<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
[ ] 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, 1999
----------------
To the Shareholders of
Roberts Pharmaceutical Corporation:
The Annual Meeting of the Shareholders of ROBERTS PHARMACEUTICAL CORPORATION
(the "Company") will be held on Thursday, May 27, 1999 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 nine 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 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 16,
1999, are entitled to notice of and to vote at the meeting.
Anthony A. Rascio, Esq.
Vice President and Secretary
Eatontown, New Jersey
April 30, 1999
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 per share ("Common Stock"), of Roberts Pharmaceutical Corporation (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board of Directors") for use at the annual
meeting of shareholders to be held on May 27, 1999, and at any adjournment
thereof (the "Annual Meeting"). A form of proxy for use at the meeting is also
enclosed. The Company anticipates mailing this Proxy Statement and the
enclosed proxy card to its shareholders on or about April 30, 1999. 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 proposal 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. 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 16, 1999, the
Company had 31,613,810 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 proposal 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. The proposal to amend the Equity Incentive Plan must be approved by
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 and entitled to vote.
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.
<PAGE>
Principal Shareholders
The following table sets forth information as of April 16, 1999, 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
of Beneficial of
Name and Address of Beneficial Owner Ownership(1) Class
- ------------------------------------ ----------------- -------
<S> <C> <C>
Yamanouchi Group Holding Inc. (2)........................... 5,048,500 16.0%
Robert A. Vukovich, Ph.D. (3)............................... 2,975,761(4)(5)(6) 9.4%
</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 172 County Road 537 East, Colts Neck, New
Jersey 07722.
(4) Includes 812,500 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.
(6) Includes 378,000 shares of Common Stock pledged as collateral to secure
payment of Dr. Vukovich's obligations under a pair of liquidity agreements
which he entered into with a securities broker in 1998. Dr. Vukovich
remains the record and beneficial owner of all shares pledged as
collateral under these liquidity agreements.
2
<PAGE>
Security Ownership of Management
The following table sets forth information as of April 16, 1999, 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, nominee for Director and
Named Officer (as defined in the section captioned "Executive Compensation")
of the Company, 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>
John T. Spitznagel.................. 173,385(2) (3)
Robert A. Vukovich, Ph.D............ 2,975,761(4)(5)(6) 9.4%
Robert W. Loy....................... 85,879(7) (3)
Peter M. Rogalin.................... 72,348(8) (3)
Anthony A. Rascio, Esq.............. 28,740(9) (3)
Digby W. Barrios.................... 36,750(10) (3)
Zola P. Horovitz, Ph.D.............. 20,750(11) (3)
Joseph N. Noonburg.................. 4,000(12) (3)
Marilyn Lloyd....................... 5,500(13) (3)
Joseph E. Smith..................... --
Ronald M. Nordmann.................. 1,000(14) (3)
All Directors, Nominees for Director
and Executive Officers as a Group
(11 persons)....................... 3,404,113(2)(4)(5)(6) 10.8%
(7)(8)(9)(10)
(11)(12)(13)
</TABLE>
- --------
(1) Except as otherwise indicated, all of the shares of the Company's Common
Stock are held beneficially and of record.
(2) Includes 154,750 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(3) Shares beneficially owned do not exceed 1% of the Company's outstanding
shares of Common Stock.
(4) Includes 812,500 shares of Common Stock subject to currently exercisable
options granted 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.
(6) Includes 378,000 shares of Common Stock pledged as collateral to secure
payment of Dr. Vukovich's obligations under a pair of liquidity
agreements which he entered into with a securities broker in 1998. Dr.
Vukovich remains the record and beneficial owner of all shares pledged
as collateral under these liquidity agreements.
(7) Includes 68,750 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(8) Includes 68,500 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(9) Includes 19,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Incentive Stock Option Plan and Equity
Incentive Plan.
(10) Includes 28,750 shares of Common Stock subject to currently exercisable
options granted pursuant to the Equity Incentive Plan.
(11) Includes 19,750 shares of Common Stock subject to currently exercisable
options granted pursuant to the Equity Incentive Plan.
(12) Includes 3,000 shares of Common Stock subject to currently exercisable
options granted pursuant to the Equity Incentive Plan.
3
<PAGE>
(13) Includes 5,500 shares of Common Stock subject to currently exercisable
options granted pursuant to the Equity Incentive Plan.
(14) Deerfield Management Company, an investment management firm, and its
general partner beneficially own 600,000 shares of the Company's Common
Stock. Mr. Nordmann is a financial analyst at Deerfield Management and a
limited partner in one of the entities controlled by Deerfield
Management's general partner.
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 Company's 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 the 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 the Company's Common Stock). As of April 16, 1999,
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. Yamanouchi has not designated any nominee for election
to the Board of Directors at the Annual Meeting.
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 granted Yamanouchi certain rights of first refusal
with respect to shares of the Company's outstanding Common Stock that he
proposes to sell, though Yamanouchi has no obligation to purchase any such
shares. Pursuant to the Shareholder Agreement, Dr. Vukovich has agreed to vote
all shares of Common Stock held by him in favor of the election of
Yamanouchi's Board of Directors designee(s), if any.
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 nine. Each of the
individuals named below has been nominated for election as a Director by the
Board of Directors. With the exception of Ronald M. Nordmann, each such
individual named below is currently a member of the Board of Directors of the
Company.
