<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>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
NOVEN PHARMACEUTICALS, 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
[NOVEN PHARMACEUTICAS, INC. LOGO]
May 1, 1997
Dear Stockholder:
The 1997 Annual Meeting of Stockholders of Noven Pharmaceuticals, Inc. (the
"Corporation") will convene at 10:00 A.M. on Tuesday, June 3, 1997. The meeting
will be held at the Miami Marriott Dadeland Hotel located at 9090 South Dadeland
Boulevard, Miami, Florida and will address the matters referred to in the
enclosed Notice of Meeting.
Your proxy is also enclosed. If you do not plan to attend the meeting,
please review the enclosed material, make your decision and sign and return your
proxy in the return envelope provided. If you do not plan to attend the meeting,
sending in your proxy now will assure that your shares are voted. Be assured
that if you send in an executed proxy you may revoke it at any time before it is
voted at the meeting by filing with the Secretary of the Corporation a document
revoking it, by submitting a proxy bearing a later date, or by attending the
meeting and voting in person.
The Board of Directors, as well as the executive officers of the
Corporation, look forward to seeing you. We hope you will participate in your
Annual Meeting, if not in person, then by proxy.
Sincerely yours,
/s/ Steven Sablotsky
STEVEN SABLOTSKY
Chairman of the Board and President
<PAGE> 3
NOTICE OF ANNUAL STOCKHOLDERS MEETING OF
NOVEN PHARMACEUTICALS, INC.
[NOVEN PHARMACEUTICAS, INC. LOGO]
To the Stockholders of Noven Pharmaceuticals, Inc.
(the "Corporation"),
NOTICE IS HEREBY GIVEN, that the 1997 Annual Meeting of the Stockholders of
the Corporation will be held at the Miami Marriott Dadeland Hotel located at
9090 South Dadeland Boulevard, Miami, Florida, on Tuesday, June 3, 1997 at 10:00
A.M. for the following purposes:
1. to elect five members to the Board of Directors for the ensuing
year;
2. to ratify and approve an amendment to the certificate of
incorporation to increase the number of authorized shares of common stock;
3. to ratify and approve a stock option plan which provides for the
grant of incentive options and non-qualified stock options;
4. to ratify and approve the appointment of Deloitte & Touche LLP as
the independent certified public accountants of the Corporation for 1997;
and
5. to transact any other business which may properly come before the
Annual Meeting, or any adjournment thereof.
April 28, 1997 has been fixed as the record date for the determination of
the Stockholders entitled to receive notice of, and to vote at, the Annual
Meeting or any adjournment thereof. All Stockholders are cordially invited to
attend the meeting in person.
Please return the proxy enclosed with this Notice as soon as possible so
that your shares can be voted at the 1997 Annual Meeting.
Please be sure that your proxy is signed and dated; it cannot be voted
without your signature.
STEVEN SABLOTSKY
/s/ Steven Sablotsky
Chairman of the Board and President
By Order of the Board of Directors
Dated: May 1, 1997
<PAGE> 4
[NOVEN PHARMACEUTICAS, INC. LOGO]
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1997
PROXY STATEMENT
The Board of Directors of Noven Pharmaceuticals, Inc. (the "Corporation")
is soliciting proxies, the form of which is enclosed, to be used at the Annual
Meeting of Stockholders to be held on Tuesday, June 3, 1997, and at any
adjournment thereof. This proxy statement and the accompanying proxy card are
first being sent to Stockholders on or about May 1, 1997.
The shares of common stock ("Common Stock") represented by all properly
executed proxies received by the Corporation will be voted as specified by the
Stockholders. If no specifications are given, the Common Stock represented by
the proxy will be voted FOR Proposals 1, 2, 3 and 4. A Stockholder who has given
a proxy may revoke it at any time before it is voted at the meeting by filing
with the Secretary of the Corporation a document revoking it, by submitting a
proxy bearing a later date, or by attending the meeting and voting in person.
Under Delaware law, abstentions are treated as present and entitled to vote.
Broker non-votes will not be included in vote totals and will have no effect on
the outcome of the votes.
The expense of soliciting proxies will be borne by the Corporation. Proxies
will be solicited principally by mail, but directors, officers and regular
employees of the Corporation, who will receive no additional compensation, may
solicit proxies by any appropriate means. The Corporation will reimburse
custodians, nominees or other persons for their out-of-pocket expenses in
sending proxy materials to beneficial owners and obtaining proxies from such
owners.
YOU ARE REQUESTED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO SIGN AND
DATE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
VOTING SECURITIES AND SHARE OWNERSHIP
On April 28, 1997 there were 19,948,948 shares of Common Stock, $.0001 par
value per share, outstanding. Each share of Common Stock of record on the books
of the Corporation at the close of business on April 28, 1997 entitles its owner
to one vote, either in person or by proxy, upon each matter to come before the
meeting.
The following table sets forth, as of April 28, 1997, information with
respect to the beneficial ownership of Common Stock by (i) each person known to
the Corporation to beneficially own more than 5% of the outstanding shares of
Common Stock, (ii) each director and named executive officer of the Corporation
who
<PAGE> 5
beneficially owns any shares of Common Stock and (iii) all directors and
executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY PERCENTAGE OF
NAME OWNED(1) TOTAL
- ---- ------------------- -------------
<S> <C> <C>
Steven Sablotsky(2)......................................... 4,764,428 23.87%
Mitchell Goldberg(3)........................................ 603,529 3.03%
Sheldon H. Becher(4)........................................ 173,048 * %
Sidney Braginsky(5)......................................... 14,999 * %
Lawrence J. DuBow(6)........................................ 18,999 * %
Robin J. Norris, MD(7)...................................... 31,500 * %
William A. Pecora(8)........................................ 45,170 * %
Colin A. Morris............................................. 24,619 * %
Ciba-Geigy Corporation(9)................................... 1,091,151 5.19%
444 Saw Mill River Road
Ardsley, New York 10502
Scudder Stevens & Clark, Inc................................ 1,607,800 8.06%
Two International Place
Boston, Mass 02110-4103(10)
The TCW Group, Inc.......................................... 1,125,000 5.64%
865 South Figueroa Street
Los Angeles, CA 90017(11)
All directors and executive officers as a group (8 persons)
(2)(3)(4)(5)(6)(7)(8)..................................... 5,676,292 28.28%
</TABLE>
- ---------------
* (less than 1%)
(1) To the Corporation's knowledge, all shares of Common Stock are owned
beneficially, with sole voting and investment power, except as otherwise
noted.
(2) Includes 13,333 shares subject to options granted pursuant to the Plan
which become exercisable on or before June 29, 1997; does not include
86,667 shares subject to options granted pursuant to the Stock Option Plan
(the "Plan") a portion of which become exercisable on December 13, 1997;
does not include 20,275 shares owned by, or options to purchase 24,000
shares granted pursuant to the Plan to, Noreen Sablotsky, Secretary of the
Company nor 24,400 shares held in custodial accounts for the benefit of his
minor children and for all of which Mr. Sablotsky disclaims beneficial
ownership.
(3) Includes 2,000 shares subject to options granted pursuant to the Plan which
become exercisable on or before June 29, 1997; does not include 48,000
shares subject to options granted pursuant to the Plan a portion of which
become exercisable on December 13, 1997; does not include 1,500 shares
owned by his spouse nor 2,800 shares held in custodial accounts for the
benefit of his minor children and for all of which Mr. Goldberg disclaims
beneficial ownership.
