<PAGE>
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 registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FOREST LABORATORIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
FOREST LABORATORIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:(1)
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
/ / 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:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
FOREST LABORATORIES, INC.
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of the Stockholders of Forest Laboratories, Inc. (the
"Company") will be held on August 11, 1997 at 10:00 a.m., at Chase Manhattan
Corporate Headquarters, 270 Park Avenue, New York, New York for the following
purposes:
1. To elect a Board of five Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified (Proposal 1);
2. To ratify the appointment of BDO Seidman, L.L.P. as the Company's
independent auditors for the fiscal year ending March 31, 1998 (Proposal 2);
and
3. To transact such other business as may properly be brought before the
Meeting.
Stockholders of record at the close of business on June 23, 1997 shall be
entitled to notice of and to vote at the Meeting. A copy of the Annual Report
for the fiscal year ended March 31, 1997 is being mailed to stockholders
simultaneously herewith.
YOU ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO BE
PRESENT, KINDLY FILL IN AND SIGN THE ENCLOSED PROXY EXACTLY AS YOUR NAME APPEARS
ON YOUR STOCK CERTIFICATES, AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
IN ORDER THAT YOUR VOTE CAN BE RECORDED. THIS MAY SAVE THE COMPANY THE EXPENSE
OF FURTHER PROXY SOLICITATION.
By Order of the Board of Directors
WILLIAM J. CANDEE, III,
Secretary
June 30, 1997
New York, New York
<PAGE>
FOREST LABORATORIES, INC.
909 THIRD AVENUE
NEW YORK, NEW YORK 10022
PROXY STATEMENT
Your proxy is solicited by the Board of Directors of the Company for use at
the Annual Meeting (the "Meeting") of Stockholders to be held on Monday, August
11, 1997, or any adjournment or adjournments thereof, for the purposes set forth
in the attached Notice of Meeting. This Proxy Statement and form of proxy are
being mailed to stockholders on or about June 30, 1997.
Any stockholder giving a proxy may revoke it at any time prior to its use at
the Meeting by giving written notice of revocation to the Secretary of the
Company; mere attendance at the Meeting, without such notice, will not revoke
the proxy. Properly executed proxies will be voted in the manner directed by a
stockholder and, if no direction is made, will be voted FOR the election of each
of the five nominees for election as directors listed below (Proposal 1) and FOR
the ratification of the appointment of BDO Seidman, L.L.P. as the Company's
independent auditors (Proposal 2).
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those set forth in this Proxy Statement, nor does the Board
of Directors know of any other matters which may come before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote it in accordance
with their judgment.
As of June 23, 1997, the record date fixed for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting, there were
outstanding 40,969,323 shares of the Company's common stock, par value $.10 per
share (the "Common Stock") which is the only outstanding class of voting
securities of the Company. Each outstanding share of Common Stock is entitled to
one vote on each matter to be voted upon.
The Company's by-laws provide that stockholders holding a majority of the
outstanding shares of Common Stock shall constitute a quorum at meetings of the
stockholders. Shares represented in person or by proxy as to any matter will be
counted toward the fulfillment of a quorum. The affirmative vote of a plurality
of the votes cast in person or by proxy is necessary for the election of
directors (Proposal 1). The affirmative vote of a majority of the shares of
Common Stock present in person or by proxy is necessary for the approval of the
ratification of the appointment of independent auditors (Proposal 2).
Votes at the Annual Meeting will be tabulated by two independent inspectors
of election appointed by the Company or the Company's transfer agent. As the
affirmative vote of a plurality of votes cast is required for the election of
directors, abstentions and broker non-votes will have no effect on the outcome
of such election. As the affirmative vote of a majority of shares of Common
Stock present in person or represented by proxy is necessary for the approval of
the ratification of the appointment of independent auditors (Proposal 2), an
abstention will have the same effect as a negative vote, but "broker non-votes"
will have no effect on the outcome of the vote.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from beneficial owners. If
specific instructions are not received, brokers may vote those shares in their
discretion, depending on the type of proposal involved. The Company believes
that, in accordance with New York Stock Exchange rules applicable to such voting
by brokers, brokers will have discretionary authority to vote with respect to
any shares as to which no instructions are received from beneficial owners with
respect to the election of directors (Proposal 1) and the ratification of the
appointment of independent auditors (Proposal 2). Shares as to which brokers
have not exercised such discretionary authority or received instructions from
beneficial owners are considered "broker non-votes."
