<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>
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 Pharmaceuticals, Inc. LOGO]
April 20, 2000
Dear Stockholder:
The 2000 Annual Meeting of Stockholders of Noven Pharmaceuticals, Inc.
will convene at 10:00 A.M. on Tuesday, June 6, 2000. 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. Details regarding the business to be conducted at the meeting are
more fully described in the accompanying Notice of Annual Meeting and Proxy
Statement.
Your vote on these matters is important and we appreciate your
continued support. Whether or not you plan to attend the meeting, I hope you
will vote as soon as possible. This year, most of you may vote over the
Internet, as well as by telephone or by mailing a traditional proxy card. Voting
over the Internet, by telephone or by written proxy will assure that your shares
are voted if you do not attend in person. Please review the instructions on the
proxy card regarding each of these voting options.
We hope you will participate in your Annual Meeting, if not in person,
then by proxy. If you are able to attend, the Board of Directors, as well as the
executive officers of Noven, look forward to seeing you there.
Sincerely yours,
STEVEN SABLOTSKY
CHAIRMAN OF THE BOARD
<PAGE> 3
[Noven Pharmaceuticals, Inc. LOGO]
11960 S.W. 144TH STREET
MIAMI, FLORIDA 33186
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
TIME 10:00 a.m. on Tuesday, June 6, 2000
PLACE Marriott Dadeland Hotel
9090 South Dadeland Boulevard
Miami, Florida
ITEMS OF BUSINESS (1) To elect members of the Board of Directors,
whose terms are described in the Proxy
Statement.
(2) To ratify the appointment of independent
accountants.
(3) To transact such other business as may
properly come before the Meeting and any
adjournment thereof.
RECORD DATE You are entitled to vote if you were a stockholder
at the close of business on April 12, 2000.
ANNUAL REPORT Noven's 1999 Annual Report, which is not a part of
the proxy soliciting material, is enclosed.
PROXY VOTING It is important that your Shares be represented and
voted at the Meeting. You can vote your Shares by
one of the following methods: vote over the
Internet or by telephone using the instructions on
the enclosed proxy card (if these options are
available to you), OR mark, sign, date and promptly
return the enclosed proxy card in the postage-paid
envelope furnished for that purpose. Any proxy may
be revoked in the manner described in the
accompanying Proxy Statement at any time prior to
its exercise at the Meeting.
Graciela M. Lopez
Corporate Secretary
THIS PROXY STATEMENT AND ACCOMPANYING PROXY CARD ARE BEING DISTRIBUTED
ON OR ABOUT APRIL 20, 2000.
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors (the "Board") of Noven Pharmaceuticals, Inc.
(sometimes referred to as "Noven") is providing these proxy materials
to solicit your proxy in connection with Noven's annual meeting of
stockholders, which will take place on June 6, 2000. You are invited to
attend the meeting and are requested to vote on the proposals described
in this proxy statement.
Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to the
proposals to be voted on at the meeting, the voting process, the
compensation of directors and Noven's most highly paid officers, and
certain other required information. We are also sending Noven's 1999
Annual Report with these materials, but it does not constitute part of
our proxy soliciting material.
Q: WHAT PROPOSALS WILL BE VOTED ON AT THE MEETING?
A: There are two proposals scheduled to be voted on at the meeting:
o Election of directors
o Ratification of the designation of Deloitte & Touche LLP to audit
Noven's books and accounts for 2000
Q: WHAT ARE THE BOARD'S VOTING RECOMMENDATIONS?
A: Noven's Board of Directors recommends that you vote your shares "FOR"
each of the nominees to the Board and "FOR" the ratification of the
appointment of Deloitte & Touche LLP.
Q: WHAT SHARES OWNED BY ME CAN BE VOTED?
A: All shares owned by you as of April 12, 1999, the RECORD DATE, may be
voted by you. These shares include those (1) held directly in your name
as the STOCKHOLDER OF RECORD and (2) held for you as the BENEFICIAL
OWNER through a stockbroker, bank or other nominee.
Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF
RECORD AND AS A BENEFICIAL OWNER?
A: Most Noven stockholders hold their shares through a stockbroker, bank
or other nominee rather than directly in their own name. As summarized
below, there are some distinctions between shares held of record and
those owned beneficially.
STOCKHOLDER OF RECORD
If your shares are registered directly in your name with Noven's
Transfer Agent, American Stock Transfer and Trust Company, you are
considered, with respect to those shares, the STOCKHOLDER OF RECORD and
these proxy materials are being sent directly to you by Noven. As the
STOCKHOLDER OF RECORD, you have the right to grant your voting proxy
directly to Noven or to vote in person at the meeting. Noven has
enclosed a proxy card for you to use.
