<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
R.P. SCHERER CORPORATION
(Name of Registrant as specified in its charter)
N/A
(Name of person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) of
Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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>
R.P. SCHERER CORPORATION
2075 WEST BIG BEAVER ROAD
P.O. BOX 7060
TROY, MI 48007-7060
July 26, 1996
Dear Shareholder:
Your Board of Directors joins me in extending to you a cordial invitation to
attend the 1996 Annual Meeting of Stockholders which will be held on September
11, 1996 at The Regency Hotel, 540 Park Avenue at 61st Street, New York, New
York. Please note that this year's meeting will start promptly at 11:00 a.m.
local time.
We sincerely hope you will be able to attend and participate in the meeting. We
will report on the Company's continued progress and respond to questions you may
have about the Company's business. In addition, we will vote on the matters
included in the enclosed proxy statement.
Whether or not you plan to attend, it is important that your shares be
represented and voted at the meeting and, therefore, we urge you to complete,
sign, date and return the enclosed proxy card in the envelope provided for this
purpose.
Sincerely yours,
/s/ Aleksandar Erdeljan
Aleksandar Erdeljan
Chairman, President and
Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
R.P. SCHERER CORPORATION
2075 WEST BIG BEAVER ROAD
P.O. BOX 7060
TROY, MICHIGAN 48007-7060
(810) 649-0900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 11, 1996
The Annual Meeting of Stockholders of R.P. Scherer Corporation will be held on
September 11, 1996 at The Regency Hotel, 540 Park Avenue at 61st Street, New
York, New York, beginning at 11:00 a.m. local time for the following purposes:
1. To elect directors of the Company to serve until the next Annual
Meeting and until their respective successors shall be elected and
shall qualify;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending
March 31, 1997; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 15, 1996 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof.
Whether or not you plan to be present at the meeting in person, please fill in,
date and sign the enclosed proxy and return it promptly in the self-addressed
envelope. It does not require postage if mailed in the United States.
By Order of the Board of Directors,
Nicole S. Williams
CORPORATE SECRETARY
July 26, 1996
<PAGE>
R.P. SCHERER CORPORATION
2075 WEST BIG BEAVER ROAD
P. O. BOX 7060
TROY, MICHIGAN 48007-7060
(810) 649-0900
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of R.P.
Scherer Corporation (the "Company") for use at the Annual Meeting of
Stockholders to be held on September 11, 1996 at The Regency Hotel, 540 Park
Avenue at 61st Street, New York, New York, beginning at 11:00 a.m. local time.
It is expected that this Proxy Statement and the accompanying proxy will be
mailed commencing July 29, 1996 to each stockholder entitled to vote.
Proxies delivered pursuant to this solicitation are revocable at the option of
the persons executing the same, prior to their exercise, by attendance and
voting at the Annual Meeting or by written notice delivered to the Corporate
Secretary of the Company prior to the meeting. Unless previously revoked, all
proxies representing shares entitled to vote which are delivered pursuant to
this solicitation will be voted at the meeting by the named attorneys-in-fact
and agents, to the extent authorized, in accordance with the directions
contained therein. If no such directions are given, the shares represented by
such proxies will be voted in favor of the election of directors, the
ratification of the appointment of auditors, and in accordance with the
discretion of the named attorneys-in-fact and agents on any other matters that
may properly come before the meeting.
On July 15, 1996, the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting, the Company had outstanding
23,464,503 shares of common stock (the "Common Stock"), and there were no
outstanding shares of any other class of stock. Each holder of the Common Stock
is entitled to one vote for each share of such stock held. A majority of the
outstanding shares, whether present in person or by proxy, is required to
constitute a quorum to transact business at the meeting.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth information as of June 30, 1996, regarding the
beneficial ownership of Common Stock of the Company by principal holders, by
each director of the Company beneficially owning Common Stock and by all
officers and directors of the Company as a group.
NUMBER OF COMMON
NAME AND ADDRESS SHARES PERCENT
- ---------------- ------ -------
Thomas W. Smith/Thomas N. Tryforos (1)
323 Railroad Avenue
Greenwich, CT 06830 1,183,680 5.0%
UBS Asset Management (2)
1211 Avenue of the Americas
New York, NY, 10036 1,222,000 5.2%
John P. Cashman 689,813 2.9%
Aleksandar Erdeljan 760,813 3.2%
Nicole S. Williams 53,372 0.2%
Thomas J. Stuart 27,779 0.1%
Louis Lasagna 8,000 -
Robert H. Rock 12,000 0.1%
R.P. Scherer Corporation(3)
2075 West Big Beaver Road
Troy, Michigan 48084
All officers and directors as a group(3) 1,384,451 6.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) As reported in Schedule 13D filed with the Securities and Exchange
Commission (the "SEC") jointly by Mr. Smith and Mr. Tryforos on February
22, 1996. Mr. Smith through direct ownership exercised as of that date
sole voting and dispositive power with respect to 250,880 shares, and, in
conjunction with Mr. Tryforos, shared voting and dispositive power with
respect to 930,400 shares, which were beneficially owned by both Mr. Smith
and Mr. Tryforos in their capacity as general partners of three limited
partnerships and trustees of a profit-sharing plan. Mr. Tryforos also
through direct ownership exercised as of that date sole voting and
dispositive power with respect to 2,400 shares.
(2) As reported in Schedule 13G filed on January 26, 1996, with the SEC by UBS
Asset Management (New York) Inc. ("UBS"), UBS exercised as that date voting
and dispositive power with respect to 336,800 shares, and dispositive power
only with respect to 885,200 shares.
(3) Each of the named individuals has (or will have upon the exercise of
options exercisable within sixty days) voting and investment power with
respect to all shares shown as beneficially owned by such person. The
shareholdings listed include shares subject to options granted pursuant to
the Company's stock plans exercisable within sixty days held as of June 30,
1996, as follows: Mr. Cashman - 643,671 shares; Mr. Erdeljan - 643,671
shares; Ms. Williams - 53,372 shares; Mr. Stuart - 27,679 shares; Mr.
Lasagna - 8,000 shares; and Mr. Rock - 12,000 shares.
2
<PAGE>
DIRECTORS
Set forth below are the name, age and employment history, including all
positions held concurrently or successively in the past five years, of each of
the Company's directors.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT
------------------------------------------
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY (1)
- ---- --- ------------------------------------
Aleksandar Erdeljan 46 Chairman and Chief Executive of the Company
since March 1996. President of the Company
since August 1991 and Director of the Company
since June 1990. President and Director of
R.P. Scherer International Corporation from
1989 to February 1995. President of Pharmaphil
Group, Inc. from January 1987 to June 1989.
Director of Corporate Development of the
Company from June 1985 to January 1987.
Lori G. Koffman 37 Director of the Company since September 1989, and
of R.P. Scherer International from September 1989
through February 1995. Assistant Secretary of the
Company from December 1989 to May 1996. Managing
Director, CIBC Wood Gundy Capital since April
1995. Senior Vice President, Lehman from 1990 to
December 1994.
Frederick Frank 64 Director of the Company since June 1990, and of
R.P. Scherer International Corporation from August
1988 through February 1995. Vice Chairman of
Lehman Brothers. Also a director of Applied
Bioscience International, Inc. and Physicians
Computer Network.
James A. Stern 45 Director of the Company since June 1990, and of
R.P. Scherer International Corporation from June
1990 through February 1995. Chairman of The
Cypress Group LLC, a private merchant bank, since
April 1994. Managing Director of Lehman and head
of its Merchant Banking Group from 1989 to 1994.
Also a director of Noel Group, Inc., K & F
Industries Inc., Lear Corporation, Infinity
Broadcasting Corporation, and Cinemark USA, Inc.
Louis Lasagna, M.D 73 Director of the Company since September 1991, and
of R.P. Scherer International Corporation from
June 1992 through February 1995. Dean for
Scientific Affairs, Tufts University School of
Medicine, since 1995. Dean, Sackler School of
Graduate Biomedical Sciences, Tufts University;
Professor of Psychiatry and Professor of
Pharmacology, Tufts University, in each case since
1984. Independent consultant since 1965. Director
of Tufts University Center for the Study of Drug
Development since 1975. Chairman of the Board of
Astra USA. Member of the Board of Trustees of
International Life Sciences Institute/Nutrition
Foundation since 1980 and Chairman since 1991.
