<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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
CEPHALON, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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> 2
CEPHALON, INC.
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
------------------------
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 15, 1998
------------------------
TO THE STOCKHOLDERS OF CEPHALON, INC.:
Notice is hereby given that the annual meeting of stockholders of CEPHALON,
INC., a Delaware corporation (the "Company" or "Cephalon"), will be held at the
Sheraton Great Valley Hotel, 707 Lancaster Avenue, Frazer, Pennsylvania, 19355,
on Friday, May 15, 1998, at 9:30 a.m., Philadelphia time, for the following
purposes:
1. To elect seven directors; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record as of the close of business on March 20, 1998
will be entitled to notice of the annual meeting and to vote at the annual
meeting and any adjournments thereof. A list of stockholders of the Company
entitled to vote at the meeting will be available for inspection by a
stockholder at the Company's office, for the ten days prior to the annual
meeting and during normal business hours.
By Order of the Board of Directors
BARBARA S. SCHILBERG
Secretary
West Chester, Pennsylvania
March 31, 1998
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. IF A STOCKHOLDER
DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO DESIRED,
REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 3
CEPHALON, INC.
145 BRANDYWINE PARKWAY
WEST CHESTER, PA 19380
------------------------
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 15, 1998
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Cephalon, Inc. (the "Company" or
"Cephalon"), for use at the 1998 annual meeting of stockholders to be held at
the Sheraton Great Valley Hotel, 707 Lancaster Avenue, Frazer, Pennsylvania,
19355, on Friday, May 15, 1998, at 9:30 a.m., Philadelphia time, and at any
adjournments thereof. This proxy statement and the accompanying proxy card are
expected to be first distributed to stockholders on or about April 15, 1998.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers, directors and a small number of regular employees of the Company who
will not be specially compensated for such services. The Company also has
retained the services of MacKenzie Partners, Inc. as the Company's proxy
solicitation agent for the 1998 annual meeting, at a cost of approximately
$5,000, which will be borne by the Company. The Company also will request banks,
brokers and other custodians, nominees and fiduciaries to solicit proxies from
beneficial owners, where appropriate, and will reimburse such persons for
reasonable expenses incurred in that regard.
The Company's annual report to stockholders for the fiscal year ended
December 31, 1997, including financial statements, is being mailed to
stockholders with this proxy statement but does not constitute a part of this
proxy statement.
<PAGE> 4
VOTING AT THE MEETING
Holders of shares of common stock of the Company, par value $.01 per share
("Common Stock"), of record at the close of business on March 20, 1998 are
entitled to vote at the meeting and at any adjournments thereof. As of that
date, there were 28,413,475 shares of Common Stock outstanding. Each stockholder
entitled to vote shall have the right to one vote for each share outstanding in
such stockholder's name.
The Company presently has no other class of stock outstanding and entitled
to be voted at the meeting. The presence in person or by proxy of stockholders
entitled to cast a majority of all votes entitled to be cast at the meeting
constitutes a quorum. A plurality of the votes cast is required for the election
of directors and to take action with respect to any other matter that may
properly be brought before the meeting.
Shares cannot be voted at the meeting unless the holder of record is
present in person or by proxy. The enclosed proxy card is a means by which a
stockholder may authorize the voting of his or her shares at the meeting. The
shares of Common Stock represented by each properly executed proxy card will be
voted at the meeting in accordance with each stockholder's directions.
Stockholders are urged to specify their choices by marking the appropriate boxes
on the enclosed proxy card; if no choice has been specified, the shares will be
voted as recommended by the board of directors. If any other matters are
properly presented to the meeting for action, the proxy holders will vote the
proxies (which confer discretionary authority to vote on such matters) in
accordance with their judgment.
With regard to the election of directors, votes may be cast in favor of or
withheld from any or all nominees. Votes that are withheld will be excluded
entirely from the vote and will have no effect, other than for purposes of
determining the presence of a quorum.
Brokers who hold shares in street name for customers have the authority
under the rules of the various stock exchanges to vote on certain items when
they have not received instructions from beneficial owners. Where brokers are
prohibited from exercising discretionary authority for beneficial owners who
have not provided voting instructions (commonly referred to as "broker
non-votes"), those shares will not be included in the vote totals.
