1997 and ending on December 31, 1997 with a
published industry index or line-of-business index. The Company has selected the
Nasdaq Stock Market (U.S.) Index and a composite peer group consisting of
ClinTrials Research Inc., Parexel International, Pharmaceutical Product
Development, Inc. and Quintiles Transnational Corp. The graph assumes that $100
was invested on August 22, 1997 in Kendle International Inc. stock (at the
initial public offering price) and in the index and peer group on August 22,
1997. The graph further assumes the reinvestment of all dividends.
Performance Graph
<TABLE>
<CAPTION>
AUGUST 22, AUGUST 31, SEPTEMBER 30, OCTOBER 31, NOVEMBER 30, DECEMBER 31,
1997 1997 1997 1997 1997 1997
---------- ---------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Kendle International Inc.... 100.00 114.29 133.93 107.14 109.82 119.64
Peer Group.................. 100.00 97.54 104.07 91.00 93.45 113.47
Nasdaq Stock Market
(U.S.).................... 100.00 99.42 105.30 99.83 100.32 98.75
</TABLE>
6
<PAGE> 9
APPROVAL OF 1998
EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board of Directors is recommending that shareholders approve the 1998
Employee Stock Purchase Plan (the "Plan"). The Plan was approved by the Board of
Directors on March 24, 1998 as a method of providing eligible employees of the
Company and its subsidiaries with the ability to acquire shares of the Company's
Common Stock through payroll deductions. The Company has reserved 500,000 shares
of the Company's Common Stock for issuance under the Plan.
ELIGIBILITY AND PARTICIPATION; ADMINISTRATION
Each full-time employee who has completed one month of employment with the
Company or any eligible subsidiary of the Company is eligible to participate in
the Plan. However, no employee shall be granted a right to purchase shares of
Common Stock under the Plan (a) if, immediately after the grant, the employee
would own, directly or indirectly, stock and/or hold outstanding purchase rights
to purchase stock equaling 5% or more of the total combined voting power or
value of all classes of stock of the Company, or (b) which permits the employee
the right to purchase stock with a fair market value of greater than $25,000
(determined at the time such purchase right is granted) during any calendar
year. As of March 31, 1998, there were approximately 870 employees eligible to
participate in the Plan.
Each participant may elect payroll deductions of any whole percentage from
1% to 10% of such participant's compensation (exclusive of bonus payments,
expense allowances and compensation paid in a form other than cash). The Plan
will be implemented through one 12-month purchase period each calendar year. On
the first day of each purchase period, each participant will be deemed to have
been granted a right to purchase a number of shares of Common Stock equal to the
accumulated payroll deductions that will be made during the purchase period
divided by the applicable purchase price per share of Common Stock. The purchase
price will be 85% of the lower of the fair market value (as defined in the Plan)
of Common Stock on the first or last day of the purchase period. On March 31,
1998, the last sale price of the Company's Common Stock was $23.25 per share. On
the last day of the purchase period each participant will be deemed to have
purchased the number of full shares of Common Stock which his or her accumulated
payroll deductions will purchase at the applicable purchase price. Fractional
shares will not be issued under the Plan. Any accumulated payroll deductions
which would have been used to purchase fractional shares will be held for the
purchase of Common Stock in the next purchase period without interest. A
participant may stop participating in the Plan at any time. Purchase rights
under the Plan are not transferable. Purchase rights are subject to
proportionate adjustments in the event of any stock dividend, stock split,
combination or other similar transaction affecting the Company's Common Stock.
Slight deviations in Plan requirements may be necessary to make the Plan conform
to the local laws of participants' countries outside of the United States. The
Plan will be administered by the Compensation Committee of the Board of
Directors.
AMENDMENT AND TERMINATION
The Plan may be amended or terminated by the Board of Directors of the
Company at any time, provided, however, that the Board of Directors may not
amend the plan to change (i) the aggregate number of shares of Common Stock
which may be issued under the Plan or (ii) the class of employees eligible to
participate in the Plan (other than to designate additional subsidiaries as
eligible to participate) without the approval of the shareholders, and may not
terminate the Plan in a manner that would adversely affect a participant's
rights thereunder without such participant's consent.