Director of the Foundation for Nutritional
Advancement since 1980.
Robert H. Rock 46 Director of the Company since September 1991, and
of R.P. Scherer International Corporation from
June 1992 through February 1995. Chairman of
Metroweek Corporation since December 1988.
President of MLR Holdings LLC since October 1987.
Chairman and Chief Executive Officer of the Hay
Group from October 1986 to October 1987. Also a
director of Hunt Manufacturing Company,
Alberto-Culver Company, Quaker Chemical
Corporation, and the Wistar Institute.
3
<PAGE>
John E. Avery 67 Director of the Company since January 1995.
Chairman of the Americas Society and Council of
the Americas since 1993, and Director since 1991.
Assistant to the Chairman of Johnson & Johnson
from 1992 to 1993. Company Group Chairman,
Johnson & Johnson, from 1979 to 1992. Also a
director of the Argentine-American Chamber of
Commerce. Member of the Dean's Council at the
Yale University School of Medicine, the Advisory
Board of the Yale School of Organization and
Management, the Board of Governors of the Foreign
Policy Association, and the Council on Foreign
Relations.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met six times during the Company's fiscal year ended
March 31, 1996. No member of the Board attended fewer than 75% of the aggregate
number of meetings of the Board and the committees on which he or she served
during the period. The Board of Directors has three standing committees: an
Audit Committee, an Executive Committee and a Compensation Committee.
The Audit Committee consists of Directors John E. Avery (Chairman), Louis
Lasagna, James A. Stern and Robert H. Rock. The principal functions of the
Audit Committee are to (i) review the scope and services of the Company's
independent auditors, (ii) review the Company's internal control policies and
procedures, (iii) make recommendations to the full Board concerning the
selection of auditors and the scope of their audit services, (iv) annually
review the Company's audited financial statements and the qualifications and
fees of the independent auditors of the Company, and (v) perform such other
functions from time to time as requested by the full Board. The Audit Committee
met three times during the 1996 fiscal year.
The Executive Committee consists of Directors John P. Cashman, Aleksandar
Erdeljan, and James A. Stern (Chairman). The Committee exercises all of the
powers of the Board of Directors, except as limited by Delaware Law or by the
Company's By-Laws, in the management of the business and the affairs of the
Company during intervals between meetings of the Board of Directors. The
Executive Committee met one time during the 1996 fiscal year.
The Compensation Committee consists of Directors Frederick Frank, Robert H. Rock
(Chairman) and James A. Stern. The Compensation Committee, subject to final
approval of the full Board, reviews and approves salaries and other benefits of
officers and employees and administers the Incentive Compensation Plan, the 1992
Stock Option Plan and the Company's other compensation plans for officers and
key employees. The Compensation Committee met five times during the 1996 fiscal
year.
COMPENSATION OF OUTSIDE DIRECTORS
Directors who are not officers or employees of the Company or any of its
subsidiaries ("Outside Directors") are currently paid an annual retainer of
$18,000 and $1,000 for each Board meeting attended, and an additional annual
retainer of $3,000 for serving as chairman of any committee of the Board of
Directors. In addition, pursuant to separate option agreements, each Outside
Director is initially granted options to purchase 12,000 shares of Common Stock
at a price which reflects the market value at the time of grant; such options
become exercisable three years from the date of grant, and expire seven years
after the date of vesting.
4
<PAGE>
EXECUTIVE COMPENSATION, RETIREMENT PLANS AND OTHER TRANSACTIONS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee (the "Committee") is comprised of three
non-employee directors: Robert H. Rock, James A. Stern and Frederick Frank. The
Committee makes recommendations to the Board of Directors concerning the
remuneration plans for senior management. In addition, the Committee exercises
administrative powers with respect to the Company's remuneration plans,
including incentive compensation, stock option and retirement benefit plans.
During fiscal 1996, the Board of Directors has neither rejected nor modified any
recommendation made by the Committee.
COMPENSATION PHILOSOPHY
Compensation for executive officers of the Company is designed to:
1. Reinforce the attainment of annual performance goals while also
encouraging a long-term perspective toward sustained profitable growth
by providing for a substantial portion of executive officers' total
compensation to be based upon the increase in economic value of the
Company.
2. Align the interests of executive officers with those of the
shareholders through programs that provide a portion of annual
compensation in options to purchase Common Stock of the Company, thus
allowing for the accumulation of an equity interest in the Company and
linking compensation with increased stock value.
3. Enable the Company to attract and retain capable management by
providing a competitive total compensation opportunity.
COMPENSATION VEHICLES
The primary components of executive compensation are an annual salary, an
incentive compensation plan for certain executives, and a stock option plan.
ANNUAL SALARY
Executive officers are provided with an annual salary which is intended to fall
within the median to 75th percentile of base compensation for equivalent
positions with industrial employers with revenues in a range comparable to those
of the Company. Annual salaries for all executives are monitored and
compensation guidelines are adjusted annually as of June 1st on the basis of
comparison to compensation surveys, changes in responsibilities and other
information. If compensation levels are deemed appropriate, then an increase
reflecting the current annual inflation rate is made. The increase to adjust
for inflation was 3.8%, effective as of June 1, 1996.
5
<PAGE>
INCENTIVE COMPENSATION PLAN
The R.P. Scherer Corporation Management Incentive Compensation Plan ("Incentive
Compensation Plan"), which was ratified by the shareholders in fiscal 1993, has
as its purpose to provide certain management employees other than the Chairman
and President an annual incentive specifically related to increases in economic
value of the Company.
Under the Incentive Compensation Plan, incentive compensation is directly linked
to return generated through the employment of capital. This return, which is
defined as "Economic Value Added" ("EVA"), is measured individually for each of
the Company's major business divisions, as well as for the Company on a
consolidated basis. EVA equals the operating profit generated less taxes and
the cost of capital (based upon net operating assets) employed to generate such
profit. The EVA Incentive Compensation Plan is designed to provide an incentive
award generally equivalent to 40% of salary for the participants, based on
objectives for increased EVA as approved by the Board of Directors. In addition
to the EVA-based award, the Committee may, at the recommendation of the Chairman
and President, grant to each participant an award, which is a function of their
performance against qualitative objectives.
The EVA objectives set for Fiscal 1996 were not achieved due to weaker than
expected financial results. Financial results in Fiscal 1996 were impacted
primarily by the poor sales performance in the Company's non-pharmaceutical
markets, particularly in Europe, as well as by higher infrastructure costs
related to increased staffing and upgrading of the Company's dedicated
pharmaceutical manufacturing facilities in Europe. Accordingly, incentive
compensation awards for most participants were significantly below those earned
in Fiscal 1995. For those executive officers listed in the accompanying
compensation tables, no EVA awards were earned for Fiscal 1996, and the bonus
amounts indicated represent awards based on qualitative performance criteria
determined by the Committee. A portion of the Fiscal 1996 awards must be used
to purchase stock options, as described below, and the remainder was paid as
cash bonuses.
1992 STOCK OPTION PLAN
The Stock Option Plan of R.P. Scherer Corporation and Subsidiaries ("1992 Stock
Option Plan"), which was ratified by the shareholders in fiscal 1993, is
designed to provide executives stock options as an additional incentive to
maximize shareholder value through improved Company financial performance.
Under the 1992 Stock Option Plan, 25% of the EVA award (or such other amount
designated by the Committee) earned by participants through the Incentive
Compensation Plan is applied each year to purchase options for shares of Common
Stock at a cost per share option as determined under the provisions of the 1992
Stock Option Plan. Options purchased in any given year are not a function of
prior holdings. The exercise price of such purchased option is the beginning of
year average stock price net of the purchase cost, increased by a 10% annual
rate compounded over five years. Hence, the market value of the Company's
Common Stock must increase at a correspondingly higher rate before such options
become in-the-money.
