<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:
<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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
PHARMERICA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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
PHARMERICA, INC.
3611 QUEEN PALM DR.
TAMPA, FL 33619
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
TO THE STOCKHOLDERS OF PHARMERICA, INC.:
The Annual Meeting of Stockholders of PharMerica, Inc. (the "Company") will
be held at Wyndham Harbour Island Hotel, 725 Harbour Island Boulevard South,
Tampa, Florida 33602-5731 on May 19, 1998, at 9:00 a.m. Eastern Daylight Time,
for the purposes of considering and voting upon the following matters:
1. To elect new Class One Directors to serve for three-year terms and
until their successors are duly elected and qualified; and
2. In their discretion, on such other matters as may properly come
before the Annual Meeting.
Stockholders of record at the close of business on April 15, 1998, will be
entitled to vote at the Annual Meeting of Stockholders.
The Company's Board of Directors urges all Stockholders of record to
exercise their right to vote at the Annual Meeting of Stockholders personally or
by proxy. Accordingly, we are sending you the accompanying Proxy Statement and
the enclosed proxy card.
Your attention is directed to the Proxy Statement accompanying this notice
for a statement regarding matters to be acted upon at the Annual Meeting of
Stockholders.
By Order of the Board of Directors,
JAMES D. SHELTON,
Secretary
Tampa, Florida
April 23, 1998
YOUR REPRESENTATION AT THE ANNUAL MEETING OF STOCKHOLDERS IS IMPORTANT. TO
ENSURE YOUR REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. SHOULD
YOU DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED IN
THE MANNER PROVIDED IN THE ACCOMPANYING PROXY STATEMENT.
<PAGE> 3
PHARMERICA, INC.
3611 QUEEN PALM DR.
TAMPA, FL 33619
---------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PharMerica, Inc. (the "Company") to be used
at the Annual Meeting of Stockholders to be held on May 19, 1998, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting of Stockholders will be held
at Wyndham Harbour Island Hotel, 725 Harbour Island Boulevard South, Tampa,
Florida 33602-5731 on May 19, 1998, at 9:00 a.m. Eastern Daylight Time. This
Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 27, 1998.
A stockholder who executes and returns the accompanying form of proxy may
revoke it at any time before it is voted by giving written notice of revocation
to the Secretary of the Company, by executing a proxy bearing a later date, or
by attending the Annual Meeting of Stockholders and voting in person. Proxies
will be voted in accordance with instructions noted on the proxies. Unless
otherwise specifically instructed in the proxies, it is the intention of the
persons named in the proxy to vote all proxies received by them FOR THE ELECTION
OF ALL OF THE NOMINEES NAMED HEREIN WHO ARE STANDING FOR ELECTION AS DIRECTORS.
Management does not know of any other matters which will be presented for action
at the Annual Meeting of Stockholders. If any other matter does come before the
Annual Meeting of Stockholders, however, the persons appointed in the proxy will
vote in accordance with their best judgment on such matter.
This solicitation is made by the Company, by whom the cost of this proxy
solicitation will be borne. It is contemplated that proxies will be solicited
solely by mail. Banks, brokers and other custodians will be requested to forward
proxy soliciting materials to their customers where appropriate, and the Company
will reimburse such banks, brokers, and custodians for their reasonable
out-of-pocket expenses in sending the proxy materials to beneficial owners of
the Company's shares.
SUMMARY OF MATTERS TO BE CONSIDERED
At the Annual Meeting of Stockholders, the stockholders of the Company will
be asked to vote on the following matters: (1) the election of three nominees to
serve as Class One Directors for three-year terms and until their successors are
duly elected and qualified (See Proposal 1: "Election of Class One Directors");
and (2) on such other matters as may properly come before the Annual Meeting of
Stockholders.
VOTING
Stockholders of record as of April 15, 1998, will be entitled to vote at
the Annual Meeting of Stockholders. At the close of business on that day, there
were outstanding 88,525,258 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"). See "Stock Ownership of Directors, Executive
Officers and Principal Holders." Each share of Common Stock is entitled to one
vote, which may be given in person or by proxy authorized in writing. The
Company has no other classes of voting stock issued. The Company has the
authority to issue shares of preferred stock in one or more series, although no
series of preferred stock has been designated or issued.
To vote by proxy, a stockholder should complete, sign, date and return the
enclosed proxy to the Secretary of the Company. The Board of Directors urges you
to complete the proxy card whether or not you plan to attend the Annual Meeting
of Stockholders. If you attend the Annual Meeting of Stockholders in person, you
may, if you wish, vote in person on all matters brought before the Annual
Meeting of Stockholders
<PAGE> 4
even if you have previously delivered your proxy. Any stockholder who has given
a proxy may revoke it any time prior to exercise by filing an instrument
revoking it with the Secretary of the Company, by duly executing a proxy bearing
a later date, or by attending the Annual Meeting of Stockholders and voting in
person. The mere presence at the Annual Meeting of a stockholder who has
appointed a proxy will not revoke the appointment.
The director nominees will be elected by a plurality of the votes of the
shares of Common Stock present or represented and entitled to vote at the Annual
Meeting of Stockholders. All other matters submitted to the stockholders will be
approved in accordance with Delaware Law and the Company's organizational
documents. Abstentions and broker non-votes will not be counted as affirmative
votes, but will be counted for purposes of determining the presence or absence
of a quorum. On matters requiring majority or two-thirds vote of all outstanding
shares for approval, abstentions have the effect of negative votes. Abstentions
and broker non-votes have no legal effect on any other proposal.