Only stockholders of record at the close of business on June 23, 1997 will
be entitled to vote at the Meeting or any adjournment or adjournments thereof.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE STOCKHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE
<PAGE>
PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY
TO INSURE THAT YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT THE MEETING
AND DESIRE TO DO SO, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON BY GIVING
WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. PLEASE RETURN YOUR EXECUTED
PROXY PROMPTLY.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of June 23, 1997 the name, address and
holdings as to each person (including any "group" as defined in Section 13(d) of
the Securities Exchange Act of 1934) known by the Company to be the beneficial
owner of more than five percent of the Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------------------- -------------------- ---------
<S> <C> <C>
Howard Solomon 2,571,653(1) 6.28%
909 Third Avenue
New York, New York
Brinson Partners, Inc. 3,952,687(2) 9.65%
209 South LaSalle Street
Chicago, Illinois
J.P. Morgan & Co., Incorporated 7,870,764(3) 19.21%
60 Wall Street
New York, New York
</TABLE>
- ------------------------
(1) Includes 2,020,164 shares subject to options exercisable by Mr. Solomon
within 60 days from the date hereof, which shares are deemed to be
outstanding for purposes of calculating Mr. Solomon's percentage ownership,
but not for purposes of calculating any other person's percentage ownership.
(2) Based upon information set forth in an Information Statement on Schedule 13G
filed by Brinson Partners, Inc. ("BPI"), a registered investment advisor and
wholly owned subsidiary of Brinson Holdings, Inc. with the Securities and
Exchange Commission ("SEC"). Includes shares beneficially owned by Brinson
Trust Company, and other affiliates of BPI.
(3) Based upon information set forth in an Information Statement on Schedule 13G
filed by J.P. Morgan & Co, Incorporated ("J.P. Morgan") with the SEC with
respect to accounts maintained by third persons at J.P. Morgan.
PROPOSAL 1
ELECTION OF DIRECTORS
The by-laws of the Company provide that there shall be three to eleven
directors, with such number to be fixed by the Board of Directors. Effective at
the time and for the purposes of the Meeting, the number of directors of the
Company, as fixed by the Board of Directors pursuant to the by-laws of the
Company, is five.
Unless otherwise specified, each proxy received will be voted for the
election as directors of the five nominees named below (each of whom was elected
at the 1996 Annual Meeting of Stockholders) to serve until the 1998 Annual
Meeting of Stockholders and until his successor shall be duly elected and
qualified. Each of the nominees has consented to be named a nominee in the Proxy
Statement and to serve as a director if elected. Should any nominee become
unable or unwilling to accept a nomination or election, the persons named in the
enclosed proxy will vote for the election of a nominee designated by the Board
of
2
<PAGE>
Directors or will vote for such lesser number of directors as may be prescribed
by the Board of Directors in accordance with the Company's by-laws.
The following persons have been nominated as directors:
<TABLE>
<CAPTION>
HAS BEEN A
NAME AND PRINCIPAL OCCUPATION OR POSITION AGE DIRECTOR SINCE
- ---------------------------------------------------------------------------- --- -----------------
<S> <C> <C>
Howard Solomon 69 1964
President and Chief Executive Officer of the Company since 1977.
William J. Candee, III 70 1959
Partner, Rivkin, Radler & Kremer, Attorneys at Law, since May 1989.
George S. Cohan 73 1977
President, The George Cohan Company, Inc., consultants, since June 1989.
For more than five years prior thereto, Mr. Cohan served as President of
Doremus & Co., Inc. and its predecessors, an advertising and public
relations firm.
Dan L. Goldwasser 57 1977
Partner, Vedder, Price, Kaufman, Kammholz & Day, Attorneys at Law, since
May 1992.
