<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Roberts Pharmaceutical Corporation
------------------------------------------------------
(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>
PROXY STATEMENT
ROBERTS PHARMACEUTICAL CORPORATION
Meridian Center II
4 Industrial Way West
Eatontown, New Jersey 07724
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1998
----------------
To the Shareholders of
ROBERTS PHARMACEUTICAL CORPORATION:
The Annual Meeting of the Shareholders of ROBERTS PHARMACEUTICAL CORPORATION
(the "Company") will be held on Wednesday, May 27, 1998 at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006, at 10:00
a.m., Eastern Daylight Savings Time, for the following purposes:
1. To elect eight Directors to serve for the following year or until their
successors have been elected and qualify;
2. To consider and act upon a proposal to amend the Roberts Pharmaceutical
Corporation 1996 Equity Incentive Plan (the "Equity Incentive Plan") to
increase the number of shares of the Company's Common Stock reserved
for issuance under the Equity Incentive Plan by 1,500,000 shares;
3. To consider and act upon a proposal to amend the Equity Incentive Plan to
require the approval of the Company's shareholders to reprice any
option or other award granted under the Equity Incentive Plan;
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Holders of Common Stock of record at the close of business on April 17,
1998, are entitled to notice of and to vote at the meeting. Adoption of
proposals 2 and 3 are each conditioned upon the approval of the other.
ANTHONY A. RASCIO, Esq.
Vice President and Secretary
Eatontown, New Jersey
April 30, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. TO ENSURE YOUR REPRESENTATION
AT THE MEETING, HOWEVER, YOU ARE URGED TO SIGN AND DATE THE ACCOMPANYING PROXY
AND MAIL IT AT ONCE IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND
YOUR COOPERATION WILL BE APPRECIATED.
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement is furnished to the holders of Common Stock, $.01 par
value ("Common Stock"), of Roberts Pharmaceutical Corporation (the "Company")
in connection with the solicitation of proxies for use at the annual meeting
of shareholders to be held on May 27, 1998, and at any adjournment thereof
(the "Annual Meeting"), pursuant to the accompanying Notice of Annual Meeting
of Shareholders. A form of proxy for use at the meeting is also enclosed. The
Company anticipates mailing this Proxy Statement to its shareholders on or
about April 30, 1998. The executive offices of the Company are located at
Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey 07724.
Shareholders may revoke the authority granted by their execution of proxies
at any time before the effective exercise of proxies by filing written notice
of such revocation with the Secretary of the Annual Meeting. Presence at the
Annual Meeting does not of itself revoke the proxy. All shares represented by
executed and unrevoked proxies will be voted in accordance with the
instructions therein. Proxies submitted without indication will be voted FOR
the nominees for Director named herein and FOR the proposals to amend the
Roberts Pharmaceutical Corporation 1996 Equity Incentive Plan (the "Equity
Incentive Plan") described herein. Management is not aware, at the date
hereof, of any matters to be presented at the Annual Meeting other than the
matters described hereinabove, but, if any other matter is properly presented,
the persons named in the proxy will vote thereon according to their best
judgment.
The cost of preparing, assembling and mailing the proxy material is to be
borne by the Company. Proxies for use at the Annual Meeting are being
solicited by the Board of Directors of the Company (the "Board of Directors").
It is not anticipated that any compensation will be paid for soliciting
proxies, and the Company does not intend to employ specially engaged personnel
in the solicitation of proxies. It is contemplated that proxies will be
solicited principally through the mail. Further, Directors, officers and
employees of the Company may also, without additional compensation, solicit
proxies, personally or by mail, telephone, telegraph, facsimile transmission
or special letter.
VOTING SECURITIES
The voting securities entitled to vote at the Annual Meeting consist of
shares of Common Stock of the Company with each share of Common Stock
entitling its owner to one vote on an equal basis. As of April 17, 1998, the
Company had 30,940,693 outstanding shares of Common Stock. Only shareholders
of record on the books of the Company at the close of business on that date
will be entitled to vote at the Annual Meeting. The holders of a majority of
the outstanding shares of Common Stock, present in person or by proxy and
entitled to vote, will constitute a quorum at the Annual Meeting for purposes
of electing Directors and acting upon the proposals to amend the Equity
Incentive Plan. Abstentions and broker non-votes will be counted for purposes
of determining whether a quorum is present at the Annual Meeting.
Directors shall be elected by a plurality of the votes cast at the Annual
Meeting by the holders of shares of Common Stock present in person or
represented by proxy and entitled to vote. The proxy card provides space for a
shareholder to withhold votes for any or all nominees for the Board of
Directors. Each of the proposals to amend the Equity Incentive Plan must be
approved by a majority of the votes cast at the Annual Meeting on such
proposal by the holders of shares of Common Stock present in person or
represented by proxy and entitled to vote; provided, that both proposals must
be approved in order for each one of them to be deemed to be approved by the
shareholders and to be adopted by the Company. If either one of the proposals
does not receive the required minimum number of shareholder votes, then both
proposals will be deemed to have been rejected by the shareholders and will
not be adopted by the Company.
<PAGE>
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting who will separately tabulate affirmative votes, negative votes,
authority withheld for any nominee for Director, abstentions and broker non-
votes. Any proxy submitted and containing an abstention or a broker non-vote
with respect to any matter voted upon will not be counted as a vote cast on
such matter.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of April 17, 1998, with
respect to each person who is known by the Company to be the beneficial owner,
as defined in Rule 13d-3 ("Rule 13d-3") of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of more than five percent (5%) of the
Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
------------------- ----------------- -------
<S> <C> <C>
Yamanouchi Group Holding Inc.(2)................. 5,048,500 16.3%
Robert A. Vukovich, Ph.D.(3)..................... 2,335,261(4)(5) 7.4%
</TABLE>
- --------
(1) Except as otherwise indicated, all of the shares of the Company's Common
Stock are held beneficially and of record.
(2) The address of the principal office of such shareholder is c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801. Yamanouchi Group Holding Inc. is a wholly
owned subsidiary of Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi").
(3) Dr. Vukovich is Chairman of the Board of Directors of the Company and
maintains a business address at the Company's offices at Meridian Center
II, 4 Industrial Way West, Eatontown, New Jersey 07724.
(4) Includes 625,000 shares of Common Stock subject to currently exercisable
options granted to Dr. Vukovich pursuant to the Incentive Stock Option
Plan, Restricted Stock Option Plan and Equity Incentive Plan.
(5) Includes 51,590 shares of Common Stock held by Dr. Vukovich's wife, with
respect to which Dr. Vukovich disclaims beneficial ownership.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of April 17, 1998, with
respect to the beneficial ownership (as defined in Rule 13d-3 of the Exchange
Act) of the Company's Common Stock by each Director or nominee for Director,
each of the Named Officers (as defined in the section captioned "Executive
Compensation") and by all Directors, nominees for Director and Executive
Officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL HOLDER OF BENEFICIAL OWNERSHIP(1) CLASS
- ------------------------- -------------------------- ----------
<S> <C> <C>
Robert A. Vukovich, Ph.D............ 2,335,261 (2)(3) 7.4%
John T. Spitznagel.................. 66,252 (4) (5)
Robert W. Loy....................... 104,482 (6) (5)
Peter M. Rogalin.................... 36,551 (7) (5)
Anthony A. Rascio, Esq.............. 42,095 (8) (5)
Digby W. Barrios.................... 30,000 (9) (5)
Zola P. Horovitz, Ph.D.............. 13,000 (10) (5)
Joseph N. Noonburg.................. --
Marilyn Lloyd....................... 1,200 (5)
All Directors, Nominees for Director
and Executive Officers as a Group
(9 persons)........................ 2,628,841 (2)(3)(4)(6) 8.3%
(7)(8)(9)(10)
</TABLE>
- --------
(1) Except as otherwise indicated, all of the shares of the Company's Common
Stock are held beneficially and of record.
(2) Includes 625,000 shares of Common Stock subject to currently exercisable
options granted to Dr. Vukovich pursuant to the Incentive Stock Option
Plan, Restricted Stock Option Plan and Equity Incentive Plan.
(3) Includes 51,590 shares of Common Stock held by Dr. Vukovich's wife, with
respect to which Dr. Vukovich disclaims beneficial ownership.
(4) Includes 53,375 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(5) Shares beneficially owned do not exceed 1% of the Company's outstanding
shares of Common Stock.
(6) Includes 103,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(7) Includes 35,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(8) Includes 7,600 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(9) Includes 27,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Restricted Stock Option Plan and the
Equity Incentive Plan.
(10) Includes 12,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Equity Incentive Plan.
3
<PAGE>
AGREEMENTS WITH YAMANOUCHI
Yamanouchi, through a subsidiary, owns 5,048,500 shares of the Company's
Common Stock. Of such shares, 4,000,000 were acquired in March 1992 pursuant
to the terms of a stock purchase agreement (the "Stock Purchase Agreement")
entered into by the Company and Yamanouchi. Under the terms of the Stock
Purchase Agreement, Yamanouchi has certain preemptive rights to acquire
securities issued by the Company for so long as Yamanouchi owns at least 15%
of the Company's outstanding Common Stock on a fully diluted basis, and the
Company is prohibited from taking any action to prevent Yamanouchi from
directly or indirectly acquiring all of the remaining shares of the Company's
outstanding Common Stock, provided that any such acquisition is made in
accordance with the terms of the Stock Purchase Agreement. Yamanouchi is under
no obligation to acquire additional shares of Common Stock. For so long as
Yamanouchi owns 10% of the outstanding Common Stock on a fully diluted basis,
Yamanouchi has granted the Company a right of first refusal with respect to
any shares of Common Stock which it proposes to sell, subject to certain
specified exceptions.
The Company has granted Yamanouchi certain demand and piggyback registration
rights with respect to shares of Common Stock owned by it. Under the Stock
Purchase Agreement, the Company is required to discuss with and obtain the
views of Yamanouchi with respect to certain specified transactions, including
equity offerings; incurring a material amount of debt; a material change in
the Company's capital structure; and the granting of any material license to a
third party. If any such proposed transaction involves a financing, the
Company has agreed to review with Yamanouchi its financing needs prior to
engaging in such transaction and to give Yamanouchi a reasonable opportunity
to propose and negotiate a financing alternative for the Company, though
Yamanouchi is under no obligation to do so. Yamanouchi is entitled to
designate two members of the Company's Board of Directors for so long as it
owns at least 18% of the outstanding shares of the Company's Common Stock on a
fully diluted basis (or one Director for so long as it owns at least 10% of
such Common Stock). Pursuant to a shareholder agreement between Yamanouchi and
Dr. Vukovich (the "Shareholder Agreement") entered into at the same time as
the Stock Purchase Agreement, Dr. Vukovich has agreed to vote all shares of
Common Stock held by him in favor of the election of any such designees. As of
April 17, 1998, Yamanouchi owned more than 10% but less than 18% of the
outstanding shares of the Company's Common Stock on a fully diluted basis and
is entitled to designate one Director. However, Yamanouchi has not designated
any nominee for election at the Annual Meeting.