4
<PAGE>
It is the intention of the persons named in the accompanying proxy to vote,
unless otherwise instructed, in favor of the election of the nine nominees
named below as Directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR DIRECTOR.
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 would
be unavailable for election, or if elected, would 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>
Nominee Age Principal Occupation or Employment
- ------- --- ----------------------------------
<S> <C> <C>
John T. Spitznagel............... 57 President, Chief Executive Officer and a Director
of Roberts Pharmaceutical Corporation
Robert A. Vukovich, Ph.D......... 55 Chairman of the Board of Directors of Roberts
Pharmaceutical Corporation and Chairman, President
and Chief Executive Officer of Wellspring
Pharmaceutical Corporation
Robert W. Loy.................... 61 Executive Vice President--Operations and a
Director of Roberts Pharmaceutical Corporation
Digby W. Barrios................. 61 Self-employed Consultant and a Director of Roberts
Pharmaceutical Corporation
Zola P. Horovitz, Ph.D........... 64 Self-employed Consultant and a Director of Roberts
Pharmaceutical Corporation
Joseph N. Noonburg............... 63 Self-employed Consultant and a Director of Roberts
Pharmaceutical Corporation
Marilyn Lloyd.................... 70 Self-employed Consultant and a Director of Roberts
Pharmaceutical Corporation
Joseph E. Smith.................. 60 Self-employed Consultant and a Director of Roberts
Pharmaceutical Corporation
Ronald M. Nordmann............... 57 Financial Analyst in Healthcare Equities--
Deerfield Management Company
</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, RiboGene, Inc. and Sheffield
Technologies Inc. Dr. Horovitz serves as a Director of BioCryst
Pharmaceuticals, Inc., Magainin Pharmaceuticals, Inc., Synaptic Pharmaceutical
Corporation, Avigen, Inc., Procept, Inc., Diacrim, Inc. and Clinicor, Inc. Mr.
Smith serves as a Director of Boren, LePore and Associates, Vivus, Inc. and
Avanir Pharmaceuticals. 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.
5
<PAGE>
John T. Spitznagel has served as President and Chief Executive Officer of
the Company since September 1997 and as a Director of the Company since July
1996. Mr. Spitznagel served as Executive Vice President--Worldwide Sales and
Marketing of the Company from March 1996 to September 1997. 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 Dickinson
University.
Robert A. Vukovich, Ph.D. has served as Chairman of the Board of the Company
since the Company's inception in 1983. In addition to his duties as Chairman
of the Board, Dr. Vukovich acts as a consultant to the Company with respect to
researching and developing pharmaceutical products and identifying and
evaluating products and businesses for potential licensing and acquisition
opportunities for the Company. From 1983 to September 1997, Dr. Vukovich
served as President and Chief Executive Officer of the Company. Currently, Dr.
Vukovich serves as Chairman, President and Chief Executive Officer of
Wellspring Pharmaceutical Corporation. From 1979 to 1983, Dr. Vukovich 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.
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 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.
Digby W. Barrios has served as a Director of the Company since March 1994.
Mr. 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.
Zola P. Horovitz, Ph.D. has served as a Director of the Company since
October 1996. Dr. Horovitz has been self-employed as a consultant in the
biotechnology and pharmaceutical industries since 1994. From 1959 to 1994, Dr.
Horovitz held various positions at Squibb Corporation, including that of Vice
President, Business Development and Planning. Dr. Horovitz received
undergraduate and masters degrees and a Ph.D. from the University of
Pittsburgh.
Joseph N. Noonburg has served as a Director of the Company since May 1997.
Mr. 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 received his undergraduate degree
from Rutgers University.
The Honorable Marilyn Lloyd has served as Director of the Company since May
1997. Ms. 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 Armed Services and was
a ranking member of the Procurement Subcommittee of the Armed Services
Committee.
6
<PAGE>
Joseph E. Smith has served as a Director of the Company since August 1998.
Mr. Smith has been self-employed as a consultant since 1997. From 1989 to
1997, Mr. Smith served in various positions at Warner-Lambert Company,
including President of Parke-Davis Pharmaceuticals and President of the
Shaving Products Division (Schick and Wilkinson Sword). In addition, Mr. Smith
held prior positions at Johnson & Johnson and served as President of Rorer
Pharmaceutical Corporation. Mr. Smith received his undergraduate degree from
the University of Buffalo and an M.B.A. degree from the Wharton School of the
University of Pennsylvania.
Ronald M. Nordmann has been a financial analyst in healthcare equities since
1971. Since September 1994, Mr. Nordmann has been a financial analyst at
Deerfield Management and a limited partner in one of the entities controlled
by Deerfield Management's general partner. From April 1985 to September 1994,
Mr. Nordmann held the position of Managing Director with PaineWebber
Incorporated. From 1980 to April 1985, Mr. Nordmann was a Senior Vice
President and Limited Partner with Oppenheimer & Co., Inc. Mr. Nordmann held
various positions with PaineWebber Incorporated from 1977 to 1980; with F.
Eberstadt & Co., Inc. from 1971 to 1977; and with Warner-Chilcott
Laboratories, a division of Warner-Lambert from 1967 to 1971. Mr. Nordmann
received his undergraduate degree from The Johns Hopkins University and an
M.B.A. from Fairleigh Dickinson University. This is Mr. Nordmann's initial
nomination for election to the Board of Directors.