Joseph M. Schor 68 1980
Dr. Schor is a private investor and consultant. For more than five years
prior to January 1, 1995, Dr. Schor served as Vice President-Scientific
Affairs of the Company.
</TABLE>
Certain information regarding the beneficial ownership of Common Stock by
each such director and nominee is set forth below at "Security Ownership of
Management."
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------------- --- ---------------------------------------------
<S> <C> <C>
Howard Solomon 69 President and Chief Executive Officer
Phillip M. Satow 56 Executive Vice President--Marketing
Kenneth E. Goodman 49 Vice President--Finance
Lawrence S. Olanoff, M.D., Ph.D. 45 Vice President--Scientific Affairs
</TABLE>
See the table of nominees for election as directors for biographical data
with respect to Mr. Solomon.
Phillip M. Satow has served as Executive Vice President--Marketing of the
Company since January 1985.
Kenneth E. Goodman has served as Vice President--Finance of the Company
since April 1980.
Dr. Lawrence S. Olanoff was elected Vice President--Scientific Affairs in
October 1995. From 1993 until he joined the Company, Dr. Olanoff was Senior Vice
President, Clinical Research and Development at Sandoz Pharmaceutical
Corporation. For nine years prior thereto, Dr. Olanoff was employed by The
Upjohn Company, where his last position was Corporate Vice President, Clinical
Development and Medical Affairs.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of Common
Stock of the Company as of June 23, 1997 of (i) the Chief Executive Officer and
each of the Company's other executive officers at March 31, 1997, (ii) each
director and nominee to serve as a director and (iii) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------------------------------- -------------------- -----------
<S> <C> <C>
Howard Solomon 2,571,653(1) 6.28%
William J. Candee, III 21,708(2) *
George S. Cohan 23,000(3) *
Dan L. Goldwasser 23,370(4) *
Joseph M. Schor 47,445(5) *
Phillip M. Satow 598,754(6) 1.46%
Kenneth E. Goodman 547,200(7) 1.34%
Dr. Lawrence S. Olanoff 9,000(8) *
All directors and executive officers
as a group 3,842,430(9) 9.38%
</TABLE>
- ------------------------
* less than 1%
(1) Includes 2,020,164 shares subject to options exercisable within 60 days of
the date hereof.
(2) Includes 20,000 shares subject to options exercisable within 60 days of the
date hereof.
(3) Includes 19,000 shares subject to options exercisable within 60 days of the
date hereof.
(4) Includes 22,000 shares subject to options exercisable within 60 days of the
date hereof. Does not include 1,300 shares owned by Mr. Goldwasser's wife as
to which shares Mr. Goldwasser disclaims beneficial ownership.
(5) Includes 2,000 shares subject to options exercisable within 60 days of the
date hereof.
(6) Includes 582,000 shares subject to options exercisable within 60 days of the
date hereof. Also includes 11,117 shares held in trusts, of which Mr. Satow
is a trustee, for the benefit of Mr. Satow's children.
(7) Includes 524,778 shares subject to options exercisable within 60 days of the
date hereof.
(8) Includes 9,000 shares subject to options exercisable within 60 days of the
date hereof.
(9) Includes 3,198,942 shares subject to options exercisable within 60 days of
the date hereof.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended March 31, 1997,
1996 and 1995, compensation paid by the Company to the Chief Executive Officer
and to each of the other executive officers of the Company during fiscal year
1997, including salary, bonuses, stock options and certain other compensation:
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(1) AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------- ALL OTHER
SALARY BONUS OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(2)
------------------------------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Howard Solomon, 1997 610,021 0 0 20,803
President and Chief 1996 583,769 60,000 100,000 15,535
Executive Officer 1995 550,644 60,000 100,000 23,728
Phillip M. Satow, 1997 434,515 0 0 17,410
Executive Vice 1996 415,764 50,000 75,000 15,959
President-- 1995 391,889 50,000 50,000 23,761
Marketing
Kenneth E. Goodman, 1997 405,514 0 0 14,852
Vice President-- 1996 386,763 50,000 50,000 15,461
Finance 1995 362,888 50,000 50,000 23,761
Dr. Lawrence S. Olanoff, 1997 356,250 35,000 30,000 5,509
Vice President-- 1996(3) 153,410 100,000 60,000
Scientific Affairs
</TABLE>
- ------------------------
(1) The Company has no long term incentive compensation plan other than its
several Employee Stock Option Plans described herein and various
individually granted options. The Company does not award stock appreciation
rights, restricted stock awards or long term incentive plan pay-outs.