For each purchased share option, the participants in the 1992 Stock Option Plan
receive a granted option to purchase an additional share of Common Stock which
is exercisable at an
6
<PAGE>
average stock price for the beginning of the year. Options may be exercised in
whole or in part, but may only be exercised for an equal number of shares
issuable upon the exercise of purchased options and granted options. The granted
options provide an added incentive for participants to achieve results which
enhance shareholder value.
7
<PAGE>
CEO COMPENSATION
The compensation structure for Messrs. Cashman and Erdeljan (co-chief executive
officers in Fiscal 1996) was established prior to the initial public offering of
Common Stock in October 1991. Changes in Messrs. Cashman's and Erdeljan's total
compensation levels have been primarily dependent upon the economic value of the
Company; an increase or a decrease in the economic value of the Company has been
reflected in an increase or decrease in Messrs. Cashman's and Erdeljan's total
compensation. In effect, the cash compensation paid during Fiscal 1996 reflects
the performance of the Company during the prior year. Consequently, the
increase of 13% in Fiscal 1996 cash compensation over that paid during Fiscal
1995 compares with the 36% increase in consolidated economic value in the
Company during Fiscal 1995.
As in prior years, a portion of the at-risk compensation for the coming fiscal
year is to be used to purchase stock options as established by the Committee.
The number of options purchased by Mr. Erdeljan for Fiscal 1996, as reflected on
the table OPTION GRANTS FOR FISCAL YEAR 1996 is only 51% of the number of
options purchased last year. See Summary Compensation Table for Fiscal Year
1996.
CEO COMPENSATION FOR FUTURE FISCAL YEARS
In light of Mr. Cashman's decision to step down from his position of Chairman
and co-CEO and the decision by the Board to appoint Mr. Erdeljan to the
positions of Chairman, President and CEO, it was decided by the Compensation
Committee that a new compensation structure should be put in place for Mr.
Erdeljan. This new compensation structure will reflect the additional
responsibilities and a more traditional structure than had existed previously.
An analysis was conducted of executive base salaries paid in companies of
similar size as Scherer, as well as an analysis of the Peer Group (as defined
below) to determine an appropriate base salary level that would place Mr.
Erdeljan in the median to 75th percentile of base salaries for similar positions
of such companies. This resulted in the establishment of a base salary for
Fiscal 1997 of $550,000. Mr. Erdeljan will also be a participant in the EVA
Incentive Compensation Plan, which will determine his cash bonus and stock
options for Fiscal 1997.
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total shareholder return on
the Company's Common Stock for the period commencing October 11, 1991 (the date
of the initial public offering of the Common Stock) with the Standard and Poor's
500 Index and peer group companies.
The following self-selected group of peer companies represents companies against
whom the Company competes and against whose performance the Company is often
compared by financial analysts: Alza Corporation, IVAX Corporation, Forest
Laboratories, Inc., Elan Corporation, plc, and The West Company (the "Peer
Group"). The Peer Group data has been weighted according to the respective
company's stock market capitalization.
Since the initial public offering in October 1991, the market value of the
Company's Common Stock has more than doubled through the end of fiscal 1996,
outperforming both the S&P 500 Index and the Company's Peer Group.
8
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF 54 MONTH CUMULATIVE TOTAL RETURN
Among R.P. Scherer Corporation, The S&P 500 Index and a Peer Group
- --------------------------------------------------------------------------------
[Graph]
NOTE: REPRESENTS $100 INVESTED ON OCTOBER 11, 1991 IN THE COMPANY'S AND ITS
PEER GROUP'S COMMON STOCK AND ON SEPTEMBER 30, 1991 IN THE STANDARD &
POOR'S INDEX. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS.
THE COMPENSATION COMMITTEE
Frederick Frank
Robert H. Rock
James A. Stern
9
<PAGE>
Sheet 1
RP SCHERER CORPORATION CCS
PERFORMANCE GRAPH 7/22/96
FOR 1996 PROXY
<TABLE>
<CAPTION>
DEC-91 JUN-92 DEC-92
10/91 3/92 9/92 3/93
<S> <C> <C> <C> <C> <C> <C> <C>
R.P. Scherer Corporation $ 100 $ 168 $ 153 $ 130 $ 166 $ 211 $ 149
Peer Group $ 100 $ 144 $ 125 $ 119 $ 116 $ 133 $ 108
S&P 500 $ 100 $ 110 $ 107 $ 109 $ 113 $ 118 $ 124
<CAPTION>
JUN-93 DEC-93 JUN-94 DEC-94
9/93 3/94 9/94
<S> <C> <C> <C> <C> <C> <C> <C>
R.P. Scherer Corporation $ 155 $ 182 $ 207 $ 201 $ 181 $ 228 $ 249
Peer Group $ 103 $ 98 $ 120 $ 102 $ 93 $ 99 $ 93
S&P 500 $ 124 $ 127 $ 130 $ 125 $ 126 $ 132 $ 132
<CAPTION>
JUN-95 DEC-96
3/95 9/95 3/96
<S> <C> <C> <C> <C> <C>
R.P. Scherer Corporation $ 275 $ 232 $ 238 $ 269 $ 240
Peer Group $ 105 $ 109 $ 117 $ 118 $ 128
S&P 500 $ 145 $ 159 $ 171 $ 182 $ 191
</TABLE>
<PAGE>
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1996
-----------------------------------------------
The following table sets forth information concerning all cash compensation
paid by the Company for services rendered in all capacities during the
three most recent fiscal years ended March 31, to each of its five most
highly compensated corporate executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- --------------------------------------
AWARDS (#) PAYOUTS
------------------------ ----------
SECURITIES
NAME AND FISCAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER STOCK OPTIONS LTIP COMPENSATION
- ---------------------------- ----- --------- -------- ------- -------- --------- ------- ------------
(1) (2) (2) (2) (2, 3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. Cashman (5) 1996 $706,270 - - $10,470
Retired Chairman and 1995 625,697 - 77,702 9,951
Co-Chief Executive Officer 1994 582,584 - 82,458 9,736
Aleksandar Erdeljan 1996 706,270 - 39,868 -
Chairman, President and 1995 625,697 - 77,702 -
Chief Executive Officer 1994 582,584 - 82,458 -
Nicole S. Williams 1996 220,389 $ 48,783 16,200 -
Executive Vice President, 1995 212,487 135,437 36,562 -
Finance, Chief Financial 1994 205,667 109,397 21,390 -
Officer, and Secretary
Thomas J. Stuart 1996 132,053 31,141 10,342 -
Senior Vice President 1995 125,625 81,152 21,908 -
1994 113,125 60,174 11,766 -
Dennis R. McGregor (4) 1996 105,436 23,338 7,750 -
Treasurer and Director of 1995 101,833 64,795 17,492 -
Tax Operations 1994 64,423 35,267 6,896 N/A
</TABLE>
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Messrs. Cashman and Erdeljan are not participants in the Company's
bonus program.
(2) The Company does not have restricted stock award plans, long term
incentive plans ("LTIPs") or stock appreciation rights ("SARs").
Other annual compensation is below the level where disclosure would be
required.
(3) Represents contributions on behalf of Mr. Cashman to a defined
contribution retirement plan. See EXECUTIVE COMPENSATION PURSUANT TO
PLANS - EMPLOYMENT AGREEMENTS. Such contributions are in lieu of Mr.
Cashman's participation in the Company's defined benefit pension plan.
(4) Mr. McGregor began employment with the Company in August, 1993.
(5) Mr. Cashman stepped down as Chairman effective March 31, 1996.