2
<PAGE> 5
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL HOLDERS
The table below sets forth, as of April 15, 1998, the number and percentage
of outstanding shares of the Company's Common Stock owned by all persons known
to the Company to be holders of 5% or more of such securities, by all directors,
by each of the executive officers of the Company and by all directors and
executive officers of the Company as a group. Unless otherwise indicated, all
holdings are of record and beneficial.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE OF TOTAL
NAME OWNED(1) OUTSTANDING(2)
- ---- ------------------- -------------------
<S> <C> <C>
Counsel Corporation(3)...................................... 8,356,815 9.4%
Exchange Tower, Suite 1300
130 King Street West
Toronto, Ontario M5X 1E3
Franklin Resources, Inc.(4)................................. 5,056,843 5.7
777 Mariners Island Blvd.
San Mateo, California 94404
Mellon Bank Corporation(4).................................. 4,388,672 5.0
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
C. Arnold Renschler, M.D.(5)................................ 641,247 *
James D. Shelton(6)......................................... 113,333 *
Robert Della Valle, Pharm. D.(7)............................ 183,333 *
R. Scott Jones(8)........................................... 78,070 *
Curtis B. Johnson(9)........................................ 60,000 *
David R. Banks(10).......................................... 175,227 *
Cecil S. Harrell(11)........................................ 2,052,729 2.3
Boyd W. Hendrickson(12)..................................... 134,045 *
Morris A. Perlis(13)........................................ 601,666 *
Fredrick C. Powell(14)...................................... 22,500 *
Albert Reichmann(15)........................................ 37,500 *
Allan C. Silber(16)......................................... 484,166 *
Edward Sonshine, Q.C.(17)................................... 47,000 *
Gail Wilensky, Ph.D.(18).................................... 40,000 *
All directors and executive officers as a group (14
persons)(19).............................................. 4,670,816 5.1%
</TABLE>
- ---------------
* Indicates less than 1.0%
(1) Unless otherwise indicated, the persons or entities identified in this
table have sole voting and investment power with respect to all shares
shown as beneficially owned by them, subject to community property laws,
where applicable.
(2) The percentages shown are based on 88,525,258 shares of Common Stock
outstanding on April 15, 1998, plus, as to each individual and group
listed, the number of shares of Common Stock deemed to be owned by such
holder pursuant to Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act"), which includes shares subject to stock options and
warrants held by such holder that are exercisable within sixty (60) days of
such date.
(3) Includes 298,181 and 238,545 shares issuable upon the exercise of warrants
at $4.50 and $5.50 per share, respectively. Directors Silber, Sonshine and
Perlis are directors of Counsel Corporation ("Counsel") and director Silber
beneficially owns or controls approximately 18% of the common stock of
Counsel, a majority of which is pledged to a lender. Directors Sonshine and
Perlis own in the aggregate less than
3
<PAGE> 6
5% of Counsel's common stock. All of the directors listed in this footnote
(3) disclaim beneficial ownership of shares of Common Stock in their
capacity as directors of Counsel, and Mr. Silber disclaims beneficial
ownership of shares of Common Stock in his capacity as a significant
stockholder of Counsel.
(4) Based solely upon information set forth in a Schedule 13G filed by such
person pursuant to the Exchange Act.
(5) Includes 52,193, 238,596, 74,561, 59,649, and 186,667 shares issuable upon
exercise of options at $8.21, $8.47, $8.47, $8.55, and $9.56, respectively.
(6) Includes 13,333 and 100,000 shares issuable upon exercise of options at
$11.50 and $9.56 per share, respectively.
(7) Includes 16,667, 66,666 and 100,000 shares issuable upon the exercise of
options at $10.13, $10.50 and $9.56 per share, respectively.
(8) Includes 44,737 and 33,333 shares issuable upon exercise of options at
$8.38 and $9.56 per share, respectively.
(9) Includes 25,000 and 35,000 shares issuable upon exercise of options at
$4.31 and $10.19 per share, respectively.
(10) Includes 72,500 shares issuable upon exercise of options at $9.56 per share
and includes 3,991 shares held by his children.
(11) Includes 20,000 shares issuable upon exercise of options at $9.56 per share
and includes 269 shares held by his spouse.
(12) Includes 47,500 shares issuable upon exercise of options at $9.56 per share
and includes 636 shares held by his children.
(13) Includes 25,000 and 20,000 shares issuable upon the exercise of warrants at
$4.50 and $5.50 per share, respectively and 15,000, 2,500, 250,000, 75,000,
166,666, 2,500 and 45,000 shares issuable upon the exercise of options at
$4.44, $7.50, $4.31, $8.50, $10.50, $11.25, and $9.56 per share,
respectively.
(14) Includes 22,500 shares issuable upon exercise of options at $9.56 per
share.
(15) Includes 15,000, 2,500 and 20,000 shares issuable upon the exercise of
options at $4.44, $11.25 and $9.56 per share, respectively.
(16) Includes 25,000 and 20,000 shares issuable upon the exercise of warrants at
$4.50 and $5.50 per share, respectively and 15,000, 2,500, 75,000, 166,666,
2,500, and 127,500 shares issuable upon the exercise of options at $4.44,
$7.50, $8.50, $10.50, $11.25, and $9.56 per share, respectively.
(17) Includes 15,000, 2,500, 2,500 and 20,000 shares issuable upon the exercise
of options at $4.44, $7.50, $11.25 and $9.56 per share, respectively.
(18) Includes 15,000, 2,500, 20,000 and 2,500 shares issuable upon the exercise
of options at $4.44, $11.25, $9.56 and $12.06 per share, respectively.
(19) Includes 2,317,434 shares issuable upon the exercise of options and
warrants.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") (and, if such security is registered
on a national securities exchange, also with the exchange). Such executive
officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon representations submitted by the Company's directors and
executive officers and the Company's review of filings on Forms 3, 4 and 5,
including amendments thereto, the Company has concluded that all such forms were
timely filed.
4
<PAGE> 7
EXECUTIVE OFFICERS
The Company's executive officers are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME OF OFFICER AGE OFFICER SINCE FOR THE LAST FIVE YEARS
- --------------- --- ------------- -----------------------
<S> <C> <C> <C>
C. Arnold Renschler,
M.D. ..................... 55 December 1997 President, Chief Executive Officer and
Director since December 1997. Executive
Vice President of Beverly and
President of Pharmacy Corporation of
America ("PCA") from June 1996 until
the Merger (as defined below). Senior
Vice President, Chief Clinical
Officer, President of three operating
divisions and a Director of NovaCare,
Inc. from 1990 to June 1996. Director
of Ameripath, Inc. since April 1997.
James D. Shelton............ 43 February 1997 Executive Vice President, Chief
Financial Officer and Secretary of the
Company since February 1997; Vice
President-Chief Financial Officer of
Allied Pharmacy Management, Inc.
("Allied") from December 1993 to
January 1997; Vice President of Ever-
green Healthcare, Inc. from October
1992 to December 1993, and as Vice
President-Chief Financial Officer of
its predecessor, National Heritage,
Inc. from February 1990 to October
1992.
