<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
2301 WEST BIG BEAVER ROAD
P.O. BOX 7060
TROY, MI 48007-7060
July 26, 1997
Dear Shareholder:
Your Board of Directors joins me in extending to you a cordial invitation to
attend the 1997 Annual Meeting of Stockholders which will be held on
September 11, 1997 at The Townsend Hotel, 100 Townsend Street, Birmingham,
Michigan. Please note that this year's meeting will start promptly at
1:00 p.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,
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
2301 WEST BIG BEAVER ROAD
P.O. BOX 7060
TROY, MICHIGAN 48007-7060
(248) 649-0900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 11, 1997
The Annual Meeting of Stockholders of R.P. Scherer Corporation will be held
on September 11, 1997 at The Townsend Hotel, 100 Townsend Street, Birmingham,
Michigan, beginning at 1:00 p.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, 1998;
3. To ratify the 1997 Stock Option Plan for key members of
management of the Company; and
4. 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 14, 1997 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, 1997
<PAGE>
R.P. SCHERER CORPORATION
2301 WEST BIG BEAVER ROAD
P. O. BOX 7060
TROY, MICHIGAN 48007-7060
(248) 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, 1997 at The Townsend Hotel, 100
Townsend Street, Birmingham, Michigan, beginning at 1:00 p.m. local time.
It is expected that this Proxy Statement and the accompanying proxy will be
mailed commencing July 29, 1997 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 14, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, the Company had
outstanding 24,277,927 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, 1997, 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.
NAME AND ADDRESS NUMBER OF COMMON SHARES PERCENT
---------------- ----------------------- -------
Thomas W. Smith/Thomas N. Tryforos (1)
323 Railroad Avenue
Greenwich, CT 06830 1,183,680 5.0%
Aleksandar Erdeljan 843,271 3.5%
Nicole S. Williams 43,762 *
Thomas J. Stuart 39,545 *
Dennis R. McGregor 6,896 *
Joseph E. Mitchell 200 *
Louis Lasagna 8,000 *
Robert H. Rock 12,000 *
R.P. Scherer Corporation(2)
2075 West Big Beaver Road
Troy, Michigan 48084
All officers and directors as a group(2) 954,774 3.9%
===============================================================================
*Represents less than 1% of the Company's outstanding common stock.
(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) 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,
1997, as follows: Mr. Erdeljan - 726,129 shares; Ms. Williams - 44,762
shares; Mr. Stuart - 39,445 shares; Mr. McGregor - 6,896 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 nominated to be re-elected.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY (1)
- - ---- --- ------------------------------------------
Aleksandar Erdeljan 47 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 38 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. Also a director of LifeCell
Corporation, Sinclair Montrose Healthcare plc,
Collegiate Health Care, Inc., Mulberry Child Care
Centers, Inc. and iVillage Inc.
Frederick Frank 65 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
Pharmaceutical Product Development,
Inc.,Physicians Computer Network and Diagnostic
Products, Inc.
James A. Stern 46 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, Cinemark USA,
Inc. and AMTROL, Inc.
Louis Lasagna, M.D 74 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 47 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 the Penn Mutual Life Insurance
Company, Hunt Manufacturing Company,
Alberto-Culver Company, Quaker Chemical
Corporation and the Wistar Institute.
3
<PAGE>
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY (1)
- - ---- --- ------------------------------------------
John E. Avery 68 Director of the Company since January 1995.
Chairman of the Americas Society and Council of
the Americas from 1993 to 1996. 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 Americas
Society and Council of the Americas and the
Argentine-American Chamber of Commerce. Member of
the Dean's Council at the Yale University School
of Medicine, the operating board of TCW/Latin
America Partners, LLC, and the Council on Foreign
Relations.
Kenneth L. Way 57 Director of the Company since January
1997. Chairman and Chief Executive Officer of Lear
Corporation since 1988. Also a director of
Comerica Bank.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met four times during the Company's fiscal year ended
March 31, 1997 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 Board of Directors. The
Audit Committee met three times during the 1997 fiscal year.
The Executive Committee currently consists of Directors Aleksandar Erdeljan,
James A. Stern (Chairman) and Ken Way. 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 once during the 1997 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 1997 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
4
<PAGE>
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.
5
<PAGE>
EXECUTIVE COMPENSATION, RETIREMENT PLANS AND OTHER TRANSACTIONS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee is comprised of three directors who are
not employees-- Robert H. Rock, James A. Stern and Frederick Frank--and a
subcommittee thereof consisting of two individuals who are each "non-employee
directors" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 as amended and "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 as amended (the "Code")
(collectively, the "Committee"). 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 1997, the Board of
Directors did not reject or modify 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
added to 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 inflationary increase, to be effective June 1,
1997, has been established at 4.0%, which was derived from
the latest Bureau of Labor Statistics Employment Cost Index.
6
<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 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 mostly qualitative
objectives.
For fiscal 1997, the EVA Award, based on the EVA objectives as approved by
the Board of Directors, was designed to provide an incentive Award equivalent
to 40% of salary for the participants in the Incentive Compensation Plan.
Actual improvement in EVA for fiscal 1997 of $7.5 million resulted in a
consolidated EVA Award of 48% of salary as compared with the target Award of
40% of salary. A portion of this Award must be used to purchase stock
options, as described below, and the remainder is paid as a cash bonus. The
average cash bonus earned under the Incentive Compensation Plan in fiscal
1997 by executive officers (other than the CEO) which appear in the summary
compensation table was 32% of total cash compensation. This situation
satisfies the Committee's desire that a significant portion of total cash
compensation be tied to the financial performance of the Company.