(2) Consists of group term life insurance and compensation credited to such
executive officers pursuant to the Forest Laboratories, Inc. Savings and
Profit Sharing Plan (the "Plan"), which covers employees of the Company and
certain of its subsidiaries. Under the Plan, all regular employees of the
Company and certain subsidiaries who are employed for at least six months
prior to the Plan year end become participants of the Plan. Contributions,
which are made at the discretion of the Company's Board of Directors, may
not exceed 25 percent of the individual Plan participant's gross salary (up
to a maximum salary of $150,000), including allocated forfeitures for the
Plan year. Plan participants vest over a period of 3 to 7 years of credited
service. The Company did not pay or provide other forms of annual
compensation (such as perquisites) to any of the named executive officers
having a value exceeding the lesser of $50,000 or 10% of the total annual
salary and bonus reported for such officers.
(3) Reflects compensation from the date Dr. Olanoff joined the Company.
OPTIONS GRANTED IN FISCAL 1997
The following information is furnished for the fiscal year ended March 31,
1997 with respect to the Company's Chief Executive Officer and each of the other
executive officers of the Company for stock options granted during such fiscal
year. Stock options were granted without tandem stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
% OF TOTAL APPRECIATION FOR
OPTIONS OPTIONS GRANTED OPTION TERM($)(2)
GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION --------------------
NAME (#) DURING FISCAL YEAR PER SHARE ($/S) DATE 5% 10%
- -------------------------------------- ----------- --------------------- --------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Howard Solomon
Phillip M. Satow
Kenneth E. Goodman
Dr. Lawrence S. Olanoff(1) 30,000 1.47% 29.6875 12/19/02 246,063 543,735
</TABLE>
- ------------------------
(1) Dr. Olanoff's options have a term of 5 years. 15% are exercisable
immediately; 15% become exercisable in each of the next three years and 40%
are exercisable in the fourth year. The options expire at the end of the
fifth year.
5
<PAGE>
(2) Represents the potential value of the options granted at assumed 5% and 10%
rates of compounded annual stock price appreciation from the date of grant
of such options. The increase in shareholders' equity to all shareholders of
the Company measured over the same period at the same assumed rates of
appreciation and based upon the market price for the Common Stock on the
date such options were granted would be $339,616,627 and $750,463,930,
respectively.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
The following information is furnished for the fiscal year ended March 31,
1997 with respect to the Company's Chief Executive Officer and each of the other
executive officers of the Company for stock option exercises during such fiscal
year.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
SHARES OPTIONS AT 3/31/97 (#) MONEY OPTIONS AT 3/31/97 ($)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
- ------------------------------ --------------------- ----------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Howard Solomon 2,020,164 95,000 30,424,331 0
Phillip M. Satow 582,000 47,500 7,060,497 0
Kenneth E. Goodman 524,778 47,500 6,143,458 0
Dr. Lawrence S. Olanoff 9,000 81,000 238,124
</TABLE>
BENEFITS AGREEMENTS
On December 1, 1989 the Board of Directors adopted a policy of granting
certain medical insurance benefits to senior corporate executive officers and
their spouses upon the completion of 10 years of service by such senior
officers. The benefit would be provided to such executives and their spouses for
their lifetimes following the termination of such executive's employment with
the Company, and would be equivalent to the medical insurance benefits provided
to such executives as of the date of their termination or as of December 1,
1989, if more favorable. The benefit need not be provided to the extent and for
any time that the executive obtained comparable insurance from a subsequent
employer. The Company has entered into formal written benefits agreements with
each of Messrs. Solomon, Schor, Goodman and Satow granting the 10 year service
benefit.