Robert Della Valle,
Pharm. D................... 46 July 1996 Executive Vice President and Chief
Operating Officer of the Company since
July 1996; President and Chief
Executive Officer of Allied from July
1993 to July 1996; Chief Operating
Officer of Allied from 1991 to 1993.
R. Scott Jones.............. 38 December 1997 Senior Vice President, Marketing and
Sales of the Company since December
1997; Vice President, Marketing and
Sales of Pharmacy Corporation of
America, Inc. from January 1997 to
December 1997; Manager at General
Electric Medical Systems from 1991 to
1995.
Curtis B. Johnson........... 42 February 1998 Senior Vice President, General Counsel
of the Company since February 1998;
General Counsel of DCAmerica, Inc., a
U.S. subsidiary of Counsel from April
1995 to February 1998; Technology
Counsel for American Express Travel
Related Services Company, Inc.
("American Express") from November
1994 to April 1995; Litigation Counsel
for American Express from January 1993
to November 1994.
</TABLE>
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the services in all
capacities to the Company for the fiscal year ended December 31, 1997 (the "1997
Fiscal Year"), the fiscal year ended December 31, 1996, and the ten months ended
December 31, 1995 of those persons who were, at any time during the 1997 Fiscal
Year, the Company's chief executive officer or were, at December 31, 1997, the
Company's other executive officers who received annual salary and bonus in
excess of $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ------------------------ -------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR(S) SALARY($) BONUS($) COMPENSATION(1)($) AWARD(S)($) SARS(#) PAYOUTS COMPENSATION
- ------------------ ------- --------- -------- ------------------ ----------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C. Arnold Renschler,
M.D..................... 1997 $ 36,384 $ -0- $-0- $-0- 520,000 -0- -0-
President and CEO(2) 1996 * * * * * * *
1995(3) * * * * * * *
James D. Shelton.......... 1997 140,985 90,000(4) -0- -0- 340,000 -0- -0-
Chief Financial 1996 * * * * * * *
Officer(5) 1995(3) * * * * * * *
Robert Della Valle,
Pharm. D. .............. 1997 168,846 100,000(4) -0- -0- 300,000 -0- -0-
Chief Operating 1996 79,719 40,000(7) -0- -0- 150,000 -0- -0-
Officer(6) 1995(3) * * * * * * *
R. Dirk Allison........... 1997 156,250 79,688 -0- -0- -0- -0- -0-
Former President and 1996 230,000 104,425(7) -0- -0- 327,500 -0- -0-
CEO(8) 1995(3) 123,000 -0- -0- -0- 65,000 -0- -0-
</TABLE>
- ---------------
* Indicates periods prior to employment with the Company.
(1) Perquisites for each executive officer are in amounts which do not require
disclosure.
(2) Dr. Renschler joined the Company in December 1997 in connection with the
Merger. Prior to the Merger, Dr. Renschler was President of PCA. The amounts
shown reflect his compensation since the Merger.
(3) Represents a ten-month fiscal period for the Company.
(4) Earned in 1997 and paid in 1998.
(5) Mr. Shelton joined the Company in February 1997.
(6) Dr. Della Valle joined the Company in July 1996.
(7) Earned in 1996 and paid in 1997.
(8) Mr. Allison resigned from the Company in August 1997. The amounts shown
exclude $375,000 received in connection with his resignation.
6
<PAGE> 9
OPTION GRANTS
The table below provides information on grants of stock options pursuant to
the Company's Option Plans (the "Option Plans") during the 1997 Fiscal Year to
the Named Executive Officers. Additional grants have been made to certain
officers, directors and other employees since December 31, 1997. See "Stock
Ownership of Directors, Executive Officers and Principal Holders." The Company
grants no stock appreciation rights.
OPTION/SAR GRANTS IN THE FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
C. Arnold Renschler,
M.D..................... 52,193(2) 1.8 $ 8.21 12/3/07 $ 269,484 $ 682,926
238,596(2) 8.2 8.47 12/3/07 1,270,938 3,220,807
74,561(2) 2.6 8.47 12/3/07 397,167 1,006,499
59,649(2) 2.0 8.55 12/3/07 320,736 812,807
20,000 * 9.56 12/30/07 120,245 304,724
500,000 17.0 9.56 12/30/07 3,006,116 7,618,089
James D. Shelton.......... 40,000 1.4 11.50 1/20/07 289,282 733,122
300,000 10.3 9.56 12/30/07 1,803,670 4,570,853
Robert Della Valle, Pharm.
D....................... 300,000 10.3 9.56 12/30/07 1,803,670 4,570,853
R. Dirk Allison(3)........ 0 -- -- -- -- --
</TABLE>
- ---------------
* Less than one percent.
(1) The dollar amounts under these columns are the result of calculations at 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.
(2) Conversion of Beverly Options in connection with the Merger.
(3) Mr. Allison resigned from the Company in August 1997.
7
<PAGE> 10
OPTION EXERCISES AND VALUES
The table below provides information as to exercises of options by the
Named Executive Officers during the 1997 Fiscal Year under the Option Plans and
the year-end value of unexercised options. The Company grants no stock
appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN THE FISCAL YEAR
ENDED DECEMBER 31, 1997 AND PERIOD-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31, 1997
1997 FISCAL FISCAL YEAR-END
YEAR-END(#) ($)(1)
SHARES VALUE --------------- -----------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- --------------- -----------------
<S> <C> <C> <C> <C>
C. Arnold Renschler, M.D............. -- -- 611,666/333,333 $970,555/271,666
James D. Shelton..................... -- -- 113,333/226,667 81,500/163,000
Robert Della Valle, Pharm. D. ....... -- -- 183,333/266,667 85,583/171,167
R. Dirk Allison(2)................... 392,500 $1,352,900 0/0 0/0
</TABLE>
- ---------------
(1) Options are classified as "in-the-money" if the market value of the
underlying Common Stock exceeds the exercise price of the option. The per
share value of such in-the-money options is the difference between the
option exercise price and $10.375, the per share fair market value of the
underlying Common Stock as of December 31, 1997. Such amounts may not
necessarily be realized. Actual values which may be realized, if any, upon
the exercise of options will be based on the per share market price of the
Common Stock at the time of exercise and are thus dependent upon future
performance of the Common Stock.