CERTAIN FEDERAL TAX CONSEQUENCES
The Plan is intended to comply with the requirements governing employee
stock purchase plans set forth in the Internal Revenue Code of 1986, as amended
(the "Code"). Certain favorable tax consequences are afforded purchasers of
stock pursuant to an employee stock purchase plan meeting those requirements. If
a participant
7
<PAGE> 10
acquires stock under such a plan and holds it for a period of more than two
years from the date the purchase right is granted and more than one year from
the actual purchase date, the participant will not realize any ordinary income
on the purchase but will realize ordinary income upon the disposition of such
stock to the extent of the excess of the fair market value of such stock at the
time the purchase right was granted over its purchase price (which in the Plan
would be the amount of the 15% reduction in price), and the participant would
report any additional gain as capital gain. If such stock is disposed of when
its fair market value is less than its fair market value was at the time the
purchase right was granted, the amount of ordinary income is limited to the
excess of the fair market value at the time of disposition over the purchase
price. Neither the grant of a purchase right under an employee stock purchase
plan meeting the requirements of the Code nor the exercise of such a purchase
right has tax consequences to the Company or the participant. If a participant
disposes of stock acquired pursuant to such a purchase right within two years
from the date the purchase right is granted or one year from the date the
purchase right is exercised, the participant must report as additional ordinary
income the difference between the purchase price and the fair market value of
the stock at the time the purchase right is exercised, and the Company may take
an income tax deduction in that amount.
The affirmative vote of a majority of the shares voting at the Annual
Meeting is required to approve the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE COMPANY'S
1998 EMPLOYEE STOCK PURCHASE PLAN.
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
The Audit Committee of the Board of Directors appointed Coopers & Lybrand
L.L.P. as the Company's independent public accountants for the year ending
December 31, 1998. Coopers & Lybrand has been the independent accounting firm
for the Company since 1996. Although not required by law, the Board of Directors
is seeking shareholder ratification of this selection. The affirmative vote of a
majority of shares voting at the Annual Meeting is required for ratification. If
ratification is not obtained, the Board of Directors intends to continue the
employment of Coopers & Lybrand at least through 1998. Representatives of
Coopers & Lybrand are expected to be present at the Annual Meeting and will be
given an opportunity to comment, if they so desire, and to respond to
appropriate questions that may be asked by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF COOPERS &
LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1998.
OTHER MATTERS
The Board knows of no other matters which will be presented at the Annual
Meeting. If however, any other matter is properly presented at the Annual
Meeting it will require the affirmative vote of a majority of shares voting.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than ten percent of the Company's
Common Stock to file reports of ownership with the Securities and Exchange
Commission and to furnish the Company with copies of these reports. Based solely
upon its review of reports received by it, or upon written representation from
certain reporting persons that no reports were required, the Company believes
that during 1997 all filing requirements were met, except that Forms 3 for Dr.
Bryan, Mr. Beekman, Mr. Bergen, Mr. Mooney and Dr. Sanders were filed after the
Company's initial public offering.
VOTING BY PROXY
All proxy cards properly signed will, unless a different choice is
indicated, be voted "FOR" election of all nominees for directors proposed by the
Board of Directors, "FOR" approval of the 1998 Employee Stock Purchase Plan and
"FOR" ratification of the selection of independent public accountants.
8
<PAGE> 11
If any other matters come before the Annual Meeting or any adjournment,
each proxy will be voted in the discretion of the individuals named as proxies
on the card.
SHAREHOLDER PROPOSALS
Shareholders who desire to have proposals included in the notice for the
Annual Meeting of Shareholders to be held in the Spring of 1999 must submit
their proposals in writing to the Company, Attention Julie G. Lerner, Investor
Relations, 700 Carew Tower, 441 Vine Street, Cincinnati, Ohio 45202 no later
than December 15, 1998.