Under the Shareholder Agreement, Dr. Vukovich has granted Yamanouchi certain
rights of first refusal with respect to shares of the Company's outstanding
Common Stock that he proposes to sell. Moreover, Dr. Vukovich has agreed in
the Shareholder Agreement to support as a shareholder and officer of the
Company any fair offer by Yamanouchi to acquire the Company or its outstanding
Common Stock made before December 31, 1998. Yamanouchi is under no obligation
to acquire the Company or any shares of Common Stock of the Company.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
In accordance with the Company's By-Laws which provide that the Board of
Directors shall consist of not less than three nor more than fifteen members,
the Board of Directors has fixed the number of Directors at eight. Each of the
individuals named below has been nominated for election as a Director by the
Board of Directors. Each such individual named below is currently a member of
the Board of Directors of the Company.
Officers serve at the discretion of the Board of Directors. The Company has
entered into employment agreements with certain officers. See "Employment
Agreements."
It is the intention of the persons named in the accompanying proxy to vote,
unless otherwise instructed, in favor of the election of the eight nominees
named hereinafter as Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR DIRECTOR.
4
<PAGE>
If any of the nominees should be unavailable for election, the proxies will
be voted for the election of such other person or persons as shall be
determined by the persons named in the proxy in accordance with their
judgment. The Company is not aware of any reason why any of the nominees
should become unavailable for election, or if elected, should be unable to
serve as a Director.
There are no family relationships among the current Directors, Executive
Officers or persons nominated by the Company to become Directors.
NOMINEES
The nominees, their ages and current principal occupations or employment,
are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NOMINEE AGE OR EMPLOYMENT
------- --- --------------------
<S> <C> <C>
Robert A. Vukovich, Ph.D 54 Chairman of the Board of Directors of
Roberts Pharmaceutical Corporation
John T. Spitznagel...... 56 President and Chief Executive Officer and a Director of
Roberts Pharmaceutical Corporation
Robert W. Loy........... 60 Executive Vice President--Operations and a Director of
Roberts Pharmaceutical Corporation
Peter M. Rogalin........ 55 Vice President, Treasurer, Chief Financial Officer and a
Director of Roberts Pharmaceutical Corporation
Digby W. Barrios........ 60 Self-employed Consultant and a Director of
Roberts Pharmaceutical Corporation
Zola P. Horovitz, Ph.D.. 63 Self-employed Consultant and a Director of
Roberts Pharmaceutical Corporation
Joseph N. Noonburg...... 62 Self-employed Consultant and a Director of
Roberts Pharmaceutical Corporation
Marilyn Lloyd........... 69 Self-employed Consultant and a Director of
Roberts Pharmaceutical Corporation
</TABLE>
Each Director will hold office until the next Annual Meeting of Shareholders
or until his or her successor is elected and qualifies. Dr. Vukovich serves as
a Director of Cypros Pharmaceutical Corporation, Biotransplant, Inc. and
Pacific Pharmaceuticals, Inc. Mr. Barrios serves as a Director of Sepracor,
Inc., Cypros Pharmaceutical Corporation and Sheffield Pharmaceuticals, Inc.
Dr. Horovitz serves as a Director of Bio Cryst Pharmaceutical, Magainin
Pharmaceutical, Synaptic Pharmaceutical, Avigen, Inc., Procept, Inc., Diacrim,
Inc. and Clinicor. None of the other nominees holds any directorships in
companies with a class of securities registered pursuant to Section 12 of the
Exchange Act or subject to the requirements of Section 15(d) of the Exchange
Act or in any company registered as an investment company under the Investment
Company Act of 1940, as amended.
ROBERT A. VUKOVICH, PH.D., served as Chairman of the Board and President and
Chief Executive Officer of the Company from its inception in 1983 until
September 1997, when he announced that he would forego his day-to-day
activities as President and Chief Executive Officer in order to concentrate on
the Company's long-term strategic business and product development programs.
Dr. Vukovich continues to serve as Chairman of the Board. From 1979 to 1983,
he served as Director of the Division of Developmental Therapeutics for Revlon
Health Care Group. From 1970 to 1974, Dr. Vukovich was employed in various
capacities by the Squibb Institute and served as Director of Clinical
Pharmacology for that organization from 1974 to 1979. Prior to 1970, Dr.
Vukovich was a clinical research scientist for The Warner Lambert Research
Institute. Dr. Vukovich is a graduate of Jefferson Medical College,
Philadelphia, Pennsylvania, with training in pharmacology and pathology.
5
<PAGE>
JOHN T. SPITZNAGEL has served as President and Chief Executive Officer of
the Company since September 1997. Mr. Spitznagel served as Executive Vice
President--Worldwide Sales and Marketing of the Company from March 1996 to
September 1997. Mr. Spitznagel has served as a Director of the Company since
July 1996. Mr. Spitznagel served as President of Reed and Carnrick
Pharmaceuticals from September 1990 through July 1995. In 1989 and 1990, Mr.
Spitznagel served as Chief Executive Officer of BioCryst Pharmaceuticals, Inc.
From 1979 through 1989, Mr. Spitznagel held various positions with Wyeth-
Ayerst Laboratories, advancing from Marketing Director to Senior Vice
President of Marketing and Sales. Mr. Spitznagel was employed by Roche
Laboratories from 1971 through 1979 and by Warner-Chilcott Laboratories from
1966 through 1971 in various sales, marketing and management positions. Mr.
Spitznagel received his undergraduate degree from Rider University and an
M.B.A. from Fairleigh Dickenson University.
ROBERT W. LOY has served as Executive Vice President--Operations of the
Company since March 1996. Mr. Loy served as Chief Operating Officer of the
Company from August 1992 to March 1996 and as a Vice President of the Company
from December 1992 to March 1996. Mr. Loy also has served as a Director of the
Company since October 1993. From 1963 to 1990, he held various positions at
Squibb Corporation, including that of Vice President, Worldwide Operations for
the Squibb Derm Division. From 1990 to 1992, Mr. Loy served as Vice President,
International Sales and Marketing, with Hollister, Inc. Mr. Loy received his
undergraduate degree from Old Dominion University and attended Villanova
University Graduate School.
PETER M. ROGALIN has served as Vice President, Treasurer and Chief Financial
Officer and a Director of the Company since February 1996. From 1978 to 1992,
Mr. Rogalin was employed in various executive capacities by Sterling Winthrop,
Inc. (formerly Sterling Drug, Inc.), including Assistant Treasurer from 1987
through 1992. From 1993 through July 1994, Mr. Rogalin was a Principal in RK
Associates, a consulting firm with specific expertise in financial and
business operations and systems for small and medium sized companies. From
July 1994 through January 1996, Mr. Rogalin served as Vice President--Finance
and Chief Financial Officer of ImClone Systems, Inc., a biopharmaceutical
company engaged in research and development of therapeutic products for the
treatment of cancer and cancer related disorders. Mr. Rogalin, a Certified
Public Accountant, received his undergraduate degree from St. Lawrence
University and an M.B.A. from the Graduate School of Business, New York
University.
DIGBY W. BARRIOS served as the President and Chief Executive Officer of
Boehringer Ingelheim Corporation from 1988 to 1992 and as an executive of that
company in various positions from 1983 to 1988. Since 1992, Mr. Barrios has
been self-employed as a consultant. Mr. Barrios also serves as a Director or
trustee of several academic institutions and pharmaceutical organizations. He
received his undergraduate degree from Loyola University. Mr. Barrios has
served as a Director of the Company since March 1994.
ZOLA P. HOROVITZ, PH.D. has been self-employed as a consultant in the
biotechnology and pharmaceutical industries from 1991 through the present.
From 1959 to 1991, Dr. Horovitz held various positions at Squibb Corporation,
including that of Vice President, Business Development and Planning. Dr.
Horovitz has served as a Director of the Company since October 1996. Dr.
Horovitz received his undergraduate degree, masters degree and Ph.D. from the
University of Pittsburgh.
JOSEPH N. NOONBURG has been self-employed as a consultant in the
pharmaceutical industry since 1995. From 1961 to 1995, Mr. Noonburg was
employed in various executive capacities with Reed and Carnrick
Pharmaceuticals, including as Senior Vice President, Sales. Mr. Noonburg was
elected to the Board of Directors at last year's Annual Meeting of
Shareholders. Mr. Noonburg received his undergraduate degree from Rutgers
University.
THE HONORABLE MARILYN LLOYD has been self-employed as a consultant since
1995. From 1974 to 1995, Ms. Lloyd was an elected member of the United States
Congress, House of Representatives, representing the Third Congressional
District of Tennessee. During her tenure as a member of Congress, Ms. Lloyd
served as Chairwoman of the Energy Subcommittee of the House Science and
Technology Committee and of the Housing and Consumer Committee of the
Committee on Aging. Ms. Lloyd was also Chair of the North Atlantic Panel on
6
<PAGE>
Armed Services and was a ranking member of the Procurement Subcommittee of the
Armed Services Committee. Ms. Lloyd was appointed to the Board of Directors in
1997.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors held
six (6) meetings, including two (2) special meetings. During fiscal 1997, each
incumbent member of the Company's Board of Directors attended at least 75% of
the meetings of the Board of Directors and of each of the committees on which
he or she served which were held during the period such person served as a
Director and, if applicable, a committee member.
The Board of Directors has three (3) standing committees: the Audit
Committee, the Compensation Committee and the Nominating Committee.
AUDIT COMMITTEE
The current members of the Audit Committee of the Board of Directors (the
"Audit Committee") are Mr. Barrios and Dr. Horovitz. The functions of the
Audit Committee are, among other things, to recommend to the Board of
Directors, the auditors to be engaged as the Company's independent public
accountants; to review the proposed plan and scope for the annual audit and
the results of such audit when completed; to review the services rendered by
the auditors and the fees charged for such services; to determine the effect,
if any, on the independent public accountants' independence in the performance
of any non-audit services; and to review the plan, scope and results of the
Company's internal audit operations. During the fiscal year ended December 31,
1997, the Audit Committee held two (2) meetings.
COMPENSATION COMMITTEE
The current members of the Compensation Committee of the Board of Directors
(the "Compensation Committee") are Mr. Barrios, Dr. Horovitz and Mr. Noonburg.
The Compensation Committee determines the compensation of officers and
administers the Management Incentive Compensation Plan, the Equity Incentive
Plan and the Employee Stock Purchase Plan (the "Stock Purchase Plan"). With
respect to the Equity Incentive Plan, the Compensation Committee determines
the persons to whom options are granted or awards are made, and the terms of
such grants or awards, including the number of shares subject to options or
awards, the type of grants or awards, and the exercise price thereof, subject
to the express provisions set forth in the Equity Incentive Plan. In addition,
the Compensation Committee administers the Company's Employees Savings and
Protection Plan (the "401(k) Plan") and Money Purchase Pension Plan (the
"Money Purchase Plan") which was merged with and into the 401(k) Plan as of
January 1, 1998. See "Employee Savings and Protection Plan and Money Purchase
Pension Plan." The Compensation Committee also administers the Company's
Incentive Stock Option Plan (the "Incentive Option Plan") and Restricted Stock
Option Plan (the "Restricted Option Plan"), each such plan which was
previously terminated, to the extent that options granted under these plans
prior to their termination remain outstanding and continue to be exercisable
pursuant to their terms. During the fiscal year ended December 31, 1997, the
Compensation Committee held two (2) meetings and acted by unanimous written
consent on twelve (12) occasions.