Execution of the accompanying proxy will not affect a stockholder's right
to attend the meeting and vote in person. Any stockholder giving a proxy has the
right to revoke it by giving written or oral notice of revocation to the
Secretary of the Company, or by delivering a subsequently executed proxy card,
at any time before the proxy is voted.
Your vote is important. Accordingly, you are asked to complete, sign and
return the accompanying proxy card whether or not you plan to attend the
meeting. If you plan to attend the meeting to vote in person and your shares are
registered with the Company's transfer agent in the name of a broker or bank,
you must secure a proxy card from the broker or bank assigning voting rights to
you for your shares.
2
<PAGE> 5
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
Seven directors are to be elected at the 1998 annual meeting. The term of
each director expires at the next annual meeting of stockholders and each person
shall hold office until the election and qualification of his respective
successor or until his earlier death, removal or resignation. The board of
directors consists of such number of directors as is fixed from time to time by
resolution adopted by the board of directors. The board of directors currently
is authorized to have seven members.
The nominees for election as directors of the Company are Drs. Baldino,
Feeney and Witzel and Messrs. Egan, Greenacre, Moley and Peacock. All nominees
are presently directors of the Company whose current terms expire at the time of
the 1998 annual meeting of stockholders. All nominees have consented to be named
and to serve if elected.
The seven directors are to be elected by a plurality of the votes cast.
Unless otherwise instructed by the stockholders, the persons named in the
proxies will vote the shares represented thereby for the election of all such
nominees. The board of directors believes all nominees will be able to serve as
directors. If this should not be the case, however, the proxies may be voted for
a substitute nominee to be designated by the board of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES.
----------------------------------
NOMINEES FOR ELECTION
----------------------------------
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATIONS DURING PAST FIVE BECAME
NAME OF DIRECTOR AGE YEARS AND CERTAIN DIRECTORSHIPS DIRECTOR
---------------- --- -------------------------------------- ----------
<S> <C> <C> <C>
Frank Baldino, Jr., 1987
Ph.D. .................... 44 Dr. Baldino, founder of the Company, has served as
President, Chief Executive Officer and director since
the Company's inception. Dr. Baldino holds several
adjunct academic appointments, including Adjunct
Professor of Pharmacology at Temple University
Medical School, Adjunct Professor of Physiology and
Biophysics and Adjunct Professor of Neurology at
Allegheny University Hospital. He currently serves as
a director of ViroPharma, Inc., a biopharmaceutical
company, Integrated Systems Consulting Group, Inc.,
which provides consulting services for information
processing, and Pharmacopeia, Inc., a developer of
proprietary technology platforms for pharmaceutical
companies.
William P. Egan............. 53 Since 1979, Mr. Egan has served as President of Burr, 1988
Egan, Deleage & Co., a venture capital company. Mr.
Egan is also a general partner of ALTA Communications
VI, L.P., a venture capital firm founded in 1996. He
currently serves as a director of Broderbund
Software, Inc.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATIONS DURING PAST FIVE BECAME
NAME OF DIRECTOR AGE YEARS AND CERTAIN DIRECTORSHIPS DIRECTOR
---------------- --- -------------------------------------- ----------
<S> <C> <C> <C>
Robert J. Feeney, Ph.D. .... 72 Since October 1987, Dr. Feeney served as a general 1988
partner of Hambrecht & Quist Life Science Technology
Fund, a life sciences venture capital fund affiliated
with Hambrecht & Quist Incorporated. He retired from
these responsibilities August 1, 1997. For 37 years
prior thereto, Dr. Feeney was employed at Pfizer Inc.
and last served as its Vice President of Licensing
and Development. Dr. Feeney currently serves as a
director of QLT PhotoTherapeutics Inc., a Canadian
biotechnology company.
Martyn D. Greenacre......... 56 Since June 1997, Mr. Greenacre has been President and 1992
CEO of DELSYS Pharmaceutical Corporation. From 1993
to 1996, Mr. Greenacre served as President and Chief
Executive Officer and as a director of Zynaxis Inc.,
a biopharmaceutical company. From 1989 to 1992, Mr.