April 14, 1998
9
<PAGE> 12
KENDLE INTERNATIONAL INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
The purpose of this Plan is to provide employees of Kendle and its
subsidiaries added incentive to their employment and to encourage their
increased efforts to promote the best interests of Kendle. The Plan seeks to
accomplish this purpose by permitting eligible employees to purchase Common
Shares of Kendle at below-market prices. For purposes of the Plan, a subsidiary
of the corporation of which Kendle is the common parent, is as defined by the
Internal Revenue Code of 1986 in Section 424(f). As used in this Plan, the term
"Kendle" means Kendle International Inc. and all such subsidiaries. This Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code and all provisions of this Plan are to be construed so
as to meet that tax objective.
2. ELIGIBILITY.
This Plan is available to each Eligible Employee of Kendle who meets
the following tests on the first day of a Purchase Period as defined in Section
3. An Eligible Employee is one (a) who has been continuously employed by Kendle
for at least one month; (b) whose customary employment by Kendle is at least 24
hours per week; and (c) whose customary employment by Kendle is more than five
months in any calendar year.
An Eligible Employee may not purchase Common Shares hereunder if,
immediately thereafter such employee would own 5% or more of the total combined
voting power or value of all classes of stock of Kendle or any subsidiary
including attributable stock under Section 424(d) of the Internal Revenue Code,
or if, for a given calendar year, such employee's aggregate rights to purchase
stock under all employee stock purchase plans of Kendle would exceed $25,000 of
fair market value of such stock for such calendar year, all determined in the
manner provided by Section 423(b)(8) of the Internal Revenue Code.
3. EFFECTIVE DATE; TERM; PURCHASE PERIODS.
This Plan shall become effective on June 30, 1998 or such later date as
may be specified by the Board of Directors. This Plan shall cease to be
effective unless, within 12 months after the date of its adoption by the Board,
it has been approved at a meeting of the shareholders of Kendle.
This Plan shall remain in effect until all Common Shares issuable under
the Plan have been issued or June 30, 2003, whichever occurs first.
A "Purchase Period" shall consist of the twelve month period beginning
on each July 1, commencing on or after the effective date and prior to
termination of the Plan.
<PAGE> 13
- 2 -
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee designated by the Board
consisting of two or more members of the Board, each of whom is a Non-Employee
Director within the meaning of Rule 16b-3(b) promulgated under the Securities
Exchange Act of 1934.
In addition to the power to amend or terminate the Plan pursuant to
Section 9, the Committee shall have full power and authority to: (i) interpret
and administer the Plan and any instrument or agreement entered into under the
Plan; (ii) establish such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (iii) make
any other determination and take any other action that the Committee deems
necessary or desirable for administration of the Plan. Decisions of the
Committee shall be final, conclusive and binding upon all persons, including
Kendle, any participant and any other employee of Kendle. A majority of the
members of the Committee may determine its actions and fix the time and place of
its meetings.
The Plan shall be administered so as to ensure all participants have
the same rights and privileges as are provided by Section 423(b)(5) of the
Internal Revenue Code.
5. BASIS OF PARTICIPATION.
5.1 PAYROLL DEDUCTION. Each Eligible Employee shall be
entitled to enroll in the Plan as of the first day of the Purchase Period which
begins after such employee has become an Eligible Employee.
To enroll in the Plan, an Eligible Employee shall execute and deliver a
payroll deduction authorization to Kendle or its designated agent. The
authorization shall become effective on the first day of the Purchase Period
following the execution and delivery of such authorization. Each authorization
shall direct that payroll deductions be made by Kendle for each payroll period
during which the employee is a participant in the Plan. The amount of each
payroll deduction for each such payroll period shall be a whole percentage
amount or a whole dollar amount, as determined by the Committee, in either case
not less than One Percent nor more than Ten Percent, or such greater or lesser
percentages as may be determined by the Committee, of the participant's current
regular wage or salary (before withholding or other deductions) paid to him/her
by Kendle.
Payroll deductions (and any other amount paid under the Plan) shall be
made for each participant in accordance with his/her authorization until
participation in the Plan terminates, the authorization is revised or the Plan
terminates, all as hereinafter provided.
A participant may not change the amount of payroll deduction during any
Purchase Period. Any requested changes on the amount of payroll deductions will
be effective beginning on the first day of the next Purchase Period, subject to
a participant's right to terminate participation in the Plan at any time as
provided in Section 8.