BENEFICIAL OWNER
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the BENEFICIAL OWNER of shares held
IN STREET NAME and these proxy materials are being forwarded to you by
your broker or nominee who is considered, with respect to those shares,
the STOCKHOLDER OF RECORD. As the beneficial owner, you have the right
2
<PAGE> 5
to direct your broker on how to vote and are also invited to attend the
meeting. However, since you are not the STOCKHOLDER OF RECORD, you may
not vote these shares in person at the meeting. Your broker or nominee
has enclosed a voting instruction card for you to use.
Q: HOW CAN I VOTE MY SHARES IN PERSON AT THE MEETING?
A: Shares held directly in your name as the STOCKHOLDER OF RECORD may be
voted in person at the annual meeting. If you choose to do so, please
bring the enclosed proxy card or proof of identification.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, WE RECOMMEND THAT YOU
ALSO SUBMIT YOUR PROXY AS DESCRIBED BELOW SO THAT YOUR VOTE WILL BE
COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE MEETING.
Q: HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
A: Whether you hold shares directly as the stockholder of record or
beneficially in street name, you may direct your vote without attending
the meeting. If you hold your shares directly, you may vote by granting
a proxy. If you hold your shares in street name, you may submit voting
instructions to your broker or nominee. In most instances, you will be
able to do this over the Internet, by telephone or by mail. Please
refer to the summary instructions below and those included on your
proxy card or, for shares held in street name, the voting instruction
card included by your broker or nominee.
BY INTERNET--If this option is available to you, you may submit your
proxy via the Internet from any location in the world by following the
"Vote by Internet" instructions on the proxy card.
BY TELEPHONE--If you live in the United States or Canada and this
option is available to you, you may submit your proxy by following the
"Vote by Phone" instructions on the proxy card.
BY MAIL--You may do this by signing your proxy card or, for shares held
in street name, the voting instruction card included by your broker or
nominee and mailing it in the enclosed, postage prepaid and addressed
envelope. If you provide specific voting instructions, your shares will
be voted as you instruct. If you sign but do not provide instructions,
your shares will be voted as described below in "HOW ARE VOTES
COUNTED?" If you vote by telephone or via the Internet, you do not need
to return your proxy card.
Q: CAN I CHANGE MY VOTE?
A: Yes, you may change your proxy instructions at any time prior to the
vote at the annual meeting. If you voted by mail, you must (a) file
with Noven's Secretary a written notice of revocation or (b) timely
deliver a valid, later-dated proxy. If you voted by telephone or via
the Internet, you may change your vote with a later telephone or
Internet vote, as the case may be. For shares held beneficially by you,
you may accomplish this by submitting new voting instructions to your
broker or nominee. Attendance at the meeting will not cause your
previously granted proxy to be revoked unless you give written notice
of revocation to Noven's Secretary before the vote at the annual
meeting or you vote by written ballot at the annual meeting.
Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the
3
<PAGE> 6
nominees. For the other proposal, you may vote "FOR", "AGAINST" OR
"ABSTAIN". If you "ABSTAIN", it has the same effect as a vote
"AGAINST". If you sign your proxy card or broker voting instruction
card with no further instructions, your shares will be voted in
accordance with the recommendations of the Board.
Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE PROPOSALS?
A: In the election for directors, each director requires the affirmative
"FOR" vote of a plurality of those shares represented, in person or by
proxy, and entitled to vote at the meeting. All other proposals require
the affirmative "FOR" vote of a majority of those shares represented,
in person or by proxy, and entitled to vote at the meeting. If you are
a BENEFICIAL OWNER and do not provide the STOCKHOLDER OF RECORD with
voting instructions, your shares may constitute BROKER NON-VOTES, as
described in "What is the quorum requirement for the meeting?" on page
17. In tabulating the voting result for any particular proposal, shares
which constitute BROKER NON-VOTES are not considered entitled to vote.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY OR VOTING
INSTRUCTION CARD?
A: It means your shares are registered differently or are in more than one
account. Please provide voting instructions for all proxy and voting
instruction cards you receive.
Q: WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting and publish
final results in Noven's quarterly report on Form 10-Q for the second
quarter of 2000.
ADDITIONAL Q&A INFORMATION REGARDING THE ANNUAL MEETING AND STOCKHOLDER
PROPOSALS MAY BE FOUND ON PAGES 17 AND 18 BELOW.
4
<PAGE> 7
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2000, information with
respect to:
o Each beneficial owner of more than 5% of Noven's common stock;
o Beneficial ownership by all Noven directors and Noven executive
officers named in the Summary Compensation Table on page 9 (the
"Named Officers"); and
o Beneficial ownership by all Noven directors and executive officers
as a group.