Meetings of the Board of Directors; Committees
During the year ended December 31, 1998, the Board of Directors held six (6)
meetings, including two (2) special meetings. During 1998, 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, Dr. Horovitz and Ms. Lloyd. 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 of the performance
of any non-audit services; and to review the plan, scope and results of the
Company's internal audit operations. During the year ended December 31, 1998,
the Audit Committee held three (3) 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, the Employee Stock Purchase Plan (the "Stock Purchase Plan"), the
Employees Savings and Protection Plan (the "401(k) Plan") and the Supplemental
Executive Retirement Plan (the "SERP"). The Compensation Committee also
administers the Company's Incentive Stock Option Plan and Restricted Stock
Option Plan, which were both previously terminated. The Compensation Committee
administers these latter plans to the extent that options granted prior to the
termination of these plans remain outstanding and continue to be exercisable
pursuant to their terms. During the year ended December 31, 1998, the
Compensation Committee held five (5) meetings and acted by unanimous written
consent on thirty-three (33) occasions.
Nominating Committee
The Nominating Committee has 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. The Nominating
Committee did not hold any meetings during 1998.
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, 1998, with
the cumulative total return on the 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 the AMEX Market Index
and the Peer Group on December 31, 1993, and reinvestment of all dividends).
The Peer Group consists of Dura Pharmaceuticals, Inc., Forest Laboratories,
Inc., IVAX Corporation, Jones Pharma Incorporated (formerly Jones Medical
Industries, Inc.) and Medeva PLC.
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roberts Pharmaceutical Corporation 100 80 45 28 24 54
- ------------------------------------------------------------------------------------------------------------------------------------
Peer Group 100 87 117 100 101 146
- ------------------------------------------------------------------------------------------------------------------------------------
AMEX Market Index 100 88 114 120 145 143
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 years ended December 31, 1998, 1997 and 1996, of the
Company's Chief Executive Officer and the other Executive Officers of the
Company who earned salary and bonuses in excess of $100,000 during the year
ended December 31, 1998 (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Underlying All Other
Salary Bonus Options/ Compensation
Name & Principal Position Year ($) (1) ($) (2) SARs (#) ($)
- ------------------------- ---- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
John T. Spitznagel (3). 1998 $314,795 $ 450,000(4) 202,500(5) $ 8,000(6)
President and Chief
Executive Officer 1997 247,692 50,000 110,000(7) 8,000
1996 149,715 -- 115,000(8) 6,750
Robert A. Vukovich,
Ph.D. (9)............. 1998 342,089 250,000 262,500(5) 379,124(10)
Chairman of the Board
and 1997 625,000 150,000 125,000(7) 8,000
Former Executive
Director 1996 540,000 -- 790,000(11) 7,500
Robert W. Loy.......... 1998 233,654 205,000(4) 108,750(5) 8,000(6)
Executive Vice
President 1997 228,365 50,000 37,500(7) 8,000
1996 202,071 -- 136,000(12) 7,500
Peter M. Rogalin (13).. 1998 193,000 125,000(4) 50,500(5) 8,000(6)
Vice President,
Treasurer and 1997 193,000 50,000 25,000(7) 8,000
Financial Officer 1996 155,677 -- 115,000(8) 7,500
Anthony A. Rascio,
Esq................... 1998 153,654 60,000(4) 53,000(5) 7,440(6)
Vice President,
Secretary and 1997 150,577 -- -- 7,529
General Counsel 1996 148,069 -- 12,000(14) 7,442
</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."
(2) Represents amounts paid to the Named Officers pursuant to the Company's
Management Incentive Compensation Plan. See "Compensation Committee Report
on Executive Compensation."
(3) Mr. Spitznagel joined the Company in March, 1996 and served as Executive
Vice President until September, 1997 when he was appointed President and
Chief Executive Officer of the Company.
(4) Includes $300,000, $130,000, $75,000 and $60,000 paid in 1999 to Mr.
Spitznagel, Mr. Loy, Mr. Rogalin and Mr. Rascio, respectively, for
services performed in 1998.
(5) Represents shares of Common Stock underlying options granted in 1998.
(6) Represents matching and discretionary contributions to be made by the
Company under the 401(k) Plan. See "Employees Savings and Protection
Plan."
(7) Includes 75,000, 125,000, 37,500 and 25,000 stock appreciation rights
("SARs") granted in January 1998 to Mr. Spitznagel, Dr. Vukovich, Mr. Loy
and Mr. Rogalin, respectively, for performance in 1997. Includes also
35,000 shares of Common Stock underlying options granted in 1997 to Mr.
Spitznagel upon his appointment as President and Chief Executive Officer
of the Company.
(8) Includes 55,000 shares of Common Stock underlying options and 30,000 SARs
granted during the 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.
(9) Dr. Vukovich currently serves as Chairman of the Board and as a consultant
to the Company. He served as President and Chief Executive Officer of the
Company from the inception of the Company until
9
<PAGE>
September 1997 and as Executive Chairman from September 1997 through
October 1, 1998, at which time he elected to retire from active employment
with the Company. See "Retirement of Dr. Vukovich."
(10) Includes a retirement bonus in the amount of $250,000 and a 1998 SERP
benefit of $64,878. Includes also compensation paid to Dr. Vukovich
during the period October 1, 1998 to December 31, 1998 in connection with
his retirement from active employment with the Company: consulting fees
of $50,000; Company car benefit of $5,095; paid health insurance premiums
of $2,723; paid life insurance premiums of $1,628; and matching
contributions under the 401(k) Plan of $4,800. See "Retirement of Dr.