NOMINATING COMMITTEE
At the annual reorganization meeting of the Board of Directors held last
May, the Board of Directors established a Nominating Committee and vested it
with the authority to identify, interview and recommend to the Board of
Directors prospective members for election or appointment to the Board of
Directors. The current members of the Nominating Committee are Dr. Vukovich,
Ms. Lloyd and Mr. Noonburg. During the fiscal year ended December 31, 1997,
the Nominating Committee held one (1) meeting at which it recommended this
year's Director candidates.
7
<PAGE>
CORPORATE PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company for the five years ended December 31, 1997, with
the cumulative total return on the NASDAQ Market Index (US Companies), NASDAQ
Pharmaceutical Stocks Index, AMEX Market Index, and a peer group (the "Peer
Group") selected by the Company over the same period (assuming an investment
of $100 in the Company's Common Stock and in each of the indices and the Peer
Group on December 31, 1992, and reinvestment of all dividends). The Peer Group
consists of Dura Pharmaceuticals, Inc., Forest Laboratories, Inc., IVAX
Corporation, Jones Medical Industries, Inc. and Medeva PLC. The Company has
included the returns of the AMEX Market Index and the Peer Group in this graph
since the Common Stock ceased trading in the NASDAQ National Market System on
May 21, 1997 and commenced trading on the American Stock Exchange on May 22,
1997.
LINE GRAPH
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roberts Pharmaceutical Corporation 100 176 140 78 50 42
Peer Group 100 103 88 115 90 94
AMEX Market Index 100 119 105 135 143 172
NASDAQ Pharmaceutical Stocks 100 89 67 123 123 127
NASDAQ Market Index (US Companies) 100 115 112 159 195 240
</TABLE>
Average Annual Compound Growth Rates
------------------------------------
Roberts Pharmaceutical Corporation -15.8%
Peer Group - 1.2%
AMEX Market Index 11.4%
NASDAQ Pharmaceutical Stocks 4.9%
NASDAQ Market Index (US Companies) 19.1%
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company and its
subsidiaries for the fiscal years ended December 31, 1997, 1996 and 1995, of
the Company's Chief Executive Officer and the other Executive Officers of the
Company who earned salary and bonuses in fiscal 1997 in excess of $100,000
(collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS/ COMPENSATION
NAME & PRINCIPAL POSITION YEAR ($)(1) ($)(2) SARS (#) ($)(3)(4)
------------------------- ---- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert A. Vukovich,
Ph.D. (5)............. 1997 $625,000 $150,000 125,000(6) $8,000
Chairman of the Board 1996 540,000 -- 790,000(7) 7,500
and Former 1995 452,770 -- -- 7,500
President and Chief
Executive Officer
John T. Spitznagel (8). 1997 247,692 50,000 110,000(6) 8,000
President and Chief 1996 149,715 -- 115,000(9) 6,750
Executive Officer
Robert W. Loy.......... 1997 228,365 50,000 37,500(6) 8,000
Executive Vice 1996 202,071 -- 136,000(10) 7,500
President 1995 182,196 -- 81,000(11) 7,500
Peter M. Rogalin (12).. 1997 193,000 50,000 25,000(6) 8,000
Vice President, 1996 155,677 -- 115,000(9) 7,500
Treasurer and
Chief Financial Officer
Anthony A. Rascio, Esq. 1997 150,577 -- -- 7,529
Vice President, 1996 148,069 -- 12,000(13) 7,442
Secretary and 1995 131,030 -- 7,000(11) 6,698
General Counsel
</TABLE>
- --------
(1) Includes amounts earned but deferred at the election of the Named Officers
under the Company's 401(k) Plan. See "Employees Savings and Protection
Plan and Money Purchase Pension Plan."
(2) Represents amounts paid to the Named Officers pursuant to the Company's
Management Incentive Plan. See "Compensation Committee Report on Executive
Compensation."
(3) Includes amounts to be contributed by the Company under the 401(k) Plan.
Amounts to be contributed by the Company to the accounts of the Named
Officers under the 401(k) Plan for fiscal 1997 are as follows: Dr.
Vukovich--$4,800; Mr. Spitznagel--$4,800; Mr. Loy--$4,800; Mr. Rogalin--
$4,800; and Mr. Rascio--$4,517.
(4) Includes amounts to be contributed by the Company under the Money Purchase
Plan which was merged with the 401(k) Plan as of January 1, 1998. See
"Employees Savings and Protection Plan and Money Purchase Pension Plan."
Amounts to be contributed by the Company to the accounts of the Named
Officers under the Money Purchase Plan for fiscal 1997 are as follows: Dr.
Vukovich--$3,200; Mr. Spitznagel--$3,200; Mr. Loy--$3,200; Mr. Rogalin--
$3,200; and Mr. Rascio--$3,012.
(5) In September 1997, Dr. Vukovich announced he would forego his day-to-day
activities as President and Chief Executive Officer of the Company in
order to concentrate on the Company's strategic business and product
development programs. Dr. Vukovich continues to serve as Chairman of the
Board.
(6) Includes 125,000, 75,000, 37,500 and 25,000 Stock Appreciation Rights
("SARs") granted in January 1998 to Dr. Vukovich, Mr. Spitznagel, Mr. Loy
and Mr. Rogalin, respectively, for performance in 1997. See "Compensation
Committee Report on Executive Compensation."
9
<PAGE>
(7) Includes 350,000 shares of Common Stock underlying options and 150,000
SARs granted during the fiscal year ended December 31, 1996. Includes also
290,000 shares of Common Stock underlying options which were repriced by
the Company in December, 1996.
(8) Mr. Spitznagel joined the Company in March, 1996 and served as an
Executive Vice President until September, 1997 when he was appointed
President and Chief Executive Officer of the Company.
(9) Includes 55,000 shares of Common Stock underlying options and 30,000 SARs
granted during the fiscal year ended December 31, 1996 to each of Mr.
Spitznagel and Mr. Rogalin. Includes also 30,000 shares of Common Stock
underlying options granted in 1996 to each of Mr. Spitznagel and Mr.
Rogalin which were repriced by the Company in December, 1996.
(10) Includes 25,000 shares of Common Stock underlying options and 30,000 SARs
granted during the fiscal year ended December 31, 1996. Includes also
81,000 shares of Common Stock underlying options granted during the
fiscal years ended December 31, 1992 through December 31, 1994 which were
repriced by the Company in December, 1996.
(11) Includes 81,000 and 7,000 shares of Common Stock underlying options
granted during the fiscal years ended December 31, 1992 through December
31, 1994 to Mr. Loy and Mr. Rascio, respectively; such options were
repriced by the Company during the fiscal year ended December 31, 1995.
(12) Mr. Rogalin joined the Company in February, 1996.
(13) Includes 5,000 shares of Common Stock underlying options granted in
November, 1996 and repriced in December, 1996. Includes also 7,000 shares
of Common Stock underlying options granted during the years December 31,
1992 through December 31, 1994 which were repriced by the Company in
December, 1996.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Dr.
Vukovich, Mr. Spitznagel, Mr. Loy, Mr. Rogalin and Mr. Rascio, which provide
for base minimum salaries of $540,000, $300,000, $186,500, $175,000 and
$135,200, respectively. Please refer to the Summary Compensation Table for the
amount of compensation received by such officers. In addition, the agreements
entitle each of such officers to participate in any incentive compensation
plan offered to the Company's senior level management and to receive all
vacation and other benefits, including insurance, provided to employees of the
Company.
Under the terms of the employment agreements with Dr. Vukovich, Mr.
Spitznagel, Mr. Loy and Mr. Rascio, in the event that the employment of any
such officer is terminated by the Company other than for the officer's willful
misconduct, the officer is entitled to receive (i) base compensation at the
annual rate of his base compensation at the time of termination for three
years after the termination (five years after termination in the case of Dr.
Vukovich), (ii) additional payments equal to three times the officer's average
annual bonus and incentive compensation for the period commencing July 1, 1988
(March 1, 1996 in the case of Mr. Spitznagel) and ending upon the termination
of the employment agreement, and (iii) an amount equal to three times any
payment made by the Company to the 401(k) Plan on behalf of the officer during
the fiscal year prior to termination (five times the average annual bonus and
incentive compensation received during such period by Dr. Vukovich and five
times any payment made by the Company to the 401(k) Plan on behalf of Dr.
Vukovich during the fiscal year prior to termination (all such payments made
to an officer in connection with the termination of employment are referred to
herein collectively as "Severance Compensation"). The Severance Compensation
shall be paid to the officer in the same manner and on the same dates as the
officer would have received such compensation had the termination of the
employment agreement not occurred.
Under the terms of the employment agreements with Dr. Vukovich, Mr.
Spitznagel, Mr. Loy and Mr. Rascio, in the event that the employment of any
such officer is terminated by the Company in connection with a "change in
control" (as such term is defined in each of their employment agreements) of
the Company, the officer is entitled to receive the full amount of the
Severance Compensation. However, if, after giving the Company six months
notice, such officer terminates his employment with the Company in connection
with a change in control of the Company, the officer shall be entitled to
receive 75% of the Severance Compensation (100% of the Severance Compensation
in the case of Dr. Vukovich).
10
<PAGE>
Under the terms of the employment agreement with Mr. Rogalin, in the event
that his employment is terminated by the Company in connection with a "change
in control" (as such term is defined in his employment agreement) of the
Company, Mr. Rogalin is entitled to receive 100% of the base compensation he
is receiving on the date of the termination of the employment agreement for a
period of two (2) years following the termination date.
The Internal Revenue Code of 1986, as amended (the "Code"), imposes an
excise tax on and limits the Company's deduction of payments to terminated
employees following a change in control if the payments meet certain
requirements and exceed the limit set forth in the Code. Generally, this limit
is equal to three times the employee's average annual compensation for the
five taxable years preceding the year in which the change of control occurs.
The employment agreements with Dr. Vukovich, Mr. Spitznagel, Mr. Loy and Mr.
Rascio provide that the Company shall pay any such excise taxes assessed
against the officers in connection with any Severance Compensation payments
made or benefits conferred under the employment agreements, including, in
connection with a change in control of the Company.
In the event of the termination of an officer's employment with the Company
for any reason, each of the employment agreements provides that such officer
shall have the right to elect, during a period of seven months from the date
of termination, to exercise all options previously granted to the officer
under all stock option plans maintained by the Company, regardless of whether
such options would then be exercisable. In the event of the termination of the
employment agreement by an officer, each such agreement prohibits the officer
from engaging in any activities in direct competition with the Company for a
two year period. Under the terms of the employment agreements with Dr.
Vukovich, Mr. Spitznagel, Mr. Loy and Mr. Rascio, in the event of the
"disability" (as such term is defined in each of their employment agreements)
of any such officer, he shall be entitled to receive the full Severance
Compensation from the Company. The current terms of each of the employment
agreements, which are automatically renewed for successive one year periods
upon their expiration, expire as follows: Dr. Vukovich--December 1999; Mr.