10
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1996
The following table provides information on option grants for the Company's
common stock in fiscal year 1996 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATE
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------ --------------------------------
SECURITIES % OF EXERCISE
UNDERLYING TOTAL OR BASE
OPTIONS 0PTION PRICE EXPIRATION
NAME GRANTED (#) GRANTS FOR ($/SHARE) DATE 5% ($) 10% ($)
THE YEAR
- ----------------------- ------------- ----------- --------- ------------ --------- ----------
(1) (2) (2)
<S> <C> <C> <C> <C> <C> <C>
John P. Cashman (1):
Purchased Portion - - - N/A - -
Granted Portion - - - N/A - -
Aleksandar Erdeljan:
Purchased Portion 19,934 8.96% $72.44 June 16, $ $211,699
2003 (247,979)
Granted Portion 19,934 8.96% 47.17 June 16, 255,753 715,431
2003
Nicole S. Williams:
Purchased Portion 8,100 3.64% 72.44 June 16, (100,764) 86,022
2003
Granted Portion 8,100 3.64% 47.17 June 16, 103,923 290,709
2003
Thomas J. Stuart:
Purchased Portion 5,171 2.33% 72.44 June 16, (64,327) 54,916
2003
Granted Portion 5,171 2.33% 47.17 June 16, 66,344 185,587
2003
Dennis R. McGregor:
Purchased Portion 3,875 1.74% 72.44 June 16, (48,205) 41,153
2003
Granted Portion 3,875 1.74% 47.17 June 16, 49,716 139,074
2003
</TABLE>
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) The purchased option cost is set at a price in accordance with the
1992 Stock Option Plan, as amended. The purchased option exercise
price is set at a beginning average market price per share, net of the
purchase cost, increased by a 10% annual rate compounded over
five years.
The granted option exercise price is set at the beginning average
market price per share. See EXECUTIVE COMPENSATION PURSUANT TO PLANS
- STOCK OPTION PLANS.
Purchased and granted options both vest three years from the date of
grant. Options may only be exercised for an equal number of purchased
portion shares and granted portion shares.
(2) Based upon market value of $42.63 per share at date of grant.
(3) Mr. Cashman stepped down as Chairman effective March 31, 1996, and
received no option grants for fiscal 1996.
11
<PAGE>
OPTION EXERCISES IN FISCAL YEAR 1996 AND
FISCAL YEAR END OPTION VALUE
The following table provides information on option exercises in fiscal year 1996
by the named executive officers and the value of such officers' options at March
31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END
--------------------------------- --------------------------
SHARES VALUE NOT NOT
ACQUIRED ON REALIZED ($) EXERCISABLE EXERCISABLE EXERCISABLE ($) EXERCISABLE
NAME EXERCISE (#) (#) (#) ($)
- --------------------- -------------- --------- -------------------------- --------------------------
(1) (2) (2)
<S> <C> <C> <C> <C> <C> <C>
John P. Cashman N/A N/A 643,671 160,160 $21,443,079 $825,817
Aleksandar Erdeljan N/A N/A 643,671 200,028 21,443,079 825,817
Nicole S. Williams N/A N/A 52,372 74,152 1,018,658 214,221
Thomas J. Stuart N/A N/A 27,679 44,016 515,000 117,836
Dennis R. McGregor N/A N/A - 32,138 - 69,063
</TABLE>
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) A substantial majority of the options now exercisable for Messrs.
Cashman and Erdeljan were granted in connection with their interests
in the leveraged buy-out of the Company in June, 1989.
(2) Based upon market value of $43.88 per share at March 31, 1996.
EXECUTIVE COMPENSATION PURSUANT TO PLANS
The Company maintains certain compensation plans, programs and arrangements for
the Company's executive officers and key employees. Set forth below is a brief
description of each such plan, program or arrangement under which compensation
or other benefits were paid to named executive officers during fiscal 1996 or
are proposed to be paid in the future. In addition, set forth below is a brief
description of termination of employment and change of control arrangements.
EMPLOYMENT AGREEMENTS
In June 1994, the Company entered into employment agreements with Mr. Erdeljan
and Ms. Williams. The agreements each provide for an initial term of employment
of one year, automatically renewable thereafter for successive one year periods,
unless terminated by either party to the agreement. The annual salary for Mr.
Erdeljan under the agreements was established at $632,286 as of June 1, 1994,
and the annual salary of Ms. Williams at $213,625. The Compensation Committee
may adjust the salary of Mr. Erdeljan or Ms. Williams for subsequent years.
Mr. Erdeljan and Ms. Williams are entitled to participate in stock option plans
which have been adopted by the Company (as described below) and in retirement
and welfare benefit plans that are in effect or which may be adopted by the
Company. In addition, Mr. Erdeljan and Ms. Williams are eligible to participate
in the Incentive Compensation Plan as described elsewhere herein.
12
<PAGE>
Pursuant to each of these employment agreements, if the Company terminates the
employment of Mr. Erdeljan or Ms. Williams without cause or if Mr. Erdeljan or
Ms. Williams terminate for good reason (as set forth in each employment
agreement) or if the Company properly notifies Mr. Erdeljan or Ms. Williams of
its intention to terminate their employment agreement on the termination date of
the term of employment then in effect, the Company must pay the employee a
monthly amount for twenty-four consecutive months after termination equal to
one-twelfth of the employee's annual average salary for the prior twenty-four
months, and also provide welfare plan benefits for twenty-four months in
accordance with plan terms. The agreements further provide that in the event of
physical or mental disability of Mr. Erdeljan or Ms. Williams (as set forth in
each employment agreement), the Company may terminate their employment and shall
be obligated for similar benefits; however, such amount will be reduced by any
amount received by Mr. Erdeljan, or Ms. Williams, as the case may be, in respect
of his or her disability from any employee benefit or disability plans
maintained by the Company.
Pursuant to their respective contracts, Mr. Erdeljan and Ms. Williams have
agreed to keep confidential all proprietary information relating to the
Company's business obtained in the course of employment, and have agreed not to
compete with the Company for a period of two years after termination of their
respective employment.
Mr. Cashman also entered into an employment agreement with the Company in June
1994, which was subsequently amended and restated in April 1996. Mr. Cashman's
amended and restated employment agreement provides for an employment term ending
on May 31, 1998. Mr. Cashman's monthly salary under the agreement is
$56,389.71, which sum includes up to $5,000 as a reimbursement of monthly office
and other expenses related to services Mr. Cashman provides, exclusive of travel
expenses.
While Mr. Cashman will not receive any stock options during his employment term,
he is entitled to participate in certain of the Company's welfare plans
currently maintained by the Company or its affiliates to the extent of his
eligibility. Mr. Cashman made an election to waive irrevocably his participation
in the R.P. Scherer Corporation Employees' Retirement Income Plan (the
"Retirement Income Plan" described below). In lieu of participation in the
Retirement Income Plan, the Company contributes annually an amount to a defined
contribution retirement plan on behalf of Mr. Cashman, as set forth in the
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1996.
Mr. Cashman's amended and restated employment agreement also provides that in
the event he should become disabled, the Company may terminate his employment,
but shall be obligated to pay Mr. Cashman his salary through the end of the
employment term; however, such payment will be reduced by any amount received by
Mr. Cashman, in respect of his disability from any employee benefit or
disability plans maintained by the Company or any affiliate. The agreement does
not explicitly provide for the Company terminating Mr. Cashman's employment
without cause.
RETIREMENT PLANS
RETIREMENT INCOME PLAN
The Retirement Income Plan, a noncontributory qualified pension plan, provides
for a defined benefit based on years of service and the employee's highest
consecutive five-year average annual compensation. The Retirement Income Plan
covers essentially all United States employees of the Company not represented by
a collective bargaining agent for which a pension plan has been the subject of
good faith bargaining and who meet certain eligibility requirements.
13
<PAGE>
Contributions to the Retirement Income Plan are made by the Company based upon
the Participants' annual salaries, plus all other forms of cash compensation
(including overtime, bonuses and commissions), and certain actuarial assumptions
with regard to funding. During fiscal 1996, the Company accrued aggregate
contributions for the Retirement Income Plan in an amount approximating 3.8% of
such total compensation.