The number of shares beneficially owned by each entity, person,
director or executive officer is determined under rules of the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes any shares as to which the individual has the sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire as of May 30, 2000 (60 days after March 31, 2000) through
the exercise of any stock option or other right. Unless otherwise indicated,
each person has sole investment and voting power (or shares such powers with his
or her spouse) with respect to the shares set forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OWNED(1) RIGHT TO ACQUIRE(2) OF TOTAL
- ---- --------------------- ----------------------- ---------------
<S> <C> <C> <C>
Steven Sablotsky(3)................................ 2,359,770 116,666 11.4%
Scudder Kemper(4).................................. 1,262,300 0 5.8%
Investments, Inc.
Two International Place
Boston, MA 02110-4103
ALL DIRECTORS AND NAMED OFFICERS NOT LISTED ABOVE:
Sheldon H. Becher(5)............................... 53,715 0 *
Sidney Braginsky................................... 1,000 20,000 *
Rodolfo C. Bryce................................... 2,500 17,500 *
John G. Clarkson, M.D. ............................ 0 0 *
Lawrence DuBow..................................... 5,000 20,000 *
James B. Messiry................................... 20,416 4,000 *
Robert C. Strauss.................................. 32,338 197,500 1.1%
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(8 PERSONS)........................................ 2,474,739 375,666 13.1%
</TABLE>
- -----------
* (less than 1%)
(1) Includes shares for which the named person has sole voting or investment
power or shared voting or investment power with a spouse, except as
otherwise noted. Excludes shares that may be acquired through stock option
exercises.
5
<PAGE> 8
(2) Shares that may be acquired through stock options exercisable through May
30, 2000.
(3) Includes 605,670 shares held directly and 1,754,100 shares held by Nevon
Ventures Limited Partnership ("NVLP"). Mr. Sablotsky is the sole
shareholder, an officer and the sole director of Nevon, Inc., the general
partner of NVLP. Does not include 44,400 shares held in custodial accounts
for the benefit of his minor children. Mr. Sablotsky disclaims beneficial
ownership with respect to the shares held in custodial accounts for the
benefit of his children.
(4) On the most recent report on Schedule 13G/A filed on or about January 28,
2000 with the Securities and Exchange Commission, Scudder Kemper
Investments, Inc., a registered Investment Advisor, reported shared voting
power with respect to 15,700 shares.
(5) These shares are held as trustee for the benefit of certain family members.
ELECTION OF DIRECTORS--PROPOSAL (1)
The Board set the number of directors constituting the Board at seven.
The persons named below were designated by the Board as nominees for election as
directors. All of the nominees have served as directors since the last annual
meeting, except for John G. Clarkson, M.D., who was appointed a director by
Noven's Board on April 10, 2000 and will stand for election as a director by
Noven's stockholders for the first time at this year's annual meeting.
Information regarding the business experience of each nominee is provided below.
All directors are elected annually to serve until the next annual meeting and
until their respective successors are elected.
NOVEN'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE
BOARD OF EACH OF THE FOLLOWING NOMINEES.
<TABLE>
<CAPTION>
<S> <C>
SHELDON H. BECHER Mr. Becher has been a director of Noven since January 1987 and is a partner in the firm
Director since 1987 of Becher, Yeager, Nall, Sherburne, Bernard & Company, P.A., Certified Public
Age 71 Accountants, a position he has held for over 10 years, including its predecessor
companies.
SIDNEY BRAGINSKY Mr. Braginsky has been a director of Noven since June 1992 and is President and Chief
Director since 1992 Executive Officer of Atropos Technology Inc., a consulting and venture capital firm.
Age 62 From 1970 through 1999, Mr. Braginsky served Olympus America, Inc. in a variety of
roles, most recently as President and Chief Operating Officer.
RODOLFO C. BRYCE Mr. Bryce has been a director of Noven since November 1998. From 1980 through November
Director since 1998 1998, Mr. Bryce served Schering-Plough Corporation in a variety of senior executive
Age 54 roles, most recently as Chairman of Schering-Plough HealthCare Products. Prior to his
career at Schering-Plough, Mr. Bryce served ITT Corporation in various directorial
positions in finance and operations, both domestically and abroad. Mr. Bryce serves on
the Board of Hauser, Inc. (natural products).
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
JOHN G. CLARKSON, M.D. Dr. Clarkson has been a director of Noven since April 2000 and is a Professor and Senior
Director since 2000 Vice President for Medical Affairs and Dean, University of Miami School of Medicine, a
Age 57 position he has held since 1995. Dr. Clarkson serves on the Board of Governors of the
UMHC/Sylvester Cancer Center and Anne Bates Leach Eye Hospital and on the Board of the
Jackson Memorial Hospital/Public Health Trust.