Greenacre was Chairman Europe, SmithKline Beecham
Pharmaceuticals. He joined SmithKline & French in
1973 where he held increasingly responsible positions
in commercial operations and management. Mr.
Greenacre currently serves as a director of IBAH,
Inc., which provides clinical research and other
development services to pharmaceutical companies,
Creative Biomolecules, Inc., a biotechnology company,
and Genset s.a., a human genome sciences company.
Kevin E. Moley.............. 51 Since January 1996, Mr. Moley has been President and 1994
CEO of Integrated Medical Systems, Inc., where he has
served as a director since 1994. From February 1993
to December 1995, Mr. Moley was Senior Vice President
of PCS Health Systems, a provider of prescription
management services. From 1984 to 1993, he held
positions of increasing responsibility with the U.S.
Department of Health and Human Services. From 1975 to
1983, he held marketing, sales, and service positions
with New England Life. Mr. Moley also serves as a
director of Merge Technologies, a medical imaging
software company.
Bruce A. Peacock............ 46 Mr. Peacock joined Cephalon in February 1992 and has 1994
served as Executive Vice President and Chief
Operating Officer since February 1994. Prior to
February 1994, Mr. Peacock served as Executive Vice
President, Treasurer and Chief Financial Officer of
the Company. From 1982 to January 1992, Mr. Peacock
was employed by Centocor, Inc., a biopharmaceutical
company, most recently as Senior Vice President,
Chief Financial Officer and Treasurer.
Horst Witzel, Dr.-Ing....... 70 From 1986 until his retirement in 1989, Dr. Witzel 1991
served as the Chairman of the Board of Executive
Directors of Schering AG and, prior to 1986, was a
member of the Board of Executive Directors in charge
of Production and Technology. Dr. Witzel currently
serves as a director of The Liposome Company, Inc.
and Aastrom Biosciences, Inc., each a biotechnology
company.
</TABLE>
4
<PAGE> 7
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors of the Company met on four occasions in the fiscal
year ended December 31, 1997. The Bylaws of the Company provide that the board
of directors, by resolution adopted by a majority of the entire board of
directors, may designate committees, each of which shall consist of one or more
directors. The board of directors annually elects from its members the Audit
Committee and the Stock Option and Compensation Committee (the "Compensation
Committee"). Each director attended 100% of the meetings of the board of
directors held during 1997 and the committee or committees on which he served
during such period.
Audit Committee. The Audit Committee is presently composed of three
non-employee directors, Messrs. Egan, Greenacre and Moley. This committee meets
with the Company's independent public accountants to review the scope and
results of auditing procedures and the Company's accounting procedures and
controls. The Audit Committee also provides general oversight with respect to
the accounting principles employed in the Company's financial reporting. The
Audit Committee met once during 1997.
Stock Option and Compensation Committee. The Compensation Committee is
presently composed of two non-employee directors, Dr. Witzel and Dr. Feeney. The
Compensation Committee annually reviews the performance and total compensation
package for the Company's executive officers, including the President and Chief
Executive Officer; considers the modification of existing compensation and
employee benefit programs and the adoption of new plans; administers the terms
and provisions of the plan under which the Company makes equity awards, the
("Equity Compensation Plan") and the Cephalon, Inc. 401(k) Profit Sharing Plan;
and reviews the compensation and benefits of non-employee directors. The
administration of such plans includes the determination, subject to the
respective plan provisions, of the individuals eligible to receive awards, the
individuals to whom awards are granted, the nature of the awards to be granted,
the number of awards to be granted, and the exercise price, vesting schedule,
term and all other conditions and terms of the awards to be granted. The
Compensation Committee met five times during 1997.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table summarizes the compensation for the periods ended
December 31, 1997, 1996 and 1995 of those persons who were, at any time during