(4) Includes 7,499 shares subject to options granted pursuant to the Plan which
become exercisable on or before June 29, 1997; does not include 2,501
shares subject to options granted pursuant to the Plan, a portion of which
become exercisable on June 6, 1998.
(5) Shares subject to options granted pursuant to the Plan which are
exercisable on or before June 29, 1997; does not include 2,501 shares
subject to options granted pursuant to the Plan, a portion of which become
exercisable on June 6, 1998.
2
<PAGE> 6
(6) Includes 14,999 shares subject to options granted pursuant to the Plan
which are exercisable on or before June 29, 1997; does not include 2,501
shares subject to options granted pursuant to the Plan, a portion of which
become exercisable on June 6, 1998.
(7) Shares subject to options granted pursuant to the Plan which are
exercisable on or before June 29, 1997; does not include options for
108,500 shares subject to options granted pursuant to the Plan, a portion
of which become exercisable on December 13, 1997.
(8) Includes 35,000 shares subject to options granted pursuant to the Plan
which become exercisable on or before June 29, 1997; does not include
36,000 shares subject to options granted pursuant to the Plan a portion of
which become exercisable on December 13, 1997.
(9) Shares subject to purchase through the exercise of certain warrants dated
November 15, 1991, April 1, 1993 and November 28, 1994, which have not been
exercised, in whole or in part, to date.
(10) The most recent report on Schedule 13G filed on or about February 10, 1997
with the Securities and Exchange Commission, Scudder, Stevens & Clark,
Inc., a registered Investment Advisor, reported shared voting power with
respect to 814,400 shares.
(11) The most recent report on Schedule 13G filed on or about February 12, 1997
with the Securities and Exchange Commission, disclosed that Robert Day, 200
Park Avenue, Suite 2200, New York, NY 10166, may be deemed to control The
TCW Group, Inc.
ELECTION OF DIRECTORS -- PROPOSAL (1)
Unless you specify otherwise on the accompanying proxy, it will be voted
for Steven Sablotsky, Mitchell Goldberg, Sheldon H. Becher, Sidney Braginsky and
Lawrence J. DuBow, the nominees for directors to serve until the next Annual
Meeting of Stockholders or until their successors are elected and qualified. All
of the nominees have consented to serve if elected. Directors will be elected by
a plurality of the shares of Common Stock present or represented and entitled to
vote at the meeting.
If any nominee should become unavailable to serve, the proxies will be
voted for a substitute nominee designated by the Board of Directors in its sole
discretion. The Board of Directors knows of no reason to anticipate that this
will occur. Each of the nominees is presently a director of the Corporation.
The names of the directors and executive officers and information about
each is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Steven Sablotsky................................... 42 Chairman of the Board and President
Mitchell Goldberg.................................. 40 Executive Vice-President and Director
Sheldon H. Becher.................................. 68 Director
Sidney Braginsky................................... 59 Director
Lawrence J. DuBow.................................. 65 Director
Robin J. Norris, MD................................ 50 Vice President and Chief Operating Officer
William A. Pecora.................................. 52 Vice President of Finance and Chief
Financial Officer
Colin A. Morris.................................... 55 Vice President of Corporate Planning*
</TABLE>
- ---------------
* Until June 12, 1996
Mr. Sablotsky is a founder of the Corporation. He has served as Chairman of
the Board and President of the Corporation since its organization in January
1987. He is a member of the American Institute of Chemical Engineers.
3
<PAGE> 7
Mr. Goldberg is a co-founder of the Corporation and has served as Executive
Vice-President since July 1988 and as a director since January 1987. Mr.
Goldberg is a cousin of Mr. Sablotsky.
Mr. Becher has been a director of the Corporation since January 1987 and is
Chairman of the Board and President of Becher, Herzog, Nall & Company, P.A.,
Certified Public Accountants, a position he has held for over 10 years. Mr.
Becher was the chief financial officer of the Corporation from December 1987
until October 1992. Mr. Becher serves as Chairman of the Audit Committee and the
Executive Compensation Committee.
Mr. Braginsky has been a director of the Corporation since June 1992 and is
President and Chief Operating Officer of Olympus America, Inc. an international
manufacturer of consumer products, cameras, tape recorders, medical endoscopes,
optoelectronic equipment, biological and industrial microscopes and clinical
analyzers. Mr. Braginsky serves on the Board of Directors of Olympus
Corporation, where he has been employed since 1970. Mr. Braginsky serves as a
member of the Audit Committee, the Executive Compensation Committee and the
Stock Option Committee.
Mr. DuBow has been a director of the Corporation since June 1992 and is the
founder and Chairman of the Board of HMS Sales and Marketing, Inc., which is
presently engaged in marketing pharmaceutical products. Since 1957, he has been
engaged in various capacities within the pharmaceutical industry, including
president and principal stockholder of Lawrence Pharmaceuticals, Inc. Mr. DuBow
was the former President of the Drug Wholesalers' Association and a former
Chairman of the National Wholesale Druggists' Association. Mr. DuBow serves as a
member of the Audit Committee, the Executive Compensation Committee and the
Stock Option Committee.
Dr. Norris has served as Vice-President and Chief Operating Officer of the
Corporation since April 1995. From March 1993 until January 1995, Dr. Norris was
Vice-President of Medical Affairs for Biostar, Inc., a diagnostics company. From
1990 until March 1993, he served as Vice-President of New Product Development
for Rhone-Poulenc Rorer, Inc.
Mr. Pecora has served as Vice President of Finance and Chief Financial
Officer of the Corporation since October 1992. From September 1987 until
September 1992, Mr. Pecora was Vice-President of Finance of Elexis Corporation,
a public company engaged in manufacturing health care accessories. Prior
thereto, he served as Senior Vice-President of Finance and Administration for
International Jensen, Inc., a division of Esmark, Inc.
Mr. Morris served as Vice President of Corporate Planning from November
1995 until June 12, 1996. He continued employment with the Corporation as a
Consultant from June 1996 to January 1, 1997. Prior thereto, Mr. Morris served
as Vice President of Operations since April 1993. From September 1988 through
April 1993, Mr. Morris was employed by Rhone-Poulenc Rorer, Inc. ("RPR") in
various technical positions.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held seven meetings in 1996 and took action by
unanimous written consent on two occasions. In 1996 four directors attended at
least 75% of the aggregate total number of meetings held by the Board of
Directors and committees on which each director served. Mr. Braginsky attended
64.3% of the aggregate total number of meetings held by the Board of Directors
and committees on which he served.
4
<PAGE> 8
AUDIT COMMITTEE
The Audit Committee reviews the financial statements of the Company and
management's disclosures and recommends to the Board of Directors the
independent public accountants to be employed by the Corporation. The Audit
Committee also confers with the independent public accountants concerning the
scope of the audit and, on completion of their audit, reviews the accountants'
findings and recommendations, reviews the adequacy of the Corporation's system
of internal accounting controls and reviews areas of possible conflicts of
interest and sensitive payments. The Audit Committee held three meetings in
1996.
EXECUTIVE COMPENSATION COMMITTEES
The Executive Compensation Committee develops and implements formal
policies with respect to executive compensation in order to best link future
compensation to the level of performance of the executive and the overall
performance of the Corporation. The Executive Compensation Committee held two
meetings in 1996.**
- ---------------
** In December 1996, the Compensation/Stock Option Committee was restructured
into two (2) separate committees -- The Executive Compensation Committee and
the Stock Option Committee. Before its restructuring, the Compensation/Stock
Option Committee held two meetings in 1996. After restructing, each committee
held one meeting.
STOCK OPTION COMMITTEE
The Stock Option Committee administers the Corporation's Stock Option Plan.