Effective March 31, 1994, the Company entered into "split dollar" life
insurance benefit agreements with each of Messrs. Solomon, Schor, Satow and
Goodman. Each of these agreements provides that the Company will pay the
premiums on a life insurance policy owned by and for the benefit of the
executive. Upon the death of the executive (or other realization by the
executive upon the principal amount of the policy), proceeds of the life
insurance policy will be applied to repay the Company for all premiums paid on
behalf of the executive. The Company is obligated to continue to pay premiums
under these agreements until the covered life insurance policies are paid in
full, notwithstanding the termination of the executive's employment with the
Company. The Company is further obligated to pay all such premiums in a lump sum
in the event the Company undergoes a "change in control."
The Company has entered into employment agreements with several key
employees, including each of Messrs. Solomon, Satow, Goodman and Dr. Olanoff.
Each of these agreements becomes effective only upon the occurrence of a "change
in control" and provides that the executive is entitled to salary, bonus and
benefits for a three year period following a "change in control" of the Company
if the executive's employment terminates during such period without cause or for
good reason. Subject to certain exceptions, a "change in control" is (i) an
acquisition of 20% or more of the Common Stock or voting securities of the
Company by a person or group not acquiring their shares directly from the
Company, (ii) a change in the majority of the current Board of Directors or
their designated successors not consented to by such current Board of Directors
or designated successors, and (iii) a liquidation or dissolution of the Company
or merger, consolidation or sale of all or substantially all of the Company's
assets which involves a greater than 50% change in the shareholders of the
Company or the replacement of a majority of the current Board of Directors or
their designated successors.
6
<PAGE>
STOCK OPTIONS
The Company's 1988, 1990 and 1994 Employee Stock Option Plans (the "Plans")
provide that options may be granted to purchase shares of Common Stock at a
price per share fixed by the Board of Directors, provided that, in the case of
incentive stock options, such price may not be less than fair market value on
the date of the option grant. All employees of the Company and its subsidiaries
are eligible to receive options under the Plans.
The Plans provide that the Board of Directors may determine the employees to
whom options are to be granted and the number of shares subject to each option.
The purchase price for shares must be paid in cash or by the tender of shares of
Common Stock having a fair market value, as determined by the Board, equal to
the option exercise price.
The non-employee directors of the Company participate in the Amended
Directors' Stock Option Plan (the "Directors' Plan") under which an initial
grant of options covering 10,000 shares of Common Stock each were granted to
each of the Company's non-employee directors at an exercise price of $9.90625
per share (being the average price for the Common Stock on the American Stock
Exchange on August 15, 1988, the date of stockholder approval of the Directors'
Plan) and pursuant to which an initial grant of options (having an exercise
price equal to average price of the Common Stock on the date of grant) covering
14,000 shares of Common Stock will automatically be granted to persons who
become non-employee directors from and after the adoption of the Directors'
Plan. The Directors' Plan expires on June 9, 1998 and options granted thereunder
have a term of 10 years (but in no event more than three months following the
optionee's ceasing to serve as a member of the Company's Board of Directors).
Twenty-five percent of the options granted under the Directors' Plan become
exercisable on the date of grant and on each anniversary of such date until all
such options are exercisable.
The Directors' Plan further provides for the automatic annual grant to each
of the Company's non-employee directors of options to purchase 2,000 shares of
Common Stock on the date of their annual election or re-election by the
Company's shareholders. Each such option grant will be at an exercise price
equal to the average price of the Common Stock on the American Stock Exchange on
the date of grant and will become exercisable six months after the date of
option grant. Each such option shall have a term of 10 years from the date of
grant (but in no event more than three months following the optionee's ceasing
to serve as a member of the Company's Board of Directors).
DIRECTORS' COMPENSATION
In addition to automatic annual option grants under the Directors' Plan,
each non-employee director of the Company received $22,500 for their services as
director during the fiscal year ended March 31, 1997, except for Mr. Candee who
received $25,000 for his services as director and the Company's secretary and
Chairman of the Audit Committee.