Payroll deductions shall be credited to an account established for each
participant. At the
<PAGE> 14
-3-
end of each Purchase Period, the amount in each participant's account will be
applied to purchase Kendle Common Shares for such Purchase Period. No interest
shall accrue at any time for any amount credited to a participant's account.
5.2 OTHER METHODS OF PARTICIPATION. The Committee may
establish additional procedures whereby Eligible Employees may participate in
the Plan by means other than payroll deduction, such as delivery of funds by
participants in a lump sum or automatic charges to participants' bank accounts.
Such other methods of participating shall be subject to such rules and
conditions as the Committee may establish. The Committee may at any time amend,
suspend or terminate any participation procedures established pursuant to this
paragraph without prior notice to any participant to Eligible Employee.
6. PURCHASE PRICE.
The purchase price for Common Shares purchased under the Plan for any
Purchase Period shall be the lesser of (i) 85% of the fair market value of the
Common Stock on the first day of such Purchase Period or (ii) 85% of the fair
market value of the Common Shares on the last day of such Purchase Period. "Fair
market value" means the average of the highest and lowest quoted selling prices
for the Common Share as reported on the National Market System of The Nasdaq
Stock Market or such other consolidated transaction reporting system on which
the shares are primarily traded. If the shares are not traded on such date, then
the next preceding day on which the shares were traded, all as reported by such
source as the Committee may select. If the shares are not traded on a national
securities exchange or other market system, fair market value shall be set under
procedures established by the Committee.
7. ISSUANCE OF SHARES.
Common Shares purchased by each participant shall be considered to be
issued and outstanding to the participant's credit as of the close of business
on the last day of each Purchase Period. A participant may any time withdraw
certificates for all or a portion of the Common Shares credited to his or her
account by giving written notice to Kendle, provided, however, that (a) no such
request may be made more frequently than once per Purchase Period, (b) such
request shall be for at least 25 Common Shares and (c) no participant shall be
entitled to receive a certificate for any fractional share. Kendle will pay any
stamp taxes imposed in connection with the issuance of any certificate under the
Plan.
After the close of each Purchase Period, a report will be sent to each
participant stating entries made to the account, the number of Common Shares
purchased and the applicable purchase price.
8. TERMINATION OF PARTICIPATION.
A participant may at any time terminate participation in the Plan,
provided such termination is received by Kendle in writing prior to the last
business day of the Purchase Period for which such termination is to be
effective. Upon any such termination, Kendle shall promptly
<PAGE> 15
-4-
deliver to such participant certificates for the number of full Common Shares
held in the account and cash equal to any remaining balances and in lieu of any
fractional shares. Such cash equivalent shall be determined by multiplying the
fractional share by the fair market value of a Common Share on the last day of
the Purchase Period immediately preceding such termination, determined as
provided in Section 6.
If the participant dies, terminates employment with Kendle for any
reason, or otherwise ceases to be an Eligible Employee, participation in the
Plan shall immediately terminate. In such event, certificates for the number of
full Common Shares held in the account, cash equal to any remaining balances and
the cash equivalent of any fractional share so held, determined as provided in
Section 6, shall be delivered promptly to such participant.
9. TERMINATION OR AMENDMENT OF THE PLAN.
Kendle may terminate the Plan at any time. Notice of termination shall
be given to all participants, but any failure to give such notice shall not
impair the effectiveness of the termination.
The Plan will terminate in any event when the maximum number of Common
Shares to be sold under the Plan has been purchased. Such termination shall not
impair any rights which under the Plan shall have vested on or prior to the date
of such termination. If at any time the number of shares remaining available for
purchase under the Plan are not sufficient to satisfy all then-outstanding
purchase rights, the Board may determine an equitable basis of allocating
available shares among all participants.
The Board may amend the Plan from time to time; provided, however, no
such amendment shall (a) materially adversely affect any purchase rights
outstanding under the Plan during the Purchase Period in which such amendment is
to be effected, (b) increase the maximum number of Common Shares which may be
purchased under the Plan, (c) decrease the purchase price of the Common Shares
for any purchase period below the lesser of 85% of fair market value on either
of the first or the last day of such Purchase Period or (d) adversely affect the
qualification of the Plan under Section 423 of the Internal Revenue Code.