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 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 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
Last year, with Mr. Cashman's decision to step down from his position of
Chairman and co-CEO and the appointment by the Board of Directors of 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. Effective for Fiscal 1997, the new compensation
structure reflects the additional responsibilities and more traditional
structure than had existed previously. The Committee reviewed surveys of
executive base salaries paid for similar positions 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 is also a participant in the EVA
Incentive Compensation Plan, which determined his cash bonus and stock option
grant for Fiscal 1997.
PROPOSED 1997 STOCK OPTION PLAN
The Company is requesting ratification by the shareholders of the R.P.
Scherer 1997 Stock Option Plan (the "1997 Stock Option Plan"), which will
provide for up to 1.2 million shares, or 5% of total common shares
outstanding as of the adoption date, to be issued thereunder. The 1997 Stock
Option Plan will continue to provide selected employees and directors with
options to purchase common stock of the Company and is designed to comply
with the requirements of Section 162(m) of the Code.
It is the intent of the Committee that the initial options granted under the
1997 Stock Option Plan will have the same fundamental attributes of options
granted under the 1992 Stock Option Plan. These attributes, which, where
applicable will appear in the option award agreements, are namely the
following:
- - - The stock options will be for a term of seven (7) years and will vest
three (3) years from the date of grant.
- - - The exercise price of these options will be established in such a manner
as to ensure that the stock appreciates for the shareholder before
participants realizes any compensation from exercise of the stock options.
- - - Accordingly, the exercise price of these options will be no less than the
fair market value of the underlying shares on the date of grant of the
options, but, if greater, will be the average of the fair market value of
the stock on each of the trading days from the period of March 1st of the
fiscal year preceding the applicable fiscal year until April 30th of the
applicable fiscal year times a factor of 1.27628 which represents five
compounded 5% increases in the average fair market.
The complete text of the 1997 Stock Option Plan is set forth in Exhibit A of
this Proxy Statement.
PERFORMANCE GRAPH
The graph set forth below compares the cumulative total shareholder return on
the Company's Common Stock, the Standard and Poor's 500 Index and peer group
companies for the five year period commencing March 31, 1992. This graph
differs from that presented in prior years as the prior year graphs used the
Company's October 11, 1991 initial public offering date as the base data
point and the current year graph presents only the required five year return
for the period commencing March 31, 1992. Since the October 1991 initial
public offering, the Company's total return of 184% has outperformed both the
Standard & Poor's 500 Index increase of 126% and the peer group increase of
76%. As presented in the attached graph, since March 31, 1992 the
8
<PAGE>
Company has substantially outperformed the peer group but been slightly below
the Standard & Poors 500 Index.
9
<PAGE>
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. As illustrated in the
following graph, the value of the $100 invested in the peer group companies
on March 31, 1992 would have declined to $82 on March 31, 1997, while the
value of $100 invested in the Company's stock would have increased 85% to
$185 over that same five year period.
<TABLE>
<CAPTION>
R.P.
Scherer Peer
Corporation Group S&P 500
<S> <C> <C> <C>
3/92 $ 100 $ 100 $ 100
6/92 85 95 102
9/92 108 93 105
12/92 138 107 110
3/93 97 87 115
6/93 101 83 116
9/93 118 79 119
12/93 135 96 122
3/94 131 82 117
6/94 118 75 117
9/94 149 81 123
12/94 162 76 123
3/95 179 86 135
6/95 151 88 148
9/95 155 94 160
12/96 175 95 169
3/96 157 105 179
6/96 162 84 187
9/96 174 84 192
12/96 179 79 208
3/97 185 82 214
</TABLE>
Note: Represents $100 invested on March 31, 1992 in each of the Company's
and the Peer Group's common stock and in the Standard & Poor's Index. Total
return assumes reinvestment of dividends.
THE COMPENSATION COMMITTEE
Frederick Frank
Robert H. Rock
James A. Stern
10
<PAGE>
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1997
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>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (2) AWARDS (3)
----------------------- ------------
SECURITIES
NAME AND FISCAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- - ------------------ ------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Aleksandar Erdeljan 1997(1) $688,367 $253,000 (2) 57,392
Chairman, President and 1996 706,270 - 39,868
Chief Executive Officer 1995 625,697 - 77,702
Nicole S. Williams 1997 228,764 105,877 24,018
Executive Vice President, 1996 220,389 48,783 16,200
Finance, Chief Financial 1995 212,487 135,437 36,562
Officer, and Secretary
Thomas J. Stuart 1997 185,977 85,639 19,426
Senior Vice President 1996 132,053 31,141 10,342
1995 125,625 81,152 21,908
Dennis R. McGregor 1997 119,347 56,120 12,730
Treasurer and Director of 1996 105,436 23,338 7,750
Tax Operations 1995 101,833 64,795 17,492
Joseph E. Mitchell (4) 1997 105,859 50,696 11,500
General Counsel and 1996 - - -
Assistant Secretary 1995 - - -
</TABLE>
- - ------------------------------------------------------------------------------
(1) Mr. Erdeljan's participation in the Company's bonus program began
in fiscal 1997. The salary paid Mr. Erdeljan in fiscal 1997 reflects the
previous compensation structure in which total cash compensation,
consisting of only salary, reflected in part the performance of the
Company during the prior fiscal year.