COMMITTEES; BOARD MEETINGS
The Company has an audit committee composed of Messrs. Candee and
Goldwasser. During the fiscal year ended March 31, 1997, the audit committee met
on two occasions for the purpose of (i) approving the selection of the Company's
independent auditors; (ii) reviewing the arrangements and scope of the audit;
and (iii) reviewing the Company's internal accounting procedures and controls
and recommendations of the Company's auditors.
The Company does not have a nominating or compensation committee.
The Board of Directors of the Company held three meetings during the fiscal
year ended March 31, 1997 and no incumbent director attended fewer than 75% of
the aggregate of such meetings and the number of meetings of each committee of
which he is a member.
7
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
BY THE BOARD OF DIRECTORS
AND THE STOCK OPTION COMMITTEE
COMPENSATION POLICY
The Company's Board of Directors (the "Board") is responsible for setting
and administering the policies which govern annual executive salaries, raises
and bonuses and the award of stock options (in the case of options to be granted
under the Company's Employee Stock Option Plans, such responsibility is limited
to the recommendation of awards to the Company's Stock Option Committee). The
Board is currently composed of five members, four of whom are non-employee
directors and one of whom, Mr. Solomon, is the President and Chief Executive
Officer of the Company. In addition, three of the non-employee directors,
Messrs. Goldwasser, Candee and Cohan, serve as a Stock Option Committee which
administers the granting of options under the Company's Employee Stock Option
Plans, including the award of options to the Company's executive officers.
The policy of the Board is to provide compensation to the Chief Executive
Officer and the Company's other executive officers reflecting the contribution
of such executives to the Company's growth in sales and earnings, the
implementation of strategic plans consistent with the long term growth
objectives of the Company and the enhancement of shareholder value as reflected
in the growth of the Company's market capitalization. Contributions to specific
Company objectives, including the development and acquisition of new product
opportunities, the progress of clinical and other studies and development
activities required to bring new ethical pharmaceutical products to market and
the successful marketing of the Company's principal products are evaluated in
setting compensation policy. Executive compensation decisions have traditionally
been made on a calendar year basis.
Long term incentive compensation policy consists exclusively of the award of
stock options under the Company's Employee Stock Option Plans and individual
option grants, which serve to identify the reward for executive performance with
increases in value created for shareholders.
COMPANY PERFORMANCE AND CEO COMPENSATION
Executive compensation for the fiscal year ended March 31, 1997 consisted of
base salary, and, in the case of Lawrence Olanoff, the Company's Vice
President-Scientific Affairs, an annual bonus and the award of stock options by
the Stock Option Committee as indicated at "Options Granted in Fiscal 1997." The
Board met in December 1996 to review executive compensation for the calendar
year commencing January 1, 1997. The Board reviewed data relating to operating
and financial goals and achievements (and specifically relating to the progress
of various clinical development programs and the in-licensing and acquisition of
products and product development opportunities), the recent history of the
compensation granted by the Board to the Company's highest paid executive
officers, the compensation policy of the Board and rules of the SEC with respect
to disclosure of the compensation and compensation policies applicable to
executive officers of the Company.
The Board noted the achievement of the following strategic objectives during
calendar year 1996: the expansion of the Company's salesforce and the launch and
growth in market share of Tiazac-Registered Trademark-, a once daily formulation
of diltiazem for the treatment of hypertension, the conclusion of licensing
arrangements for Citalopram, a selective serotonin reuptake inhibitor for the
treatment of depression and for a patented combination of oxycodone and
ibuprofen, for the treatment of moderate to severe pain and the conclusion of
Phase III clinical trials for Synapton-TM-, an acetylcholinesterase inhibitor
for the treatment of the symptoms of Alzheimer's Disease. The Board further
noted the decision to modify the Company's trade practices to reduce trade
levels of inventory of certain of the Company's principal promoted products and
the Company's projections that such decision would have the effect of reducing
sales during the succeeding six-month period, as well as causing an operating
loss for the 1997 fiscal year.