Upon termination of the Plan, certificates for the number of full
Common Shares held in the account, cash equal to any remaining balances and the
cash equivalent of any fractional share so held, determined as provided in
Section 6, shall be delivered promptly to such participant.
10. NON-TRANSFERABILITY.
No right or interest in this Plan shall be assignable or transferable,
or subject to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. Any attempted assignment, transfer, pledge or other disposition of
any rights under this Plan shall be null and void and shall automatically
terminate all rights of a participant under the Plan.
<PAGE> 16
-5-
11. SHAREHOLDER'S RIGHTS.
No Eligible Employee or participant shall by reason of this Plan have
any rights of a shareholder of Kendle until and to the extent such person
acquires Common Shares as herein provided.
12. MAXIMUM NUMBER AND SOURCE OF SHARES; ADJUSTMENTS.
The maximum number of Common Shares which may be purchased under this
Plan is Five Hundred Thousand (500,000) shares. Common Shares sold hereunder may
be treasury shares, authorized and unissued shares, or a combination thereof.
The Committee may also purchase Common Shares on behalf of the participants
through market transactions.
If Kendle shall, at any time change its issued Common Shares into a
different number through stock dividend, stock split, combination or otherwise,
the number of Common Shares specified in this Plan shall be proportionately
adjusted.
13. MISCELLANEOUS.
13.1 Any authorization, election, notice or document under this Plan
from an Eligible Employee or participant shall be delivered to Kendle and shall
be effective when delivered.
13.2 This Plan, and Kendle's obligation to sell and deliver Common
Shares hereunder, shall be subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approval by any regulatory or
governmental agency as may, in the opinion of counsel for Kendle, be required.
<PAGE> 17
R.S. Rowe & Company, Inc.: Job No. 6438; Proof Of 03-31-98
(617) 482-7765; (212) 926-2444; (800) 324-6202; FAX No. (617) 423-6308
EMAIL Address: [email protected]
PM6\5TH 3RD\Kendle-pr?
[Kendle Logo]
Kendle International Inc.
700 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
PROXY The undersigned hereby appoints Paul F. Ritter and Anthony L.
FOR Parcellini, or either of them, proxies of the undersigned, each with
ANNUAL the power of substitution, to vote all shares of Common Stock which the
MEETING undersigned would be entitled to vote on the matters specified below
and in their discretion with respect to such other business as may
properly come before the Annual Meeting of Shareholders of
Kendle International Inc. to be held on May 21, 1998 at 10:00 A.M.
Eastern Time at The OMNI Netherland Plaza, 35 West Fifth Street,
Cincinnati, Ohio or at any adjournment of such Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
<TABLE>
<S> <C>
1. Authority to elect as directors the following five (5) nominees;
Candace Kendle Bryan, Christopher C. Bergen, Timothy M. Mooney, Philip E. Beckman AND Charles A. Sanders
[ ] FOR [ ] WITHHOLD AUTHORITY
WRITE THE NAME OF ANY NOMINEES(S) FOR WHOM AUTHORITY TO VOTE IS WITHHELD ______________________________________________
2. To approve the 1998 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Coopers & Lybrand L.L.P. as independent public accountants for 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS UNLESS A CONTRARY CHOICE IS SPECIFIED
(This proxy is continued and is to be signed on the reverse side)
</TABLE>
<PAGE> 18
[Kendle Logo]
c/o Corporate Trust Services
Mail Drop 1890FS--4129
38 Fountain Square Plaza
Cincinnati, OH 45263
fold and detach here
- -------------------------------------------------------------------------------
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders dated April 14, 1998 and the Proxy Statement furnished therewith.
Any proxy hereinfore given to vote said shares is hereby revoked.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Dated: ______________, 1998
-----------------------------
Signature
-----------------------------
Signature
(Important: Please sign exactly
as name appears hereon
indicating where proper, official
position or representative
capacity. In the case of joint
holders, all should sign.)