(2) Mr. Allison resigned August 15, 1997. The number of securities underlying
options granted to Mr. Allison prior to his resignation were 15,000, 50,000,
75,000, 250,000 and 2,500 shares issuable upon the exercise of options at
$4.44, $4.31, $8.50, $10.50 and $11.25, respectively. Mr. Allison exercised
all of his options following his resignation.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report is not deemed to be part of a
document filed with the SEC pursuant to the Securities Act of 1933 (the
"Securities Act") or the Exchange Act and is not to be deemed incorporated by
reference in any documents filed under the Securities Act or the Exchange Act
without the express written consent of the persons named below.
Decisions on compensation of the Company's senior executives, except for
decisions related to awards under the Company's Options Plans, are made by the
Compensation Committee of the Company's Board of Directors. It is the task of
the Compensation Committee to establish executive compensation guidelines for
the Company which are reasonable and appropriate, meet their stated purpose and
effectively serve the needs of the Company and its stockholders.
The current members of the Compensation Committee have met with the entire
Board of Directors in setting the compensation for the current executive
officers and have set forth policies to govern such compensation currently and
in the future. The Committee continues to review all management compensation in
light of these policies.
Compensation Philosophy and Policies for Executive Officers
The Company's primary business goal is to provide high quality service
while maximizing stockholder value. The Company believes it can best achieve
this goal by achieving leadership in the provision of relevant and high quality
health services, expanding its operations primarily through acquisitions and
internal growth without imperiling the achievement of other strategic
objectives, and establishing a reputation as a desirable employer and
responsible corporate citizen. In connection with the merger of Beverly with and
into Capstone Pharmacy Services, Inc. ("Capstone") with the Company being the
resulting entity (the "Merger"), in December 1997, the composition of the
Compensation Committee changed. In connection with that change, the new
Compensation Committee reevaluated the Company's compensation philosophy and
policies. Company attempts to align management compensation with the Company's
business goals to increase the likelihood of the Company's success on both a
short-term and long-term basis.
The Company's current executive compensation program supports the Company's
strategy and objective of creating stockholder value by:
- Emphasizing pay for performance by linking a significant portion of
executive compensation to the performance of both the Company and the
individual executive officer.
- Directly aligning the interest of executives with the long-term
interest of stockholders by awarding stock options at current market
prices to give value to the executives through long-term stock
appreciation.
- Providing compensation opportunities appropriate for the Company's
size and industry in order to attract and retain talented and
committed executives on a long-term basis.
Currently, the Company's executive compensation program is comprised of
three principal components: base salary, annual cash incentive (bonus) and
long-term incentive opportunity through stock options. The annual executive pay
targets (base salary plus incentive) are intended to be competitive with
executive compensation of other U.S. public health care companies, particularly
institutional pharmacy companies, when the Company meets or exceeds its annual
operating goals.
The Company attempts to compare its executive pay targets with the annual
pay of other publicly held companies, particularly institutional pharmacy
companies, subject to available information. These other companies include
companies from the Peer Group reflected in the Stock Performance Graph found
elsewhere in this Proxy. However, since the Peer Group is small and contains
some companies substantially smaller than the Company, the Compensation
Committee retains the discretion to compare the Company's executive pay targets
with those of companies outside of this group.
9
<PAGE> 12
The Compensation Committee believes that compensation should meet the
following goals in connection with the consolidation efforts of the Company:
incentivize current management and employees during the transition period after
the Merger; retain management and employees to participate in managing and
operating the combined entity; and, ultimately, fit with the internal
compensation system of the combined entity.
Base Salary
All management salaries, including those of the executives, are evaluated
on a regular basis. In making its decision on salary levels, the Company does
not use a predetermined formula. In determining the salaries of the Company's
new executive team, the Company considered past earnings of those individuals as
well as historical Company compensation and the new executives' potential to
contribute to the Company's future. In evaluating appropriate pay levels and
salary increases for Company executives, the Compensation Committee, without
assigning particular weight to any, intends to consider the following factors:
level of responsibility of the executive, individual job performance, internal
salary structure, pay practices of other companies, size of the Company and
achievement of the Company's strategic goals. In the past, salary ranges have
been based primarily on individual job performances and past earnings.
Annual Cash Incentives
Annual cash incentive awards are designed to focus management attention on
key operational goals for the current fiscal year. The key operational goals are
specific to each executive's area of responsibility. Specific weighting is
assigned for identified financial, strategic and management practices goals. At
least 50% of the available bonus percentage for each named executive officer is
now tied to Company profitability, generally defined by achievement of the
annual budget as approved by the Board of Directors. The remaining percentages
are based on specific goals set for each executive, such as quality of care,
revenue growth, accounts receivable management, control expenses and integration
of acquisitions. The nature of the operational goals and the weighting assigned
to each is subject to change annually.
Bonus targets for Company executives are set between 20% and 50% of their
annual base salaries based upon achievement of their specific operational goals
and achievement by the Company or business unit of its financial targets. At the
end of the year, performance in light of these goals is determined on an
arithmetic scale with the pre-established weighting. Discretionary adjustments
by the Compensation Committee are possible if the Committee believes the
circumstances so warrant. For the 1997 Fiscal Year, bonuses awarded to Dr.
Renschler, Mr. Shelton, and Dr. Della Valle were $0, $90,000 and $100,000,
respectively.
Long-Term Incentives
The Company's long-term incentive compensation program consists of
incentive and nonqualified stock options which are related to improvement in
long-term stockholder value. Stock option grants are designed to focus an
executive's attention on managing the Company from the perspective of a
long-term owner with an equity stake in the business. Stock options are granted
under the Option Plans by the Disinterested Stock Option Plan Committee.
The option grants to executive officers offer the right to purchase shares
of Common Stock at their fair market value on the date of the grant. These
options will have value only if the Company's stock price increases. The number
of shares covered by each grant is selected based on the executive's level of
responsibility and past and anticipated contributions to the Company.
Chief Executive Officer Compensation
Dr. Renschler is the Company's Chief Executive Officer. Generally, the
Chief Executive Officer is eligible to participate in the same executive
compensation plans available to the Company's other senior executive officers.
The Compensation Committee's general approach in setting the Chief Executive
Officer's annual compensation is derived from the same considerations described
above, that is to be competitive with other publicly held health care
corporations, but also to have a significant portion of annual incentive
compensation based upon specific corporate-wide operating performance criteria.
10
<PAGE> 13
The Compensation Committee approved a $400,000 base salary for Dr.