(2) Last year, with Mr. Cashman's decision to step down from his position of
Chairman and co-CEO and the appointment by the Board of Directors of
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. Effective for Fiscal 1997, the
new compensation structure reflects the additional responsibilities and
more traditional structure than had existed previously. The Committee
conducted a survey of executive base salaries paid for similar positions
in companies of similar size as Scherer, as well as an analysis of the
Peer Group 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 $550,000. Mr. Erdeljan also became a participant
in the EVA Incentive Compensation Plan, which determined his cash bonus
and stock option grant for Fiscal 1997.
(3) The Company does not have restricted stock award plans, long term
incentive plans ("LTIPs") or stock appreciation rights ("SARs"). Other
annual compensation is below the level where disclosure would be required.
(4) Mr. Mitchell began employment with the Company in April, 1996.
11
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1997
The following table provides information on option grants for the Company's
common stock in fiscal year 1997 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATE
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------- ---------------------------
SECURITIES
UNDERLYING % OF EXERCISE
OPTIONS TOTAL OR BASE
NAME GRANTED OPTION PRICE EXPIRATION
(#) GRANTS ($/SHARE) DATE 5% ($) 10% ($)
FOR THE
YEAR
- - ----------------------- ---------- ------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(1) (2) (2)
Aleksandar Erdeljan:
Purchased Portion 28,696 7.79% $65.02 June 15, 2004 $ 304,512 $1,139,907
Granted Portion 28,696 7.79% 42.67 June 15, 2004 945,867 1,781,262
Nicole S. Williams:
Purchased Portion 12,009 3.26% $65.02 June 15, 2004 127,435 477,040
Granted Portion 12,009 3.26% 42.67 June 15, 2004 395,836 745,441
Thomas J. Stuart:
Purchased Portion 9,713 2.64% 65.02 June 15, 2004 103,071 385,835
Granted Portion 9,713 2.64% 42.67 June 15, 2004 320,156 602,920
Dennis R. McGregor:
Purchased Portion 6,365 1.73% 65.02 June 15, 2004 67,543 252,840
Granted Portion 6,365 1.73% 42.67 June 15, 2004 209,801 395,098
Joseph E. Mitchell:
Purchased Portion 5,750 1.56% 65.02 June 15, 2004 61,017 228,410
Granted Portion 5,750 1.56% 42.67 June 15, 2004 189,529 356,923
</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 $53.75 per share at date of grant.
12
<PAGE>
OPTION EXERCISES IN FISCAL YEAR 1997 AND
FISCAL YEAR END OPTION VALUE
The following table provides information on option exercises in fiscal year
1997 by the named executive officers and the value of such officers' options
at March 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END
---------------------------- -------------------------
SHARES VALUE NOT NOT
NAME ACQUIRED ON REALIZED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
EXERCISE (#) ($) (#) (#) ($) ($)
- - ------------------- ------------ -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
(1) (2) (2)
Aleksandar Erdeljan N/A N/A 726,129 174,962 $28,077,928 $357,041
Nicole S. Williams 25,000 $682,900 43,762 76,780 845,300 168,002
Thomas J. Stuart N/A N/A 39,445 51,676 948,396 100,667
Dennis R. McGregor N/A N/A 6,896 37,972 124,231 80,376
Joseph E. Mitchell N/A N/A - 11,500 - -
</TABLE>
- - -----------------------------------------------------------------------------
(1) A substantial majority of the options now exercisable by Mr. Erdeljan
were granted in connection with his interest in the leveraged buy-out of
the Company in June, 1989.
(2) Based upon market value of $51.875 per share at March 31, 1997.
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 1997 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.
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.
13
<PAGE>
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 12 months, and also provide welfare plan
benefits for 24 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 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.
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.
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 1997, the
Company accrued aggregate contributions for the Retirement Income Plan in an
amount approximating 3.7% 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 $160,000, 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 1997 limit is $261,573). 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.
14
<PAGE>
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.
15
<PAGE>
ANNUAL BENEFIT FOR YEARS OF SERVICE INDICATED
---------------------------------------------
HIGHEST CONSECUTIVE
FIVE YEAR AVERAGE ANNUAL TEN TWENTY THIRTY FORTY
COMPENSATION YEARS YEARS YEARS YEARS
- - ------------------------ ------- ------- ------- -------
$125,000 $17,250 $34,500 $51,750 $66,625
150,000 21,000 42,000 63,000 81,000
175,000 24,750 49,500 74,250 95,375
200,000 28,500 57,000 85,500 109,750
225,000 32,250 64,500 96,750 124,125
250,000 (1) 35,740 71,479 107,219 137,502
300,000 (1) 35,740 71,479 107,219 137,502
350,000 (1) 35,740 71,479 107,219 137,502
400,000 (1) 35,740 71,479 107,219 137,502
450,000 (1) 35,740 71,479 107,219 137,502
500,000 (1) 35,740 71,479 107,219 137,502
- - ------------------------------------------------------------------------------
(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 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 ($261,573 for calendar 1997).
Credited service in the Plans for those individuals listed in SUMMARY
COMPENSATION TABLE FOR FISCAL YEAR 1997 who are active participants is as
follows: Mr. Erdeljan, 15.7 years (including years credited for service from
1978 to 1987 and from 1989 to the present); Ms. Williams, 4.9 years; Mr.
Stuart, 6.7 years; and McGregor, 3.4 years. Under the terms of the Plan, Mr.
Mitchell became a participant effective July 1, 1997. The final average
compensation of such individuals as of January 1, 1997 was approximately as
follows: Mr. Erdeljan, $241,722; Ms. Williams, $239,470; Mr. Stuart,
$193,225, and Mr. McGregor, $154,449.
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 $9,500 for the 1997 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 become 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.
16
<PAGE>
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 24 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.
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
17
<PAGE>
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 approximately 22 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 "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.