Vukovich."
(11) 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.
(12) Includes 25,000 shares of Common Stock underlying options and 30,000 SARs
granted during the 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.
(13) Mr. Rogalin joined the Company in February, 1996.
(14) 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
In August 1998, the Company entered into new employment agreements with each
of Mr. Spitznagel, Mr. Loy, Mr. Rogalin and Mr. Rascio, which provide for
minimum annual base salaries of $350,000, $240,000, $193,000 and $160,000,
respectively. The agreements entitle each such officer 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 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 at
the time of termination, for three years (four years for Mr. Spitznagel) after
the termination, (ii) additional payments equal to three times (four times for
Mr. Spitznagel) the officer's average annual bonus and incentive compensation
(or $50,000 if the average bonus is less than $50,000) for the period
commencing March 4, 1996 for Mr. Spitznagel, August 31, 1992 for Mr. Loy and
July 1, 1988 for Mr. Rascio, and ending upon the termination of employment,
and (iii) an amount equal to three times (four times for Mr. Spitznagel) any
payment made by the Company to the 401(k) Plan on behalf of the officer 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"). At the election of the officer, the
Severance Compensation shall be paid to the officer either in a lump sum or in
the same manner and on the same dates as the officer would have received such
compensation had the termination of employment not occurred.
Under the terms of the employment agreements with 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" of the
Company (as defined in each of their employment agreements), the officer is
entitled to receive the full amount of the Severance Compensation. Following a
change in control of the Company, each of Mr. Spitznagel, Mr. Loy and Mr.
Rascio have the right to terminate their employment agreements and receive the
full amount of the Severance Compensation, if he remains in the employ of the
Company or any successor thereto for a period of one (1) year following a
change in control and provides the Company with notice of termination during
the thirty (30) day period immediately following the end of such one (1) year
period, or at any time after the change in control if (i) his duties are
diminished, (ii) his place of employment is relocated more than twenty (20)
miles from its prior location, or (iii) his annual compensation is reduced.
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" of the Company (as such term is defined in his employment
agreement), Mr. Rogalin is entitled to receive his base compensation as of the
date of his termination for a period of three (3) years following the
termination.
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 Mr. Spitznagel, Mr. Loy, Mr. Rogalin 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 these employment agreements provide that the officer
shall have the right to elect, during the one year period after 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 Mr.
Spitznagel, Mr. Loy and Mr. Rascio, in the event of the "disability" of any
such officer (as defined in each of their employment agreements), 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 on
August 31, 2001, with the exception of Mr. Spitznagel's employment agreement
which expires on August 31, 2002.
Retirement of Dr. Vukovich
In October 1998, Dr. Vukovich retired from active employment with the
Company, although he continues to serve as Chairman of the Board. In
connection with his retirement from the Company, the Board of Directors
approved a series of retirement benefits, including (i) a retirement bonus of
$250,000, (ii) an annual fee of $75,000 for as long as Dr. Vukovich serves as
Chairman of the Board; (iii) payment of all health insurance premiums for life
for both Dr. Vukovich and his wife; (iv) payment of all premiums on a $500,000
group term life insurance policy insuring Dr. Vukovich's life; (v) the
continued use of a Company car through the expiration of the car lease in
January 1999; (vi) accelerated vesting of all options and allowing Dr.
Vukovich to exercise such options on or before the original expiration dates;
and (vii) full vesting in his accrued benefit under the SERP. In addition, the
Company and Dr. Vukovich entered into a five (5) year Consulting Agreement
pursuant to which Dr. Vukovich will be paid $200,000 per year in exchange for
advice and other assistance in researching and developing pharmaceutical
products and identifying and evaluating product and business licensing and
acquisition opportunities for the Company.
Employees Savings and Protection Plan
The Company's 401(k) Plan is an employee savings plan 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 1998, the total amount of employee and Company contributions under the
401(k) Plan will be $1,304,247 of which the Company will contribute $557,164.
See the Summary Compensation Table for amounts to be contributed by the
Company under the 401(k) Plan to the accounts of the Named Officers.
11
<PAGE>
Supplemental Executive Retirement Plan
The following table indicates the approximate gross annual benefits which
would be received by a participant in the SERP upon retirement at age 60 in
the remuneration and years of service classifications indicated. The actual
annual benefit received by a participant will be reduced by (i) 50% of the
participant's annual social security benefit and (ii) the actuarial equivalent
of the participant's account balance in the Company's 401(k) Plan accumulated
from Company contributions.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Remuneration Years of Service
- ------------ ----------------------------------------------------------------------
3 4 6 8 10+
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $24,375 $ 32,500 $ 48,750 $ 65,000 $ 81,250
150,000 29,250 39,000 58,500 78,000 97,500
175,000 34,125 45,500 68,250 91,000 113,750
200,000 39,000 52,000 78,000 104,000 130,000
225,000 43,875 58,500 87,750 117,000 146,250
250,000 48,750 65,000 97,500 130,000 162,500
300,000 58,500 78,000 117,000 156,000 195,000
400,000 78,000 104,000 156,000 208,000 260,000
450,000 87,750 117,000 175,500 234,000 292,500
500,000 97,500 130,000 195,000 260,000 325,000
</TABLE>
The SERP is a funded, non-qualified defined benefit retirement plan which
was adopted by the Board of Directors in order to provide a higher, more
competitive level of retirement benefits to certain designated executive
employees of the Company. In 1998, the Company engaged an outside consultant
to undertake a competitive review and analysis of the retirement benefits made
available by the Company to its executive employees. The consultant's report
concluded that the retirement benefits offered by the Company to its executive
employees were not competitive in the Company's marketplace for executives. In
order to enhance the retirement benefits for the Company's executive
employees, the consultant recommended the adoption of the SERP. In approving
and adopting the SERP, the Board of Directors believes that the retirement
benefits provided under the SERP can (i) be a factor in retaining certain key
executives as well as a factor in attracting other highly experienced and
talented individuals to the Company, and (ii) allow for appropriate succession
planning within the executive ranks of the Company.