Renschler for the 1997 Fiscal Year, granted a bonus of $75,000 in connection
with the Merger, and established his incentive bonus at a target range of 50% of
his base salary, or approximately $200,000. Dr. Renschler's compensation package
was developed primarily based upon his historical compensation elsewhere and his
experience in the industry. In 1997, new stock options to acquire 500,000 shares
of Common Stock were granted to Dr. Renschler in connection with his position as
Chief Executive Officer.
In connection with Mr. Allison's resignation as Chief Executive Officer,
the Company and Mr. Allison entered into a Separation Agreement on August 15,
1997. Pursuant to the Separation Agreement, the Company agreed: (i) to pay to
Mr. Allison the sums of (a) $375,000 (representing 150% of the base salary of
Mr. Allison then in effect) and (b) $79,687.50 (representing a pro rata portion
of Mr. Allison's 1997 incentive bonus based upon service through August 15,
1997); (ii) that all options issued to Mr. Allison under the Nonqualified Stock
Option Agreements, an aggregate of 392,500 shares, would become fully vested and
remain exercisable for a period of eighteen (18) months from August 15, 1997;
(iii) to continue the benefits and perquisites provided in Mr. Allison's
Employment Agreement until the earlier of 18 months from August 15, 1997 or the
date Mr. Allison obtains employment with another employer and is qualified to
participate in such employer's plans, and; (iv) to provide Mr. Allison's
automobile allowance for eighteen months following August 15, 1997.
Tax Regulations
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for executive compensation in
excess of $1 million. It is not anticipated that the Company will pay any of its
executive officers compensation in excess of $1 million in the current fiscal
year and, accordingly, to date the Company has not adopted a policy in this
regard.
THE FOREGOING REPORT IS SUBMITTED BY ALL OF THE MEMBERS OF THE COMPENSATION
COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS, WHOSE MEMBERS ARE AS FOLLOWS:
DAVID R. BANKS, CECIL S. HARRELL, AND FREDRICK C. POWELL.
Compensation Committee Interlocks and Insider Participation
The following current directors served on the Compensation Committee during
the 1997 Fiscal Year: Banks, Harrell, Powell, Reichmann (resigned from
Compensation Committee in connection with the Merger) and Perlis (resigned from
Compensation Committee in connection with the Merger). No member of the
Compensation Committee is an employee of the Company.
Mr. Banks currently serves as Chief Executive Officer and Chairman of the
Board of Beverly, the Company's largest customer. On a pro forma basis, Beverly
and its residents accounted for approximately 16.0% of the Company's 1997
revenues. See "Certain Transactions."
11
<PAGE> 14
CERTAIN TRANSACTIONS
Set forth below is a summary of various transactions involving PharMerica
and certain of its directors, officers, stockholders or other affiliates.
Joseph F. Furlong, III is a former director of the Company and a principal
of Adirondack Capital Advisors, LLC. The Company entered into an agreement with
Adirondack, as of June 1996, pursuant to which Adirondack agreed to assist the
Company in identifying and negotiating transactions with acquisition targets.
Adirondack receives as compensation 3.0% of the first $10.0 million of aggregate
transaction value plus 0.7% of aggregate transaction value in excess thereof as
well as a number of warrants to buy the Company's common stock set according to
a formula, not to exceed 200,000 shares in the aggregate, at a strike price of
$12.00. The Company has issued warrants to Adirondack to purchase 200,000 shares
of PharMerica Common Stock and since June 1996 has paid approximately $1.8
million in connection with this agreement.
Adirondack and the Company also entered into an agreement, as of December
1996, pursuant to which Adirondack served as financial advisor to the Company in
connection with the Merger. Pursuant to that agreement, Adirondack earned $4.0
million.
Directors Banks and Hendrickson are directors and officers of Beverly, the
Company's largest customer. On a pro forma basis, Beverly and its residents
accounted for approximately 16.0% of the Company's 1997 revenues. Revenues from
sales directly to Beverly facilities were approximately $74.0 million, $82.1
million and $99.5 million for 1995, 1996 and 1997, respectively. In connection
with the Merger, Beverly and the Company entered into various agreements
including: (i) a Non-Competition Agreement from Beverly; (ii) a Preferred
Provider Agreement; and (iii) an Interim Services Agreement pursuant to which
each party agreed to provide services to the other on a temporary basis to
facilitate the Merger. These agreements were negotiated on an arms length basis
and the Company believes it both pays and receives fair market value for
services provided pursuant to these agreements. Directors Banks and Hendrickson
received options to purchase 50,000 and 25,000 shares of PharMerica Common Stock
at the fair market value on the date of grant in recognition of their
contributions to the successful completion of the Merger.
Prior to the Merger, Beverly provided certain administrative services to
Pharmacy Corporation of America, Inc. ("PCA"). These services included, among
others, cash management, finance, legal, tax, financial reporting, executive
management, payroll and payables processing and employee benefit plans
maintenance. The responsibility for certain of these services, including
finance, tax and payables processing was transferred to PCA in mid-1996 as part
of a consolidation and reorganization of the Company's accounting and related
functions. Fees for the services amounted to approximately $3.2 million, $1.8
million and $2.8 million for the years ended December 31, 1997, 1996, and 1995,
respectively. Beverly also allocated insurance expense to PCA of approximately
$2.6 million, $1.8 million and $1.4 million for the years ended December 31,
1997, 1996 and 1995, respectively. The Company believes that the charges for
services provided by Beverly to the Company were a reasonable allocation of the
costs incurred by Beverly on behalf of the Company in providing these services;
however, such costs are not necessarily indicative of the costs that would have
been incurred if the Company operated as a stand-alone entity.
At the time the Company entered a preferred provider agreement with
Integrated Health Services, Inc. ("IHS") in 1996, IHS was a significant
stockholder of the Company. The Company provides institutional pharmacy services
to a significant number of long-term care facilities owned and managed by IHS
pursuant to a preferred provider agreement. Revenues from sales to IHS
facilities and their residents were over $20.0 million and $25.0 million in 1996
and 1997, respectively.