The Stock Option Committee also evaluates and makes recommendations to the Board
of Directors concerning stock option plans and other benefit programs. The Stock
Option Committee held two meetings in 1996.***
- ---------------
*** See, footnote ** above.
COMPENSATION
Directors
Directors of the Corporation, who are also employees, do not receive any
stated salary for services rendered in their capacity as directors but, by
resolution of the Board, a fixed fee and/or reimbursement of expenses may be
provided for attendance at each meeting. No such fees or reimbursements were
paid in 1996.
Each director not employed by the Corporation receives $7,500 per year for
his services as a director, in addition to $750 for each Board meeting attended
and $750 for each Board Committee meeting attended. In addition, the Chairman of
each Board Committee receives $2,500 per year for his services as Chairman.
Further, in June 1996, Messrs Becher, Braginsky and DuBow were each awarded
options to purchase 2,500 shares upon re-election to the Board of Directors
pursuant to the terms of the Stock Option Plan.
5
<PAGE> 9
Executive Officers
The following table sets forth all compensation paid or accrued during the
three fiscal years ended December 31, 1996 by the Corporation for services
rendered by certain executive officers of the Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
--------------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION* YEAR SALARY BONUS OPTIONS
---------------------------- ---- -------- ------- ---------------------
<S> <C> <C> <C> <C>
Steven Sablotsky............................. 1996 $325,000 $65,000 60,000
President and 1995 $290,000 $50,000 40,000
Chairman of the 1994 $230,000 $40,000 0
Board
Mitchell Goldberg............................ 1996 $165,000 $33,000 30,000
Executive Vice 1995 $150,000 $25,000 20,000
President 1994 $132,000 $15,000 0
Robin J. Norris, MD.......................... 1996 $187,000 $37,500 25,000
Vice President and 1995 $121,000 $15,000 115,000
Chief Operating 1994 N/A N/A N/A
Officer
William A. Pecora............................ 1996 $110,000 $22,000 20,000
Vice President of 1995 $104,000 $10,000 20,000
Finance and 1994 $ 97,000 $ 2,500 0
Chief Financial Officer
Colin A. Morris.............................. 1996 $165,000 $ 0 0
Vice President 1995 $160,000 $ 2,500 110,000
of Corporate 1994 $147,000 $10,000 0
Planning
</TABLE>
- ---------------
* Includes President (chief executive officer) and most highly compensated
executives whose salary and bonus exceeded $100,000 in 1996.
6
<PAGE> 10
STOCK OPTIONS
The following table sets forth all grants in 1996 of stock options to the
executive officers named in the Summary Compensation Table.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES OR BASE EXPIRATION -----------------------
NAME GRANTED IN 1996 PRICE DATE 5% 10%
---- ------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven Sablotsky...................... 60,000 16.54% $15.82 12/09/01 $382,528 $900,791
Mitchell Goldberg..................... 30,000 8.27% $14.38 12/09/03 $173,854 $409,399
Robin J. Norris, MD................... 25,000 6.89% $14.38 12/09/03 $144,879 $341,166
William A. Pecora..................... 20,000 5.51% $14.38 12/09/03 $115,903 $272,932
</TABLE>
The following table sets forth certain information with respect to
outstanding stock options held at year end by the named executive officers or
exercised under the Plan in 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
HELD AT DECEMBER 31, 1996 DECEMBER 31, 1996(1)
SHARES ACQUIRED VALUE --------------------------------- ---------------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
---- --------------- ----------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Steven Sablotsky...... N/A N/A 13,333 86,667 $ 32,666 $ 65,334
Mitchell Goldberg..... N/A N/A 2,000 48,000 $ 67,000 $ 63,000
Robin J. Norris,
M.D................. N/A N/A 11,500 128,500 $ 63,450 $571,050
William A. Pecora..... N/A N/A 33,000 38,000 $105,770 $ 78,750
Colin A. Morris....... N/A N/A 46,000 99,000 $154,375 $601,875
</TABLE>
- ---------------
(1) Represents difference between exercise price and market price of Noven
Common Stock on December 31, 1996 ($14.00).
EMPLOYMENT AGREEMENTS
In December 1994, the Corporation entered into employment agreements with
Steven Sablotsky and Mitchell Goldberg. Each of these agreements is for a term
of three years commencing January 1, 1995 through December 31, 1997, and
provides for annual cost of living increases and additional annual increases and
bonuses at the discretion of the Board of Directors. Mr. Sablotsky's salary for
1997 is $375,000. Mr. Sablotsky's agreement also provides for, among other
things, life and disability insurance and an automobile. Mr. Goldberg's salary
for 1997 is $190,000. Mr. Goldberg's employment agreement also provides for,
among other things, life and disability insurance.
On February 1, 1995 the Corporation entered into an employment agreement
with Colin A. Morris. This Agreement was for a period of two years commencing
January 1, 1995 through December 31, 1996, and provided for annual cost of
living increases and additional annual increases and bonuses at the discretion
of the
7
<PAGE> 11
Board of Directors. On June 12, 1996, the Corporation entered into a Severance
and Consulting Agreement with Mr. Morris. Pursuant to this Agreement, his
employment with the Corporation, as the Vice President of Corporate Planning,
was terminated, but he remained employed as a consultant through January 1,
1997.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
rules issued thereunder, the Corporation's executive officers and directors are
required to file with the Securities and Exchange Commission reports of
ownership and changes in ownership of the Common Stock. Copies of such reports
are required to be furnished to the Corporation. Based solely on its review of
the copies of such reports furnished to the Corporation, the Corporation
believes that during 1996 all of its executive officers and directors complied
with the Section 16(a) requirements.
8
<PAGE> 12
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total Stockholder return on the Corporation's Common Stock against the
cumulative total return of the Russell 2000 Stock Index and Peer Group (Value
Line Drug Industry) for the period through December 31, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
NOVEN PHARMACEUTICALS, RUSSELL 2000 INDEX AND PEER GROUP**
(PERFORMANCE RESULTS THROUGH 12/31/96)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NOVEN RUSSELL 2000 INDEX DRUGS (PEER
(FISCAL YEAR COVERED) PHARMACEUTICALS GROUP)
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 190.74 118.41 83.08
1993 209.26 140.80 76.38
1994 183.33 138.01 83.13
1995 166.67 177.26 132.16
1996 207.41 206.48 163.65
</TABLE>
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in Noven Common Stock, Russell
2000 Index and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
** Peer Group consists of Value Line Drug Industry.
9
<PAGE> 13
TRANSACTIONS WITH MANAGEMENT AND OTHERS
For the year ended December 31, 1996, the Corporation paid $67,180 to the
accounting firm of Becher, Herzog, Nall & Company, P.A. for services rendered.
Sheldon H. Becher, a director of the Corporation, is the Chairman of the Board,
the President and a stockholder of this firm.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Policy
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee"), which consists of three non-employee
directors. The compensation program is based on the general principle that
compensation be designed to allow the Corporation to secure and retain the
services of high quality executives.
The Corporation's compensation program consists of the following three
components: 1) a base salary, 2) annual incentives and 3) long-term incentives.
The Corporation's annual incentives are awarded in the form of cash bonuses and
long-term incentives are awarded in the form of stock options.
It is the Committee's belief that the base salary should be the major fixed
element of an executive compensation package. The base salary for executives is
targeted at the mean level for competitors in the pharmaceutical industry. For
the purpose of establishing these levels, the Corporation compares itself to a
self-selected group of six pharmaceutical companies that compete with the
Corporation in business or who are in competition with the Corporation for
executive talent.