Under the SERP, participating employees are entitled to receive a benefit
equal to 65% of their highest average annual compensation for any period of 36
consecutive months or three (3) calendar years during the participant's final
120 months of employment, less (i) 50% of the employee's social security
benefit, and (ii) an actuarial equivalent of the employee's account balance in
the 401(k) Plan accumulated from Company contributions. A participating
employee's accrued benefit is determined as an annual single life annuity. A
participating employee's interest in his or her accrued benefit under the SERP
is fully vested upon completion of three (3) years of service with the Company
and reaching the age of sixty (60); provided, that if the employee has been
credited with less than ten (10) years of service at the time his or her
employment terminates, the accrued benefit shall be prorated based on actual
time of service. Upon death or total disability, a participating employee's
interest in his or her accrued benefit will be fully vested regardless of age,
but the benefit shall be prorated for less than ten (10) years of service.
Upon a change in control of the Company (as defined in the SERP), a
participating employee will become immediately and fully vested in his or her
accrued benefit regardless of age at termination of employment or years of
service upon reaching age fifty (50).
In connection with its funding obligation under the SERP, the Board has
established a rabbi trust into which the Company will deposit all of its
required funding contributions. During 1998, the Company's expense with
respect to the SERP was approximately $2.1 million, of which $65,000 was
deposited into the trust. The balance of the Company's 1998 SERP expense will
be funded in 1999.
12
<PAGE>
Each of the Named Officers and certain other executive employees have been
designated as participants in the SERP. At December 31, 1998, the Named
Officers had the following credited years of service under the SERP: Mr.
Spitznagel 3 years; Dr. Vukovich 10 years; Mr. Loy 7 years; Mr. Rogalin 3
years; Mr. Rascio 10 years.
Employee Stock Purchase Plan
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 to purchase shares of the Company's Common Stock. The
fair market value of the aggregate number of shares of Common Stock which an
eligible employee may acquire under the Stock Purchase Plan in a particular
plan year may not exceed $25,000.
The Stock Purchase Plan is administered by the Compensation Committee.
500,000 shares of the Company's Common Stock have been reserved for issuance
under the Stock Purchase Plan. The Stock Purchase Plan shall terminate when
all shares of Common Stock reserved for issuance are issued, or at any other
time at the discretion of the Board of Directors. As of April 16, 1999, 20,062
shares of the Company's Common Stock have been issued and allocated to
participant accounts under the Stock Purchase Plan.
Equity Incentive Plan
For a description of the material features of the Equity Incentive Plan, see
"Summary of Provisions of the Equity Incentive Plan" under "Amendment of
Equity Incentive Plan."
Incentive Stock Option Plan and Restricted Stock Option Plan
The Incentive Stock Option Plan and Restricted Stock Option Plan were
previously terminated. However, options granted under the Incentive Stock
Option Plan and Restricted Stock Option Plan which were outstanding on the
date of the termination of each such plan will continue to be exercisable
pursuant to their respective terms. As of April 16, 1999, there were 415,375
such incentive stock options and 40,000 such restricted stock options still
outstanding.
13
<PAGE>
Option Grants
The following table shows certain information regarding options granted to
each of the Named Officers during the year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options Exercise of Stock Price Appreciation
Underlying Granted to or Base for Option Term (2)
Options Employees in Price Expiration ----------------------------
Name Granted (#)(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- -------------- ------------ -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John T. Spitznagel...... 25,000(3) 2% $13.69 4/10/04 $ 116,398 $ 264,067
52,500(4) 4% 17.50 6/10/04 144,818 304,106
100,000(5) 7% 16.375 9/1/04 258,111 542,013
25,000(5) 2% 21.125 12/11/04 83,246 174,809
Robert A. Vukovich,
Ph.D................... 25,000(6) 2% 13.69 4/9/04 53,947 113,285
137,500(4) 9% 17.50 6/10/04 379,285 796,469
100,000(6) 7% 16.375 9/1/04 258,111 542,013
Robert W. Loy........... 10,000(3) 1% 13.69 4/9/04 21,579 45,314
33,750(4) 2% 17.50 6/10/04 93,097 195,497
50,000(5) 3% 16.375 9/1/04 129,055 271,006
15,000(5) 1% 21.125 12/11/04 49,947 104,886
Peter M. Rogalin........ 27,500(4) 2% 17.50 6/10/04 75,857 159,294
15,000(5) 1% 16.375 9/1/04 38,717 81,302
8,000(5) 1% 21.125 12/11/04 26,639 55,939
Anthony A. Rascio, Esq.. 10,000(3) 1% 13.688 4/13/04 21,575 45,306
35,000(5) 2% 16.375 9/1/04 90,339 189,704
8,000(5) 1% 21.125 12/11/04 26,639 55,939
</TABLE>
- --------
(1) Represent shares of Common Stock underlying options granted under the
Equity Incentive Plan.