Spitznagel--September 2000; Mr. Loy--December 1998; Mr. Rascio--December 1998;
and Mr. Rogalin--November 1998.
EMPLOYEES SAVINGS AND PROTECTION PLAN AND MONEY PURCHASE PENSION PLAN
As of January 1, 1998, the Company merged its Money Purchase Plan with and
into its 401(k) Plan in order to provide one employee savings plan which is
available to all employees who meet certain age and service requirements. In
addition to salary deferral contributions by the participating employees, the
401(k) Plan provides for (i) mandatory contributions by the Company based on
participant contributions and (ii) discretionary contributions by the Company
based on a percentage of a participant's compensation.
For fiscal 1997, the total of employee and Company contributions under the
401(k) Plan will be $607,011 of which the Company will contribute $255,245.
For Fiscal 1997, the Company will contribute also an aggregate amount of
$199,099 under the Money Purchase Plan, which will be distributed to the
participants' accounts pursuant to an allocation percentage equal to 2% of
each participant's 1997 compensation up to $160,000. See the Summary
Compensation Table for amounts to be contributed by the Company under the
401(k) Plan and Money Purchase Plan to the accounts of the Named Officers.
EMPLOYEE STOCK PURCHASE PLAN
The Stock Purchase Plan approved by the Board of Directors and the
shareholders of the Company in 1996, was implemented by the Company as of
April 1, 1997. Under the Stock Purchase Plan, eligible employees may use
salary deductions to invest in the Company's Common Stock pursuant to a plan
which is intended to qualify as an "employee stock purchase plan" within the
meaning of section 423 of the Code. Each eligible employee who elects to
participate in the Stock Purchase Plan shall be able to designate from 1% to
10% of the eligible employee's compensation, which shall automatically be
deducted from the employee's paycheck, to purchase shares of the Company's
Common Stock; provided, that no employee participant may purchase in a
particular plan year under the Stock Purchase Plan, shares of Common Stock
with a fair market value of more than $25,000.
11
<PAGE>
The Stock Purchase Plan is administered by the Compensation Committee.
500,000 shares of the Company's Common Stock have been reserved for issuance
under the Stock Purchase Plan. The Stock Purchase Plan shall terminate when
all shares of Common Stock reserved for issuance are issued, or at any other
time at the discretion of the Board of Directors. As of April 17, 1998, 9,468
shares of the Company's Common Stock have been issued and allocated to
participant accounts under the Stock Purchase Plan.
EQUITY INCENTIVE PLAN
For a description of the material features of the Equity Incentive Plan, see
"Summary of Provisions of the Equity Incentive Plan" under "Amendment of
Equity Incentive Plan."
INCENTIVE STOCK OPTION PLAN AND RESTRICTED STOCK OPTION PLAN
The Incentive Option Plan and Restricted Option Plan were previously
terminated. However, options granted under the Incentive Option Plan and
Restricted Option Plan which were outstanding on the date of the termination
of each such plan, will continue to be exercisable pursuant to their
respective terms. As of April 17, 1998, there were 688,375 such incentive
stock options and 140,040 such restricted stock options still outstanding.
OPTION GRANTS
The Company has (i) options outstanding under its Restricted Option Plan and
Incentive Option Plan, and (ii) options and SARs outstanding under the Equity
Incentive Plan. The following table shows, for the fiscal year ended December
31, 1997, certain information regarding options and SARs granted to each of
the Named Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION/SAR TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ------------ ------------ ----------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Vukovich,
Ph.D................... 125,000(2) 15% $10.56 1/12/01 $207,500 $437,500
John T. Spitznagel...... 35,000(3) 4% 12.75 9/10/03 151,768 344,309
75,000(2) 9% 10.56 1/12/01 124,500 262,500
Robert W. Loy........... 37,500(2) 5% 10.56 1/12/01 62,250 131,250
Peter M. Rogalin........ 25,000(2) 3% 10.56 1/12/01 41,500 87,500
Anthony A. Rascio, Esq.. -- -- -- -- -- --
</TABLE>
- --------
(1) The potential realizable value does not represent actual value. The value,
if any, a Named Officer may realize will depend upon the excess of the
fair market value of the Common Stock over the exercise price on the date
the option or SAR is exercised so that there is no assurance the value
realized by the Named Officer will be at or near the estimated value. The
estimated values are based upon assumptions of 5% and 10% appreciation,
respectively, in the fair market value of the Company's Common Stock from
the date of grant of these options and SARs through the expiration dates
of such options and SARs.
(2) Includes 125,000, 75,000, 37,500 and 25,000 SARs granted in January 1998
to Dr. Vukovich, Mr. Spitznagel, Mr. Loy and Mr. Rogalin, respectively,
for performance in 1997. See "Compensation Committee Report on Executive
Compensation."
(3) Represents shares of Common Stock underlying options granted under the
Equity Incentive Plan.
12
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
No option or SAR was exercised by any of the Named Officers during the
fiscal year ended December 31, 1997. Shown below is certain information
regarding options and SARs held by each of the Named Officers at December 31,
1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AND NUMBER OF OPTIONS/SARS
ACQUIRED SARS HELD AT FY-END(#) AT FY-END($)(1)
ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
- ---- ----------- ----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Vukovich,
Ph.D................... -- -- 690,000 210,000(2) -- --
John T. Spitznagel...... -- -- 62,000 133,000(2) -- --
Robert W. Loy........... -- -- 118,000 55,500(2) -- --
Peter M. Rogalin........ -- -- 46,000 64,000(2) -- --
Anthony A. Rascio Esq... -- -- 7,600 4,400 -- --
</TABLE>
- --------
(1) The value of unexercised in-the-money options and SARs represents the
difference between an option's or SAR's exercise price and the reported
last sale price of the Company's Common Stock on the American Stock
Exchange on December 31, 1997 ($9.56 per share.) None of the options or
SARs disclosed in this table were in-the-money on December 31, 1997. The
actual value, if any, a Named Officer may realize upon the exercise of an
option or an SAR will depend upon the excess of the stock price over the
exercise price on the date the option or SAR is exercised.
(2) Includes 125,000, 75,000, 37,500 and 25,000 SARs granted in January 1998
to Dr. Vukovich, Mr. Spitznagel, Mr. Loy and Mr. Rogalin, respectively,
for performance in 1997. See "Compensation Committee Report on Executive
Compensation."
DIRECTORS' COMPENSATION
Each Director who is not an employee of the Company is entitled to receive a
participation fee of $500 for each meeting of the Board of Directors attended
and a fee of $250 for each meeting attended of any committee of the Board of
Directors on which such Director serves. In addition, each Director who is not
an employee of the Company is entitled to receive a $7,500 fee annually for
services as a Director. The Company makes no payment to Directors who are
employees of the Company for their services on the Board of Directors or
committees thereof. The Company paid a total of $47,556 during the fiscal year
ended December 31, 1997 to Directors who are not employees of the Company.
Nonemployee directors are eligible to participate in the Company's Equity
Incentive Plan. During the fiscal year ended December 31, 1997, options with
respect to 10,000 of shares of Common Stock were granted to Mr. Noonburg upon
his election, and to Ms. Lloyd upon her appointment, to the Board of
Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL COMPENSATION POLICIES
The base salaries and wages for all the Company's employees are managed
through the Company's wage and salary administration program. Increases in
base salary and wages are managed according to three guidelines: individual
merit, promotions and competitive factors. Guidelines are established each
year and vary in order to reflect the Company's performance and the
competitive environment and to manage appropriately the overall cost of wage
and salary growth.
The Company's compensation program is based on a pay for performance
criterion and consists of three key components: base salary, an annual
incentive bonus program and longer term incentives through the granting of
equity based awards, such as stock options and stock appreciation rights. The
compensation program is
13
<PAGE>
designed to attract, retain and motivate the best personnel possible for all
levels of the Company. The Company's various programs are designed to treat
all employees in a fair and equitable manner and have the following common
attributes upon which compensation is based:
. level of job responsibility;
. individual performance;
. company performance;
. competitive marketplace factors.
EXECUTIVE OFFICER COMPENSATION
The method of compensation of the Company's Executive Officers is consistent
with the Company's general compensation policies and is related to the
Company's growth and performance. The Compensation Committee is responsible
for administering the compensation program for Executive Officers of the
Company, the Management Incentive Compensation Plan, the Equity Incentive
Plan, the 401(k) Plan and the Money Purchase Plan which was merged with and
into the 401(k) Plan as of January 1, 1998. The Compensation Committee
believes that the Company's compensation practices should reward strategic
management of the business in the best long term interests of the
shareholders.
A portion of an Executive Officer's compensation may consist of bonus
payments under the Management Incentive Compensation Plan. Under this plan,
awards are based on the Company's performance and the employee's contribution
to that performance. The aggregate amount allocated to any individual award
under the Management Incentive Compensation Plan is determined by the
Compensation Committee.
The Company's long term incentives are generally in the form of stock option
grants. The objectives of the Company's stock option programs are to advance
the long term interests of the Company and its shareholders. Equity
compensation, in the form of stock options, is an important element of the
performance-based compensation of the Executive Officers. The grant of stock
options continues the Company's practice of providing for management's equity
ownership in order to ensure that their interests remain closely aligned with
those of the Company's shareholders. Equity ownership in the Company provides
a direct relationship between executive compensation and shareholder value.
Stock options provide the Company's key employees an opportunity for increased
equity ownership, and create an incentive to remain with the Company for the
long term. The Equity Incentive Plan authorizes the Compensation Committee to
grant SARs to employees of the Company. The Company granted SARs to certain of
its Executive Officers for services performed in 1997. These rights are
expected to provide the holders thereof with an additional long term
incentive, the value of which is a function of the appreciation in the value
of a share of the Company's Common Stock. Neither the grant nor the exercise
of stock options having an exercise price equal to or greater than the fair
market value of the Company's Common Stock on the date of grant will affect
the Company's income statement. The grant of SARs affects the Company's income
statement by way of a charge to compensation expense measured by the amount by
which the price of the Company's Common Stock at the end of a measurement
period exceeds the grant price of the SAR. Accordingly, the compensation
expense attributable to a SAR reported for any measurement period will be
adjusted in future periods depending upon the market price of the Company's
Common Stock at the end of the measurement period.
The compensation of the Company's Chief Executive Officer is determined by
the Compensation Committee based on its assessment of the Company's financial
and non-financial performance against a background of various factors. The
Committee has identified several factors which are critical to the success of
the business, including sales growth, business growth and achievement,
financial strength, progress toward achievement of goals and growth in
shareholder value. The Compensation Committee believes it is important that
these factors are well managed in order to maximize returns to the Company's
shareholders over the long term. Performance is reviewed on an annual basis.
Under his employment agreement, Dr. Vukovich was entitled to receive a minimum
base salary of $540,000 in 1997. Based on the Compensation Committee's review
and evaluation of various performance factors outlined above, Dr. Vukovich's
annual salary was increased by 14%
14
<PAGE>
in 1997 to $625,000. Dr. Vukovich's base salary had not been increased since
1995. In September 1997, Mr. Spitznagel was elected by the Board of Directors
to assume the office of President and Chief Executive Officer of the Company.