the last completed fiscal year, the Company's Chief Executive Officer and who
were, at December 31, 1997, the other five executive officers who earned the
highest compensation during the last completed fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------------------
AWARDS
-------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS COMPEN-
NAME YEAR SALARY($) BONUS($) SATION($)(1) AWARDS($)(2) GRANTED(#) SATION($)(3)
---- ---- --------- -------- ------------ ------------ ---------- ------------
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank Baldino Jr., Ph.D......... 1997 $385,000 $173,300 $22,912 $ 0 60,000 $9,500
President and Chief 1996 $350,000 $198,000 $25,011 $ 443,750 50,000 $9,000
Executive Officer 1995 $300,000 $180,000 $21,345 $2,480,000 0 $9,000
---------------------------------------------------------------------------------
Peter E. Grebow, Ph.D.(4)....... 1997 $209,000 $37,600 $13,464 $ 42,000 11,100 $9,500
Senior Vice President, 1996 $190,000 $55,000 $ 9,901 $ 106,500 6,000 $9,000
Business Development 1995 $175,000 $42,000 $ 1,244 $ 0 10,500 $9,000
---------------------------------------------------------------------------------
Bruce A. Peacock................ 1997 $313,500 $85,000 $16,878 $ 0 40,500 $9,500
Executive Vice President and 1996 $285,000 $107,000 $16,795 $ 213,000 12,000 $9,000
Chief Operating Officer 1995 $247,000 $87,000 $11,403 $1,860,000 0 $9,000
---------------------------------------------------------------------------------
Barbara S. Schilberg............ 1997 $227,000 $43,000 $13,586 $ 42,000 11,500 $9,500
Senior Vice President and 1996 $210,000 $63,000 $10,328 $ 97,625 5,000 $9,000
General Counsel 1995 $195,000 $47,000 $ 28 $ 0 10,000 $9,000
---------------------------------------------------------------------------------
Jeffry L. Vaught, Ph.D.(5)...... 1997 $209,000 $37,600 $12,913 $ 42,000 11,400 $9,500
President, Research and 1996 $190,000 $55,000 $10,214 $ 106,500 6,000 $9,000
Development Division and 1995 $175,000 $42,000 $51,468(5) $ 0 10,000 $9,000
Senior Vice President, Research
---------------------------------------------------------------------------------
Kenneth P. Wolski, M.D.(6)...... 1997 $215,625 $38,500 $27,494 $ 42,000 38,000 $9,500
Senior Vice President, 1996 -- -- -- -- -- --
Worldwide Clinical Research 1995 -- -- -- -- -- --
and Regulatory Affairs
</TABLE>
- ---------------
(1) The amounts shown for certain officers include:
(a) Automobile allowances in 1997, as follows: Dr. Baldino $13,750; Mr.
Peacock $7,750; Dr. Grebow $10,200; Ms. Schilberg $10,200; Dr. Vaught
$10,200; and Dr. Wolski $9,775.
(b) Financial estate planning advice in 1997, as follows: Dr. Baldino
$2,480; Mr. Peacock $2,472; Dr. Grebow $1,236; and Dr. Wolski $1,273.
(c) Supplemental long-term disability insurance in 1997, as follows: Dr.
Baldino $4,773 Dr. Grebow $2,008; Mr. Peacock $5,171; and Dr. Vaught
$1,563.
(d) Deferred compensation amounts above the 120% applicable federal rate are
as follows: Dr. Baldino $1,909; Mr. Peacock $1,485; Ms. Schilberg
$3,386; Dr. Vaught $1,150, and Dr. Grebow $20.
(2) Dollar amount shown equals number of shares subject to each restricted stock
award, multiplied by the per share stock price on the award date. This
amount does not take into account the diminution in value attributable to
the restrictions applicable to the shares. The restricted stock awards
reported in this table were made on December 13, 1995, December 17, 1996,
and November 21, 1997 and the restrictions on such shares will lapse over
four years at the rate of 25% per year, on each anniversary of the award.
The 4,000 shares subject to the restricted stock awards made on November 21,
1997, based on a closing price of the Common Stock on November 21, 1997 of
$10.50, had a dollar value of $42,000 for each of: Dr. Grebow, Ms.
Schilberg, Dr. Vaught, and Dr. Wolski and the dollar value of such shares on
March 20, 1998, based on a closing price of the Common Stock on that date of
$14.1875 was $56,750 for each of: Dr. Grebow, Ms. Schilberg, Dr. Vaught, and
Dr. Wolski. No dividends will be paid on such shares until the applicable
restrictions have lapsed. After the lapse of the applicable restrictions on
the shares underlying these awards, any dividends would be paid at the same
rate as on other shares of Common Stock. However, the Company has never
declared or paid cash dividends on the Common Stock and does not anticipate
paying any cash dividends in the foreseeable future.