Directors Silber, Perlis and Sonshine are affiliates of Counsel, the
Company's largest shareholder as of April 15, 1998. Counsel and its affiliates
have from time to time in the past provided routine services to the Company
without compensation. Directors Silber and Perlis received $600,000 and
$400,000, respectively, in connection with finding, negotiating and closing a
1996 acquisition. Directors Silber and Perlis received options to purchase
100,000 and 25,000 shares of PharMerica Common Stock, respectively, at the fair
market value on the date of grant in recognition of their contributions to the
successful completion of the Merger. The Company entered into an agreement with
Counsel as of February 1998 pursuant to which Counsel will assist
12
<PAGE> 15
the Company with a specific targeted acquisition. Counsel will receive, if the
transaction closes, a fee equal to approximately 1.0% of the aggregate
transaction value.
PharMerica and R. Dirk Allison, the Company's former chief executive
officer, are parties to a Separation Agreement dated August 15, 1997 pursuant to
which: (i) Mr. Allison resigned from all positions with the Company and its
affiliates; (ii) the Company paid Mr. Allison approximately $468,000; and (iii)
previously issued options covering 392,500 shares of PharMerica Common Stock (of
which 167,500 shares were vested on such date) held by Mr. Allison (at exercise
prices ranging from $4.44 to $11.25 per share) immediately vested and became
exercisable through February 15, 1999, providing an estimated benefit to Mr.
Allison, based on the closing price of PharMerica Common Stock on December 31,
1997, of approximately $250,000.
The Company believes that any past transactions with its affiliates have
been at prices and on terms no less favorable to the Company than transactions
with independent third parties. The Company may enter into transactions with its
affiliates in the future. However, the Company intends to enter into such
transactions only at prices and on terms no less favorable to the Company than
transactions with independent third parties and with approval of the
disinterested members of the board of directors or a committee thereof. In
addition, the Indenture contains certain restrictions on transactions with
affiliates.
13
<PAGE> 16
STOCK PERFORMANCE GRAPH
The stock performance graph depicted below is not deemed to be part of a
document filed with the Securities and Exchange Commission pursuant to the
Securities Act or the Exchange Act and is not to be deemed incorporated by
reference in any documents filed under the Securities Act or the Exchange Act
without the express written consent of the Company.
The following graph compares the cumulative total returns of the Company
with those of the Nasdaq Market Index and a peer group index. Cumulative return
assumes $100 invested in the Company or respective index on February 28, 1993,
with dividend reinvestment through December 31, 1997. The Company has selected a
peer group known as the DOSE Group as compiled by Research Data Group. This peer
group index is comprised of six companies, excluding the Company. These
companies are Care Group, Inc., Genesis Health Ventures Inc., Mednet Mpc Corp.,
Omnicare Inc., Synetic Inc. and Vitalink Pharmacy Services Inc. GranCare Inc. is
no longer included in the peer group because it was combined with Vitalink
Pharmacy Services Inc.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Pharmerica, Inc. Peer Group S & P 500
<S> <C> <C> <C>
2/93 100 100 100
2/94 93 122 108
2/95 100 179 116
12/95 214 261 150
12/96 325 362 185
12/97 296 330 246
</TABLE>
- ---------------
* $100 invested on February 28, 1993 in stock or index -- including reinvestment
of dividends.
To date, the Company has not directly tied executive compensation to stock
performance. The future impact of stock performance on executive compensation
will be determined by the Compensation Committee.
14
<PAGE> 17
PROPOSAL 1:
ELECTION OF CLASS ONE DIRECTORS
The Board of Directors of the Company currently consists of ten members. In
accordance with the terms of the Merger agreement, the Board of Directors was
divided into three classes, with Class One directors standing for election at
the 1998 Annual Meeting of Stockholders (and every three years thereafter),
Class Two directors standing for election at the 1999 Annual Meeting of
Stockholders (and every three years thereafter), and Class Three directors
standing for election at the 2000 Annual Meeting of Stockholders (and every
three years thereafter). Directors are elected to hold office until their
successors have been duly elected and qualified.
The Board of Directors proposes that the Class One nominees indicated below
be elected as directors to serve for a three-year term and until their
successors are duly elected and qualified. Should any nominee for the office of
director become unable to accept nomination or election, which is not
anticipated, it is the intention of the persons named in the proxy, unless
otherwise specifically instructed in the proxy, to vote for the election of such
other person as the Board of Directors may recommend.
NOMINEES FOR ELECTION AS CLASS ONE DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Cecil S. Harrell(1)(2)(3)................................... 63 Director
Albert Reichmann(4)......................................... 68 Director
Gail Wilensky, Ph.D.(3)(4).................................. 54 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Disinterested Stock Option Plan Committee.
(3) Member of Compliance Committee.
(4) Member of Audit Committee.
Mr. Harrell became a Director of PharMerica in December 1997 in connection
with the Merger. Mr. Harrell has served as President and as a Director of The
Harrell Corporation of Tampa, Inc., a management company, since July 1995. Mr.
Harrell founded Pharmacy Management Services, Inc. in 1972 and served as its
President, Chairman and Chief Executive Officer until its merger in July 1995
with and into Beverly. He serves on the board of directors of National
Healthcare Resources, Inc., a medical cost containment company, the board of
trustees of the University of Tampa, the board of directors for the Auburn
University Foundation and the Florida Health Sciences Center, Inc., the holding
company of Tampa General Hospital. Mr. Harrell served on the board of directors
for NationsBank South from 1992 to 1997.
Mr. Reichmann has served as a Director of the Company since August 1995. He
has served as Chairman and a Director of Olympia & York Developments, Limited, a
privately held Canadian real estate company, for at least five years prior to
February 1993. Mr. Reichmann currently participates in major philanthropic
activities in addition to serving on the boards of several major hospitals in
Canada.
Dr. Wilensky has served as a Director of the Company since August 1995. She
has served as the John M. Olin Senior Fellow, Project HOPE since January 1993,
and as Chair, Medicare Payment Advisory Commission since October 1997. Dr.
Wilensky served as Deputy Assistant to the President for Policy Development from
March 1992 to January 1993. She was Administrator of the Health Care Financing
Administration of the Department of Health and Human Services from January 1990
to March 1992. Dr. Wilensky also serves as a director for Advanced Tissue
Sciences, Neopath Inc., Quest Diagnostics, St. Jude Medical, Syncor
International, SMS Corporation and United Healthcare.