The remaining 59,716 options available under the 1992 Stock Option Plan are
to be granted for fiscal 1997. For such fiscal 1997 grants, the purchased
portion, costing $2.30 each, is exercisable at $65.02 per share, and the
granted portion is exercisable at $42.67 per share. For persons named in the
SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 1997 and all executive officers as
a group, the following options were granted under the 1992 Stock Option Plan
(as amended), all for fiscal 1997: Aleksandar Erdeljan, 57,392 shares and all
executive officers as a group, 59,716 shares. Remaining fiscal 1997 stock
option awards for other executive officers' and management employees' will be
awarded under the 1997 Stock Option Plan, subject to ratification by
stockholders. No compensation expense was recorded by the Company in
connection with the 1992 Stock Option Plan for fiscal 1997. No options for
common stock remain available for future grant under the 1992 Stock Option
Plan.
As of July 21, 1997, the last sale price of the Common Stock on the New York
Stock Exchange was $50.75 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
18
<PAGE>
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 497,343 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
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.
19
<PAGE>
During fiscal 1997, 10,465 1990 Stock Option Plans options were granted to
new employees of the Company and 9,050 options were exercised, leaving
1,036,256 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. In fiscal 1997, $0.1 million of
compensation expense was recorded related to fiscal 1997 grants under the
1990 Stock Option Plans.
As of July 21, 1997, the last sale price of the Common Stock on the New York
Stock Exchange was $50.75 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, 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 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 Code
with respect to any amounts which are deemed to be excess parachute payments.
20
<PAGE>
MATTERS TO BE VOTED UPON
ELECTION OF DIRECTORS
There are currently eight 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, 1998, 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, 1998. 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.
RATIFICATION OF THE 1997 STOCK OPTION PLAN
The Board of Directors has adopted the 1997 Stock Option Plan, subject to the
ratification of stockholders. The purpose of the 1997 Stock Option Plan is
to attract, retain and motivate selected employees and directors
("Participants") who are in a position to have an impact on the results of
the operations of the business of the Company or one or more of its
Subsidiaries. The Company expects that it will benefit from the additional
incentive which such employees will have to increase the value of the
Company's shares as a result of the 1997 Stock Option Plan. The 1997 Stock
Option Plan will replace the 1992 Stock Option Plan, under which no shares
remain available for grant. The complete text of the 1997 Stock Option Plan
is set forth in Exhibit A of this Proxy Statement. The following summary of
the material features of the 1997 Stock Option Plan does not purport to be
complete and is qualified in its entirety by reference to Exhibit A.
SUMMARY OF THE TERMS OF THE 1997 STOCK OPTION PLAN
The 1997 Stock Option Plan will be administered by the Committee. In
accordance with the provisions of the 1997 Stock Option Plan, the Committee
has the authority to select the Participants to be granted awards under the
1997 Stock Option Plan, to determine the size and terms of an Award (as
hereinafter defined), and to determine the time when grants of Awards will be
made. Under the terms of the 1997 Stock Option Plan, Participants may be
selected from among the employees and directors of the Company or any of its
subsidiaries who are in a position to have an impact upon the Company's
results of operations. An Award may consist of options to purchase common
stock of the Company or of limited stock appreciation rights ("LSARs") which
are exercisable upon the occurrence of a specified contingent event. The
1997 Stock Option Plan
21
<PAGE>
authorizes up to 1.2 million shares of common stock (5% of outstanding shares
on July 17, 1997, the adoption date) to be issued upon exercise of stock
options or LSARs granted thereunder. Shares of common stock which are
subject to Awards which terminate or lapse may be granted again under the
1997 Stock Option Plan. The Company anticipates that approximately 25
employees and directors will initially be Participants in the 1997 Stock
Option Plan. The 1997 Stock Option Plan permits the Committee to grant Awards
of stock options or LSARs (collectively, "Awards") to Participants and to
determine the timing and amount of such Awards, provided that no individual
can receive an Award for more than 100,000 shares of common stock in any one
fiscal year. The exercise price for an Award will be determined by the
Committee but may not be less than 100% of the fair market value of the
underlying common stock on the date the Award is granted. The Committee may
also grant Awards under the 1997 Stock Option Plan that are intended to be
incentive stock options ("ISOs") complying with the requirements of Section
422 of the Code. Awards granted under the 1997 Stock Option Plan will be
exercisable at such time and upon such terms and conditions as may be
determined by the Committee, but in no event will an Award be exercisable
more than ten years after the date it is granted. Additionally, the
Compensation Committee may develop procedures for a Participant to defer
receipt of shares otherwise subject to stock options granted under the 1997
Stock Option Plan.
A Participant may exercise a stock option by delivering a written notice of
exercise to the Company and tendering payment of the full price of the shares
being exercised together with payment or arrangement for payment of any
federal income or other tax required to be withheld by the Company with
respect to such shares. The exercise price for the shares with respect to
which the option is being exercised may be paid in cash; in shares having a
fair market value equal to the aggregate purchase price; partly in cash and
partly in such shares; through the withholding of shares (which would
previously have been delivered to the Participant) with an aggregate fair
market value on the exercise date equal to the aggregate exercise price; or
through irrevocable instructions to a broker to deliver promptly to the
Company an amount equal to the exercise price for the options purchased.
LSARs granted under the 1997 Stock Option Plan will be exercisable upon the
occurrence of specified contingent events, and such LSARs may be exercised by
a Participant whether or not such Participant is employed by the Company at
the time of exercise. Unless otherwise specified by the Committee, each LSAR
shall entitle a Participant to receive, upon exercise, an amount in cash
equal to the excess of (i) a price per share determined in connection with
specified contingent events, both as specified in the LSAR grant document,
over (ii) the exercise price of such LSAR (which shall be no less than the
fair market value of one share on the date of grant of such LSAR).