(3) The amounts shown represent Company matching contributions during calendar
years 1995, 1996, and 1997 under the Cephalon, Inc. 401(k) Profit Sharing
Plan covering all of the Company's eligible employees.
(4) Dr. Grebow was appointed Senior Vice President, Business Development in
November 1997. He previously served as Senior Vice President, Drug
Development.
(5) Dr. Vaught was appointed President, Research and Development Division in
November 1997. Includes $50,966 for relocation expenses reimbursed to Dr.
Vaught during 1995.
(6) Dr. Wolski commenced employment with the Company in January 1997. Dr. Wolski
received 25,000 stock options in February 1997 priced at $24.25 per share
and 13,000 options in November 1997, priced at $10.50 per share. In 1997,
Dr. Wolski received relocation expenses of $16,446.
6
<PAGE> 9
The following table summarizes stock options granted during the fiscal year
ended December 31, 1997 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTION EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL 1997 ($/SHARE) DATE 5%($) 10%($)
---- ------------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank Baldino, Jr., Ph.D. ........... 60,000 7.8% $10.50 Nov 2007 $396,204 $1,004,058
- ----------------------------------------------------------------------------------------------------------------------
Peter E. Grebow, Ph.D. .............. 11,100 1.4% $10.50 Nov 2007 $ 73,298 $ 185,751
- ----------------------------------------------------------------------------------------------------------------------
Bruce A. Peacock..................... 40,500 5.2% $10.50 Nov 2007 $267,437 $ 677,739
- ----------------------------------------------------------------------------------------------------------------------
Barbara S. Schilberg................. 11,500 1.5% $10.50 Nov 2007 $ 75,939 $ 192,444
- ----------------------------------------------------------------------------------------------------------------------
Jeffry L. Vaught, Ph.D. ............. 11,400 1.5% $10.50 Nov 2007 $ 75,279 $ 190,771
- ----------------------------------------------------------------------------------------------------------------------
Kenneth P. Wolski, M.D. ............. 25,000(3) 4.9% $24.25 Feb 2007 $381,267 $ 966,206
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
13,000 $10.50 Nov 2007 $ 85,844 $ 217,546
</TABLE>
- ---------------
(1) Consists of options granted in November 1997, unless otherwise noted. These
options have a ten-year term, commencing November 1997, are exercisable in
cumulative 25% annual installments beginning in November 1998, with full
vesting occurring by November 2001. The options are subject to acceleration
in the case of a Change in Control or a Corporate Transaction, as defined
under the Equity Compensation Plan.
(2) Potential Realizable Values assume that the price of the Common Stock is
equal to the exercise price shown for each particular option on the date of
grant and appreciates at the annual rate shown (compounded annually) from
the date of grant until the end of the ten-year term of the option. These
amounts are reported net of the option exercise price, but before any taxes
associated with exercise or subsequent sale of the underlying stock. The
actual value, if any, an optionholder may realize will depend on the extent,
if any, to which the stock price exceeds the exercise price on the date the
option is exercised and also will depend on the optionholder's continued
employment by the Company throughout the vesting period. The actual value to
be realized by the optionholder may be greater or less than the values
estimated in this table.
(3) Consists of options granted in February 1997. These options have a ten-year
term, commencing February 1997, are exercisable in cumulative 25% annual
installments beginning February 1998, with full vesting occurring by
February 2001. These options are subject to acceleration in the case of a
Change in Control or a Corporate Transaction, as defined under the Equity
Compensation Plan.