In connection with his increased responsibilities, the Compensation Committee
adjusted his base salary from $225,000 to $300,000 and granted him 35,000
options under the Equity Incentive Plan.
Incentive bonus awards to the Chief Executive Officer are determined by the
Compensation Committee based on the Company's performance and the Compensation
Committee's assessment of the individual contribution of the Chairman of the
Board and the Chief Executive Officer to that performance. The Compensation
Committee awarded bonuses to the Chief Executive Officer and other Executive
Officers of the Company for 1997 as follows: Dr. Vukovich--$150,000; Mr.
Spitznagel--$50,000; Mr. Loy--$50,000; and Mr. Rogalin--$50,000. In awarding
these bonuses, the Compensation Committee focused on the significant
contribution of Dr. Vukovich and the other executive officers of the Company
toward the approval of AGRYLIN(TM) by the U.S. Food and Drug Administration
(the "FDA") and the successful launch of that product in early 1997. In
addition, the Compensation Committee determined that SARs should be awarded to
Dr. Vukovich and certain of the Company's Executive Officers to reward certain
achievements that the Company made in 1997. In recognition of a variety of
corporate achievements, including the acquisition of a distribution center in
Oakville, Illinois, the licensing of SAMPATRILAT as well as four chemical
compounds in late stage development for the treatment of bowel disorders, the
launch of LODINE(R) in the United Kingdom, the approval of EMINASE(R) in
Canada and the launch of that product, the successful marketing of
PROAMATINE(R), the reorganization and automation of the Company's field sales
force in the United States, the effective control of costs, the divestiture of
the product NORETHIN and Pronetics Health Care Group, Inc. and the acquisition
of the product SLOW-MAG(R), the Company awarded SARs to certain of its
Executive Officers. SARs awarded in 1998 for performance in 1997 to certain
Executive Officers of the Company are as follows: Dr. Vukovich--125,000; Mr.
Spitznagel--75,000; Mr. Loy--37,500; and Mr. Rogalin--25,000. In its
assessment of the award to Dr. Vukovich, the Compensation Committee focused on
Dr. Vukovich's significant contribution toward the product acquisitions
completed in 1997. These SARs have a three year term, expiring on January 12,
2001, and are exercisable in whole or in part over said term. 50% of the
rights granted were exercisable on the date of grant and the remaining 50%
become exercisable on January 13, 1999. Vesting of the SARs is accelerated
upon a change in control of the Company. Upon exercise of an SAR, the holder
is entitled to receive, in cash, an amount equal to the excess of the fair
market value of a share of the Company's Common Stock on the date of exercise
over $10.56, the fair market value of a share of the Company's Common Stock on
January 13, 1998, the date the SARs were granted.
As of January 1, 1998, the Company elected to merge its Money Purchase Plan
with its 401(k) Plan, and to cease accruing benefits in the Money Purchase
Plan. Benefit accruals for participants in the Money Purchase Plan were frozen
as of that date and, in lieu of future contributions to the Money Purchase
Plan, the Company plans matching contributions to the extent required under
its 401(k) Plan. The Money Purchase Plan was available to full time employees
who had completed one year of service and attained age 20 1/2. See "Employee
Savings and Protection Plan and Money Purchase Pension Plan."
Section 162(m) of the Code ("Section 162(m)"), disallows a tax deduction to
public companies for compensation over $1 million (per capita) paid to a
corporation's Chief Executive Officer and four other highest paid officers.
Qualifying performance-based compensation is not subject to the deduction
limit if certain requirements are met.
The Section 162(m) limitation has not yet had any effect upon the Company
and its ability to deduct, for tax purposes, the compensation paid to the
Company's Named Officers. Compensation paid, or to be paid, pursuant to
certain of the Company's employee benefit plans will not qualify for the
performance-based compensation exception to Section 162(m) by reason of Dr.
Vukovich's previous participation as a member of the Compensation Committee.
Dr. Vukovich resigned from the Compensation Committee in 1995 with the
intention that the Company would thus be able to attempt to qualify
compensation to be paid pursuant to future employee benefit plans under the
performance-based exception to Section 162(m).
15
<PAGE>
The Compensation Committee recognizes that certain future events, such as a
change in control of the Company, termination by the Company of certain
executive personnel, or the exercise of certain stock options, depending upon
the difference between the fair market value of the Company's Common Stock and
the exercise price of such an option on the date of exercise, may result in
the disallowance of a portion of the Company's compensation deductions under
Section 162(m) as it relates to the Named Officers of the Company. See
"Employment Agreements." Moreover, the Compensation Committee may from time to
time award compensation that may be non-deductible under Section 162(m) when,
in the exercise of the Compensation Committee's business judgment, such award
would be in the best interests of the Company.
COMPENSATION COMMITTEE
Digby W. Barrios
Dr. Zola P. Horovitz
Joseph N. Noonburg
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's Executive Officers
and Directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes
in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission
("SEC"). Executive Officers, Directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its Executive Officers, Directors,
and greater than ten percent beneficial owners complied with all filing
requirements applicable to them with respect to reports required to be filed
by Section 16(a) of the Exchange Act during fiscal 1997.
AMENDMENT OF EQUITY INCENTIVE PLAN
(ITEMS 2 AND 3 ON PROXY CARD)
INTRODUCTION
The Board of Directors has approved and adopted, subject to approval and
ratification by the shareholders, the following two (2) proposals to amend the
Equity Incentive Plan:
1. TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE EQUITY INCENTIVE PLAN BY 1,500,000 SHARES TO 3,000,000 SHARES, OF
WHICH 1,500,000 SHARES WOULD BE AVAILABLE FOR GRANT PURSUANT TO AWARDS (ITEM 2
ON THE PROXY CARD); AND
2. TO PROVIDE THAT ANY REPRICING BY THE COMPENSATION COMMITTEE OF AN OPTION
OR OTHER AWARD GRANTED UNDER THE EQUITY INCENTIVE PLAN MUST BE RATIFIED BY THE
SHAREHOLDERS (ITEM 3 ON THE PROXY CARD).
If either one of the proposals does not receive the minimum number of votes
required for approval and ratification by the shareholders, then the other
proposal will also be deemed to have not been ratified and approved by the
shareholders and neither proposal will be adopted by the Company.
SUMMARY OF PROVISIONS OF THE EQUITY INCENTIVE PLAN
The Equity Incentive Plan was approved by the shareholders at the 1996
Annual Meeting. The Equity Incentive Plan is administered by the Compensation
Committee, which is authorized to grant (i) "incentive stock options" within
the meaning of Section 422 of the Code, (ii) nonqualified stock options, (iii)
stock appreciation
16
<PAGE>
rights, (iv) restricted stock grants, (v) deferred stock awards, and (vi)
other stock based awards to employees of the Company and its subsidiaries and
other persons and entities who, in the opinion of the Compensation Committee,
are in a position to make a significant contribution to the success of the
Company and its subsidiaries. The Compensation Committee determines (i) the
recipients of awards, (ii) the times at which awards will be made, (iii) the
size and type of awards, and (iv) the terms, conditions, limitations and
restrictions of awards. Awards may be made singly, in combination or in
tandem.
When the Equity Incentive Plan was approved by the shareholders at the 1996
Annual Meeting, 1,500,000 shares of Common Stock were reserved for issuance.
All of such shares are subject to awards currently outstanding. The maximum
number of shares of Common Stock which can be issued to the Company's Chief
Executive Officer under the Equity Incentive Plan pursuant to various awards
shall not exceed 35% of the total number of shares of Common Stock reserved
for issuance, and the maximum number of shares which can be issued to any
other employee or participant under the Equity Incentive Plan shall not exceed
20% of the total number of shares of Common Stock reserved for issuance. There
are approximately 475 employees eligible to participate in the Equity
Incentive Plan and awards have been granted to approximately 261 employees.
The Equity Incentive Plan will terminate on May 21, 2006, unless earlier
terminated by the Board of Directors.
AWARDS UNDER THE EQUITY INCENTIVE PLAN
Stock Options. The Compensation Committee can grant either incentive stock
options or nonqualified stock options. Only employees of the Company and its
subsidiaries may be granted incentive stock options. The exercise price of an
incentive stock option shall not be less than the fair market value, or, in
the case of an incentive stock option granted to a 10% or greater shareholder
of the Company, 110% of the fair market value of the Company's Common Stock on
the date of grant. For purposes of the exercise price of an option, "fair
market value" shall mean the arithmetic average of the highest and lowest sale
prices of the Common Stock reported on the American Stock Exchange on a
particular date. On April 17, 1998, the closing price of the Company's Common
Stock reported on the American Stock Exchange was $15.50 and the average of
the high and low sale prices was $15.22. The term of an option and the time or
times at which such option is exercisable shall be set by the Compensation
Committee; provided, however, that no option shall be exercisable more than 10
years (5 years for an incentive stock option granted to a 10% or greater
shareholder of the Company) from the date of grant, and with respect to an
incentive stock option, the fair market value on the date of grant of the
shares of Common Stock which are exercisable by a participant for the first
time during any calendar year shall not exceed $100,000. Payment of the
exercise price shall be made in any form permitted by the Compensation
Committee, including cash and shares of the Company's Common Stock.
Stock Appreciation Rights. The Compensation Committee may grant SARs either
alone or in combination with an underlying stock option. The term of an SAR
and the time or times at which an SAR shall be exercisable shall be set by the
Compensation Committee; provided, that an SAR granted in tandem with an option
will be exercisable only at such times and to the extent that the related
option is exercisable. SARs entitle the grantees to receive an amount in cash
or shares of Common Stock with a value equal to the excess of the fair market
value of a share of Common Stock on the date of exercise over the fair market
value of a share of Common Stock on the date the SAR was granted, which
represents the same economic value that would have been derived from the
exercise of an option. Payment may be made in cash, in shares of Common Stock
or a combination of both at the discretion of the Compensation Committee. If a
SAR granted in combination with an underlying stock option is exercised, the
right under the underlying option to purchase shares of Common Stock is
terminated.
Restricted Stock Grants. The Compensation Committee may grant shares of
Common Stock under a restricted stock grant which sets forth the applicable
restrictions, conditions and forfeiture provisions which shall be determined
by the Compensation Committee and which can include restrictions on transfer,
continuous service with the Company or any of its subsidiaries, achievement of
business objectives, and individual, subsidiary and Company performance.
Shares of Common Stock may be granted pursuant to a restricted stock grant for
no
17
<PAGE>
consideration or for any consideration as determined by the Compensation
Committee. A grantee is entitled to vote the shares of Common Stock and
receive any dividends thereon prior to the termination of any applicable
restrictions, conditions or forfeiture provisions.
Deferred Stock Awards. The Compensation Committee may grant shares of Common
Stock under a deferred stock award, with the delivery of such shares of Common
Stock to take place at such time or times and on such conditions as the
Compensation Committee may specify. Shares of Common Stock may be granted
pursuant to deferred stock awards for no consideration or for any
consideration as determined by the Compensation Committee.