The Committee further believes annual incentives, in the form of cash
bonuses, should be used to reward an individual executive for exceptional
performance. Thus, annual incentives can serve as a motivational tool to focus
the executive's attention on his own performance. The determination of what is
exceptional performance is, at this stage, a subjective one made by the members
of the Committee based on general criteria, including the executive's role in
the progress of the Corporation's products, regulatory matters, organizational
staffing and other corporate developments. Annual incentives also allow the
Committee to adjust compensation packages on an annual basis so that they remain
competitive.
Stock options allow the Corporation to motivate executives to increase
stockholder value. This type of incentive also allows the Corporation to recruit
members of the management team whose contributions and skills are important to
its long-term success. Incentives, in the form of stock options, also provide
the Corporation with a method of compensation that avoids cash expenditures.
Recommendations concerning stock options and the administration of the
Corporation's Stock Option Plan are now made by the Stock Option Committee.
The Committee evaluates the following seven factors in order to determine
an adequate level of total compensation:
(1) Type of responsibility of the executive;
(2) Executive's level within the Corporation;
(3) Corresponding amounts paid by members of the defined competitive
industry group;
(4) Supply and demand factors;
(5) Size of Corporation;
10
<PAGE> 14
(6) Executive performance; and
(7) Corporation's profitability.
The Committee assigns no specific weight to any of the foregoing factors
when making compensation determinations.
Chief Executive Officer Compensation
Mr. Sablotsky's employment agreement calls for annual cost of living
increases and additional increases and bonuses at the discretion of the Board of
Directors. Mr. Sablotsky received an annual bonus of $65,000 in 1996 and an
increase in base salary of $50,000. Mr. Sablotsky also received options to
purchase 60,000 shares of common stock.
The Committee took into account Mr. Sablotsky's role in the performance of
the Corporation in its efforts to (i) obtain regulatory approvals for products
submitted for review; (ii) develop new products, and (iii) establish a
management and employee team to further the goals of the Corporation.
Additionally, the Committee took into account Mr. Sablotsky's successful efforts
in regard to his continuing lead role in the Corporation's activities with
licensees in areas of technology, manufacturing and quality control. The award
to Mr. Sablotsky of a cash bonus, stock options and increase in base salary also
maintained his compensation within the acceptable range of targeted compensation
set by the Committee.
Compensation Committee:
Sheldon H. Becher (Chairman)
Sidney Braginsky
Lawrence J. DuBow
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF ALL NOMINEES.
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK -- PROPOSAL (2)
Unless you specify otherwise on the accompanying proxy, it will be voted
for the Amendment to increase the number of authorized shares of Common Stock.
DESCRIPTION
The proposed Amendment to Article IV of the Corporation's Certificate of
Incorporation authorizes the Corporation to issue up to 40,000,000 shares of
Common Stock, par value $.0001.
PURPOSES AND EFFECTS OF AMENDMENT
The Corporation is presently authorized to issue 30,000,000 shares of
Common Stock, par value $.0001 per share, of which, as of April 28, 1997,
19,948,948 shares were issued and outstanding. An additional 7,750,000 shares
are reserved for issuance upon exercise of options which have been granted or
may be granted pursuant to the Corporation's Stock Option Plans. An additional
2,019,151 shares of Common Stock are reserved for issuance pursuant to
outstanding warrants. Accordingly, 29,718,099 shares are either issued and
outstanding or reserved for issuance.
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The Amendment will increase the authorized Common Stock of the Corporation
by 10,000,000 shares from 30,000,000 to 40,000,000 shares. The Amendment will
provide the Corporation with additional shares of Common Stock which may be used
in connection with future acquisitions, in connection with the issuance of
warrants, for stock splits and stock dividends, for conversions of preferred
stock or debt and for other corporation purposes, including the raising of
additional capital at times when the Board of Directors of the Corporation, in
its discretion, deems it advantageous to do so. If approved, the increased
number of authorized shares of Common Stock will be available for issuance from
time to time for such purposes and consideration as the Board of Directors may
approve and no further vote of the Stockholders of the Corporation will be
required, except as provided under Delaware corporation law or if the rules of
any national securities exchange apply. The availability of additional shares
for issuance, without the delay and expense of obtaining the approval of
Stockholders at a special meeting, will afford the Corporation greater
flexibility in acting upon proposed transactions.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock of the Corporation now
authorized. Holders of Common Stock do not have preemptive rights to subscribe
to additional securities which may be issued by the Corporation. The increase in
the number of shares of Common Stock which the Corporation is authorized to
issue would not, by itself, have any effect on the rights of existing
Stockholders.
The affirmative vote of the majority of the outstanding shares of Common
Stock present, or represented and entitled to vote at the meeting, is necessary
for the adoption of the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THIS AMENDMENT
AND AUTHORIZATION OF UP TO 40,000,000 SHARES OF COMMON STOCK.
APPROVAL OF THE 1997 STOCK OPTION PLAN WHICH PROVIDES FOR THE GRANT OF
INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS -- PROPOSAL (3)
The Board of Directors is proposing for stockholder approval at the Annual
Meeting the Corporation's Stock Option Plan (the "Option Plan"). The
Corporation's prior Stock Option Plan terminated, by its own terms, on December
31, 1996. The purpose of the Option Plan is to encourage stock ownership by
certain officers, employees, and non-employee directors, so that they may
acquire a proprietary interest in the success of the Corporation. The Option
Plan is intended to provide an incentive for maximum effort in the successful
operation of the Corporation, to encourage certain employees of the Corporation
to remain in the employ of the Corporation, to attract non-employee directors to
the Corporation and to encourage non-employee directors to remain with the
Corporation. Therefore, the Board of Directors has adopted and recommends that
the stockholders approve the Option Plan as set forth on Exhibit A to this Proxy
Statement.
The Option Plan provides for the grant of qualified and non-qualified stock
options to certain officers, employees, non-employee directors and consultants
of the Corporation. The following is a brief summary of the principal features
of the Option Plan proposed by the Board of Directors, which the Corporation
believes is a fair and complete summary of the Option Plan. This summary is
qualified in its entirety by reference to the terms of the Option Plan set forth
as Exhibit A.
Available Shares under the Option Plan
Under the terms of the Option Plan, 4,000,000 shares of authorized but
unissued Common Stock of the Corporation are reserved for issuance. The Option
Plan provides for the grant of options that are intended to
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qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code as well as non-qualified options. As of February, 1997, there were
approximately 140 employees and 5 directors eligible to receive options under
the Option Plan. No options have yet been granted to any eligible individuals
under this Option Plan.
Administration
The Plan will be administered by a Stock Option Committee (the "Committee")
appointed by the Board of Directors of the Corporation (the "Board"). The
Committee will select the officers, employees and consultants of the Corporation
and subsidiaries to whom options may be granted and shall be responsible for
such actions which are required to be taken by outside directors to qualify for
the exceptions under Internal Revenue Code sec. 162(m) for performance-based
compensation. Options grants to non-employee directors of the Corporation are
fixed pursuant to the terms of the Option Plan.
Price, Term and Exercise of Option
The exercise price of options granted under the Option Plan may not be less
than 100% of the fair market value of the Common Stock on the date of the grant,
as determined in accordance with the Option Plan. The maximum option term will
be 10 years. No person may receive any incentive stock option if, at the time of
grant such person owns directly or indirectly more than 10% of the total
combined voting power of the Corporation unless the Option price is at least
110% of the fair market value of the Common Stock and the exercise period of
such incentive option is by its terms limited to five years. There is also a
$100,000 limit on the value of stock (determined at the time of grant) covered
by incentive stock options that first become exercisable by an optionee in any
calendar year. No option may be granted more than 10 years after the effective
date of the Option Plan.