SUPPLEMENTAL PLAN
In 1994, the limits on the amount of annual compensation that can legally be
taken into account for purposes of determining pension benefits under the
Retirement Income Plan were significantly reduced (originally $150,000 in 1994,
now adjusted for inflation to $157,305, as opposed to $235,840 which was in
effect for 1993), and impacted the pensions of key management employees. In
order to provide retirement benefits for key management employees based on
annual compensation limits in effect prior to 1994, increased thereafter for
cost of living, in 1994 the Company adopted the Supplemental Benefit Plan for
Key Employees of R.P. Scherer Corporation (the "Supplemental Plan"), a
nonqualified benefit plan. The Supplemental Plan provides benefits to key
management employees only as designated by the Compensation Committee. Benefits
under the Supplemental Plan will be provided pursuant to the same terms as the
Retirement Income Plan, provided that the limit on compensation taken into
account to determine benefits under the Supplemental Plan will be set at a base
of approximately $242,000 in fiscal 1994, thereafter adjusted by a percentage
based on cost of living increases, not to exceed 4% annually (the 1996 limit is
$254,086). A key management employee's Supplemental Plan benefits will not be
subject to Internal Revenue Code limits on annual additions applicable to
qualified plans, but are offset by benefits payable to that employee under the
Retirement Income Plan.
BENEFITS PAYABLE UNDER THE PLANS
The following table shows annual pension benefits payable on a straight life
annuity basis, in various remuneration and years of service classifications, to
employees under the Retirement Income Plan and the Supplemental Plan (jointly,
the "Plans"), assuming retirement at age 65 in calendar 1996. Benefit amounts
are not subject to reduction for Social Security payments. Benefit amounts may
be offset by payments made under a prior plan of the Company or a plan sponsored
by a foreign subsidiary or affiliate.
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS OF SERVICE INDICATED
---------------------------------------------
HIGHEST CONSECUTIVE
FIVE YEAR AVERAGE ANNUAL TEN TWENTY THIRTY FORTY
COMPENSATION YEARS YEARS YEARS YEARS
- --------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $17,400 $34,800 $52,200 $67,150
150,000 21,150 42,300 63,450 81,525
175,000 24,900 49,800 74,700 95,900
200,000 28,650 57,300 85,950 110,275
225,000 32,400 64,800 97,200 124,650
250,000(1) 34,908 69,816 104,725 134,265
300,000(1) 34,908 69,816 104,725 134,265
350,000(1) 34,908 69,816 104,725 134,265
400,000(1) 34,908 69,816 104,725 134,265
450,000(1) 34,908 69,816 104,725 134,265
500,000(1) 34,908 69,816 104,725 134,265
</TABLE>
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) The Retirement Income Plan has been amended effective January 1, 1994,
as required by law, to limit compensation that may be taken into
account by such plan after 1993 to $150,000 annually, as adjusted
14
<PAGE>
for cost-of-living increases. Accordingly, the Supplemental Plan
provides additional benefits based on annual compensation limits in
effect prior to the reduction of includible compensation to $150,000,
but as increased for cost of living ($254,086 for calendar 1996).
Credited service in the Plans for those individuals listed in SUMMARY
COMPENSATION TABLE FOR FISCAL YEAR 1996 who are active participants is as
follows: Mr. Erdeljan, 14.7 years (including years credited for service from
1978 to 1987 and from 1989 to the present); Ms. Williams, 3.9 years; Mr. Stuart,
5.7 years; and Mr. McGregor, 2.4 years. Mr. Cashman has elected not to
participate in the Retirement Income Plan. For purposes of the Plans, the final
average compensation of such individuals as of January 1, 1996 was approximately
as follows: Mr. Erdeljan, $235,348; Ms. Williams, $235,119; Mr. Stuart,
$169,395, and Mr. McGregor, $154,291.
401(K) PLAN
Eligible employees may also participate in a tax-qualified cash or deferred
profit sharing plan known as the R.P. Scherer Corporation Savings Plan (the
"401(k) Plan"). Under the 401(k) Plan, employees who have met eligibility
standards may elect to reduce their annual compensation by up to 15%, to a
maximum of $9,240 for the 1996 calendar year, and have the amount of the
reduction contributed to the 401(k) Plan. The Company also contributes to the
401(k) Plan on behalf of each participant an additional amount equal to 50% of
each participant's pretax contributions, but not to exceed $500. All
contributions are fully vested.
INCENTIVE COMPENSATION PLAN
The purpose of the Incentive Compensation Plan is to provide certain key
employees of the Company an incentive to promote the maximization of shareholder
value over the long term.
The Incentive Compensation Plan is administered by the Committee in conjunction
with the full Board of Directors. Under the Incentive Compensation Plan,
incentive compensation is directly linked to return generated through the
employment of capital. This return, or EVA (as previously defined), is measured
individually for each of the Company's major business divisions (each a "Unit")
and equals the operating profit generated by each Unit less taxes and the cost
of capital employed to generate such profit. The Incentive Compensation Plan
rewards designated management employees in each Unit for increases in EVA and
penalizes such employees for any decreases in EVA by deducting amounts from an
employee's Bonus Bank, as described below.
Management employees who are designated as participants ("Participants") by the
Chairman and President of the Company and approved by the Committee are eligible
to participate in the Incentive Compensation Plan. Currently approximately 18
employees are Participants in the Incentive Compensation Plan. The
Participant(s) of each Unit are eligible to receive an EVA-based award (the "EVA
Award") based on the performance of their Unit. The EVA Award each year for a
Unit is comprised of two elements: the "Base Award" and the "Improvement
Award." The Base Award is equal to a pre-determined percentage of the aggregate
annual salary of a Unit's Participants and is earned for an applicable year if
the prior year's EVA level for the Unit is achieved. The Improvement Award is
based on a percentage of the increase or decrease in EVA from the prior year's
EVA. Improvement Awards which exceed a pre-determined percentage of a
Participant's base salary are deferred and credited to the Participant's account
("Bonus Bank"). These amounts are subject to loss if subsequent performance
deteriorates. One-third of the balance in a Participant's Bonus Bank (if it is
positive) is paid out each succeeding year in which a Participant earns a new
bonus under the Incentive Compensation Plan. The relationship between EVA
achievement and percentages of salary awarded as EVA Award is determined by the
Committee.
15
<PAGE>
The Incentive Compensation Plan provides that 25% (or such other percentage set
by the Compensation Committee) of the EVA Award for each current year, subject
to certain limits, is used to purchase stock options under the Company's 1992
Stock Option Plan (as described below). Once options have been purchased from
such portion of a year's EVA Award, and to the extent that options remain
available for purchase under the Stock Option Plan, then up to 25% of additional
amounts distributed from the Bonus Bank, if any, will be used to purchase such
options.
The Board of Directors may amend, suspend or terminate the Incentive
Compensation Plan upon the recommendation of the Committee and, as required,
with stockholder approval, provided that no such change in the Incentive
Compensation Plan will be effective to eliminate or diminish the distribution of
any award that has been allocated to a Participant's Bonus Bank prior to the
date of such change.
DISCRETIONARY AWARDS
In addition to the EVA Award under the Incentive Compensation Plan, the
Committee may, at the recommendation of the Chairman and President, grant to key
members of management a discretionary award, generally up to 10% of salary,
which is a function of their performance against a pre-determined set of
primarily qualitative objectives. The discretionary award is paid in cash
following the year in which it is earned.
STOCK OPTION PLANS
1992 STOCK OPTION PLAN
The purpose of the 1992 Stock Option Plan is to aid the Company in retaining and
attracting capable management employees and to provide an inducement to such
employees to promote the best interests of the Company by enabling and
encouraging them to acquire stock ownership in the Company.
The 1992 Stock Option Plan is administered by the Committee, which has the
authority to grant options and set the terms and conditions of each grant. The
1992 Stock Option Plan authorizes a total of 1,800,000 shares of Common Stock to
be issued upon exercise of options granted thereunder. Under the terms of the
1992 Stock Option Plan any management employee of the Company who is eligible to
receive a bonus under the Incentive Compensation Plan or such other management
employee designated by the Committee is eligible to receive options under the
1992 Stock Option Plan. Currently, there are 24 participants in the 1992 Stock
Option Plan ("Optionee"). The Committee also has the authority to ensure that
the 1992 Stock Option Plan complies with foreign law and practices.