Other Stock Based Awards. The Compensation Committee may grant shares of
Common Stock to employees of the Company or its subsidiaries as bonus
compensation, or if agreed to by an employee, in lieu of such employee's cash
compensation.
FEDERAL INCOME TAX CONSEQUENCES
Stock Options. The grant of an incentive stock option or a nonqualified
stock option does not result in income for the grantee or in a deduction for
the Company.
The exercise of a nonqualified stock option results in ordinary income for
the grantee and a business deduction for the Company measured by the
difference between the option's exercise price and the fair market value of
the shares of Common Stock received at the time of exercise. If the Company is
required to withhold income taxes in connection with the exercise of a
nonqualified stock option, the Compensation Committee may, in its discretion,
permit such withholding obligation to be satisfied by the delivery of shares
of Common Stock held by the grantee or to be delivered to the grantee upon
exercise of the option.
The exercise of a qualified incentive stock option does not result in income
for the grantee or in a business deduction for the Company; provided, that the
employee does not dispose of the shares of Common Stock acquired upon exercise
within two years after the date of grant of the option and one year after the
transfer of the shares of Common Stock upon exercise, and provided that, the
employee is employed by the Company or a subsidiary of the Company from the
date of grant until three months before the date of exercise. If these
requirements are met, the employee's basis in the shares of Common Stock would
be the exercise price. Any gain related to the subsequent disposition of the
shares of Common Stock will be taxed to the employee as a long-term capital
gain and the Company will not be entitled to any deduction. The excess of the
fair market value of the Common Stock on the date of exercise over the
exercise price is an item of tax preference for the employee, potentially
subject to the alternative minimum tax.
If an employee should dispose of the shares of Common Stock acquired
pursuant to the exercise of an incentive stock option prior to the expiration
of either of the designated holding periods, the employee recognizes ordinary
income and the Company is entitled to a business deduction in an amount equal
to the lesser of the fair market value of the shares of Common Stock on the
date of exercise minus the option exercise price or the amount realized on
disposition of the shares of Common Stock minus the option exercise price. Any
gain in excess of the ordinary income recognized by the employee is taxable as
long-term or short-term capital gain, depending on the holding period. If an
option, intended to be an incentive stock option, does not satisfy all of the
requirements of an incentive stock option pursuant to Section 422 of the Code
when granted, the employee recognizes ordinary income upon exercise of the
option and the Company is entitled to a business deduction in an amount equal
to the fair market value of the shares of Common Stock on the exercise date
minus the option exercise price. Income tax withholding would be required. In
the event an option intended to be an incentive stock option does not qualify
as such when granted or when exercised, the Board of Directors believes that
any related deduction should not be subject to the annual $1 million per
capita limitation on employee remuneration for the Named Officers of the
Company imposed by Section 162(m) of the Code. The Board of Directors believes
that the income recognized by an employee or other participant upon the
exercise of an option granted under the Equity Incentive Plan should be
qualified performance-based compensation and, therefore, an exception to the
limitations imposed on the Company by Section 162(m) of the Code with respect
to the deductibility of a Named Officer's compensation during a particular
calendar year.
18
<PAGE>
SARS. The grant of an SAR does not result in income for the grantee or in a
business deduction for the Company for federal income tax purposes. Upon the
exercise of an SAR, the grantee recognizes ordinary income and the Company is
entitled to a business deduction measured by the fair market value of the
shares of Common Stock plus any cash received. Income tax withholding would be
required for employees of the Company and its subsidiaries. The Board of
Directors believes that any income related to the exercise of SARs should be
exempt from the $1 million limit of Section 162(m) of the Code pursuant to the
performance-based compensation exception.
Restricted Stock Grants and Deferred Stock Awards. If the shares of Common
Stock issued pursuant to a restricted stock grant or deferred stock award are
subject to restrictions resulting in a "substantial risk of forfeiture"
pursuant to the meaning of such term under Section 83 of the Code, the
restricted stock grant or deferred stock award does not result in income for
the grantee or in a business deduction for the Company for federal income tax
purposes. If there are no such restrictions, conditions, limitations or
forfeiture provisions, the grantee recognizes ordinary income and the Company
is entitled to a business deduction upon receipt of the shares of Common
Stock. Dividends paid to the grantee while the stock remained subject to any
restrictions would be treated as compensation for federal income tax purposes.
At the time the restrictions lapse, the grantee receives ordinary income and
the Company is entitled to a business deduction, subject to the $1 million
deduction limitation under Section 162(m), measured by the fair market value
of the shares of Common Stock at the time of lapse. Income tax withholding
would be required for employees of the Company and its subsidiaries.
Other Stock Based Awards. Any employee of the Company or any of its
subsidiaries who receives shares of Common Stock as bonus compensation or in
lieu of the employee's cash compensation shall recognize ordinary income, and
the Company shall be entitled to a business deduction, subject to the $1
million deduction limitation under Section 162(m), measured by the fair market
value of the shares of Common Stock issued to the employee.
OTHER INFORMATION
If there is a stock split, stock dividend or other relevant change affecting
the Company's Common Stock, appropriate adjustments will be made in the number
of shares of Common Stock or in the type of securities to be issued pursuant
to any award granted before such event. In the event of a merger,
consolidation, combination or other similar transaction involving the Company
in which the Company is not the surviving entity, either all outstanding stock
options and SARs shall become exercisable immediately and all restricted stock
grants and deferred stock awards shall immediately become free of all
restrictions and conditions, or the Compensation Committee may arrange to have
the surviving entity grant replacement awards for all outstanding awards. Upon
termination of service prior to age 65 for any reason other than death or
disability, or upon involuntary termination after age 65, stock options and
SARs which are exercisable as of the date of such termination may be exercised
within three months of the date of termination, and any restricted stock
grants and deferred stock awards which are still subject to any restriction
shall be forfeited to the Company. Upon death or disability or voluntary
termination of service after age 65, all stock options and SARs become
immediately exercisable and may be exercised for a period of six months after
the date of termination (three months in the case of voluntary termination
after age 65), and all restricted stock grants and deferred stock awards shall
become immediately free of all restrictions and conditions. The Compensation
Committee has the discretionary authority to alter or establish the terms and
conditions of an award in connection with termination of service. The Board of
Directors may amend, suspend or terminate the Equity Incentive Plan, subject
to shareholder approval if required pursuant to Section 162(m) of the Code or
the rules of the American Stock Exchange.
19
<PAGE>
PLAN BENEFITS
The following table sets forth information as of April 17, 1998 with respect
to awards granted under the Equity Incentive Plan to the persons and groups of
persons identified in this table.
ROBERTS PHARMACEUTICAL CORPORATION
EQUITY INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME AND POSITION OPTIONS SARS
- ----------------- --------- ---------
<S> <C> <C>
Robert A. Vukovich, Ph.D................................... 350,000 275,000
Chairman of the Board
John T. Spitznagel......................................... 60,000 105,000
President and Chief Executive Officer
Robert W. Loy.............................................. 25,000 67,500
Executive Vice President
Peter M. Rogalin........................................... 35,000 55,000
Vice President, Treasurer and Chief Financial Officer
Anthony A. Rascio.......................................... 5,000 --
Vice President, Secretary and General Counsel
Executive Officer Group.................................... 475,000 502,500
Non-Executive Director Group............................... 90,000 15,000
Non-Executive Officer Employee Group....................... 935,000 --
</TABLE>
VOTE REQUIRED
Approval by the Company's shareholders of each of the proposals to amend the
Equity Incentive Plan (i) to increase the number of shares of Common Stock
reserved for issuance by 1,500,000 shares, and (ii) to require shareholder
approval of the repricing of any option or other award by the Compensation
Committee, requires the affirmative vote of a majority of the votes cast at
the annual meeting by the holders of shares of Common Stock present in person
or represented by proxy. Both proposals must be approved by the Company's
shareholders in order for each of them to be adopted by the Company. If one
proposal does not receive the minimum number of shareholder votes required for
approval, then the other proposal shall also be deemed to have not been
approved by the shareholders and will not be adopted by the Company regardless
of whether such other proposal receives the minimum number of shareholder
votes required for approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON
STOCK RESERVED FOR ISSUANCE THEREUNDER BY 1,500,000 SHARES.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S EQUITY INCENTIVE PLAN TO REQUIRE THAT THE REPRICING OF ANY OPTION OR
OTHER AWARD BE APPROVED BY THE SHAREHOLDERS.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended December 31,
1997 accompanies this Proxy Statement. Coopers & Lybrand L.L.P. has audited
the financial statements for the fiscal year ended December 31, 1997, which
financial statements are contained in the annual report to shareholders. Such
annual report, including the audited financial statements contained therein,
is not incorporated in this Proxy Statement and is not deemed to be a part of
the proxy soliciting material.
20
<PAGE>
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Selection of the independent public accountants for the Company is made by
the Board of Directors and is based upon the recommendation of the Company's
Audit Committee. Coopers & Lybrand L.L.P. was the Company's independent public
accountants for the fiscal year ended December 31, 1997. A representative of
Coopers & Lybrand L.L.P. will be present at the meeting and will have an
opportunity to make a statement if the representative desires to do so. Said
representative will also be available to respond to appropriate questions from
shareholders of the Company.
The appointment of the Company's independent public accountants for the
current fiscal year shall be made by the Board of Directors at its annual
reorganization meeting which shall be held immediately following the
conclusion of the Annual Meeting.
SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the Company's next Annual Meeting
of shareholders must be received by the Company at its principal executive
offices for inclusion in its proxy statement and form of proxy relating to
that meeting no later than December 31, 1998. The Company's By-Laws contain
certain procedures which must be followed in connection with shareholder
proposals.
MANAGEMENT OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
NOMINEES TO THE BOARD OF DIRECTORS AND FOR EACH OF THE PROPOSALS TO AMEND THE
COMPANY'S EQUITY INCENTIVE PLAN.
THE COMPANY SUBMITS TO THE SECURITIES AND EXCHANGE COMMISSION AN ANNUAL
REPORT ON FORM 10-K. COPIES OF THE REPORT WILL BE FURNISHED WITHOUT CHARGE
UPON WRITTEN REQUEST RECEIVED FROM ANY HOLDER OF RECORD OR BENEFICIAL OWNER OF
SHARES OF THE COMMON STOCK OF THE COMPANY. REQUESTS SHOULD BE DIRECTED TO
INVESTOR RELATIONS, ROBERTS PHARMACEUTICAL CORPORATION, MERIDIAN CENTER II, 4
INDUSTRIAL WAY WEST, EATONTOWN, NEW JERSEY 07724.
ALL SHAREHOLDERS ARE URGED TO FILL IN, SIGN AND SEND IN THEIR PROXIES
WITHOUT DELAY TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, 2 BROADWAY, 19TH
FLOOR, NEW YORK, NY 10004. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION
WILL BE APPRECIATED.
ANTHONY A. RASCIO, ESQ.
Vice President and Secretary
April 30, 1998
21
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS--MAY 27, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Robert A. Vukovich, Ph.D., John T.