Payment for the shares purchased under the Option Plan may be made either
in cash or cash equivalents, or by exchanging shares of Common Stock of the
Corporation with a fair market value equal to or less than the total option
price plus cash for any difference or by a combination of the foregoing. Options
may also be exercised by the optionee directing that certificates for the shares
purchased be delivered to a licensed broker acceptable to the Corporation as
agent for the optionee, provided that the broker tenders to the Corporation cash
or cash equivalents to the option exercise price plus the amount of any taxes
that the Corporation may be required to withhold in connection with the exercise
of the option.
Eligibility
The plan provides that options may be granted to any employee or consultant
of the Corporation or any of its subsidiaries, including officers and directors.
Each "Outside Director," as that term is defined in the Plan, shall be granted
an option to purchase 5,000 shares of Stock, subject to the terms and conditions
specified in the Plan, on the day of his/her election at each annual meeting of
the Stockholders of the Corporation. Subject to the availability of shares, each
person elected to the Board of Directors, for the first time, as an "Outside
Director," after the effective date of the Plan, shall be granted an Option to
purchase 12,500 shares of Stock subject to the terms and conditions of the Plan,
as of the date such "Outside Director" takes office. The Plan provides that an
individual may hold more than one Option subject to such restrictions provided
therein.
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Restriction on Transfer and Termination of Employment
Unless set forth in the option agreement at the time of grant or at any
time thereafter, options shall not be assignable by the optionee other than by
will or the laws of descent and distribution and only such optionee may exercise
the option. If an employee's employment with the Corporation or a subsidiary
terminates by reason of death or permanent and total disability, his or her
options, whether or not then exercisable, may be exercised by the employee, or
by the executors or administrators or legatees or distributees of such
Optionee's estate, whichever may apply, at any time within six months after
termination of such service or employment and prior to termination of the option
as further provided in the Option Plan. If the optionee's employment terminates
for any reason other than death or disability, options held by such optionee
will terminate one month after the date of such termination unless otherwise
provided in the Option Plan. The Board or the Committee may, subject to the
terms of the Option Plan, extend the time period during which the option may be
exercised by so providing in the option agreement. Options granted to
non-employee directors of the Corporation shall remain exercisable for their
remaining term in the event the non-employee director ceases to be a member of
the Board of Directors by reason of death or permanent and total disability and
three months following the date on which the non-employee director ceases to be
a member of the Board for any other reason.
Government Regulations
The Option Plan and the grant and exercise of options thereunder shall be
subject to all applicable governmental rules and regulations; and,
notwithstanding any other provision of the Option Plan or any agreement to the
contrary, the Board of Directors may in its discretion make such changes in the
Option Plan and such agreements as may be required, in its discretion, to
conform the Option Plan and such agreements to such rules and regulations.
Federal Income Tax Treatment
An optionee will not be deemed to have received taxable income upon the
grant or exercise of any incentive stock option (except that the alternative
minimum tax may apply). Any gain realized upon a disposition of shares received
pursuant to the exercise of an incentive stock option will be taxed as a
long-term capital gain, so long as the optionee holds the shares for at least
two years after the date of grant and for at least one year after the date of
exercise. Upon exercise of a nonstatutory stock option, unless an appropriate
election had been made upon grant, an optionee will be deemed to receive
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of the underlying stock on the date of exercise.
Generally, neither gain or loss will be recognized by the Corporation upon
the grant or exercise of an incentive stock option. Upon the exercise of a
nonstatutory stock option, the Corporation will be entitled to a deduction for
the amount recognized as ordinary income by the optionee. If Common Stock
acquired upon the exercise of an incentive stock option is disposed of prior to
satisfaction of the holding periods described above, generally the optionee will
be deemed to have realized as ordinary income, and the Corporation will be
allowed to deduct, the excess of the market value at the date of exercise over
the option price. If an optionee pays the exercise of an option by delivering
shares of Common Stock, the exchange of shares generally will be treated as a
non-taxable transaction (provided, in the case of an incentive stock option,
that the shares delivered in
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<PAGE> 18
payment are not shares acquired upon exercise of an incentive stock option which
have not satisfied the holding period requirements discussed above).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION AND APPROVAL OF
THE OPTION PLAN.
RATIFICATION AND APPROVAL OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS -- PROPOSAL (4)
The Corporation has been advised that a representative of Deloitte & Touche
LLP will be present at the 1997 Annual Meeting and will have an opportunity to
make a statement and to respond to appropriate questions raised.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present, or represented and entitled to vote at the meeting, is
necessary for the ratification and approval of the appointment of Deloitte &
Touche LLP. In the event of a negative vote on the ratification of such
selection, the Board of Directors will reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION AND APPROVAL OF
THE SELECTION OF DELOITTE & TOUCHE LLP AS THE CERTIFIED PUBLIC ACCOUNTANTS OF
THE CORPORATION FOR 1997.
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
at the meeting and does not intend to bring before the meeting any matter other
than the proposals described herein. However, if any other business should come
before the meeting, or any adjournment thereof, the person(s) named in the
accompanying proxy will have discretionary authorization to vote all proxies in
accordance with their best judgment.
STOCKHOLDER PROPOSALS
Proposals on matters appropriate for Stockholder consideration, consistent
with the regulations of the Securities and Exchange Commission, which are
submitted by Stockholders for inclusion in the proxy statement and form of proxy
for the 1998 Annual Meeting of Stockholders, must be received by the Corporation
on or before January 1, 1998. Such Stockholder proposals may be mailed to Mr.
Mitchell Goldberg, Executive Vice-President, Noven Pharmaceuticals, Inc., 11960
Southwest 144th Street, Miami, Florida 33186.
GENERAL
In order that all holders of Common Stock may be represented at the Annual
Meeting, it is extremely important that proxies be returned promptly.
PLEASE SIGN, DATE AND MAIL OR OTHERWISE DELIVER THE ENCLOSED PROXY. THE
ACCOMPANYING ADDRESSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
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Stockholders mailing or otherwise delivering their proxies who attend the
meeting may, if desired, revoke their proxies and personally vote their shares
by ballot at the meeting. Your cooperation in promptly returning your proxy will
be appreciated and will help secure, at an early date, a quorum for our meeting.
By order of the Board of Directors
/s/ Steven Sablotsky
Steven Sablotsky
Chairman of the Board and President
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EXHIBIT "A"
STOCK OPTION PLAN
Noven Pharmaceuticals, Inc., a Delaware corporation (the "Company") sets
forth herein the terms of this Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company by providing
eligible individuals (as designated pursuant to Section 4 below) with an
opportunity to acquire or increase a proprietary interest in the Company, which
will thereby create a stronger incentive to expend maximum effort for the growth
and success of the Company and its subsidiaries, and will encourage such
eligible individuals to remain in the employ or service of the Company or that
of one or more of its subsidiaries. Each stock option granted under the Plan (an
"Option") is intended to be an "incentive stock option" ("Incentive Stock
Option") within the meaning of Section 422 of the Internal Revenue Code of 1986,
or the corresponding provision of any subsequently-enacted tax statute, as
amended from time to time (the "Code"), except (i) to the extent that any such
Option would exceed the limitations set forth in Section 7 below; (ii) for
Options specifically designated at the time of grant as not being "incentive
stock options"; and (iii) for Options granted to consultants or to members of
the board of directors of the Company who are not officers or other employees of
the Company or any "subsidiary corporation" (a "Subsidiary") thereof within the
meaning of Section 424(f) of the Code or to directors of any Subsidiary who are
not officers or other salaried employees of the Company (a "Subsidiary
Director"). If any Options granted hereunder shall, for any reason, fail to
qualify as an Incentive Stock Option, they shall nevertheless be deemed options
issued by the Company pursuant to the Plan and for tax purposes shall be
"non-qualified stock options."