Unless otherwise so provided by the Committee, an Award shall not be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy).
The Board of Directors may amend, alter or discontinue the 1997 Stock Option
Plan, but no amendment, alteration or discontinuation shall be made which,
(i) without the approval of the stockholders of the Company, would (except as
is provided in Section 13 of the 1997 Stock Option Plan), (A) increase the
total number of shares reserved for the purposes of the 1997 Stock Option
Plan, (B) change the maximum number of shares for which Awards may be granted
to any Participant, (C) materially increase the benefits accruing to
Participants under the 1997 Stock Option Plan or (D) materially modify the
eligibility requirements for participation in the 1997 Stock Option Plan, or
(ii) without the consent of a Participant, would impair any of the rights or
obligations under any Award theretofore granted to such Participant under the
1997 Stock Option Plan; provided, however, that the Committee may amend the
1997 Stock Option Plan in such manner as it deems necessary to permit the
granting of Awards meeting the requirements of the Code or other applicable
(United States or foreign) laws.
22
<PAGE>
In the event of any change in the outstanding common stock of the Company by
reason of any share dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of shares or other
corporate exchange, or any distribution to stockholders of shares other than
regular cash dividends, the Committee in its sole discretion and without
liability to any person may make such substitution or adjustment, if any, as
it deems to be equitable, as to (i) the number or kind of shares or other
securities issued or reserved for issuance pursuant to the 1997 Stock Option
Plan or pursuant to outstanding Awards, (ii) the option price and/or (iii)
any other affected terms of such Awards.
In the event of a change in control of the Company, the Committee in its sole
discretion and without liability to any person may take such actions, if any,
as it deems necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the payment of a
cash amount in exchange for the cancellation of an Award and/or (iii) the
requiring of the issuance of substitute Awards that will substantially
preserve the value, rights and benefits of any affected Awards previously
granted hereunder) as of the date of the consummation of the change in
control. A change in control generally occurs if: (i) the Company merges
with or into, or consolidates with another corporation; (ii) the Company
sells, exchanges, or otherwise disposes of all or substantially all of the
assets of the Company; (iii) 50% or more of the Company's then-outstanding
shares of voting stock is acquired by another corporation, person or entity;
(iv) the Company liquidates or dissolves; or (v) the Company recapitalizes or
enters into any similar transaction as a result of which the shares either
(A) are no longer equity voting securities of the Company or (B) are no
longer listed on a national securities exchange or authorized for quotation
on an inter-dealer quotation system of a national securities association.
Subject to ratification of the 1997 Stock Option Plan by stockholders, a
total of 308,456 stock options were granted under the 1997 Stock Option Plan
on June 11, 1997 for fiscal 1997. With respect to these fiscal 1997 grants,
the purchased portion, costing $2.30 each, will be exercisable at $65.02 per
share and the granted portion will be exercisable at $42.67 per share. For
persons named in the Executive Cash Compensation Table and all executive
officers as a group, the following options were granted under the 1997 Stock
Option Plan, all for fiscal 1997: Nicole S. Williams, 24,018 shares; Thomas
J. Stuart, 19,427 shares; Dennis R. McGregor, 12,730 shares; Joseph E.
Mitchell, 11,500 shares; and all executive officers as a group, 72,590
shares. Subject to ratification of the 1997 Stock Option Plan by
shareholders, a total of 905,440 options for common stock will remain
available for future grant under the 1997 Stock Option Plan.
As of July 21, 1997, the last sale price of the Common Stock on the New York
Stock Exchange was $50.75 per share.
Federal Income TAX Consequences of the 1997 Stock Option Plan
As described above, the 1997 Stock Option Plan authorizes the grant of both
Non-Qualified stock options, ISOs and LSARs. The following discussion is a
general summary of the material U.S. federal income tax consequences to U.S.
participants in the 1997 Stock Option Plan. The discussion is based on 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.
There are no material federal income tax consequences either to the
Participant or to the Participant's employer upon the grant of an ISO or a
Non-Qualified stock option. On exercise of a Non-Qualified stock option, the
excess of the date-of-exercise fair market value of the shares acquired over
the option price will generally be taxable to the Participant as ordinary
income and deductible by the Participant's employer. The disposition of
shares acquired upon exercise of a Non-
23
<PAGE>
Qualified stock option will generally result in a capital gain or loss for
the Participant, but will have no material tax consequences for the
Participant's employer.
On the exercise of an ISO, the Participant will not recognize any income and
the Participant's employer will not be entitled to a deduction (although such
exercise may give rise to alternative minimum tax liability for the
Participant). Generally, if the Participant disposes of shares acquired upon
exercise of an ISO within two years of the date of grant or one year of the
date of exercise, the Participant will recognize ordinary income, and the
Participant's employer will be entitled to a deduction, equal to the excess
of the fair market value on the date of exercise over the option price
(limited generally to the gain on the sale). The balance of any gain and any
loss, will be generally treated as a capital gain or loss to the Participant.
If the shares are disposed of after the foregoing holding requirements are
met the Participant's employer will not be entitled to any deduction, and the
entire gain or loss for the Participant will be treated as a long-term
capital gain or loss.
Amounts received by a Participant upon the exercise of an LSAR are taxed at
ordinary rates when received. The Participant's employer is generally
allowed an income tax deduction equal to the amount recognized as ordinary
income by the Participant.