Spitznagel and Anthony A. Rascio, Esq. and each of them, the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, to vote with respect to all of the shares of Common Stock of
ROBERTS PHARMACEUTICAL CORPORATION standing in the name of the undersigned at
the close of business on April 17, 1998, at the annual meeting of shareholders
to be held at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York 10006, on May 27, 1998 at 10:00 a.m., and at any and all
adjournment or adjournments thereof, with all powers that the undersigned would
possess if personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated below and on the
reverse side of this Proxy.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
[ ] [ ]
Robert A. Vukovich, Ph.D., John T. Spitznagel, Robert W. Loy, Peter M. Rogalin,
Digby W. Barrios, Zola P. Horovitz, Ph.D., Joseph N. Noonburg and Marilyn Lloyd.
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
<PAGE>
2. To approve the amendment to the Roberts Pharmaceutical Corporation 1996
Equity Incentive Plan to increase the number of shares of Common Stock
reserved for issuance under the Equity Incentive Plan by 1,500,000 shares.
Adoption of this proposal No. 2 is conditioned on adoption of proposal No. 3
below.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the amendment to the Roberts Pharmaceutical Corporation 1996
Equity Incentive Plan to require shareholder approval of the repricing of
any option or other award granted under the Equity Incentive Plan. Adoption
of this proposal No. 3 is conditioned on adoption of proposal No. 2 above.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion upon such other matters as may properly come before the
meeting or any adjournment or adjournments thereof.
The shares represented by this Proxy will be voted in the manner directed, and
if no instructions to the contrary are indicated, will be voted FOR the election
of the nominees indicated on the reverse side of this Proxy and FOR each of the
proposals to amend the Roberts Pharmaceutical Corporation 1996 Equity Incentive
Plan.
NOTE: Please mark, sign, date and return
promptly in the envelope provided.
No postage is required if mailed in the United
States.
Date: ____________, 1998
________________________
(Signature)
________________________
(Signature)
Please sign exactly as your name appears. When
signing as attorney, executor, administrator,
trustee or guardian, please set forth your full
title. If signer is a corporation, please sign
the full corporate name by a duly authorized
officer. Joint owners should each sign.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 99.1
ROBERTS PHARMACEUTICAL CORPORATION
1996 EQUITY INCENTIVE PLAN, AS AMENDED
1. PURPOSE.
--------
The purpose of this Roberts Pharmaceutical Corporation 1996 Equity
Incentive Plan (the "Plan") is to advance the interests of Roberts
Pharmaceutical Corporation (the "Company") and its subsidiaries by
enhancing the ability of the Company to (i) attract and retain employees
and other persons or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries; (ii)
reward such persons for such contributions; and (iii) encourage such
persons or entities to take into account the long-term interest of the
Company through ownership of shares of the Company's common stock, $.01 par
value per share (the "Common Stock").
The Plan is intended to accomplish these objectives by enabling the Company
to grant awards ("Awards") in the form of incentive stock options ("ISOs"),
nonqualified stock options ("Nonqualified Options") (ISOs and Nonqualified
Options shall be collectively referred to herein as "Options"), stock
appreciation rights ("SARs"), restricted stock ("Restricted Stock"),
deferred stock ("Deferred Stock"), or other stock based awards ("Other
Stock Based Awards"), all as more fully described below.
2. ADMINISTRATION.
---------------
The Plan will be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board"). The
Committee may be constituted to permit the Plan to comply with the
"disinterested administration" requirement of Rule 16b-3(c)(2)(i)
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any successor rules, and to comply with the "outside
director" requirement of Section 162(m)(4)(c)(i) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder, or any successor rules. The Committee will determine the
recipients of Awards, the times at which Awards will be made, the size and
type or types of Awards to be made to each recipient, and will set forth in
each such Award the terms, conditions and limitations applicable to the
Award granted. Awards may be made singly, in combination or in tandem.
The Committee
<PAGE>
will have full and exclusive power to interpret the Plan, to adopt rules,
regulations and guidelines relating to the Plan, to grant waivers of Plan
restrictions and to make all of the determinations necessary for its
administration. Such determinations and actions of the Committee, and all
other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and
binding on all parties.
3. EFFECTIVE DATE AND TERM OF PLAN.
--------------------------------
The Plan will become effective on May 22, 1996. Awards under the Plan may
be made prior to that date, subject to the shareholders' approval of the
Plan.
The Plan will terminate on May 21, 2006, subject to earlier termination of
the Plan by the Board pursuant to Section 18 herein. No Award may be
granted under the Plan after the termination date of the Plan, but Awards
previously granted may extend beyond that date pursuant to the terms of
such Awards.
4. SHARES SUBJECT TO THE PLAN.
---------------------------
Subject to adjustment as provided in Section 16 herein, the aggregate
number of shares of Common Stock reserved for issuance pursuant to Awards
granted under the Plan shall be 3,000,000. The maximum number of shares of
Common Stock which may be issued to the Chief Executive Officer ("CEO") of
the Company pursuant to all Awards granted the CEO under the Plan shall not
exceed thirty-five percent (35%) of the number of shares of the Company's
Common Stock reserved for issuance hereunder. The maximum number of shares
of the Company's Common Stock awarded to any other "Participant" (as
defined in Section 5 below) pursuant to all Awards granted to such
Participant under the Plan shall not exceed twenty percent (20%) of the
number of shares of the Company's Common Stock reserved for issuance
hereunder.
The shares of Common Stock delivered under the Plan may be either
authorized but unissued shares of Common Stock or shares of the Company's
Common Stock held by the Company as treasury shares, including shares of
Common Stock acquired by the Company in open market and private
transactions. No fractional shares of Common Stock will be delivered
pursuant to Awards granted under the Plan and the Committee shall determine
the manner in which fractional share value will be treated.
If any Award requiring exercise by a Participant for delivery of shares of
Common Stock is cancelled or terminates without having been exercised in
full, or if any
-2-
<PAGE>
Award payable in shares of Common Stock or cash is satisfied in cash rather
than Common Stock, the number of shares of Common Stock as to which such
Award was not exercised or for which cash was substituted will be available
for future Awards of Common Stock; provided, however, that Common Stock
subject to an Option cancelled upon the exercise of an SAR shall not again
be available for Awards under the Plan unless, and to the extent that, the
SAR is settled in cash. Shares of Restricted Stock and Deferred Stock
forfeited to the Company in accordance with the Plan and the terms of the
particular Award shall be available again for Awards under the Plan unless
the Committee determines otherwise.
5. ELIGIBILITY AND PARTICIPATION.
------------------------------
Those eligible to receive Awards under the Plan (each, a "Participant" and
collectively, the "Participants") will be persons in the employ of the
Company or any of its subsidiaries designated by the Committee
("Employees") and other persons or entities who, in the opinion of the
Committee, are in a position to make a significant contribution to the
success of the Company or its subsidiaries, including, without limitation,
consultants and agents of the Company or any subsidiary; provided, that
such consultants and agents have been actively engaged in the conduct of
the business of the Company or any subsidiary. A "subsidiary" for purposes
of the Plan will be a present or future corporation of which the Company
owns or controls, or will own or control, more than 50% of the total
combined voting power of all classes of stock or other equity interests.
6. OPTIONS.
--------
(a) Nature of Options. An Option is an Award entitling the Participant to
------------------
purchase a specified number of shares of Common Stock at a specified
exercise price. Both ISOs, as defined in Section 422 of the Code, and
Nonqualified Options may be granted under the Plan; provided however,
that ISOs may be awarded only to Employees.
(b) Exercise Price. The exercise price of each Option shall be equal to
---------------
the "Fair Market Value" (as defined below) of the Common Stock on the
date the Award is granted to the Participant; provided, however, that
(i) in the Committee's discretion, the exercise price of a
Nonqualified Option may be less than the Fair Market Value of the
Common Stock on the date of grant; (ii) with respect to a Participant
who owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, the option price of an
ISO granted to such Participant shall not be less than
-3-
<PAGE>
one hundred and ten percent (110%) of the Fair Market Value of the
Common Stock on the date the Award is granted; and (iii) with respect
to any Option repriced by the Committee, the exercise price shall be
equal to the Fair Market Value of the Common Stock on the date such
Option is repriced unless otherwise determined by the Committee. For
purposes of this Plan, Fair Market Value shall mean the arithmetic
average of the highest and lowest sale prices of the Common Stock as
reported on the Automated Quotation System of the National Association
of Securities Dealers, Inc. National Market System ("NASDAQ National
Market System"), on a particular date, or if there is no sale on such
date, then the average of such high and low sale prices on the last
previous date on which a sale of Common Stock is reported on the
NASDAQ National Market System.
(c) Duration of Options. The term of each Option granted to a Participant
--------------------
pursuant to an Award shall be determined by the Committee; provided,
however, that in no case shall an Option be exercisable more than ten
(10) years (five (5) years in the case of an ISO granted to a ten-
percent shareholder as defined in (b) above) from the date of the
Award.
(d) Exercise of Options and Conditions. Except as otherwise provided in
-----------------------------------
Sections 16 and 17 herein, and except as otherwise provided below with
respect to ISOs, Options granted pursuant to an Award will become
exercisable at such time or times, and on and subject to such
conditions, as the Committee may specify at the time of the Award.
The Options may be subject to such restrictions, conditions and
forfeiture provisions as the Committee may determine, including, but
not limited to, restrictions on transfer, continuous service with the
Company or any of its subsidiaries, achievement of business
objectives, and individual, division and Company performance. To the
extent exercisable, an Option may be exercised either in whole at any
time or in part from time to time. With respect to an ISO granted to
a Participant, the Fair Market Value of the shares of Common Stock on
the date of grant which are exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000.
(e) Payment for and Delivery of Stock. Full payment for shares of Common
----------------------------------
Stock purchased will be made at the time of the exercise of the
Option, in whole or in part. Payment of the purchase price will be
made in cash or in such other form as the Committee may permit,
including, without limitation, delivery of shares of Common Stock.
-4-
<PAGE>
7. STOCK APPRECIATION RIGHTS.
--------------------------
(a) Nature of Stock Appreciation Rights. A SAR is an Award entitling the
------------------------------------
recipient to receive payment, in cash and/or shares of Common Stock,
determined in whole or in part by reference to appreciation in the
value of a share of Common Stock. A SAR entitles the recipient to
receive in cash and/or shares of Common Stock, with respect to each
SAR exercised, the excess of the Fair Market Value of a share of
Common Stock on the date of exercise over the Fair Market Value of a
share of Common Stock on the date the SAR was granted.
(b) Grant of SARs. SARs may be subject to Awards in tandem with, or
--------------
independently of, Options granted under the Plan. A SAR granted in
tandem with an Option which is not an ISO may be granted either at or
after the time the Option is granted. A SAR granted in tandem with an
ISO may be granted only at the time the ISO is granted and may expire
no later than the expiration of the underlying ISO.
(c) Exercise of SARs. A SAR not granted in tandem with an Option will
-----------------
become exercisable at such time or times, and on such conditions, as
the Committee may specify. A SAR granted in tandem with an Option will
be exercisable only at such times, and to the extent, that the related
Option is exercisable. A SAR granted in tandem with an ISO may be
exercised only when the market price of the shares of Common Stock
subject to the ISO exceeds the exercise price of the ISO, and the SAR
may be for no more than one hundred percent (100%) of the difference
between the exercise price of the underlying ISO and the Fair Market
Value of the Common Stock subject to the underlying ISO at the time
the SAR is exercised. At the option of the Committee, upon exercise,
an SAR may be settled in cash, Common Stock or a combination of both.