Each option grant under the 1992 Stock Option Plan represents the right to
purchase a number of shares of Common Stock of the Company and consists of two
portions: a purchased portion and a granted portion. The purchased portion for
a participating management employee is determined by applying 25% (or such other
percentage set by the Committee) of such employee's bonus under the Company's
Incentive Compensation Plan (or such other compensation designated by the
Committee to be applied to purchase options), to purchase stock options at a
cost per share option as determined under the provisions of the Plan. The
designated stock price equals the average market value per share of the Common
Stock over a two month period which includes the first month of the fiscal year
in which the option is granted and the last month of the preceding fiscal year
(the
16
<PAGE>
"Average Stock Price"). The exercise price for the purchased portion is fixed
on the grant date and equals the Average Stock Price, net of the purchase cost,
increased at a 10% annual rate compounded over five years. The granted portion
represents the right to purchase an additional number of shares equal to the
number of shares which make up the purchased portion and is exercisable at the
Average Stock Price. Options may be exercised in whole or in part, but may only
be exercised for an equal number of purchased portion shares and granted portion
shares.
Options become exercisable on the third anniversary of the date of their grant,
provided that the Committee may accelerate the time at which any option may be
exercised. Each option granted under the 1992 Stock Option Plan will expire on
the day following the seventh anniversary of the date when granted, unless such
option shall have expired earlier under the provisions of the Plan or the
Committee shall have extended the time in which such options may be exercisable.
The Board of Directors may amend or terminate the 1992 Stock Option Plan, but
may not (i) without the consent of the Optionees, alter or impair any rights or
obligations under any option theretofore granted, or (ii) make any alternation
in the 1992 Stock Option Plan that would cause the 1992 Stock Option Plan to
fail to comply with any requirement of applicable law or regulation, if such
revision or amendment were not approved by the stockholders of the Company,
unless and until stockholder approval of such revision or amendment is obtained.
Options to purchase a total of 222,239 shares are to be granted under the 1992
Stock Option Plan for fiscal 1996. For such fiscal 1996 grants, the purchased
portion, costing $2.19 each, is exercisable at $72.44 per share, and the granted
portion is exercisable at $47.17 per share. For persons named in the SUMMARY
COMPENSATION TABLE FOR FISCAL YEAR 1996 and all executive officers as a group,
the following options were granted under the 1992 Stock Option Plan (as
amended), all for fiscal 1996: Aleksandar Erdeljan, 39,868 shares; Nicole S.
Williams, 16,200 shares; Thomas J. Stuart, 10,342 shares; Dennis R. McGregor,
7,750 shares; and all executive officers as a group, 74,160 shares. No options
were granted to Mr. Cashman in fiscal 1996. A total of 148,079 share options
were granted to other non-executive officer employees for fiscal 1996. No
compensation expense was recorded by the Company in connection with the 1992
Stock Option Plan for fiscal 1996. A total of 59,716 options for common stock
remain available for future grant under the 1992 Stock Option Plan.
As of July 22, 1996, the last sale price of the Common Stock on the New York
Stock Exchange was $40.88 per share.
1990 STOCK OPTION PLANS
The Company implemented three Stock Option Plans in November 1990: the 1990
Nonqualified Stock Option Plan, the 1990 Nonqualified Performance Stock Option
Plan A, and the 1990 Nonqualified Performance Stock Option Plan B (collectively,
the "1990 Stock Option Plans") A total of 1,239,612 options for shares of
Common Stock were authorized for issuance to key management personnel under the
1990 Stock Option Plans. As a group, all current executive officers hold
998,186 options under the 1990 Stock Option Plans.
The 1990 Stock Option Plans are administered by the Committee. Each option
granted under the 1990 Stock Option Plans will expire no later than the day
following the 10th anniversary of the date granted, unless such option shall
have expired earlier under the provisions of the 1990 Stock Option Plans.
Options granted under the 1990 Stock Option Plans, as amended, may be
transferred by an Optionee to a grantor trust under certain conditions, if the
transfer is approved by the Compensation Committee. The Board of
17
<PAGE>
Directors may alter or amend the 1990 Plans or alter or amend any and all Option
Agreements thereunder; provided, that no such action may alter the provisions of
any outstanding Stock Option Agreement to the detriment of an Optionee without
the Optionee's consent.
During fiscal 1996, no options were granted, and 50,142 options were exercised,
leaving 1,034,841 options outstanding at year-end. All options granted under
the 1990 Stock Option Plans have an exercise price of $5.49 per share. No
commitments exist to exercise any options granted under the 1990 Stock Option
Plans and the Company has no present plans to grant the remaining Options
authorized for the 1990 Stock Options Plans. No compensation expense was
recorded for the 1990 Stock Option Plans in fiscal 1996.
As of July 22, 1996, the last sale price of the Common Stock on the New York
Stock Exchange was $40.88 per share.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1992 AND 1990 STOCK OPTION PLANS
The following discussion is a general summary of the material U.S. federal
income tax consequences to U.S. participants in the Company's stock option
plans. The discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), regulations thereunder, rulings and decisions now in effect, all
of which are subject to change. The summary does not discuss all aspects of
federal income taxation that may be relevant to a particular participant in
light of such participant's personal investment circumstances.
The grant of an option generally will not result in taxable income to the
Optionee at the time of grant. In general, upon the exercise of options by the
payment of cash, the Optionee will recognize ordinary income (and the Company
will be entitled to a deduction if certain withholding requirements are met,
subject to deductible limits on executive compensation under Section 162(M) of
the Internal Revenue Code, where applicable) in an amount equal to the excess of
the fair market value of the shares of Common Stock on the date of exercise over
the exercise price.
Any subsequent disposition of the shares acquired pursuant to an option will
result in gain or loss to the Optionee in an amount equal to the difference
between the sale price and the Optionee's basis in the Common Stock at the date
of exercise. An Optionee's basis for the Common Stock for purposes of
determining his gain or loss on subsequent disposition of the shares generally
will be the fair market value of the Common Stock on the date of exercise of the
Option.
Pursuant to the terms of the 1992 and 1990 Stock Option Plans, the time at which
options may be exercised due to a merger, consolidation or other reorganization
of the Company with or into another entity may be accelerated. Under certain
circumstances, such acceleration may result in an excess parachute payment and
the imposition of an excise tax payable by the Optionee and the loss of a
deduction to the Company under Section 280(G) of the Internal Revenue Code with
respect to any amounts which are deemed to be excess parachute payments.
18
<PAGE>
MATTERS TO BE VOTED UPON
ELECTION OF DIRECTORS
There are currently seven members of the Board of Directors whose names and
background information are described above under DIRECTORS. All of the current
members of the Board of Directors are nominated to be re-elected to hold office
until the next Annual Meeting of Stockholders and until their successors have
been elected and have qualified. The persons named in the accompanying proxy
will vote all shares for which they have received proxies for the election of
the nominees unless contrary instructions are given. In the event that any
nominee should become unavailable, shares will be voted for such other person or
persons as may be nominated by management. Management has no reason to believe
that nominees will be unable to serve. Directors are elected by plurality vote.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Arthur Andersen LLP to audit the accounts
of the Company for the fiscal year ending March 31, 1997, subject to the
ratification of such appointment by the affirmative vote of holders of a
majority of the outstanding shares entitled to vote at the Annual Meeting.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting and will be afforded an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING
MARCH 31, 1997. THE VOTE REQUIRED FOR SUCH RATIFICATION IS A FAVORABLE VOTE OF
THE HOLDERS OF A MAJORITY OF ALL OUTSTANDING SHARES PRESENT IN PERSON OR BY
PROXY AND ENTITLED TO BE VOTED AT THE ANNUAL MEETING.
OTHER MATTERS
The Company does not know of any business other than that described above to be
presented for action to the stockholders at the meeting, but it is intended that
the proxies will be exercised upon any other matters and proposals that may
legally come before the meeting and any adjournments thereof in accordance with
the discretion of the persons named therein as attorneys-in-fact and agents
unless contrary instructions are received.
The cost of this solicitation will be borne by the Company. Proxies may be
solicited by personal interview, telephone and telegraph, as well as by use of
the mails. Banks, brokerage houses and other custodians, nominees or
fiduciaries will be requested to forward soliciting material to their principals
and to obtain authorization for the execution of proxies, and will be reimbursed
for their reasonable out-of-pocket expenses incurred in that connection.