LAWRENCE J. DUBOW Mr. DuBow has been a director of Noven since June 1992 and is the founder and Chairman
Director since 1992 of the Board of HMS Sales and Marketing, Inc., which is presently engaged in marketing
Age 68 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 is a former President of the Drug Wholesalers'
Association and a former Chairman of the National Wholesale Druggists' Association.
STEVEN SABLOTSKY Mr. Sablotsky is a co-founder of Noven. He has served as Chairman of the Board of
Director since 1987 Directors since Noven's organization in 1987, and served as President and Chief
Age 45 Executive Officer from January 1987 until December 1997. He is a member of
the American Institute of Chemical Engineers.
ROBERT C. STRAUSS Mr. Strauss has been President and Chief Executive Officer and a director of Noven since
Director since 1997 December 1997. From March 1997 to July 1997, he served as President and Chief Operating
Age 58 Officer and a director of IVAX Corporation. From 1983 to 1997, he served in various
executive positions with Cordis Corporation, most recently as its Chairman of the Board,
President and Chief Executive Officer. Mr. Strauss serves on the Board of Directors of
Eclipse Surgical Technologies, Inc. (medical devices), Columbia Laboratories, Inc.
(pharmaceuticals) and Percardia Inc. (medical devices).
</TABLE>
7
<PAGE> 10
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board has the following three committees: (1) Audit, (2) Executive
Compensation and (3) Stock Option. The Board held 10 meetings in 1999, and each
director attended more than 75% of the meetings of the Board and the Committees
on which he served.
AUDIT COMMITTEE
The Audit Committee reviews Noven's financial statements and
management's disclosures and recommends to the Board the engagement of the
independent public accountants. 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 Noven's system of internal accounting
controls and reviews areas of possible conflicts of interest.
Members: Messrs. Becher (Chairman), Braginsky, Bryce and DuBow
Meetings last year: 5
EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee develops and implements policies
with respect to executive compensation and approves all elements of compensation
for Noven's executive officers.
Members: Messrs. Bryce (Chairman), Becher, Braginsky and DuBow
Meetings last year: 6
STOCK OPTION COMMITTEE
The Stock Option Committee administers Noven's stock option plans,
including its 1999 Long-Term Incentive Plan. The Stock Option Committee also
evaluates and makes recommendations to the Board concerning stock option plans
and other benefit programs.
Members: Messrs. DuBow (Chairman), Braginsky and Bryce
Meetings last year: 5
8
<PAGE> 11
DIRECTOR COMPENSATION
The following table provides information on Noven's compensation and
reimbursement practices during 1999 for non-employee directors. Directors who
are employed by Noven do not receive any additional compensation for their Board
activities.
Annual Director Retainer $ 7,500
Board Meeting Attendance Fees (per meeting) $ 750
Committee Meeting Attendance Fees (per meeting) $ 750
Additional Retainer for Committee Chair $ 2,500
Stock Options Granted upon Election to Board 12,500
Annual Stock Options Granted (upon reelection at annual meeting) 5,000
Reimbursement for Expenses Attendant to Board Membership Yes
EXECUTIVE COMPENSATION
The following table discloses compensation received by Noven's Chief
Executive Officer and its two other most highly paid executive officers for
the fiscal year ended December 31, 1999, as well as their compensation for
each of the fiscal years ended December 31, 1998 and December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- -----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS COMPENSATION
- --------------------------- ---------- ------------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Steven Sablotsky...................... 1999 $404,250 $267,750 112,500 0
Chairman of the Board 1998 396,730 96,250 0 0
1997 373,077 0 0 0
Robert C. Strauss*.................. 1999 420,000 277,262 112,500 0
President and Chief Executive 1998 406,468 100,000 0 0
Officer 1997 7,692 0 525,000 0
James B. Messiry**.................. 1999 168,269 131,040 130,000 0
Vice President and Chief Financial 1998 N/A N/A N/A N/A
Officer 1997 N/A N/A N/A N/A
</TABLE>
- ------------
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
9
<PAGE> 12
* Mr. Strauss's employment with Noven commenced December 12, 1997.