7
<PAGE> 10
The following table summarizes option exercises during the fiscal year
ended December 31, 1997 and the value of vested and unvested unexercised options
for the persons named in the Summary Compensation Table at December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE DECEMBER 31, 1997(#) AT DECEMBER 31, 1997(2)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank Baldino, Jr., Ph.D....... 0 $ 0 304,501 155,499 $500,000 $208,751
Peter E. Grebow, Ph.D.......... 10,000 $113,600 70,500 27,100 $ 72,782 $ 29,244
Bruce A. Peacock............... 0 $ 0 281,250 93,250 $351,563 $152,625
Barbara S. Schilberg........... 0 $ 0 55,000 36,500 $ 58,594 $ 29,594
Jeffry L. Vaught, Ph.D......... 0 $ 0 83,875 34,025 $ 73,281 $ 29,506
Kenneth P. Wolski, M.D......... 0 $ 0 0 38,000 $ 0 $ 11,375
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise date minus the exercise
price of all options.
(2) For "in-the-money" options, these amounts are the market value of underlying
shares of common stock at December 31, 1997, minus the exercise price. These
amounts are reported before any taxes associated with exercise or subsequent
sale of the underlying stock.
The Company does not currently grant any long-term incentives other than
stock options and restricted stock to its executive officers or other employees.
The Company does not sponsor any defined benefit or actuarial plans at this
time.
COMPENSATION OF DIRECTORS
Employees of the Company who also are directors of the Company (Dr. Baldino
and Mr. Peacock) receive no additional remuneration for their service as a
director.
Non-employee directors receive a fee of $3,000 for each meeting of the
board of directors attended as well as reimbursement of their expenses incurred
to attend such meetings. In addition to the meeting fee, non-employee directors
receive an annual retainer of $15,000. Non-employee directors who are members of
a committee of the board of directors receive a $3,000 annual retainer for each
such committee membership. Under the Equity Compensation Plan, new non-employee
directors will receive on the effective date they first become a member of the
board of directors, a grant of an option to purchase 15,000 shares of the
Company's Common Stock. In addition, under the current terms of the Equity
Compensation Plan, each non-employee director will receive a grant of an option
to purchase 10,000 shares of the Company's Common Stock on the date of each
annual meeting of stockholders at which he or she is re-elected. The Equity
Compensation Plan provides that non-employee directors are not eligible to
receive in the aggregate options to purchase in excess of 50,000 shares under
such plan. All these options vest over a four-year period with an exercise price
equal to the closing market price of the Company's Common Stock on the date of
grant. With respect to non-employee directors, upon the occurrence of a
Corporate Transaction (as defined in the Equity Compensation Plan) or upon
Involuntary Termination (as defined in the Equity Compensation Plan) of a
non-employee director within 36 months following a Change in Control (as defined
in the Equity Compensation Plan), each option of such non-employee director will
automatically accelerate and become fully exercisable and will remain
exercisable until the expiration of the option term or earlier surrender of such
option. In 1997, each of the non-employee directors received an annual grant of
options, under the Equity Compensation Plan, to purchase 10,000 shares of Common
Stock at an exercise price of $12.875 per share.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee annually reviews the performance and total
compensation package for all executive officers, considers the modification of
existing compensation and employee benefit programs and the adoption of new
plans, administers the Company's Equity Compensation Plan and reviews the
compensation and benefits of non-employee directors.
COMPENSATION PHILOSOPHY
The Compensation Committee believes that a well designed compensation
program should align the goals of the stockholder with the goals of the
executive and that a significant part of an executive's compensation, over the
long term, should be dependent upon the value created for the stockholder.
However, the Compensation Committee recognizes that, in the short-term, the
market price of the Company's stock will be affected by many factors, some of
which may be transient in nature and beyond the control of the Company's
executives. This is especially true in the biotechnology industry, which is
characterized by a large number of small companies, long product lead times,
highly volatile stock prices and, currently, few commercial products. In such an
environment, external events, such as negative financial and clinical reports
from other members of the biotechnology industry, can have a marked adverse
effect on the stock prices of companies within the industry, including Cephalon.
In order to attract and retain qualified executives in such an environment, the
Compensation Committee attempts to create a balanced compensation package by
combining components based upon the achievement of long-term value to
stockholders with components based upon the execution of shorter-term strategic
goals. These goals include progress in research and drug development programs,
success in financings, corporate collaborations, and the development of the
organization. The Compensation Committee expects that the achievement of these
shorter-term goals ultimately will contribute to the long-term success of the
enterprise.