Employees of the Company participating in the solicitation of proxies will not
receive any additional remuneration.
The Annual Report of the Company for the fiscal year ending March 31, 1996,
including certified financial statements, has been furnished to all persons who
were stockholders of record of the Company on the record date for the Annual
Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be open to
examination by any stockholder during business hours, for any purpose germane to
the meeting, from August 27, 1996 through September 12, 1996 at the World
Headquarters of R.P. Scherer Corporation, 2075 West Big Beaver Road, Troy,
Michigan 48084.
19
<PAGE>
PROPOSALS OF SECURITY HOLDERS
A proposal by a security holder intended to be presented at the Company's next
annual meeting of stockholders and to be included in the proxy statement
therefor must be received at the Company's principal executive offices at 2075
West Big Beaver Road, Troy, Michigan 48084, to the attention of the Corporate
Secretary, no later than April 24, 1997.
AVAILABILITY OF FORM 10-K
THE COMPANY WILL PROVIDE TO ANY STOCKHOLDER, WITHOUT CHARGE, UPON WRITTEN
REQUEST OF SUCH STOCKHOLDER, A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED MARCH 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. SUCH REQUESTS SHOULD BE ADDRESSED TO: NICOLE S. WILLIAMS, CORPORATE
SECRETARY, R.P. SCHERER CORPORATION, 2075 WEST BIG BEAVER ROAD, P.O. BOX 7060,
TROY, MICHIGAN 48007-7060.
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED REPLY ENVELOPE TO
WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
20
<PAGE>
R.P. SCHERER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
P SEPTEMBER 11, 1996
R Revoking any prior appointment, the undersigned hereby appoints A.
Erdeljan and N. Williams and each of them, attorneys-in-fact and
O agents with power of substitution, to vote as Proxy for the undersigned
as herein stated, at the Annual Meeting of Stockholders of R.P. Scherer
X Corporation to be held at The Regency Hotel (Park at 61st Street),
540 Park Avenue, New York, New York on September 11, 1996, beginning at
Y 11 A.M. local time, and at any adjournment thereof, with respect to the
number of shares of common stock of R.P. Scherer Corporation the
undersigned would be entitled to vote if personally present.
Election of Directors, Nominees:
John E. Avery, Aleksander Erdeljan, Frederick Frank,
Lori G. Koffman, Louis Lasagna, Robert H. Rock, James A. Stern
(change of address)
________________________________________
________________________________________
________________________________________
________________________________________
(If you have written in the above space,
please mark the corresponding box on the
reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
SEE REVERSE SIDE
21
<PAGE>
/X/ Please mark your SHARES IN YOUR NAME
votes as in this
example.
FOR WITHHELD
/ / / /
1. Election of Directors
(see reverse)
For, except vote withheld from the
following nominee(s):
____________________________________
FOR AGAINST ABSTAIN
/ / / / / /
2. Ratification of the
appointment of auditors
for Fiscal 1997.
FOR AGAINST ABSTAIN
/ / / / / /
3. In accordance with their
discretion on any other
matters which may properly
come before the meeting.
Change
of / /
Address
Attend / /
Meeting
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement dated July 26, 1996.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
an authorized person.
SIGNATURE(S) ________________________________ DATE _____________
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
SIGNATURE(S) ________________________________ DATE ________________
NOTE: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
22
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION PAGE
Exhibit 10.1 - Amended and Restated Employment Agreement dated as of April 1,
1996, between John P. Cashman and R.P. Scherer Corporation
23
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 1, 1996, between JOHN P. CASHMAN (the
"Employee") and R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Employee was serving as Chairman and Co-Chief Executive
Officer of the Company and has been an officer of one or more of the Company's
affiliates; and
WHEREAS, the Company and the Employee have agreed that the Employee will
change his employment status to that of a non-officer employee; and
WHEREAS, the Employee possesses special knowledge and experience which is
of continuing value to the Company and its affiliates; and
WHEREAS, the Company desires to assure itself and its affiliates of the
benefit of the Employee's continuing services and experience for a period of
time and the Employee is willing to enter into an agreement to that end upon the
terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. TERM OF AGREEMENT. Subject to the terms and conditions hereof, this
amended and restated Agreement shall become effective as of April 1, 1996, and
the term of continued employment of the Employee under this amended and restated
Agreement shall commence on April 1, 1996 and shall terminate on May 31, 1998.
Such term of continued employment is hereinafter referred to as the "Employment
Period."
2. SERVICES TO BE RENDERED.
(a) During the term of employment of the Employee under this
Agreement (and any renewals thereof) the Employee shall serve the Company and
any affiliate of the Company designated by the Company and reasonably agreed to
by the Employee (collectively, the "Employer"), as a non-officer employee, and,
as requested by the Company, serve on one or more boards of directors of the
Company and its affiliates.
(b) The Employee agrees that he will, during the term of employment
under this Agreement devote his time, attention and ability to continue to
render services to the Employer with respect to ongoing business matters in
which he has been participating and to any new business matters with respect to
which the Chief Executive Officer of the Company wishes to consult with him.
The Employee shall be required to devote that number of hours per month to his
services hereunder as may be agreed between the Chief Executive Officer of the
Company and him, from time to time. Employee further agrees that he shall
faithfully serve the Company and its affiliates and shall exercise the powers
and authorities and fulfill the responsibilities hereby conferred upon him
honestly, diligently, in good faith and in the best interest of the Company and
its affiliates and use his best efforts to promote their interests. The
Employee shall not be precluded, other than pursuant to Section 7, from serving
as a director, employee or consultant of any other corporation.
(c) It is understood that the Employee may not, absent the express
direction of the Chairman and Chief Executive Officer of the Company or the
Chief Financial Officer of the Company, possess the authority to bind the
Company or any of its affiliates to any material contract.
3. COMPENSATION.
(a) In full payment for services rendered to the Company and its
affiliates under this Agreement, the Employer shall pay the Employee a total
amount of $56,389.71 per month during the Employment Period ("Monthly Payment"),
which shall include up to $5,000 as reimbursement of office and other expenses
related to the services provided hereunder exclusive of travel expenses,
provided that the Employee must document such expenses in order to receive the
reimbursement amount. The entities comprising the
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Employer shall determine how such amount is to be allocated among them. To the
extent the Employee is required to travel in performing services at the request
of the Employer, the Employer shall reimburse his reasonable expenses incurred
as part of his performance of those duties.
(b) In addition to the compensation otherwise provided for in this
Section 3, during the term of his employment hereunder, the Employee also shall
be entitled to participate in those health, life insurance, disability insurance
and retirement benefit plans currently maintained for him by the Company and its
affiliates, as from time to time they may be in effect.
(c) No stock options shall be granted to the Employee during the
Employment Period.
(d) The Company or an affiliate shall provide the Employee, during
the Employment Period, with the use of the currently provided leased automobile,
and will pay all taxes and insurance on said vehicle.
4. DISABILITY, DEATH AND TERMINATION.
(a) In the event of the Employee's inability to perform his principal
duties hereunder for any consecutive period of at least one year, the Company
may terminate the Employee's employment hereunder. In the event of any such
termination, the Employer shall be obligated (i) for compensation earned by the
Employee hereunder, but not yet paid, prior to such termination, and (ii) to pay
the Employee the Monthly Payment for the remainder of the Employment Period (the
"Disability Benefit"); PROVIDED, HOWEVER, that the amount of the Disability
Benefit shall be reduced by any amounts received by the Employee in respect of
the Employee's disability from any employee benefit or disability plans
maintained by the Company or any affiliate.