** Mr. Messiry's employment with Noven commenced January 11, 1999.
(1) Bonuses for each of the named executive officers were paid in a
combination of cash and Noven common stock.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock option grants in
1999 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK PRICE APPRECIATION
OPTIONS FOR
GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES OR BASE EXPIRATION --------------------------
NAME GRANTED IN 1999 PRICE DATE 5% 10%
- ---- ---------- ------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Steven Sablotsky.................... 50,000 6.6 6.19 1/12/2004 $50,000 $144,000
62,500 8.3 14.23 12/1/2004 143,125 413,125
Robert C. Strauss................... 50,000 6.6 5.63 1/12/2006 114,500 267,000
. 62,500 8.3 12.94 12/1/2006 329,375 767,500
James B. Messiry.................... 40,000 5.3 5.63 1/12/2006 91,600 213,600
40,000 5.3 8.81 10/5/2006 143,600 334,400
50,000 6.6 12.94 12/1/2006 263,500 614,000
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information with respect to
outstanding stock options held at year end by the named executive officers or
exercised in 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED VALUE OPTIONS IN-THE-MONEY OPTIONS AT
NAME ON EXERCISE (#) REALIZED ($) HELD AT DECEMBER 31, 1999 DECEMBER 31, 1999
- ---- ---------------- -------------- ----------------------------- ------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
(#) (#) ($) ($)
-------------- -------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven Sablotsky......... 0 0 100,000 112,500 401,300 840,188
Robert C. Strauss........ 0 0 192,500 445,000 2,299,413 4,920,526
James B. Messiry......... 0 0 0 130,000 0 1,131,650
</TABLE>
10
<PAGE> 13
EMPLOYMENT AGREEMENTS
On December 12, 1997, Noven entered into an employment agreement with
Robert C. Strauss as President and Chief Executive Officer. This agreement
expires on December 31, 2002 unless it is extended for consecutive one year
terms under certain conditions. Mr. Strauss's base salary under the agreement is
$400,000 per annum, subject to cost of living increases each year and further
increases and incentive compensation at the sole discretion of the Board of
Directors. In addition, Mr. Strauss was granted options to purchase 525,000
shares of common stock at a per share exercise price of $6 3/16 pursuant to the
provisions of Noven's 1997 Stock Option Plan. Options for 50,000 shares of
common stock vested and became exercisable immediately, and the remaining shares
are subject to vesting over a five-year period. Mr. Strauss is also entitled to
participate in all incentive, savings and retirement plans, as well as welfare
benefit plans that are available to executive officers of Noven. Further, upon
termination "without cause" or for "good reason" (as defined in the agreement),
including, termination after a "change of control" through (i) the acquisition
of 30% or more of the then issued and outstanding shares of common stock of
Noven by any person, entity or group (within the meaning of Section 13(d)(3) or
14(d) of the Securities Exchange Act of 1934), (ii) the reconstitution of the
Board of Directors whereby the existing members cease to constitute at least a
majority of the Board (other than a reconstitution approved by the incumbent
board), (iii) the approval of a reorganization or consolidation, where
stockholders of Noven do not, immediately thereafter, own more than 51% of the
combined voting power of the reorganized, merged or consolidated corporation,
(iv) a liquidation or dissolution of Noven, or (v) a sale or distribution of all
or substantially all the assets of Noven, Mr. Strauss would be entitled to a
lump sum payment equal to his then annual base salary, plus an additional one
year base salary paid over a period of two subsequent years, as well as the
vesting of 50% of outstanding options not otherwise vested.
CHANGE IN CONTROL AGREEMENTS
Noven has entered into change in control employment agreements with
certain officers, including Steven Sablotsky and James B. Messiry. These
agreements are intended to further the interests of Noven's stockholders by
providing for continuity of management in the event of a change in control of
Noven. The agreements become effective if a change in control occurs during the
three-year period that commences on the execution of the agreement. The period
may be renewed each year for an additional three years, at the option of Noven.
Under the change in control agreements, a change in control includes
any of the following events: (1) the acquisition of 40% or more of Noven's
common stock by a person or group, (2) a change in the majority of Noven's board
(other than a change approved by the incumbent board), (3) approval by the
shareholders of a reorganization, merger or consolidation, or (4) approval by
the shareholders of a liquidation or dissolution or sale of all or substantially
all of the assets of Noven. Exceptions are provided for certain transactions,
including those where the existing shareholders of Noven maintain effective
control.
Once the agreements become effective upon a change in control, they
have a term of three years. Each agreement provides that a covered officer will
have a position, responsibilities and authority at least commensurate with those
held during the ninety days preceding the change in control. Each agreement also
11
<PAGE> 14
provides that the covered officer will be paid an annual base salary equal to
the highest salary received during the twelve months preceding the change in
control; will be entitled to an annual bonus equal to the average annual bonus
paid during the three years preceding the change in control; and will be
entitled to continued participation in Noven's benefit plans, fringe benefits,
office support and staff, vacation, and expense reimbursement on the same basis
as prior to the change in control, and in any case no less favorable than those
provided by Noven to peer executives (as defined in the agreements).