Pursuant to the terms of the 1997 Stock Option Plan, 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
Participant and the loss of a deduction to the Participant's employer under
Section 280G of the Code with respect to any amounts which are deemed to be
excess parachute payments.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
1997 STOCK OPTION PLAN. THE VOTE REQUIRED FOR SUCH RATIFICATION IS A
FAVORABLE VOTE OF THE HOLDERS OF A MAJORITY OF VOTES CAST ON THE ISSUE
(INCLUDING ABSTENTIONS TO THE EXTENT ABSTENTIONS ARE COUNTED AS VOTING UNDER
APPLICABLE STATE LAW).
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, 1997,
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, 1997
24
<PAGE>
through September 12, 1997 at the World Headquarters of R.P. Scherer
Corporation, 2301 West Big Beaver Road, Troy, Michigan 48084.
25
<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
2301 West Big Beaver Road, Troy, Michigan 48084, to the attention of the
Corporate Secretary, no later than April 24, 1998.
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, 1997, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE ADDRESSED TO: NICOLE S.
WILLIAMS, CORPORATE SECRETARY, R.P. SCHERER CORPORATION, 2301 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.
<PAGE>
EXHIBIT A
R.P. SCHERER CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Plan is to attract, retain and
motivate selected employees and directors who are in a position to have an
impact on the results of the operations of the business of the Company or one
or more of its Subsidiaries. The Company expects that it will benefit from
the additional incentive which such employees will have to increase the value
of the Company's Shares as a result of the Plan.
2. DEFINITIONS
The following capitalized terms used in the Plan have the
respective meanings set forth in this Section:
(a) ACT: The Securities Exchange Act of 1934, as
amended, or any successor thereto.
(b) AWARD: An Option or LSAR granted pursuant to the
Plan.
(c) BOARD: The Board of Directors of the Company.
(d) CAUSE: The occurrence of any of the following events:
(i) any act or acts of a Participant 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 a Participant of any
employment agreement with the Company or any
Subsidiary or the policies of the Company or any
Subsidiary or the willful and persistent failure or
refusal of a Participant (after written notice to
such Participant) to perform his or her duties of
employment or comply with any lawful directives of
the Board or the board of directors of any
Subsidiary that employs the Participant;
(iii) a course of conduct amounting to gross,
willful misconduct or dishonesty; or
(iv) any misappropriation of material property of
the Company or any Subsidiary by a Participant or
any misappropriation of a corporate or business
opportunity of the Company or any Subsidiary by a
Participant.
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(e) CHANGE IN CONTROL: The occurrence of any of the
following events:
(i) the Company merges with or into, or consolidates
with, another corporation, person or entity;
(ii) the Company sells, exchanges or otherwise
disposes of all or substantially all of the assets
of the Company;
(iii) 50% or more of the Company's then-outstanding
shares of voting stock is acquired by another
corporation, person or entity;
(iv) the Company liquidates or dissolves; or
(v) the Company recapitalizes or enters into any
similar transaction, and as a result of which the
Shares either (A) are no longer equity voting
securities of the Company or (B) are no longer
listed on a national securities exchange or
authorized for quotation on an inter-dealer
quotation system of a national securities
association.
(f) CODE: The Internal Revenue Code of 1986, as amended,
or any successor thereto.
(g) COMMITTEE: The Compensation Committee of the Board.
(h) COMPANY: R.P. Scherer Corporation, a Delaware
corporation.
(i) DISABILITY: Inability to engage in any substantial
gainful activity by reason of a medically
determinable physical or mental impairment which
constitutes a permanent and total disability, as
defined in Section 22(e)(3) of the Code (or any
successor section thereto). The determination
whether a Participant has suffered a Disability
shall be made by the Committee based upon such
evidence as it deems necessary and appropriate. A
Participant shall not be considered disabled unless
he or she furnishes such medical or other evidence
of the existence of the Disability as the Committee,
in its sole discretion, may require.
(j) EFFECTIVE DATE: The date on which the stockholders
of the Company approve the Plan.
(K) FAIR MARKET VALUE: On a given date, the arithmetic
mean of the high and low prices of the Shares as
reported on such date on the Composite Tape of the
principal national securities exchange on which such
Shares are listed or admitted to trading, or, if no
Composite Tape exists for such national securities
exchange on such date, then on the principal
national securities exchange on which such Shares
are listed or admitted to trading, or, if the Shares
are not listed or admitted on a national securities
exchange, the arithmetic mean of the per Share
closing bid price and per Share closing asked price
on such date as quoted on the National Association
of Securities Dealers Automated Quotation System (or
such market in which such prices are regularly
quoted), or, if there is
A-2
<PAGE>
no market on which the Shares are regularly quoted,
the Fair Market Value shall be the value established
by the Committee in good faith. If no sale of Shares
shall have been reported on such Composite Tape or
such national securities exchange on such date or
quoted on the National Association of Securities
Dealers Automated Quotation System on such date,
then the immediately preceding date on which sales
of the Shares have been so reported or quoted shall
be used.
(l) GOOD REASON: The occurrence of any of the following
events:
(i) any material reduction by the Company of a
Participant's duties, responsibilities or titles;
(ii) any involuntary removal of a Participant from
any position previously held (except in connection
with a promotion or a termination for Cause, death
or disability, or the voluntary termination by the
Participant other than for Good Reason); or
(iii) such other reasons (including non-employment
related reasons) as may be approved by the
Committee, in its sole discretion, from time to time.
(m) ISO: An Option that is also an incentive stock
option granted pursuant to Section 6(d) of the Plan.