(2) 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 is exercised. 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 through the expiration dates of such
options.
(3) 50% of these options are immediately exercisable and the remaining 50%
become exercisable on the one year anniversary of the date of grant of
the options.
(4) Represents the immediately exercisable options granted in connection with
the accelerated vesting of all outstanding SARs by the Company and the
voluntary exercise of such SARs by the Named Officer. See "Option
Exercises and Fiscal Year-End Values" and "Compensation Committee Report
on Executive Compensation."
(5) These options may be exercised in equal installments of 20% on the first,
second, third, fourth and fifth year anniversaries of the date of grant
of the options.
(6) Upon Dr. Vukovich's retirement from the Company, all options granted to
him became fully vested and immediately exercisable. See "Retirement of
Dr. Vukovich."
14
<PAGE>
Option Exercises and Fiscal Year-End Values
Shown below is information regarding options and SARs exercised by certain
of the Named Officers during 1998 as well as information regarding options
held by each of the Named Officers at December 31, 1998. During the year ended
December 31, 1998, 156,000 options and 502,500 SARs were exercised by certain
of the Named Officers. In order to mitigate the potential future compensation
expense which the Company would have to recognize with respect to the SARs, in
1998 (i) the Company accelerated the vesting of all outstanding SARs, and (ii)
the Executive Officers of the Company holding such SARs agreed to voluntarily
exercise all of their outstanding SARs. By exercising all of their SARs, the
Executive Officers forfeited the additional value which they potentially could
have realized during the term of their SARs if the price of the Company's
Common Stock were to increase over the Company's stock price on the dates on
which these SARs were exercised. In connection with the acceleration of
vesting and the exercise of all of their outstanding SARs, these Executive
Officers also received immediately exercisable options under the Equity
Incentive Plan to purchase one share of the Company's Common Stock for every
two (2) SARs exercised. At December 31, 1998 and at April 16, 1999, there were
no outstanding SARs.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options Held at FY- In-the-Money Options
Shares End (#) at FY-End ($) (3)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) (1) Realized ($) (2) Exercisable Unexercisable Exercisable Unexercisable
- ---- ---------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John T. Spitznagel...... 105,000 $ 708,000 135,875 156,625 $ 307,625 $619,500
Robert A. Vukovich,
Ph.D................... 350,000 2,212,813 812,500 -- 6,782,750 --
Robert W. Loy........... 148,500 1,025,625 63,750 70,000 424,050 300,925
Peter M. Rogalin........ 55,000 351,000 58,500 47,000 110,000 79,875
Anthony A. Rascio, Esq.. -- -- 12,600 52,400 39,063 21,438
</TABLE>
- --------
(1) Includes 75,000 and 81,000 shares of Common Stock acquired by Dr.
Vukovich and Mr. Loy, respectively, upon the exercise of options.
Includes also 105,000, 275,000, 67,500 and 55,000 SARs exercised by Mr.
Spitznagel, Dr. Vukovich, Mr. Loy and Mr. Rogalin, respectively. No
shares of Common Stock were received upon the exercise of the SARs,
rather cash in the amounts set forth in footnote (2) below was received
by each of these Named Officers.
(2) Includes $407,813 and $577,875 as the value realized by Dr. Vukovich and
Mr. Loy, respectively, with respect to the exercise of options. The value
realized with respect to exercised options is the product of (i) the
number of shares of Common Stock acquired upon exercise of the options
and (ii) the difference between (a) the average sale price of the
Company's Common Stock on the American Stock Exchange on the date of
exercise of the options and (b) the exercise price of the options
exercised. Includes also $708,000, $1,805,000, $447,750 and $351,000
received in cash by Mr. Spitznagel, Dr. Vukovich, Mr. Loy and Mr.
Rogalin, respectively, upon the exercise of their SARs.
(3) The value of unexercised in-the-money options represents the difference
between an option's exercise price and the reported last sale price of
the Company's Common Stock on the American Stock Exchange on December 31,
1998 ($21.50 per share). The actual value, if any, a Named Officer may
realize upon the exercise of an option will depend upon the excess of the
stock price over the exercise price on the date the option is exercised.
Executive Officer Loans
In April 1999, the Board of Directors approved loans to be made by the
Company to Mr. Spitznagel and Mr. Rogalin in the amounts of $283,200 and
$144,400, respectively (the "Loans"). The Loans were approved to assist these
officers with their individual tax consequences relating to (i) the Company's
decision, in 1998, to accelerate the vesting of all outstanding SARs, and (ii)
the officers' decision to exercise voluntarily all of their
15
<PAGE>
SARs, for the purpose of eliminating any potential future compensation expense
which the Company would be required to recognize with respect to the SARs. See
"Option Exercises and Fiscal Year-End Values" and "Compensation Committee
Report on Executive Compensation." The Loan amounts are approximately forty
percent (40%) of the amount of compensation income to be recognized by each
such officer in connection with the exercise of the officer's SARs. Each of
the Loans is unsecured, has a five (5) year term, and bears interest at the
rate of 4.15% per annum. Ten percent (10%) of the outstanding principal
balance of the Loan together with accrued interest is payable on each
anniversary of the Loan. The remaining principal amount of each Loan and all
accrued interest thereon is due and payable at the end of the term of the
Loan; provided, that all principal and interest owed with respect to such
officer's Loan shall be due and payable immediately upon the officer's
termination of employment.