15
<PAGE> 18
CONTINUING DIRECTORS(1)
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
C. Arnold Renschler, M.D.(3)(4)(5)........... 55 President, Chief Executive Officer and Director
David R. Banks(3)(5)(8)...................... 60 Director
Boyd W. Hendrickson(2)(6)(7)................. 53 Director
Morris A. Perlis(2)(5)....................... 49 Director
Fredrick C. Powell(2)(8)(9).................. 57 Director
Allan C. Silber(3)(4)(5)..................... 48 Chairman of the Board of Directors
Edward Sonshine, Q.C.(2)(7).................. 50 Director
</TABLE>
- ---------------
(1) Class 2 and Class 3 directors are not currently up for election. Class 2
directors will stand for election at the 1999 Annual Meeting of Stockholders
and Class 3 directors will stand for election at the 2000 Annual Meeting of
Stockholders.
(2) Class 2 director.
(3) Class 3 director.
(4) Member of Acquisition committee.
(5) Member of Executive Committee.
(6) Member of Compliance Committee.
(7) Member of Audit Committee.
(8) Member of Compensation Committee.
(9) Member of Disinterested Stock Option Plan Committee.
For the purposes of this section, references to the Company for the period
prior to December 1997 refer to Capstone, rather than PCA, since Capstone was
the corporation surviving the Merger.
Dr. Renschler joined the Company as President, Chief Executive Officer and
Director in December 1997 in connection with the Merger. From June 1996 to
December 1997, Dr. Renschler was Executive Vice President of Beverly and
President of PCA. From 1990 to June 1996, Dr. Renschler was Senior Vice
President and Chief Clinical Officer, as well as President of three operating
divisions of NovaCare, Inc. and a member of its board of directors. Prior to
that time, he held a series of key executive positions at both Manor Care, Inc.
("Manor Care") and its wholly-owned subsidiary, Manor Healthcare Corp. ("Manor
Healthcare"), including President and Chief Executive Officer of Manor
Healthcare and Chief Operating Officer and director of ManorCare. Dr. Renschler
has served as a director of Ameripath, Inc. since April 1997.
Mr. Banks became a Director of PharMerica in December 1997 in connection
with the Merger. Mr. Banks has been a director of Beverly since 1979 and has
served as Chief Executive Officer since May 1989 and Chairman of the Board since
March 1990. Mr. Banks was President of Beverly from 1979 to September 1995. Mr.
Banks is a director of Nationwide Health Properties, Inc., Ralston Purina
Company and Wellpoint Health Networks, Inc., and trustee for Occidental College.
Mr. Hendrickson became a Director of PharMerica in December 1997 in
connection with the Merger. Mr. Hendrickson joined Beverly in 1988 as a Division
President and was elected Vice President of Marketing in May 1989, Executive
Vice President of Operations and Marketing in February 1990, and to his current
positions as President, Chief Operating Officer and a director of Beverly in
September 1995.
Mr. Perlis has been Vice Chairman of the Company since May 1995 and a
Director since December 1994. Mr. Perlis served as interim chief executive
officer of the Company from December 1994 to May 1995. He has served as a
director of and consultant to Counsel since September 1992 and as President of
Counsel since January 1994. Mr. Perlis has served as a director of American
HomePatient, Inc., a home healthcare provider ("AHP") since March 1993, and as
its Chairman since May 1994. He served as a director of NOMA, Inc., a
manufacturer of consumer wire and cable, from September 1993 to June 1996. Mr.
Perlis was President of Morris A. Perlis & Assoc., an executive management
consulting firm, from September 1992 until January 1994 and President of
American Express Canada, Inc. from September 1988 until September 1992. Mr.
Perlis served as interim President of Stadtlander Drug Co., Inc., a mail order
pharmacy company
16
<PAGE> 19
("Stadtlander"), from September 1996 to December 1996. He has served as director
of Stadtlander since July 1996 and as Chief Executive Officer since September
1996.
Mr. Powell became a Director of PharMerica in December 1997 in connection
with the Merger. Mr. Powell was the founder and has been President of OMNI
Interactive Systems since 1993 and has served as a consultant to Lister Bestcare
since 1996. Mr. Powell founded Rehab Systems Company in 1987 and served as its
Chairman of the Board, President and Chief Executive Officer until 1991 when the
company merged with NovaCare Inc. and from 1993 to 1995, he served as a
consultant to NovaCare Inc. He currently serves as a board member of Alfred
University in New York and Wesley Theological Seminary in Washington, DC as well
as a board member of several private companies.
Mr. Silber has served as Chairman since February 1995 and a director of the
Company since December 1994. Mr. Silber has been Chairman, Chief Executive
Officer and a director of Counsel since August 1979. He served as President of
Counsel from August 1979 until January 1994. Mr. Silber has served as a director
of American HomePatient since September 1991. Mr. Silber served as chairman of
AHP from September 1991 to May 1994. He has served as director of Stadtlander
since July 1996 and as Chairman since September 1996. Mr. Silber is also a
member of the Board of Trustees of RioCan Real Estate Investment Trust since
December 1993.
Mr. Sonshine has served as a Director of the Company since December 1994.
He has been President and Chief Executive Officer of RioCan Real Estate
Investment Trust of Toronto, Canada since July 1995. He has been a director of
RioCan Real Estate Investment Trust since December 1993. Mr. Sonshine has served
as a director of American HomePatient since September 1991. Mr. Sonshine has
served as Vice Chairman of Counsel since January 1994. He served as a director
of Counsel Management Services, Inc. from October 1993 until July 1995. Mr.
Sonshine served as Executive Vice President of Counsel from February 1987 until
January 1994. Mr. Sonshine served as President and Chief Executive Officer of
Icarus Realty Corp. from February 1987 until September 1993. He has served as a
director of Stadtlander since July 1996. He served as a director of Advocat,
Inc. from May 1995 to November 1996.
Directors who are not officers, employees or consultants of the Company
(currently all Directors except Dr. Renschler) receive a cash retainer of
$10,000 per year, a fee of $500 for each telephonic meeting of the Board of
Directors or any Committee, a fee of $1,000 ($1500 for the Chairman of the
Board) for each meeting of the Board of Directors attended in person and a fee
of $750 for each Committee meeting attended in person. Each Director receives
options to purchase 20,000 shares upon initially joining the Board, options to
purchase 5,000 (10,000 for the Chairman of the Board) shares per year thereafter
and additional options to purchase 2,500 shares per year for each Committee
Chairman. All directors are reimbursed for actual expenses incurred in
connection with attendance at meetings of the Board of Directors or Committees
of the Board.