(n) LSAR: A limited stock appreciation right granted
pursuant to Section 7 of the Plan.
(o) OPTION: A stock option granted pursuant to Section 6
of the Plan.
(p) OPTION PRICE: The purchase price per Share of an
Option, as determined pursuant to Section 6(a) of
the Plan.
(q) PARTICIPANT: An individual who is selected by the
Committee to participate in the Plan pursuant to
Section 5 of the Plan.
(r) PLAN: The R.P. Scherer Corporation 1997 Stock Option
Plan.
(s) RETIREMENT: A Participant's termination of
employment with the Company or any Subsidiary at or
over the age of 55 (or at any earlier date approved
by the Committee).
(t) SHARES: Shares of common stock, par value $0.01 per
Share, of the Company.
(u) SUBSIDIARY: A subsidiary corporation of the
Corporation, as defined in Section 424(f) of the
Code (or any successor section thereto).
A-3
<PAGE>
3. SHARES SUBJECT TO THE PLAN
The total number of Shares that may be issued under the
Plan is 5% of the aggregate number of Shares outstanding as of the date the
Plan is adopted by the Board. The maximum number of Shares for which Awards
may be granted during a calendar year to any Participant shall be 100,000.
The Shares may consist, in whole or in part, of unissued Shares or treasury
Shares. The issuance of Shares or the payment of cash upon the exercise of
an Award shall reduce the total number of Shares available under the Plan, as
applicable. Shares which are subject to Awards which terminate or lapse may
be granted again under the Plan.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which
may delegate its duties and powers in whole or in part to any subcommittee
thereof consisting solely of at least two individuals who are each (a)
"non-employee directors" within the meaning of Rule 16b-3 under the Act (or
any successor rule thereto) and (b) "outside directors" within the meaning of
Section 162(m) of the Code (or any successor section thereto). The Committee
shall have the authority to select the Participants to be granted Awards
under the Plan, to determine the size and terms of an Award and to determine
the time when grants of Awards will be made. The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations that it deems
necessary or desirable for the administration of the Plan. Any decision of
the Committee shall lie within its sole and absolute discretion and shall be
final, conclusive and binding on all parties concerned.
5. ELIGIBILITY
The Committee may, in its sole discretion, designate
those person(s) who shall be Participant(s) in the Plan. Participants shall
be selected from among the employees and directors of the Company and any of
its Subsidiaries who are in a position to have an impact on the results of
the operations of the Company or one or more of its Subsidiaries; PROVIDED
THAT ISOs may only be granted to employees of the Company or its Subsidiaries.
6. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be, as determined by
the Committee, non-qualified, incentive or other stock options for federal
income tax purposes, as evidenced by the related Option agreements. The
Committee may, in its sole discretion, set forth terms in an Option agreement
relating to a Participant's termination from employment due to Retirement,
Cause or Good Reason. Options granted under the Plan shall be subject to the
following terms and conditions:
A-4
<PAGE>
(a) OPTION PRICE. The Option Price per Share shall be
determined by the Committee, but shall not be less than 100% of the Fair
Market Value of the Shares on the date an Option is granted.
(b) EXERCISABILITY OF OPTIONS. Options granted under
the Plan shall be exercisable at such time and upon such terms and conditions
as may be determined by the Committee, but in no event shall an Option be
exercisable more than ten years after the date it is granted.
(c) METHOD OF EXERCISE. Except as otherwise provided in
the Plan or in an Award agreement, an Option may be exercised for all, or
from time to time any part, of the Shares for which it is then exercisable.
For purposes of this Section 6 of the Plan, the exercise date of an Option
shall be the later of the date a notice of exercise is received by the
Company and, if applicable, the date payment is received by the Company
pursuant to clauses (i), (ii) or (iii) in the following sentence. The
purchase price for the Shares as to which an Option is exercised shall be
paid to the Company in full at the time of exercise at the election of the
Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to
the aggregate Option Price for the Shares being purchased and satisfying such
other requirements as may be imposed by the Committee, (iii) partly in cash
and partly in such Shares, (iv) through the withholding of Shares (which
would otherwise be delivered to the Participant) with an aggregate Fair
Market Value on the exercise date equal to the aggregate Option Price or
(v) through the delivery of irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the aggregate Option Price for the
Shares being purchased. No Participant shall have any rights to dividends or
other rights of a stockholder with respect to Shares subject to an Option
until the Shares have been issued to the Participant. A Participant may, if
and to the extent permitted by the Committee, elect to defer payment of an
Award.
(d) ISOS. The Committee may grant Options under the
Plan that are intended to be ISOs. Such ISOs shall comply with the
requirements of Section 422 of the Code (or any successor section thereto).
No ISO may be granted to any Participant who, at the time of such grant, owns
more than ten percent of the total combined voting power of all classes of
stock of the Company or of any Subsidiary, unless (i) the Option Price for
such ISO is at least 110% of the Fair Market Value of a Share on the date the
ISO is granted and (ii) the date on which such ISO terminates is a date not
later than the day preceding the fifth anniversary of the date on which the
ISO is granted. Any Participant who disposes of Shares acquired upon the
exercise of an ISO either (i) within two years after the date of grant of
such ISO or (ii) within one year after the transfer of such Shares to the
Participant, shall notify the Company of such disposition and of the amount
realized upon such disposition.
(e) DEFERRAL. The Committee may develop procedures for
a Participant to defer receipt of Shares otherwise subject to Options granted
hereunder.