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors of the
Company (the "Board"), which shall have the full power and authority to take all
actions, and to make all determinations required or provided for under the Plan
or any Option or Option Agreement (as defined in Section 8 below) entered into
hereunder and all such other actions and determinations not inconsistent with
the specific terms and provisions of the Plan deemed by the Board to be
necessary or appropriate to the administration of the Plan or any Option granted
or Option Agreement entered into hereunder. All such actions and determinations
shall be by the affirmative vote of a majority of the members of the Board
present at a meeting at which any issue relating to the Plan is properly raised
for consideration or without a meeting by written consent of the Board executed
in accordance with the Company's Certificate of Incorporation and By-Laws, and
with applicable law. The interpretation and construction by the Board of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.
(b) Committee. The Board shall appoint a Stock Option Committee (the
"Committee"), which may be the Compensation Committee, consisting of not less
than two members of the Board, none of whom shall be an officer or other
salaried employee of the Company or any of its subsidiaries, and each of whom
shall qualify in all respects as a "non-employee director" as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as an "outside director" under Section 162(m)(4)(C)(i) of
the Code. The Committee shall be solely responsible for those actions and
responsibilities which are required to be taken by outside directors to qualify
for the exceptions under Code sec. 162(m) and the regulations thereunder for
performance-based compensation. The Board, in its sole
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discretion, may provide that the role of the Committee shall be otherwise
limited to making recommendations to the Board concerning any determinations to
be made and actions to be taken by the Board pursuant to or with respect to the
Plan, or the Board may delegate to the Committee such powers and authorities
related to the administration of the Plan, as set forth in Section 2(a) above,
as the Board shall determine, consistent with the Certificate of Incorporation
and By-Laws of the Company and applicable law. The Board may remove members, add
members, and fill vacancies on the Committee from time to time, all in
accordance with the Company's Certificate of Incorporation and By-Laws, and with
applicable law. The majority vote of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder, and the
Company shall indemnify and hold harmless any member of the Board or Committee
from any and all damages, losses or claims, including reasonable attorneys fees,
arising from their actions (or inactions) in connection with this Plan or its
administration.
(d) Delegation to the Committee. In the event that the Plan or any Option
granted or Option Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in
Section 2(b) above. Unless otherwise expressly determined by the Board, any such
action or determination by the Committee shall be final and conclusive.
(e) Action by the Board. The Board may act under the Plan with respect to
any Option granted to or Option Agreement entered into with an officer, director
or stockholder of the Company who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") other than by, or in
accordance with the recommendations of, the Committee, constituted as set forth
in Section 2(b) above, only if the Plan is otherwise administered in accordance
with the provisions of Rule 16b-3 and if the provision of Code sec. 162(m) are
not applicable to such recommendations.
3. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of common stock, par value $.0001 per share, of the Company (the
"Stock"), which shares may be treasury shares or authorized but unissued shares.
The number of shares of Stock that may be issued pursuant to Options granted
under the Plan shall not exceed in the aggregate 4,000,000 shares. The foregoing
numbers of shares are subject to adjustment as provided in Section 17 below. If
any Option expires, terminates, or is terminated or canceled for any reason
prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options granted
under the Plan and such number of shares shall be restored to the number of
shares available for issuance under Options granted.
4. ELIGIBILITY
(a) Employees and Subsidiary Directors. Options may be granted under the
Plan to any employee or consultant of the Company or any Subsidiary (including
any such employee who is an officer or director of the Company or any
Subsidiary) or to any Subsidiary Director as the Board or Committee shall
determine and designate from time to time prior to the expiration or termination
of the Plan.
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(b) Outside Directors. On the day of each annual meeting of the
Stockholders of the Company, each director who is not then an employee of the
Company or any of its subsidiaries (an "Outside Director"), shall be granted an
Option to purchase 5,000 shares of Stock, in each case at the price and upon the
other terms and conditions specified in the Plan. In addition, subject to the
availability of shares of Stock under the Plan, each person first elected to the
Board as an Outside Director after the effective date of the Plan, shall be
granted, as of the date such individual takes office, an Option to purchase
12,500 shares of Stock at the price and upon the terms and conditions specified
in the Plan. Each Option granted to an Outside Director shall be granted at an
Option Price equal to 100 percent of the fair market value of a share of Stock
on the date of grant (determined under Section 9 below) and upon the other terms
and conditions specified in the Plan. Except as provided in this Section 4(b),
no Outside Director shall be eligible to be granted Options under this Plan.
(c) Multiple Grants. An individual may hold more than one Option subject
to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERMS OF THE PLAN
(a) Effective Date. The Plan shall be effective and considered adopted as
of January 1, 1997, subject to approval of the Plan within one year of such
effective date by a majority of the votes present and entitled to vote at a duly
held meeting of the stockholders of the Company at which a quorum representing a
majority of all outstanding voting stock is present, either in person or by
proxy; provided, however, that upon approval of the Plan by stockholders of the
Company as set forth above, all Options granted under the Plan on or after the
effective date shall be fully effective as if the stockholders of the Company
had approved the Plan on the effective date. If the stockholders fail to approve
the Plan within one year of such effective date, any Options granted hereunder
shall be null and void and of no effect.
(b) Term. The Plan shall terminate on December 31, 2006.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board or Committee
may, at any time and from time to time, prior to the date of termination of the
Plan, grant to such eligible individuals as the Board or Committee may determine
("Optionees"), Options to purchase such number of shares of the Stock on such
terms and conditions as the Board or Committee may determine, including any
terms or conditions which may be necessary to qualify such Option as "incentive
stock options" under Section 422 of the Code. The date on which the Board or
Committee approves the grant of an Option (or such later date as is specified by
the Board or Committee) shall be considered the date on which such Option is
granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) or (iii) of
Section 1) shall constitute an Incentive Stock Option to the extent that the
aggregate fair market value of Stock (determined at the time the Option is
granted) with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
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8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by the Company and by the
Optionee, in such form or forms and containing such provisions as the Board or
Committee shall from time to time determine. Option Agreements covering Options
granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option (the
"Option Price") shall be fixed by the Board or Committee and stated in each
Option Agreement, and shall be not less than 100 percent of the fair market
value of a share of Stock on the date the Option is granted (as determined in
good faith by the Board or Committee); provided, however, that in the event the
Optionee would otherwise be ineligible to receive an Incentive Stock Option by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than ten percent), the Option Price of an Option that
is intended to be an Incentive Stock Option shall be not less than 110 percent
of the fair market value of a share of Stock at the time such Option is granted.
In the event that the Stock is listed on an established national or regional
stock exchange, is admitted to quotation on the Nasdaq National Market System,
or is publicly traded on an established securities market, in determining the
fair market value of the Stock, the Board or Committee shall use the closing
price of the Stock on such exchange or System or in such market (the highest
such closing price if there is more than one such exchange or market) on the
trading date the Option is granted (or, if there is no such closing price, then
the Board or Committee shall use the mean between the high and low prices on
such date or if unavailable the mean between the high and low bid prices on such
date), or, if no sale (or bid) of the Stock had been made on such day, on the
next preceding day on which any such sale (or bid) shall have been made.