(b) The obligations of the Employer under this Agreement shall
terminate upon the death of the Employee ; EXCEPT THAT the Monthly Payment for
the remainder of the Employment Period shall be payable to Employee's estate or
heirs, over the remainder of the Employment Period.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates employment with the Employer,
or
(2) the Employer terminates the Employee's employment for Cause,the
Employer's obligations hereunder shall terminate and no further payments of any
kind (other than in respect of compensation, benefits or other rights accrued
and earned by the Employee prior to such termination) shall thereafter be made
by the Employer to the Employee hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting a felony
(or its equivalent) under the laws of the United States, any state thereof
or any foreign jurisdiction;
(ii) any material breach by the Employee of any employment
agreement with the Employer or the policies of the Employer or any of its
subsidiaries or the willful and persistent (after written notice to the
Employee) failure or refusal of the Employee to perform his duties of
employment or comply with any lawful directives of the Board of Directors
of the Company;
(iii) a course of conduct amounting to gross neglect, willful
misconduct or dishonesty; or
(iv) any misappropriation of material property of the
Employer by the Employee or any misappropriation of a corporate or business
opportunity of the Employer by the Employee.
5. CONFIDENTIALITY. For purposes of this Agreement, "proprietary
information" shall mean any information relating to the business of the Company
or any of its affiliates that has not previously been publicly released by duly
authorized representatives of the Company
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and shall include (but shall not be limited to) Company information encompassed
in all research, product development, designs, plans, formulations and
formulating techniques, proposals, marketing and sales plans, financial
information, costs, pricing information, strategic business plans, customer
information, and all methods, concepts, or ideas in or reasonably related to the
business of the Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Employer's business that has been or may be
obtained by the Employee in the course of his employment with the Employer,
whether he has such information in his memory or in writing or other physical
form. The Employee will not, without prior written authority from the Employer
to do so, use for his benefit or purposes, or disclose to any other person,
firm, partnership, corporation or other entity, either during the term of his
employment hereunder or thereafter, any proprietary information connected with
the business or developments of the Employer, except as required in connection
with the performance by the Employee of his duties and responsibilities as an
employee of the Employer. This provision shall not apply after the proprietary
information has been voluntarily disclosed to the public, independently
developed and disclosed by others, or otherwise enters the public domain through
lawful means.
6. REMOVAL OF DOCUMENTS OR OBJECTS. The Employee agrees not to remove
from the premises of the Employer, except as an employee of the Employer in
pursuit of the business of the Company or any of its affiliates, or except as
specifically permitted in writing by the Company, any document (regardless of
the medium on which it is recorded), object, computer program, computer source
code, object code or data (the "Documents") containing or reflecting any
proprietary information of the Employer. The Employee recognizes that all such
Documents, whether developed by him or by someone else, are the exclusive
property of the Employer.
7. NON-COMPETITION. The Employee agrees that during the term of his
employment hereunder he will not in any way, directly or indirectly, manage,
operate, control, solicit officers or employees of the Employer, accept
employment, a directorship or a consulting position with or otherwise advise or
assist or be connected with or own or have any other interest in or right with
respect to (other than through ownership of not more than one percent of the
outstanding shares of a corporation's stock which is listed on a national
securities exchange) any enterprise which competes or shall compete with the
Employer, by engaging in or otherwise carrying on the research, development,
manufacture or sale of any product of any type developed, manufactured or sold
by the Company or any subsidiary thereof, whether now or hereafter (to the
extent that any such product is under consideration by the Board of Directors of
the Company at the time the Employee's employment terminates or is terminated).
8. CORPORATE OPPORTUNITIES. The Employee agrees that during the
Employment Period he will not take any action which might divert from the
Company or any affiliate of the Company any opportunity which would be within
the scope of any of the present or future businesses of the Company or any of
its affiliates (which future businesses are then under consideration by the
Board of Directors of the Company), the loss of which has or would have had, in
the reasonable judgment of the Board of Directors of the Company, an adverse
effect upon the Employer, unless the Board of Directors of the Company has given
prior written approval.
9. RELIEF. It is understood and agreed by and between the parties hereto
that the service to be rendered by the Employee hereunder, and the rights and
privileges granted to the Employer by the Employee hereunder, are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and that a breach by the Employee of any of the
provisions contained in this Agreement will cause the Employer great irreparable
injury and damage.
The Employee hereby expressly agrees that the Company shall be entitled to
the remedies of injunction, specific performance and other equitable relief to
prevent a breach of
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this Agreement by the Employee. The Employee further expressly agrees that in
the event the Employee breaches the non-competition provisions of Section 7 of
this Agreement or the confidentiality provisions of Section 5 of this Agreement,
the balance of any payments due under this Agreement shall be forfeited by the
Employee.
The provisions of this Section 9 shall not, however, be construed as a
waiver of any of the rights which the Company may have for damages or otherwise.
10. WARRANTY. The Employee hereby warrants that he is free to enter into
this Agreement and to render his services pursuant hereto.
11. NON-ASSIGNABILITY. Except as otherwise provided herein, this
Agreement may not be assigned by either the Company or the Employee.
12. MERGER OR CONSOLIDATION. In the event (a) the Company merges with or
into, or consolidates with, another entity; (b) the Company sells, exchanges or
otherwise disposes of all or substantially all of the assets of the Company; (c)
50% or more of the Company's then outstanding shares of voting stock is acquired
by another corporation, person or entity; (d) the Company liquidates or
dissolves; or (e) the Company recapitalizes or enters into any similar
transaction, and as a result of which the common stock of the Company either (i)
is no longer a voting equity security of the Company or (ii) is no longer listed
on a national securities exchange or authorized for quotation on an inter-
dealer quotation system of a national securities association (referred to
collectively as a "Change in Control"), this Agreement may be assigned and
transferred to such successor in interest as an asset of the Company upon such
assignee assuming the Company's obligations hereunder, in which event the
Employee agrees to continue to perform his duties and obligations according to
the terms and conditions hereof for such assignee or transferee of this
Agreement.
13. WITHHOLDING. The Employer shall have the right to withhold the amount
of taxes, which in the determination of the Employer, are required to be
withheld under law with respect to any amount due or paid under this Agreement.
14. NOTICES. All notices and other communications which are required or
may be given under this Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
(a) If to the Employer, to the Company at:
R.P. Scherer Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Corporate Secretary
(b) If to the Employee, to him at such address as set forth in the
signature page hereof or as he shall otherwise have specified by notice in
writing to the Company.
15. GOVERNMENTAL REGULATION. Nothing contained in this Agreement shall be
construed so as to require the commission of any act contrary to law and
wherever there is any conflict between any provision of this Agreement and any
statute, law, ordinance, order or regulation, the latter shall prevail, but in
such event any such provision of this Agreement shall be curtailed and limited
only to the extent necessary to bring it within the legal requirements.
16. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan. Any suit,
action or proceeding against the Employee with respect to this Agreement, or any
judgment entered by any court in respect of any thereof, may be brought in any
court of competent jurisdiction in the State of Michigan and the Employee hereby
submits to the exclusive jurisdiction of such courts for the purpose of any such
suit, action, proceeding or judgment. The Employee hereby irrevocably waives
any objections which he may now or hereafter have to the laying of the venue of
any suit, action or proceeding arising out of or relating to this Agreement
brought in any court of competent jurisdiction in the State of Michigan, and
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hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum.
No suit, action or proceeding against the Employer with respect to this
Agreement may be brought in any court, domestic or foreign, or before any
similar domestic or foreign authority other than in a court of competent
jurisdiction in the State of Michigan, and the Employee hereby irrevocably
waives any right which he may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign
authority. The Employer hereby submits to the jurisdiction of such courts for
the purpose of any such suit, action or proceeding. The Employee irrevocably
waives his right to trial by jury with regard to any suit, action, or proceeding
with respect to this Agreement; provided, however, that if such waiver of the
right to jury trial shall be held unenforceable, the invalidity or
unenforceability of this provision shall not impair the validity or
enforceability of any other provision of this Agreement.
17. ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth the entire
understanding of the parties in respect of the subject matter contained herein
and supersedes all prior agreement, arrangements and understandings relating to
the subject matter and may only be amended by a written agreement signed by both
parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
R.P. SCHERER CORPORATION
/s/ Nicole S. Williams
Title: Executive VP, Finance,
Treasurer & CFO
/s/ John P. Cashman
John Cashman
40 Chestnut Park
Toronto, Ontario
Canada M4W 1W8
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