If, following a change in control, the officer is terminated for any
reason other than death, disability or for cause, or if such officer terminates
his employment agreement for good reason (as defined in the agreements), then
the officer is entitled to a severance payment equal to two times the officer's
annual base salary (as defined in the agreements) plus the higher of his last
annual bonus or the average annual bonus paid during the three years preceding
the change in control. The agreements also provide that the officer is entitled
to continue to participate in Noven's welfare benefit plans for the full
three-year employment period.
In the event that any payments made in connection with a change in
control would be subjected to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended, Noven will "gross-up" the officer's
compensation for all federal, state and local income and excise taxes and any
penalties and interest thereon.
INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to the Chief
Executive Officer and the four other most highly compensated executive officers.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. Noven structured the 1999 Long-Term Incentive
Plan so that awards and payments made thereunder should constitute qualifying
performance-based compensation under Section 162(m). Noven recognizes that
unanticipated future events, such as a change of control of Noven or a change in
executive personnel, could result in a disallowance of compensation deductions
under Section 162(m). Moreover, the Board or its Executive Compensation
Committee may from time to time award compensation that is non-deductible under
Section 162(m) when, in the exercise of its business judgment, such award would
be in the best interests of Noven.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and the rules
issued thereunder requires Noven's executive officers and directors to file with
the Securities and Exchange Commission reports of ownership and changes in
ownership of Noven's stock. Copies of these reports are furnished to Noven.
Based solely on Noven's review of the copies of such reports furnished to Noven,
we believe that during 1999 all of Noven's executive officers and directors
complied with the Section 16(a) requirements.
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<PAGE> 15
STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph below shows the five-year cumulative total shareholder return
assuming the investment of $100 on December 31, 1994 (and the reinvestment of
dividends thereafter) in each of Noven common stock, the Russell 2000 Stock
Index and Noven's Peer Group (Value Line Drug Industry).
COMPARISION OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
NOVEN PHARMACEUTICALS, RUSSELL 2000 INDEX AND VALUE LINE DRUGS INDEX
(PERFORMANCE RESULTS THROUGH 12/31/99)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Noven Pharmaceuticals 100.00 90.91 113.13 56.57 43.94 146.46
Russell 2000 Index 100.00 128.44 149.55 182.75 177.76 209.46
Drugs 100.00 178.96 236.68 406.34 605.30 730.51
</TABLE>
13
<PAGE> 16
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Mildred Sablotsky, the former Manager of Payroll and Cash Management of
Noven and the mother of Steven Sablotsky, resigned on April 14, 2000. Mrs.
Sablotsky was an employee of Noven since 1987 and is considered a founder of the
company. In consideration for Mrs. Sablotsky's agreement to assist in an orderly
transition of her duties and to be available for general consultation, and in
recognition of her status as a founder of the company, Noven agreed to pay Mrs.
Sablotsky her base salary of $91,290 for a period of eighteen months, to
continue providing certain other benefits to Mrs. Sablotsky for that period, and
to permit Mrs. Sablotsky's stock options that had not vested as of her
resignation date to continue vesting in accordance with their terms.
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
POLICY
Noven's executive compensation program is administered by the Executive
Compensation Committee (the "Committee"), which consists of four non-employee
directors who are also responsible for establishing Noven's executive
compensation policy. The compensation program is designed to serve Noven's goal
of creating long-term shareholder value by allowing Noven to secure and retain
the services of high quality executives and by aligning the interests of the
executives with those of Noven's shareholders.
Noven's compensation program consists of the following three
components: 1) a base salary, 2) annual incentives and 3) long-term incentives.
Noven's annual incentives are awarded in the form of cash or stock bonuses and
long-term incentives are awarded in the form of stock options.
In establishing Noven's compensation program, the Committee reviews
compensation data for companies that compete with Noven for executive talent.
These companies include primarily drug and health care companies and are chosen
on the basis of sales, market capitalization and geographic location. The
Committee seeks to implement compensation programs that are competitive with
those of these peer companies.
BASE SALARY
The Committee determines each executive officer's base salary by
considering the competitive information described above, the individual's
responsibility, the individual's performance and the performance of the
business. For executives other than the Chairman and the Chief Executive
Officer, the Committee also reviews the Chief Executive Officer's performance
rating of such individuals and considers the Chief Executive Officer's salary
recommendations.
ANNUAL INCENTIVES
The Committee believes that annual incentives, in the form of bonuses,
should represent a significant component of an executive's annual compensation.