8. RESTRICTED STOCK.
-----------------
A Restricted Stock Award entitles the recipient to acquire shares of Common
Stock, subject to certain restrictions or conditions, for no cash
consideration, if permitted by applicable law, or for such other
consideration as may be determined by the Committee. The Award may be
subject to such restrictions, conditions and forfeiture provisions as the
Committee may determine, including, but not limited to, restrictions on
transfer, continuous service with the Company or any of its subsidiaries,
achievement of business objectives, and individual, division and Company
performance. Subject to such restrictions, conditions and
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forfeiture provisions as may be established by the Committee, any
Participant receiving an Award of Restricted Stock will have all the rights
of a shareholder of the Company with respect to the shares of Restricted
Stock, including the right to vote the shares and the right to receive any
dividends thereon.
9. DEFERRED STOCK.
---------------
A Deferred Stock Award entitles the recipient to receive shares of Common
Stock to be delivered in the future. Delivery of the shares of Common Stock
will take place at such time or times, and on such conditions, as the
Committee may specify. At the time any Deferred Stock Award is granted,
the Committee may provide that the Participant will receive an instrument
evidencing the Participant's right to future delivery of Deferred Stock.
10. OTHER STOCK BASED AWARDS.
-------------------------
The Committee shall have the right to grant Other Stock Based Awards under
the Plan to Employees which may include, without limitation, the grant of
shares of Common Stock as bonus compensation and the issuance of shares of
Common Stock in lieu of an Employee's cash compensation.
11. AWARD AGREEMENTS.
-----------------
The grant of any Award under the Plan may be evidenced by an agreement
which shall describe the specific Award granted and the terms and
conditions of the Award. Any Award shall be subject to the terms and
conditions of any such agreement required by the Committee.
12. TRANSFERS.
----------
No Award (other than an outright Award in the form of Common Stock without
any restrictions) may be assigned, pledged or transferred other than by
will or by the laws of descent and distribution and, during a Participant's
lifetime, will be exercisable only by the Participant or, in the event of a
Participant's incapacity, by the Participant's guardian or legal
representative.
13. RIGHTS OF A SHAREHOLDER.
------------------------
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a shareholder of the Company. The
Participant will obtain such rights, subject to any limitations imposed by
the Plan, or the instrument evidencing the Award, upon actual receipt of
shares of Common Stock.
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14. CONDITIONS ON DELIVERY OF STOCK.
--------------------------------
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restrictions or legends from shares
of Common Stock previously delivered under the Plan until, (a) in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (b) until the shares of Common Stock
to be delivered have been listed or authorized to be listed on the NASDAQ
National Market System, and (c) until all other legal matters in connection
with the issuance and delivery of such shares of Common Stock have been
approved by the Company's counsel. If the sale of shares of Common Stock
has not been registered under the Securities Act of 1933, as amended (the
"Act"), and qualified under the appropriate "blue sky" laws, the Company
may require, as a condition to exercise of the Award, such representations
and agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and laws and may require that the certificates
evidencing such shares of Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by a Participant's legal representative, the
Company will be under no obligation to deliver shares of Common Stock
pursuant to such exercise until the Company is satisfied as to the
authority of such representative.
15. TAX WITHHOLDING.
----------------
The Company will have the right to deduct from any cash payment under the
Plan taxes that are required to be withheld and to condition the obligation
to deliver or vest shares of Common Stock under this Plan upon the
Participant's paying the Company such amount as the Company may request to
satisfy any liability for applicable withholding taxes. The Committee may
in its discretion permit Participants to satisfy all or part of their
withholding liability either by delivery of shares of Common Stock held by
the Participant or by withholding shares of Common Stock to be delivered to
a Participant upon the grant or exercise of an Award.
16. ADJUSTMENT OF AWARD.
--------------------
(a) In the event that a dividend shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of the Common
Stock then subject to any Award and the number of shares of the Common
Stock which may be issued under the Plan but not yet covered by an
Award shall be adjusted by adding to each share
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the number of shares which would be distributable thereon if such
shares had been outstanding on the date fixed for determining the
shareholders entitled to receive such stock dividend. In the event
that the outstanding shares of the Common Stock shall be changed into
or exchanged for a different number or kind of shares of Common Stock
or other securities of the Company or of another corporation or for
cash, whether through reorganization, recapitalization, stock split,
combination of shares, sale of assets, merger or consolidation in
which the Company is the surviving corporation, then, there shall be
substituted for each share of the Common Stock then subject to any
Award, the number and kind of shares of stock or other securities or
the amount of cash into which each outstanding share of the Common
Stock shall be so changed or for which each such share shall be
exchanged.
(b) In the event of a proposal, which is approved by the Board, of any
merger or consolidation involving the Company where the Company is not
the surviving entity, any sale of substantially all of the Company's
assets or any other transaction or series of related transactions as a
result of which a single person or several persons acting in concert
own a majority of the Company's then outstanding Common Stock (such
merger, consolidation, sale of assets, or other transaction being
hereinafter referred to as a "Transaction"), all outstanding Options
and SARs shall become exercisable immediately before or
contemporaneously with the consummation of such Transaction and each
outstanding share of Restricted Stock and each outstanding Deferred
Stock Award shall immediately become free of all restrictions and
conditions upon consummation of such Transaction. Upon consummation
of the Transaction, all outstanding Options and SARs shall terminate
and cease to be exercisable.
In lieu of the foregoing, if the Company will not be the surviving
corporation or entity, the Committee may arrange to have such
acquiring or surviving corporation or entity, or an "Affiliate" (as
defined below) thereof, grant replacement Awards to Participants
holding outstanding Awards.
The term "Affiliate," with respect to any Person, shall mean any other
Person who is, or would be deemed to be an "affiliate" or an
"associate" of such Person within the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act. The term "Person" shall mean a
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corporation, association, partnership, joint venture, trust,
organization, business, individual or government or any governmental
agency or political subdivision thereof.
(c) In the event of the dissolution or liquidation of the Company (except
a dissolution or liquidation relating to a sale of assets or other
reorganization of the Company referred to in the preceding sections),
the outstanding Options and SARs shall terminate as of a date fixed by
the Committee; provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to each Participant
who shall have the right during such period to exercise the
Participant's Options or SARs as to all or any part of the shares of
Common Stock covered thereby. Further, in the event of the
dissolution or liquidation of the Company, each outstanding share of
Restricted Stock and each outstanding Deferred Stock Award shall
immediately become free of all restrictions and conditions.
17. TERMINATION OF SERVICE.
-----------------------
Upon a Participant's termination of service with the Company or a
subsidiary (if an employee only of a subsidiary), any outstanding Award shall be
subject to the terms and conditions set forth below, unless otherwise determined
by the Committee:
(a) In the event a Participant leaves the employ or service of the Company
or, if the Participant is an employee only of a subsidiary of the
Company, a subsidiary prior to the Participant's 65th birthday,
whether voluntarily or otherwise but other than by reason of the
Participant's death or "disability" (as such term is defined in
Section 22(e)(3) of the Code), each Option and SAR granted to the
Participant shall terminate upon the earlier to occur of (i) the
expiration of the period three (3) months after the date of such
termination and (ii) the date specified in the Option or SAR;
provided, that, prior to the termination of such Option or SAR, the
Participant shall be able to exercise any part of the Option or SAR
which is exercisable as of the date of termination. Further, each
outstanding share of Restricted Stock and each outstanding Deferred
Stock Award which remains subject to any restrictions or conditions of
the Award shall be forfeited to the Company upon such date of
termination.
(b) In the event a Participant's employment with or service to the Company
or its subsidiaries terminates by reason of the Participant's death or
"disability" (as such term is defined in Section 22(e)(3) of the
Code), each
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Option and SAR granted to the Participant shall become immediately
exercisable in full and shall terminate upon the earlier to occur of
(i) the expiration of the period six (6) months after the date of such
termination and (ii) the date specified in the Option or SAR. Further,
each outstanding share of Restricted Stock and each outstanding
Deferred Stock Award shall immediately become free of all restrictions
and conditions upon the date of such termination.
(c) In the event a Participant voluntarily leaves the employ or service of
the Company or, if the Participant is an employee only of a subsidiary
of the Company, a subsidiary after the Participant's 65th birthday,
each Option and SAR granted to the Participant shall become
immediately exercisable in full and shall terminate upon the earlier
to occur of (i) the expiration of three (3) months after the date of
such termination and (ii) the date specified in the Option or SAR.
Further, each outstanding share of Restricted Stock and each
outstanding Deferred Stock Award shall immediately become free of all
restrictions and conditions upon the date of such termination unless
otherwise provided in the Award. If the Participant involuntarily
leaves the employ or service of the Company or a subsidiary after the
Participant's 65th birthday, each Option and SAR granted to the
Participant shall terminate upon the earlier to occur of (i) the
expiration of three (3) months after the date of such termination and
(ii) the date specified in the Option or SAR; provided, that, prior to
the termination of such Option or SAR, the Participant shall be able
to exercise any part of the Option or SAR which is exercisable as of
the date of termination. Further, each outstanding share of
Restricted Stock and each outstanding Deferred Stock Award which
remains subject to any restrictions or conditions of the Award shall
be forfeited to the Company upon such date of termination.
18. AMENDMENTS AND TERMINATION.
---------------------------
The Committee will have the authority to make such amendments to any terms
and conditions applicable to outstanding Awards as are consistent with this
Plan; provided, that, (i) except for adjustments under Section 16 hereof,
no such action will modify such Award in a manner adverse to the
Participant without the Participant's consent except as such modification
is provided for or contemplated in the terms of the Award, and (ii) except
for adjustments provided for in Section 16 of this Plan, the exercise price
of any Option or SAR, or the consideration due the Company with respect to
any other Award, shall not be repriced or
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otherwise amended without the approval of a majority of the votes cast by
the Company's shareholders.
The Board may amend, suspend or terminate the Plan, except (i) no such
action may be taken, without shareholder approval, which would effectuate
any change for which shareholder approval is required pursuant to Section
16 of the Exchange Act or Section 162(m) of the Code, and (ii) no action
may, without the consent of a Participant, alter or impair any Award
previously granted to the Participant under the Plan.
19. SUCCESSORS AND ASSIGNS.
-----------------------
The provisions of this Plan shall be binding upon all successors and
assigns of any such Participant including, without limitation, the estate
of any such Participant and the executors, administrators, or trustees of
such estate, and any receiver, trustee in bankruptcy or representative of
the creditors of any such Participant.
20. MISCELLANEOUS.
-------------
(a) This Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey.
(b) Any and all funds received by the Company under the Plan may be used
for any corporate purpose.
(c) Nothing contained in the Plan or any Award granted under the Plan
shall confer upon a Participant any right to be continued in the
employment of the Company or any subsidiary, or interfere in any way
with the right of the Company, or its subsidiaries, to terminate the
employment relationship at any time.
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