The Board of Directors currently has standing Acquisition, Executive,
Audit, Compliance, Compensation, and a Disinterested Stock Option Plan
Committee. The Board of Directors currently has no standing nominating
committee.
The Acquisition Committee is presently composed of Directors Silber and
Renschler. The responsibility of this Committee is to review significant
acquisition opportunities. This Committee was formed in the 1998 Fiscal Year.
The Executive Committee is presently composed of Directors Silber, Perlis,
Renschler and Banks. The Delaware General Corporation Law and the Company's
Bylaws provide that the Board may designate such a committee from their number
to carry out the functions of the Board as permitted by law. Between meetings of
the Board, an executive committee may exercise all powers of the Board except
for those prohibited by Delaware General Corporation Law. During the 1997 Fiscal
Year, the Executive Committee held no meetings and adopted three written consent
actions.
The Audit Committee presently is composed of Directors Hendrickson,
Sonshine, Reichmann and Wilensky. Responsibilities of this Committee include
engagement of independent auditors, review of audit fees, supervision of matters
relating to audit functions, and review and setting of internal polices and
17
<PAGE> 20
procedures regarding audits, accounts and other financial controls. During the
1997 Fiscal Year, this Committee held no meetings and adopted no written consent
actions.
The Compliance Committee presently is composed of Directors Harrell,
Hendrickson, and Wilensky. The responsibilities of this Committee include
overseeing compliance with state and federal laws, particularly laws governing
healthcare companies, and reviewing plans and programs to comply with such laws.
This Committee was formed in the 1998 Fiscal Year.
The Compensation Committee presently is composed of Directors Banks,
Harrell and Powell. Responsibilities of this Committee include approval of
remuneration arrangements for executive officers of the Company, review of
compensation plans relating to executive officers and directors, including
benefits under the Company's compensation plans, and general review of the
Company's employee compensation policies. Prior to the creation of the
Disinterested Stock Option Plan Committee, the Compensation Committee also had
the authority to grant options under the Company's option plans. During the 1997
Fiscal Year, the Compensation Committee held four meetings and adopted no
written consent actions.
The Disinterested Stock Option Plan Committee presently is composed of
Directors Harrell and Powell. The Disinterested Stock Option Plan Committee is
authorized to grant options to directors and employees of the Company under the
Company's Option Plans. During the 1997 Fiscal Year, the Disinterested Stock
Option Plan Committee held no meetings and adopted two written consent actions.
During the 1997 Fiscal Year, the Company's Board of Directors held 4
meetings and adopted 8 written consent actions. Each current director who was
serving on the Board of Directors during the last fiscal year attended at least
75% of the Board meetings and Committee meetings held or taken during the period
in which such person served as a director of the Company and committee member
during the last fiscal year.
A plurality of the votes of the shares of Common Stock present or
represented by proxy at the Annual Meeting of Stockholders and entitled to vote
is required to elect the nominees as directors of the Company. Counsel has
expressed its intention to vote all its shares in favor of the election of the
nominees. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL STOCKHOLDERS VOTE IN FAVOR
OF THE ELECTION OF THE NOMINEES AS DIRECTORS.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP was appointed by the Board of
Directors to serve as the Company's Independent Public Accountants for the
fiscal year ended December 31, 1997. A representative of that firm will be
present at the Annual Meeting of Stockholders and will have the opportunity to
make a statement if he so desires and to respond to questions.
DEADLINE FOR SUBMITTING
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for consideration at the Company's 1999
Annual Meeting of Stockholders must be received by the Company's executive
offices at 3611 Queen Palm Dr., Tampa, Florida 33619, no later than December 29,
1998, if any such proposal is to be eligible for inclusion in the Company's
proxy materials for that Annual Meeting of Stockholders.
OTHER MATTERS
The management of the Company knows of no other matters to be brought
before the Annual Meeting of Stockholders. If any other matter is duly presented
for action, it is the intention of the persons named in the enclosed proxy to
vote on such matter in accordance with their best judgment.
A copy of the Company's Annual Report to Shareholders is being mailed to
each stockholder of record together with this Proxy Statement.
18
<PAGE> 21
EACH STOCKHOLDER IS URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY
PROMPTLY. IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE ANNUAL MEETING, THE
PROXY MAY, IF SUCH STOCKHOLDER WISHES, BE REVOKED AND SUCH STOCKHOLDER MAY VOTE
THE SHARES IN PERSON. IN ADDITION, A PROXY MAY BE REVOKED BY A STOCKHOLDER AT
ANY TIME BEFORE SUCH PROXY IS VOTED.
EACH STOCKHOLDER WILL BE PROVIDED, WITHOUT CHARGE, A COMPLETE COPY
(INCLUDING EXHIBITS) OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K UPON WRITTEN
REQUEST TO THE OFFICE OF THE SECRETARY, 3611 QUEEN PALM DR., TAMPA, FL 33619.
19
<PAGE> 22
APPENDIX A
PROXY PHARMERICA, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 19, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Arnold Renschler and James D. Shelton, or
either of them, as proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of the Stockholders of PharMerica, Inc.,
to be held on May 19, 1998, at 9:00 a.m. Eastern Daylight Time at Wyndham
Harbour Island Hotel, 725 Harbour Island Boulevard South, Tampa, Florida
33602-5731, and at any adjournments or postponements thereof, in accordance with
the following instructions:
(1) ELECTION OF CLASS ONE DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary below) nominees listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE CHECK THE
BOX TO VOTE "FOR" ALL NOMINEES AND STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.)
Cecil S. Harrell Albert Reichmann Dr. Gail Wilensky
(2) In their discretion, on such other matters as may properly come before the
meeting.
[ ] FOR DISCRETION [ ] AGAINST DISCRETION [ ] ABSTAIN
(Continued on reverse side)
(Continued from other side)
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION OF DIRECTORS,
AND, IN THE DISCRETION OF THE PROXIES, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
Dated: , 1998
-----------------------
------------------------------
Dated: , 1998
-----------------------
------------------------------
Signatures of stockholder(s)
should correspond exactly with
the name printed hereon. Joint
owners should each sign
personally. Executors,
administrators, trustees,
etc., should give full title
and authority.
PHARMERICA, INC.
3611 QUEEN PALM DR.
TAMPA, FL 33619