10. TERM AND EXERCISE OF OPTION
(a) Term. Each Option granted under the Plan shall terminate and all
rights to purchase shares thereunder shall cease upon the expiration of ten
years from the date such Option is granted, or, with respect to Options granted
to persons other than Outside Directors, on such date prior thereto as may be
fixed by the Board or Committee and stated in the Option Agreement relating to
such Option; provided, however, that in the event the Optionee would otherwise
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to stock ownership of
more than ten percent), an Option granted to such Optionee that is intended to
be an Incentive Stock Option, shall in no event be exercisable after the
expiration of five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option granted to
persons other than Outside Directors under the Plan shall be exercisable, in
whole or in part, at any time and from time to time, over a period commencing on
or after the date of grant and ending upon the expiration or termination of the
Option, as the Board or Committee shall determine and as set forth in the Option
Agreement relating to such Option. Without limiting the foregoing, the Board or
Committee, subject to the terms and conditions of the Plan, may in its sole
discretion provide that an Option may not be exercised in whole or in part for
any period or periods of time during which such Option is outstanding; provided,
however, that any such limitation on the exercise of an Option contained in any
Option Agreement may be rescinded, modified or waived by the Board or Committee,
in its sole discretion, at any time and from time to time after the date of such
Option, so as to accelerate that time at which the Option may be exercised.
Subject to Section 10(a), each Option granted to
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Outside Directors shall be exercisable, in whole or in part, at any time and
from time to time, over a period commencing on the date of grant and ending upon
the expiration of the Option as set forth in the Option Agreement.
Notwithstanding any other provision of the Plan, no Option granted to an
Optionee under the Plan shall be exercisable in whole or in part prior to the
date the Plan is approved by the stockholders of the Company as provided in
Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Company on any business day, at its principal
office, addressed to the attention of the Committee (or Board if no Committee),
of written notice of exercise, which notice shall specify the number of shares
with respect to which the Option is being exercised. The minimum number of
shares of Stock with respect to which an Option may be exercised, in whole or in
part, at any time, shall be the lesser of 100 shares or the maximum number of
shares available for purchase under the Option at the time of exercise. Except
as provided in the next following sentence, payment in full of the Option Price
of the shares for which the Option is being exercised shall accompany the
written notice of exercise of the Option and shall be made either (i) in cash or
in cash equivalents; (ii) through the tender to the Company of shares of Stock,
including the shares of Stock subject to the Option being exercised, which
shares shall be valued, for purposes of determining the extent to which the
Option Price has been paid thereby, at their fair market value (determined in
the manner described in Section 9 above) on the date of exercise; or (iii) by a
combination of the methods described in (i) and (ii); provided, however, that
the Board or Committee may in its discretion impose and set forth in the Option
Agreement pertaining to an Option granted to persons other than Outside
Directors such limitations or prohibitions on the use of shares of Stock to
exercise Options as it deems appropriate. Unless the Board or Committee shall
provide otherwise, in the case of an Option Agreement relating to an Option
granted to someone other than an Outside Director, payment in full of the Option
Price need not accompany the written notice of exercise provided the notice of
exercise directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Company as the agent for the individual exercising the Option and, at the
time such Stock certificate or certificates are delivered, the broker tenders to
the Company cash (or cash equivalents acceptable to the Company) equal to the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option plus the amount (if any) of federal and other taxes which the Company
may, in its judgment, be required to withhold with respect to the exercise of
the Option. An attempt to exercise any Option granted hereunder other than as
set forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the individual exercising the Option shall be entitled
to the issuance of a Stock certificate or certificates evidencing his ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stock Option which certificate or certificates shall not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising an Option shall have
none of the rights of a stockholder until the shares of Stock covered thereby
are fully paid and issued to him and, except as provided in Section 17 below, no
adjustments shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
11. TRANSFERABILITY OF OPTIONS
Unless set forth in the Option Agreement at the time of grant, or at any
time thereafter, no Option shall be assignable or transferable by the Optionee
to whom it is granted, other than by will or the laws of descent and
distribution and during the lifetime of an Optionee to whom an Option is
granted, only such Optionee (or, in the event of legal incompetency, the
Optionee's guardian or legal representative) may exercise the Option.
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<PAGE> 25
12. TERMINATION OF SERVICE OR EMPLOYMENT
(a) Employees and Subsidiary Directors. Upon the termination of the
employment or service of an Optionee (other than an Outside Director) with the
Company or a Subsidiary, other than by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, any Option granted to an Optionee pursuant to the Plan shall terminate
one month after the date of such termination of employment, unless earlier
terminated pursuant to Section 10(a); provided, however, that the Board or
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that the Optionee may (subject to the general limitations on exercise
set forth in Section 10(b) above), in the event of termination of service or
employment of the Optionee with the Company or a Subsidiary, exercise an Option,
in whole or in part, at any time subsequent to such termination of service or
employment and prior to termination of the Option pursuant to Section 10(a)
above, either subject to or without regard to any installment limitation on
exercise imposed pursuant to Section 10(b) above. Whether a leave of absence or
leave on military or government service shall constitute a termination of
service or employment for purposes of the Plan shall be determined by the Board
or Committee, which determination shall be final and conclusive. For purposes of
the Plan, a termination of employment with the Company or a Subsidiary shall not
be deemed to occur if the Optionee is immediately thereafter employed with or in
the service of the Company or any Subsidiary.
(b) Outside Directors. Except as provided in Section 13(c), any Option
granted to an Outside Director shall terminate upon the expiration of three
months after the termination of the Outside Director's service with the Company
other than because of death or "permanent and total disability" as defined
above, or, if earlier, upon the expiration of ten years after grant of the
Option.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death of an Employee or Subsidiary Director. If an Optionee (other
than an Outside Director) dies while in the employ or service of the Company or
a Subsidiary or within the period following the termination of employment or
service during which the Option is exercisable under Section 12 above or 13(b)
below, the executors or administrators or legatees or distributees of such
Optionee's estate shall have the right (subject to the general limitations on
exercise set forth in Section 10(b) above), at any time within six months after
the date of such Optionee's death and prior to termination of the Option
pursuant to Section 10(a) above, to exercise any Option held by such Optionee at
the date of such Optionee's death, whether or not such Option was exercisable
immediately prior to such Optionee's death; provided, however, that the Board or
Committee may provide by inclusion of appropriate language in any Option
Agreement that, in the event of the death of the Optionee, the executors or
administrators or legatees or distributees of such Optionee's estate may
exercise an Option (subject to the general limitations on exercise set forth in
Section 10(b) above), in whole or in part, at any time subsequent to such
Optionee's death and prior to termination of the Option pursuant to Section
10(a) above, either subject to or without regard to any installment limitation
on exercise imposed pursuant to Section 10(b) above.
(b) Disability of an Employee or Subsidiary Director. If an Optionee
(other than an Outside Director) terminates employment or service with the
Company or a Subsidiary by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 10(b) above), at any time within six months after such
termination of service or employment and prior to termination of the Option
pursuant to Section 10(a) above, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of service or employment,
whether or not such Option was exercisable immediately prior
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<PAGE> 26
to such termination of service or employment; provided, however, that the Board
or Committee may provide, by inclusion of appropriate language in any Option
Agreement, that the Optionee may, in the event of the termination of service or
employment of the Optionee with the Company or a Subsidiary by reason of the
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee, exercise an Option, in whole or in part, at any time
subsequent to such termination of service or employment and prior to termination
of the Option pursuant to Section 10(a) above, either subject to or without
regard to any installment limitation on exercise imposed pursuant to Section
10(b) above. Whether a termination of service or employment is to be considered
by reason of "permanent and total disability" for purposes of this Plan shall be
determined by the Board or Committee, which determination shall be final and
conclusive.