In 1999, the Committee adopted an executive bonus plan that includes goals for
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<PAGE> 17
company, individual and team performance, with the greatest weight given to
company performance. The Committee fixed percentages of base salary as target
incentive bonus awards for the executives, and also set targets for both
revenues and net income. To the extent that actual revenues and net income are
equal to, greater than or less than the company performance targets, an
executive's bonus award may be equal to, greater than or less than his target
award. The Committee then determines whether the executive has met his
non-financial goals in determining his final award. In 1999 Noven met or
exceeded each of the revenue and net income goals, and, in accordance with the
plan formula, the bonus awards to each of the executive officers were greater
than their initial target awards.
LONG-TERM INCENTIVES
Stock options represent a significant portion of total compensation for
Noven's executive officers. Options are generally awarded to executive officers
at the time that they join Noven and periodically thereafter. Stock options are
granted at the prevailing market price on the date of grant, and will only have
value if the value of Noven's common stock increases. Generally, grants vest
over a five-year period and have seven-year terms. Executives must be employed
by Noven at the time of vesting in order to exercise the options. The
determination of the timing and number of stock options granted to the executive
officers is made by reference to ranges that are established based on the
competitive information described above. The Committee makes recommendations
concerning stock option grants for executive officers to the Stock Option
Committee, which is charged with administering Noven's stock option plans.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER COMPENSATION
In setting the base salaries of Mr. Sablotsky and Mr. Strauss, the
Committee evaluates the same factors that it considers in establishing the
salary levels of the executive officers generally. In addition, the Committee
considers the status of Messrs. Sablotsky and Strauss as Noven's most senior
officers and the important role they have in achieving overall corporate goals.
In making stock option recommendations for Messrs. Sablotsky and Strauss, the
Committee sets no fixed guidelines, but takes into consideration their total
compensation package and competitive compensation data, overall corporate
performance, their role in attaining those results, and the relative amount of
stock options granted by competitive companies.
Mr. Sablotsky will receive a base salary in 2000 equal to $444,675,
which represents a 10% increase over his 1999 base salary. In accordance with
the bonus plan described above, Mr. Sablotsky received a bonus in the amount of
$267,250 in February 2000 for 1999, paid in a combination of cash and Noven
common stock. He was also granted stock options for a total of 112,500 shares of
Noven common stock in 1999, 50,000 of which were granted in January 1999 as part
of his 1998 compensation package and 62,500 of which were granted in December
1999 as part of his 1999 compensation package.
Mr. Strauss has been Noven's Chief Executive Officer since December 12,
1997 and is subject to an employment contract. He will receive a base salary in
2000 equal to $462,000, which represents a 10% increase over his 1999 base
salary. In accordance with the bonus plan described above, Mr. Strauss received
a bonus in the amount of $277,262 in February 2000 for 1999, paid in a
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<PAGE> 18
combination of cash and Noven common stock. He was also granted stock options
for a total of 112,500 shares of Noven common stock in 1999, 50,000 of which
were granted in January 1999 as part of his 1998 compensation package and 62,500
of which were granted in December 1999 as part of his 1999 compensation package.
Executive Compensation Committee:
Sheldon H. Becher
Sidney Braginsky
Rodolfo C. Bryce (Chairman)
Lawrence J. DuBow
RATIFICATION AND APPROVAL OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS -- PROPOSAL (2)
Upon the recommendation of the Audit Committee, the Board has appointed
Deloitte & Touche LLP as the Company's independent accountants to audit Noven's
financial statements for the 2000 fiscal year and will offer a resolution at the
annual meeting to ratify the appointment. Deloitte & Touche LLP has served as
Noven's independent accountants since 1991. Noven has been advised that a
representative of Deloitte & Touche LLP will be present at the annual meeting
and will have an opportunity to make a statement and to respond to appropriate
questions raised.
NOVEN'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION AND
APPROVAL OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT
ACCOUNTANTS OF NOVEN FOR 2000. If the appointment is not ratified, Noven will
select other independent accountants.
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<PAGE> 19
ADDITIONAL QUESTIONS AND INFORMATION REGARDING
THE ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: Other than the two proposals described in this proxy statement, we do not
expect any matters to be presented for a vote at the annual meeting. If
you grant a proxy, the persons named as proxy holders will have the
discretion to vote your shares on any additional matters properly
presented for a vote at the meeting. If for any unforeseen reason any of
Noven's nominees is not available as a candidate for director, the
persons named as proxy holders will vote your proxy for such other
candidate or candidates as may be nominated by the Board of Directors.
Q: WHAT CLASS OF SHARES IS ENTITLED TO BE VOTED?