Directors' Compensation
Each Director who is not an employee of the Company is entitled to receive
an annual fee of $25,000 for services as a Director. Dr. Vukovich, for his
services as Chairman of the Board, is entitled to receive an annual fee of
$75,000. Each non-employee Director is entitled to receive a participation fee
of $2,000 for each meeting of the Board of Directors attended and a fee of
$500 for each meeting attended of any committee of the Board of Directors on
which such Director serves. In addition, each non-employee Director receives
annually options to purchase a minimum of 10,000 shares of the Company's
Common Stock. The Company paid a total of $196,689 during the year ended
December 31, 1998 to non-employee Directors. During the year ended December
31, 1998, a total of 87,500 options to purchase shares of Common Stock were
granted to the Company's non-employee Directors under the Equity Incentive
Plan. The Company makes no payment to Directors who are employees of the
Company for their services on the Board of Directors or committees thereof.
Compensation Committee Interlocks and Insider Participation
During 1998, no member of the Compensation Committee was an employee of the
Company and no member of the Compensation Committee and no Executive Officer
named in this Proxy Statement has any relationship that must be disclosed
under this caption.
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. The compensation program is
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 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.
16
<PAGE>
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.
During the second quarter of 1998, the Compensation Committee recommended
and the Board of Directors approved the SERP, which is a non-qualified defined
benefit plan that provides retirement benefits to certain designated executive
employees of the Company. The Compensation Committee expects that the
increased retirement benefits will (i) be a factor in retaining certain key
executives as well as a factor in attracting other highly experienced and
talented individuals to the Company, and (ii) allow for appropriate succession
planning within the executive ranks of the Company. See "Supplemental
Executive Retirement Plan." The Compensation Committee believes that the
adoption of the SERP is fully consistent with the Company's compensation
philosophy and is a customary form of retirement benefit for executive
officers similar to that adopted by comparable companies. The 1998 SERP
expense to the Company was $2.1 million, of which $65,000 was funded by the
Company in 1998 with the balance to be funded in 1999.
Also in 1998, in order to mitigate the potential future compensation expense
which the Company might have had to recognize with respect to outstanding
SARs, the Company accelerated the vesting of all such SARs and the Executive
Officers holding such SARs agreed to voluntarily exercise all such SARs
thereby terminating any potential benefit from the SARs which such Executive
Officers may have realized in the future. The exercise of all outstanding SARs
during 1998 resulted in a one time charge of $3.3 million, of which $0.7
million relates to the accelerated vesting and immediate exercise of the SARs.
In connection with the acceleration of vesting and the exercise of all
outstanding SARs, the Executive Officers who exercised the SARs received
immediately exercisable options to purchase one (1) share of the Company's
Common Stock for every two (2) SARs exercised by them. See "Option Exercises
and Fiscal Year-End Values."
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
Compensation 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. In connection with his appointment as President and Chief
Executive Officer of the Company in 1997, Mr. Spitznagel signed a new
employment agreement in August 1998 replacing an agreement which was scheduled
to expire in September 2000. Under his new employment agreement, Mr.
Spitznagel received an increase in annual base salary from $300,000 to
$350,000. See "Employment Agreements."
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 Chief Executive
Officer to that performance. The Compensation Committee awarded bonuses to the
Chief Executive Officer and other Executive Officers of the Company for 1998
as follows: Mr. Spitznagel--$450,000, Dr. Vukovich--$250,000, Mr. Loy--
$205,000, Mr. Rogalin--$125,000 and Mr. Rascio--
17
<PAGE>
$60,000. In awarding these bonuses, the Compensation Committee focused on the
significant contribution of Mr. Spitznagel and the other Executive Officers of
the Company with respect to (i) the acquisition of the exclusive U.S. rights
to market PENTASA(R) from Hoechst Marion Roussel in April, 1998; (ii) the
divestiture of VRG International, Inc., the Company's contract research
business; (iii) entering into an agreement with RiboGene, Inc. whereby the
Company was granted the exclusive right to market EMITASOL(R) in the U.S.,
Canada, and Mexico; (iv) the sale of NORETHIN to, and the entering into a
Distribution Agreement for the distribution rights to SLOW-MAG(R) with, G.D.
Searle, (v) the settlement of a shareholders class action suit in January,
1998; (vi) the receipt of a patent for an improved process to manufacture
AGRYLIN(R) as well as receipt of Food and Drug Administration approval for the
use of AGRYLIN(R) in a broader patient population; and (vii) the improved
operating results of the Company.
Options, including the options granted in connection with the acceleration
of vesting and exercise of the SARs, were granted in 1998 to Mr. Spitznagel
and the other Executive Officers of the Company as follows: Mr. Spitznagel--
202,500; Dr. Vukovich--262,500; Mr. Loy--108,750; Mr. Rogalin--50,500; and Mr.
Rascio--53,000. All options granted to Dr. Vukovich became fully vested in
connection with his retirement from the Company. See "Retirement of Dr.
Vukovich."
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 the 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).
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.
18
<PAGE>
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 1998.