7. TERMS AND CONDITIONS OF LSARS
LSARs granted under the Plan shall be exercisable upon
the occurrence of specified contingent events, and such LSARs may be
exercised by a Participant whether or not such Participant is employed by the
Company at the time of exercise. Unless otherwise specified by the Committee,
each LSAR shall entitle a Participant to receive, upon exercise, an amount in
cash equal to the excess of (a) a price per Share determined in connection with
specified contingent events, both as specified in the LSAR grant document,
over (b) the exercise price of such LSAR (which shall be no less than the
Fair Market Value of one Share on the date of grant of such LSAR).
A-5
<PAGE>
8. TAX WITHHOLDING
The Committee shall have the right to require payment of
any federal, state, local or foreign income or other taxes required to be
withheld with respect to the exercise of an Award. Unless the Committee
specifies otherwise, the Participant may elect to pay a portion or all of
such withholding taxes by (a) delivery in Shares or (b) having Shares
withheld by the Company from any Shares that would have otherwise been
received by the Participant. The number of Shares so delivered or withheld
shall have an aggregate Fair Market Value sufficient to satisfy the
applicable withholding taxes.
9. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan, but
no amendment, alteration or discontinuation shall be made which, (a) without
the approval of the stockholders of the Company, would (except as is provided
in Section 13 of the Plan), (i) increase the total number of Shares reserved
for the purposes of the Plan, (ii) change the maximum number of Shares for
which Awards may be granted to any Participant, (iii) materially increase the
benefits accruing to Participants under the Plan or (iv) materially modify
the eligibility requirements for participation in the Plan, or (b) without
the consent of a Participant, would impair any of the rights or obligations
under any Award theretofore granted to such Participant under the Plan;
PROVIDED, HOWEVER, that the Committee may amend the Plan in such manner as it
deems necessary to permit the granting of Awards meeting the requirements of
the Code or other applicable (United States or foreign) laws.
10. NO RIGHT TO EMPLOYMENT
The granting of an Award under the Plan shall impose no
obligation on the Company or any Subsidiary to continue the employment of a
Participant or to make any additional Awards to the Participant and shall not
lessen or affect the Company's or Subsidiary's right to terminate the
employment of such Participant.
11. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns
of the Company and a Participant, including, without limitation, the estate
of such Participant and the executor, administrator or trustee of such
estate, or any receiver or trustee in bankruptcy or representative of the
Participant's creditors.
12. NONTRANSFERABILITY OF AWARDS
Unless otherwise so provided by the Committee, an Award
shall not be subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect.
A-6
<PAGE>
13. ADJUSTMENTS UPON CERTAIN EVENTS
Notwithstanding any provision in the Plan to the
contrary, the following provisions shall apply to all Awards granted under
the Plan:
(a) GENERALLY. In the event of any change in the
outstanding Shares by reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Shares or other corporate exchange, or any distribution to stockholders of
Shares other than regular cash dividends, the Committee in its sole
discretion and without liability to any person may make such substitution or
adjustment, if any, as it deems to be equitable, as to (i) the number or kind
of Shares or other securities issued or reserved for issuance pursuant to the
Plan or pursuant to outstanding Awards, (ii) the Option Price and/or (iii)
any other affected terms of such Awards.
(b) CHANGE IN CONTROL. Except as otherwise provided in
an Award agreement, in the event of a Change in Control, the Committee in its
sole discretion and without liability to any person may take such actions, if
any, as it deems necessary or desirable with respect to any Award (including,
without limitation, (i) the acceleration of an Award, (ii) the payment of a
cash amount in exchange for the cancellation of an Award and/or (iii) the
requiring of the issuance of substitute Awards that will substantially
preserve the value, rights and benefits of any affected Awards previously
granted hereunder) as of the date of the consummation of the Change in
Control.
14. CHOICE OF LAW
The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to the
choice of law provisions thereof.
15. TERM OF THE PLAN
The Plan shall be effective as of the Effective Date. No
Award may be granted under the Plan after the tenth anniversary of the date
the Plan is adopted by the Board, but Awards theretofore granted may extend
beyond that date.
A-7
<PAGE>
PROXY
R.P. SCHERER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 11, 1997
Revoking any prior appointment, the undersigned hereby appoints A. ERDELJAN and
N. WILLIAMS and each of them, attorneys-in-fact and 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 Corporation to be held at The
Townsend Hotel, 100 Townsend Street, Birmingham, Michigan on September 11, 1997,
beginning at 1 P.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.
(change of address)
Election of Directors, Nominees:
---------------------------------------
John E. Avery, Aleksander Erdeljan,
Frederick Frank,
---------------------------------------
Lori G. Koffman, Louis Lasagna,
Robert H. Rock, James A. Stern
---------------------------------------
Kenneth L. Way
---------------------------------------
(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
<PAGE>
/X/ Please mark your SHARES IN YOUR NAME
votes as in this
example.
<TABLE>
<CAPTION>
<S><C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of / / / / 2. Ratification of the / / / / / / 4. In accordance with / / / / / /
Directors appointment of their discretion
(see reverse) auditors for on any other
Fiscal 1998. matters which may
properly come
before the meeting.
For, except vote withheld from 3. Ratification of the / / / / / /
the following nominee(s): 1997 Stock
Option Plan.
- - ------------------------------
The undersigned acknowledges receipt of the
Notice of Annual Meeting of Stockholders
Change / / and the Proxy Statement dated July 26,
of 1997.
Address
When shares are held by joint tenants, both
Attend / / should sign. When signing as attorney,
Meeting 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
SIGNATURE(S) DATE USING THE ENCLOSED ENVELOPE.
------------------------------------------------------ --------
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.
</TABLE>