8
<PAGE>
The Board determined that, although there were many positive developments
for the past year, salary increases, bonuses and option grants should remain
tied to current operating results. Accordingly, the Board determined that no
increases in base compensation and no bonuses or stock option awards be granted
(or in the case of stock option awards, recommended for grant to the Stock
Option Committee) for three of the Company's senior executive officers,
including the Chief Executive Officer. The Board further determined to award to
the Vice President-Scientific Affairs, a salary increase and bonus and to
recommend the grant of stock options, in each case as described in the preceding
tables. The Board noted that Dr. Olanoff had been with the Company for
approximately one year and was responsible for the achievement of many of the
strategic scientific and technical objectives of the Company.
During fiscal 1997, the Stock Option Committee awarded stock options to Dr.
Olanoff, the Company's Vice President-Scientific Affairs as set forth in the
table set forth at "Options Granted in Fiscal 1997" in the amount set forth
therein. The Stock Option Committee determined to continue the Company's long-
standing policy of utilizing the award of stock options (which provide value to
the executive over time as growth in the market price of the Company's shares
reflects the successful achievement of the Company's business objectives) to
identify the success of the Company's executives with the growth in equity value
to the Company's shareholders. The size of the award made was determined based
upon such officer's contribution to the achievement of the performance
objectives described above and the Committee's view of an appropriate equity
position to be maintained by the Company's executive officers in light of the
Company's market capitalization. Each of these factors was equally considered.
THE BOARD OF DIRECTORS
Howard Solomon
Joseph M. Schor
George S. Cohan*
William J. Candee, III*
Dan L. Goldwasser*
- ------------------------
* Stock Option Committee Member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Howard Solomon, the Company's President and Chief Executive Officer, is a
member of the Board and participated in deliberations concerning executive
compensation. Mr. Solomon abstained from voting with respect to his own
compensation. Joseph M. Schor, formerly Vice President--Scientific Affairs of
the Company until his retirement on December 31, 1994, is a member of the Board
and participated in deliberations concerning executive compensation.
9
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock for the last five fiscal years with the cumulative total return on
the Standard & Poors Health Care Drugs Index and the Standard & Poors MIDCAP 400
Index over the same period (assuming the investment of $100 in the Common Stock,
the S&P Health Care Drugs Index and the S&P MIDCAP 400 on March 31, 1992, and
the reinvestment of all dividends).
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FOREST LABORATORIES, INC., THE S & P MIDCAP 400 INDEX
AND THE S & P HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) INDEX
Research Total Return -- Data Summary
FRX
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/92 3/93 3/94 3/95 3/96 3/97
--- --- --- --- --- ---
Forest Labs Inc. FRX 100 97 127 141 144 111
S & P MIDCAP 400.......... IMID 100 116 123 134 172 190
S & P HLTH CARE
(DRUGS--MAJOR PHARMS)... IHCD 100 78 71 108 173 222
</TABLE>
Research Company Total Return Worksheet
BEGIN: 03/31/92
FYE: 03/31/97
FOREST LABS INC FRX END: 03/31/96
<TABLE>
<CAPTION>
BEGIN CUM
TYPE NO. OF DIV DIV DIV ENDING TOTAL
OF CLOSE SHARES $ PER $.$$ SHARES NO. OF SHRHLDR
DATE* LINE PRICE *** SHARES** PAID REINVD SHARES RETURN
- ---------------------- --------- ----------- ----------- ----------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
03/31/92 BEGIN 33.875 2.952 2.952 100
03/31/93 YE 33.000 2.952 2.952 97
03/31/94 YE 42.875 2.952 2.952 127
03/31/95 YE 47.625 2.952 2.952 141
03/31/96 YE 48.750 2.952 2.952 144
03/31/97 YE 47.625 2.952 2.952 111
</TABLE>
* Fiscal yearend and ex-dividend dates.