AMENDMENT OF EQUITY INCENTIVE PLAN
(Item 2 on Proxy Card)
Introduction
The Board of Directors has approved and adopted, subject to approval and
ratification by the shareholders, the following proposal to amend the 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 TO 4,500,000 SHARES.
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 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.
In 1998, the Equity Incentive Plan was amended to increase the number of
shares of Common Stock reserved for issuance from 1,500,000 to 3,000,000, of
which 51,702 shares are not subject to awards which are 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 500 employees eligible to participate in
the Equity Incentive Plan and awards have been granted to approximately 479
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 16, 1999, the closing price of the Company's Common
Stock reported on the American Stock Exchange was $19.625 and the average of
the high and low sale prices was $19.75. The term of an option and the time or
times at which such option is exercisable
19
<PAGE>
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 stock
appreciation rights 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, or 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 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
20
<PAGE>
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.
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.
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<PAGE>
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
employment agreements of Mr. Spitznagel, Mr. Loy, Mr. Rogalin and Mr. Rascio
provide that upon termination of their employment for any reason, they shall
have one (1) year to exercise all options which have been granted to them
under the Equity Incentive Plan. See "Employment Agreements." Shareholder
approval is required for the repricing of any option or other award. 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.
Plan Benefits
The following table sets forth information as of April 16, 1999 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
Name and Position Options
- ----------------- ---------
<S> <C>
John T. Spitznagel.................................................. 262,500
President and Chief Executive Officer
Robert A. Vukovich, Ph.D............................................ 622,500
Chairman of the Board
Robert W. Loy....................................................... 133,750
Executive Vice President
Peter M. Rogalin.................................................... 85,500
Vice President, Treasurer and Chief Financial Officer
Anthony A. Rascio................................................... 58,000
Vice President, Secretary and General Counsel
Executive Officer Group............................................. 1,162,250
Non-Executive Director Group........................................ 177,500
Non-Executive Officer Employee Group................................ 1,241,100
</TABLE>
22
<PAGE>
Vote Required
Approval by the Company's shareholders of this proposal to amend the Equity
Incentive Plan to increase the number of shares of Common Stock reserved for
issuance by 1,500,000 shares 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.
The Board of Directors recommends a vote "FOR" the amendment to the
Company's Equity Incentive Plan to increase the number of shares reserved for
issuance thereunder by 1,500,000 from 3,000,000 shares to 4,500,000 shares.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended December 31,
1998 accompanies this Proxy Statement. Ernst & Young L.L.P. has audited the
financial statements for the fiscal year ended December 31, 1998, 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.
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. On December 2, the Company received notice that
PricewaterhouseCoopers L.L.P. had resigned as the Company's independent public
accountants. The reports of PricewaterhouseCoopers L.L.P. on the financial
statements for the years ended December 31, 1997 and December 31, 1996
contained no adverse opinion or disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principle. During the
years ended December 31, 1997 and December 31, 1996 and the period January 1,
1998 through November 25, 1998, there were no disagreements between the
Company and PricewaterhouseCoopers L.L.P. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers L.L.P. would have caused it to make reference thereto
in connection with its reports on the financial statements. Further, there
have been no events involving the Company during the two (2) most recent
fiscal years and through November 25, 1998 which would require disclosure to
the SEC under Regulation S-K Item 304(a)(1)(v).
Upon the recommendation of the Audit Committee, the Board of Directors
approved the engagement of Ernst & Young L.L.P. as the Company's new
independent public accountants on December 9, 1998. During the years ended
December 31, 1997 and December 31, 1996 and the period January 1, 1998 through
December 9, 1998, the Company had not consulted with Ernst & Young L.L.P.
regarding either (i) the application of accounting principles to any
transaction or audit opinion that might be rendered on the Company's financial
statements; or (ii) any matter that was either the subject of (a) a
disagreement between the Company and PricewaterhouseCoopers L.L.P., or (b) a
reportable event regarding internal controls of the Company, financial
statements prepared by the Company, expansion of the scope of the Company's
audit, or any other information deemed reportable.
A representative of Ernst & Young 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 Company has appointed Ernst &
Young, L.L.P. as its independent public accountants for the year ending
December 31, 1999.
23
<PAGE>
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, 1999. 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 THE PROPOSAL 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, NEW YORK 10004. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
Anthony A. Rascio, Esq.
Vice President and Secretary
April 30, 1999
24
<PAGE>
EXHIBIT A
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"),
<PAGE>
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 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 4,500,000. 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.
-2-
<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
(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.
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
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<PAGE>
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 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.
---------------
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<PAGE>
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.
14. CONDITIONS ON DELIVERY OF STOCK.
--------------------------------
-7-
<PAGE>
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.
--------------------
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<PAGE>
(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 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.
-9-
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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,
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<PAGE>
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.
-13-
<PAGE>
ROBERTS PHARMACEUTICAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS--MAY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints 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 16, 1999, 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, 1999 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 (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
John T. Spitznagel, Robert A. Vukovich, Ph.D., Robert W. Loy, Digby W. Barrios,
Zola P. Horovitz, Ph.D., Joseph N. Noonburg, Marilyn Lloyd, Joseph E. Smith and
Ronald M. Nordmann.
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
from 3,000,000 shares to 4,500,000 shares.
3. In their discretion upon such other matters as may properly come before the
meeting or any adjournment or adjournments thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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 the proposal
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: ____________, 1999
________________________
(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.