(c) Death or Disability of an Outside Director. Any Option granted to an
Outside Director shall remain exercisable for its remaining term in the event
the Outside Director's termination of service is by reason of death or
"permanent and total disability," as defined above, or, in the event of the
Outside Director's death during the three-month period following the Outside
Director's termination of service by reason other than death or permanent and
total disability during which the Option was exercisable pursuant to Section
12(b) above.
14. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant to
Options granted under the Plan shall constitute general funds of the Company.
15. REQUIREMENTS OF LAW
(a) Violations of Law. The Company shall not be required to sell or issue
any shares of Stock under any Option if the sale or issuance of such shares
would constitute a violation by the individual exercising the Option or the
Company of any provisions of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933 (as now
in effect or as hereafter amended), upon exercise of any Option, unless a
registration statement under such Act is in effect with respect to the shares of
Stock covered by such Option, the Company shall not be required to sell or issue
such shares unless the Board or Committee has received evidence satisfactory to
it that the holder of such Option may acquire such shares pursuant to an
exemption from registration under such Act. Any determination in this connection
by the Board or Committee shall be final, binding, and conclusive. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act of 1933 (as now in effect or as hereafter
amended). The Company shall not be obligated to take any affirmative action in
order to cause the exercise of an Option or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority. As
to any jurisdiction that expressly imposes the requirement that an Option shall
not be exercisable unless and until the shares of Stock covered by such Option
are registered or are subject to an available exemption from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
(b) Compliance with Rule 16b-3. The intent of this Plan is to qualify for
the exemption provided by Rule 16b-3 promulgated under the Exchange Act. To the
extent any provision of the Plan does not comply with the requirements of Rule
16b-3, it shall be deemed inoperative to the extent permitted by law and deemed
advisable by the Board or Committee and shall not affect the validity of the
Plan. In the event Rule 16b-3 is revised or replaced, the Board, or the
Committee acting on behalf of the Board, may exercise
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<PAGE> 27
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.
16. AMENDMENT AND TERMINATION OF THE PLAN
The Board or Committee may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options have
not been granted; provided, however, that no amendment by the Board or Committee
shall, without approval by a majority of the votes present and entitled to vote
at a duly held meeting of the stockholders of the Company at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the amendment, or by written consent, in
accordance with applicable state law and the Certificate of Incorporation and
By-Laws of the Company, materially increase the benefits accruing to
participants under the Plan, change the requirements as to eligibility to
receive Options or increase the maximum number of shares of Stock in the
aggregate that may be sold pursuant to Options granted under the Plan (except as
permitted under Section 17 hereof). Except as permitted under this Section 16,
no amendment, suspension or termination of the Plan shall, without the consent
of the holder of the Option, alter or impair rights or obligations under any
Option theretofore granted under the Plan.
17. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increases or decreases in such shares effected without receipt of consideration
by the Company, occurring after the effective date of the Plan, the number and
kinds of shares of Stock for the purchase of which Options may be granted under
the Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares of Stock for which Options are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, remain the same as immediately prior to
such event. Any such adjustment in outstanding Options shall not change the
aggregate Option Price payable with respect to shares of Stock subject to the
unexercised portion of the Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share.
(b) Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving Corporation or
Sale of Assets of Stock. Upon the dissolution or liquidation of the Company, or
upon a merger, consolidation, reorganization or other business combination of
the Company with one or more other entities in which the Company is not the
surviving entity, or upon a sale of all or substantially all of the assets of
the Company to another entity, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the
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<PAGE> 28
surviving corporation) approved by the Board which results in any person or
entity (or persons or entities acting as a group or otherwise in concert) owning
80 percent or more of the combined voting power of all classes of stock of the
Company, the Plan and all Options outstanding hereunder shall terminate, except
to the extent provision is made in writing in connection with such transaction
for the continuation of the Plan and/or the assumption of the Options
theretofore granted, or for the substitution for such Options of new options
covering the stock of a successor entity, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Board or Committee in its sole
discretion shall determine and designate, to exercise such Option in whole or in
part, whether or not such Option was otherwise exercisable at the time such
termination occurs and without regard to any installment limitation on exercise
imposed pursuant to Section 10(b) above. The Board or Committee shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its stockholders.
(d) Adjustments. Adjustments under this Section 17 related to Stock or
securities of the Company shall be made by the Board or Committee, whose
determination in that respect shall be final, binding, and conclusive. No
fractional shares of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
(e) No Limitations on Company. The grant of an Option pursuant to the Plan
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve or liquidate or to sell or
transfer all or any part of its business or assets.
18. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any
Subsidiary, or to interfere in any way with the right and authority of the
Company or any Subsidiary either to increase or decrease the compensation of any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or any Subsidiary.
19. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes or individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
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<PAGE> 29
APPENDIX B
NOVEN PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 3, 1997
The signer(s) hereby appoint(s) Steven Sablotsky, Mitchell Goldberg and
Sheldon H. Becher, or any one of them, with power of substitution in each,
proxies to vote all Common Stock of the signer(s) in Noven Pharmaceuticals, Inc.
at the Annual Meeting of Stockholders, to be held June 3, 1997, and at all
adjournments thereof, as specified on the matters indicated hereon, and in their
discretion on any other business that may properly come before such Meeting.
This Proxy is solicited on behalf of the Board of Directors.
1. ELECTION OF DIRECTORS
To elect five directors for a term of one year as indicated below:
Stephen Sablotsky, Mitchell Goldberg, Sheldon H. Becher, Sidney Braginsky and
Lawrence J. DuBow
2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
3. PROPOSAL TO RATIFY AND APPROVE A STOCK OPTION PLAN WHICH PROVIDES FOR THE
GRANT OF INCENTIVE OPTIONS AND NON-QUALIFIED STOCK OPTIONS.
4. PROPOSAL TO RATIFY AND APPROVE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 1997.
The shares represented by this Proxy will be voted as directed by the
Stockholder(s) on the reverse side hereof. If this Proxy is signed and returned
but no direction is indicated, this Proxy will be voted FOR the election of
directors and Items 2, 3 and 4 as set forth in the Proxy Statement dated May 1,
1997.
(Vote and sign on the other side. Signature(s) should be exactly as
addressed. When signing as Attorney, Executor, Administrator, Personal
Representative, Trustee or Guardian, please give your full title as such.)
<TABLE>
<S> <C> <C>
------------------------
Please mark your vote
with an X.
Avoid using red ink
------------------------
</TABLE>
1. ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR Item 1.
<TABLE>
<S> <C>
[ ] Vote For all Nominees* [ ] Withhold vote for all Nominees
</TABLE>
*To withhold authority to vote for any Nominee write the Nominee's name here:
- --------------------------------------------------------------------------------
2. RATIFY AND APPROVE INCREASE IN NUMBER OF SHARES OF COMMON STOCK
The Board of Directors recommends a vote FOR Item 2.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFY AND APPROVE STOCK OPTION PLAN
The Board of Directors recommends a vote FOR Item 3.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. RATIFY AND APPROVE ACCOUNTANTS
The Board of Directors recommends a vote FOR Item 4.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated , 1997
Signature of Stockholder
Signature (if joint)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. DO NOT FOLD, STAPLE, OR
MUTILATE.