A: Each share of Noven's common stock outstanding as of the close of
business on April 12, 2000, the Record Date, is entitled to one vote at
the annual meeting. On the Record Date, we had approximately 21,767,630
shares of common stock issued and outstanding.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and transacting business
is a majority of the outstanding shares entitled to be voted. The shares
may be present in person or represented by proxy at the meeting. Both
abstentions and broker non-votes are counted as present for the purpose
of determining the presence of a quorum. Generally, broker non-votes
occur when shares held by a broker for a beneficial owner are not voted
with respect to a particular proposal because (1) the broker has not
received voting instructions from the beneficial owner and (2) the broker
lacks discretionary voting power to vote such shares.
Q: WHO WILL COUNT THE VOTES?
A: Proxy instructions, ballots and voting tabulations that identify
individual stockholders are handled in a manner that protects your voting
privacy. Your vote will not be disclosed either within Noven or to third
parties except (1) as necessary to meet applicable legal requirements,
(2) to allow for the tabulation of votes and certification of the vote,
or (3) to facilitate a successful proxy solicitation by Noven's Board.
Occasionally, stockholders provide written comments on their proxy card,
which are then forwarded to Noven management.
Q: WHO WILL BEAR THE COST OF SOLICITING VOTES FOR THE MEETING?
A: Noven will pay the entire cost of preparing, assembling, printing,
mailing and distributing these proxy materials, except that certain
expenses for Internet access will be incurred by you if you choose to
vote over the Internet. In addition to the mailing of these proxy
materials, the solicitation of proxies or votes may be made in person, by
telephone or by electronic communication by Noven's directors, officers,
and employees, who will not receive any additional compensation for such
solicitation activities. We will also reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation materials to
stockholders.
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<PAGE> 20
Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING OF
STOCKHOLDERS OR NOMINATE INDIVIDUALS TO SERVE AS DIRECTORS?
A: You may submit proposals for consideration at future stockholder
meetings, including director nominations.
STOCKHOLDER PROPOSALS FOR PRESENTATION AT MEETING: Pursuant to Rule 14a-4
under the Securities Exchange Act of 1934, if a stockholder notifies the
Company after March 6, 2001 of an intent to present a proposal at next
year's annual meeting (and for any reason the proposal is voted upon at
that annual meeting), Noven's proxy holders will have the right to
exercise discretionary voting authority with respect to the proposal, if
presented at the meeting, without including information regarding the
proposal in its proxy materials.
STOCKHOLDER PROPOSALS FOR INCLUSION IN PROXY: In order for a stockholder
proposal to be considered for inclusion in Noven's proxy statement for
next year's annual meeting, the written proposal must be received by
Noven no later than December 21, 2000. Such proposals also will need to
comply with Securities and Exchange Commission regulations regarding the
inclusion of stockholder proposals in company sponsored proxy materials.
NOMINATION OF DIRECTOR CANDIDATES: You may propose director candidates
for consideration by Noven's Board of Directors. In addition, Noven's
Bylaws permit stockholders to nominate directors at a stockholder
meeting. In order to make a director nomination at a stockholder meeting
it is necessary that you notify Noven not fewer than 60 nor more than 90
days prior to the meeting. In addition, the notice must meet all other
requirements contained in Noven's Bylaws.
COPY OF BYLAW PROVISIONS: You may contact Noven's Corporate Secretary at
Noven's headquarters for a copy of the relevant Bylaw provisions
regarding the requirements for making stockholder proposals and
nominating director candidates.
By Order of the Board of Directors
GRACIELA M. LOPEZ
CORPORATE SECRETARY
April 20, 2000
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<PAGE> 21
NOVEN PHARMACEUTICALS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 2000
The signer(s) hereby appoint(s) Steven Sablotsky, Robert C. Strauss and
James B. Messiry, 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 6, 2000, 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 seven directors for a term of one year as indicated below:
Sheldon H. Becher, Sidney Braginsky, Rodolfo C. Bryce, John G.
Clarkson, M.D., Lawrence J. DuBow, Steven Sablotsky, and
Robert C. Strauss.
2. PROPOSAL TO RATIFY AND APPROVE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
THE INDEPENDENT ACCOUNTANTS FOR 2000.
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 Item 2 as set forth in the Proxy Statement dated April 20, 2000.
(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.)
<PAGE> 22
Please mark your vote with an X. Avoid using red ink.
1. ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR Item 1.
[ ] Vote For all Nominees* [ ] Withhold vote for all Nominees
*To withhold authority to vote for any Nominee,
write the Nominee's name here: ______________________________________
2. RATIFY AND APPROVE ACCOUNTANTS
The Board of Directors recommends a vote FOR Item 2.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. DO NOT FOLD,
STAPLE, OR MUTILATE.
Dated __________________, 2000
_______________________________
Signature of Stockholder
_______________________________
Signature (if joint)