** All Closing Prices and Dividends are adjusted for stock splits. 2373EFRX
*** "Begin No. Shares" based on $100 investment.
10
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The firm of BDO Seidman, L.L.P. has audited the financial statements of the
Company for each of the three fiscal years ended March 31, 1997. The Board of
Directors desires to continue the services of BDO Seidman, L.L.P. for the
current fiscal year ending March 31, 1998. Accordingly, the Board of Directors
will recommend to the Meeting that the stockholders ratify the appointment by
the Board of Directors of the firm of BDO Seidman, L.L.P. to audit the financial
statements of the Company for the current fiscal year. Representatives of that
firm are expected to be present at the Meeting, shall have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE APPOINTMENT OF
BDO SEIDMAN, L.L.P.
MISCELLANEOUS
ANNUAL REPORT
The Company's 1997 Annual Report is being mailed to stockholders
contemporaneously with this Proxy Statement.
FORM 10-K
UPON THE WRITTEN REQUEST OF A RECORD HOLDER OR BENEFICIAL OWNER OF COMMON
STOCK ENTITLED TO VOTE AT THE MEETING, THE COMPANY WILL PROVIDE WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED MARCH 31, 1997. REQUESTS SHOULD BE MAILED TO
CORPORATE SECRETARY, FOREST LABORATORIES, INC., 909 THIRD AVENUE, NEW YORK, NEW
YORK 10022.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will be
paid by the Company. In addition to solicitation by mail, arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to beneficial owners, and the Company will, upon request,
reimburse them for their reasonable expenses in doing so. To the extent
necessary in order to assure sufficient representation, officers and regular
employees of the Company and a commercial proxy solicitation firm may be engaged
to assist in the solicitation of proxies. Whether either measure will be
necessary depends entirely upon how promptly proxies are received. No outside
proxy solicitation firm has been selected or employed by the Company in respect
of the Meeting as of the date of this Proxy Statement, and the Company is unable
to estimate the costs to it of any such services.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders to be presented at the 1997 Annual Meeting
must be received by the Company for inclusion in the Company's proxy statement
and form of proxy relating to that meeting no later than March 3, 1998.
Stockholders are urged to send in their proxies without delay.
WILLIAM J. CANDEE, III,
Secretary
Dated: June 30, 1997
11
<PAGE>
FOREST LABORATORIES, INC.
Proxy - For the Annual Meeting of Stockholders - August 11, 1997
The undersigned stockholder of FOREST
LABORATORIES, INC., revoking any previous proxy for such stock, hereby
appoints Howard Solomon and Kenneth E. Goodman, or either of them, the
attorneys and proxies of the undersigned, with full power of substitution,
and hereby authorizes them to vote all shares of Common Stock of Forest
LABORATORIES, INC. which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on August 11, 1997 at 10:00 A.M. at Chase
Manhattan Corporate Headquarters, 270 Park Avenue, New York, New York, and
any adjournments thereof on all matters coming before said meeting.
In the event no contrary instructions
are indicated by the undersigned stockholder, the proxies designated hereby
are authorized to vote the shares as to which this proxy is given FOR
proposals 1 and 2, each of which are set forth on this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The Board of Directors Recommends a Vote FOR proposals 1 and 2.
(continued on reverse side)
<PAGE>
Please mark
/X/ your choices
like this ___________________ ______________
ACCOUNT NUMBER COMMON
1. Election of five Directors: Howard Solomon, William J. Candee, III,
George S. Cohan, Dan L. Goldwasser and Joseph M. Schor
FOR ALL WITHHOLD
NOMINEES AUTHORITY
/ / / /
_______________________________________
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the line provided above.)
2. Ratification of BDO Seidman, L.L.P. as Accountants
FOR AGAINST ABSTAIN
/ / / / / /
Please sign here exactly as your name(s) appear(s)
on this proxy. If signing for an estate, trust or
corporation, title or capacity should be stated. If
shares are held jointly, each holder should sign. If
a partnership, sign in partnership name by authorized
person.
Dated_________________________________________________
______________________________________________________
(Signature)
______________________________________________________
(Signature)
PLEASE MARK BOXES IN BLUE OR BLACK INK
PLEASE SIGN, DATE AND MAIL IN THE
ENVELOPE PROVIDED