OVERVIEW OF 1997
The Compensation Committee believes that the management team took positive
action in 1997 to position the Company for long-term stockholder value and
future challenges. Specifically, significant results were achieved with respect
to each of the strategic goals outlined above.
Progress in research and drug development was demonstrated by the following
accomplishments:
- receipt of Cephalon's first product approval -- PROVIGIL(R) (modafinil)
Tablets in the UK, and receipt of an approvable letter for the same
product in the United States;
- continuation of the collaboration with TAP Holdings Inc., including Phase
I cancer study for CEP-2563 and development of CEP-701 as an orally
administered product;
- obtaining 18 US patents on various products and processes; and,
- continuation of preclinical development of CEP-1347 for Alzheimer's
disease.
Corporate collaborations strengthened with these accomplishments:
- continuation of the co-promotion of Stadol NS(R) (butorphanol tartrate)
and Serzone(R) (nefazadone HCl) with Bristol-Myers Squibb to
neurologists; and
- initiation of the co-promotion of Intrathecal Baclofen Therapy (ITB(TM))
with Medtronics to neurologists in the United States.
The Company's financial position was strengthened by:
- completion of a $30 million private placement of senior convertible
notes.
Considerable progress in organizational development also was made to expand
the management team through the addition of experienced executives as Country
Manager in Germany; to the UK Sales and Marketing organization; and to the
Clinical Research and Regulatory Affairs staffs.
9
<PAGE> 12
The Compensation Committee also carefully considered the developments in
1997 related to MYOTROPHIN(R) (rhIGF-1). The progress in filing an NDA with the
FDA in early 1997 was followed by a setback in May 1997, when the FDA's advisory
committee failed to recommend the NDA for approval on the basis of the efficacy
evidence presented to it for review. However, management continued a dialogue
with the agency and provided additional information to support MYOTROPHIN'S
efficacy, which was in the process of being further evaluated by the FDA at
year-end. A marketing authorization application for MYOTROPHIN also was filed in
1997 using the centralized procedures in the European Community. The questions
arising from that regulatory process also were managed and addressed by
management during 1997.
The Compensation Committee believes that these accomplishments justified
increases to executives' base salaries as well as the grant of annual bonuses.
Although the Committee felt that bonuses should be granted in 1997, it concluded
that these bonuses should be awarded at lower percentages of base salary than
the bonuses that were made in 1996.
Cephalon has assembled a senior team with considerable biotechnology and
pharmaceutical industry experience, and the Compensation Committee believes that
executive retention and incentive will be critical in the years ahead as the
Company seeks to move its product candidates toward commercialization. With the
increased hiring in the pharmaceutical industry and continued attempts by
competitors to recruit management from the Company, the Committee felt that
additional stock option grants should be made to provide an additional retention
incentive. For these reasons, and after comparisons with the level of option
holdings of executives at biotechnology companies of similar size and product
development stages, the Compensation Committee felt that additional stock option
grants also should be made to the executive team in 1997.
The Compensation Committee awarded restricted stock to the Senior Vice
Presidents in 1997. These awards were made based on their performance during the
year, recognizing that their retention and motivation are crucial to the
long-term value of the Company.
COMPENSATION COMPONENTS
The Company competes against both biotechnology and larger pharmaceutical
companies in the market for qualified personnel. The Compensation Committee has
established three categories of compensation for executives: base salary, annual
incentive bonus and long-term incentives consisting of stock options and
restricted stock awards. Salaries for experienced executives of biotechnology
companies in the Philadelphia metropolitan area are heavily influenced by the
salaries paid by the large pharmaceutical companies which maintain executive
staffs in the region. The Company routinely competes against these companies in
trying to attract qualified candidates and has successfully induced most of its
current executives to leave such organizations. The salaries of Cephalon's
executives are set below those levels which would be achieved by executives with
similar levels of authority and experience in larger pharmaceutical companies.
To compensate for this shortfall and remain competitive in the market for
qualified executives, the Company places a correspondingly greater weight on
variable pay incentives and longer-term compensation. The Compensation Committee
believes that by putting an increased emphasis on variable pay amounts and
long-term incentives, the Company is able to attract executives who are willing
to sacrifice current earnings and the retirement benefits generally offered by
larger employers for potential long-term gains in a less stable and more risky
environment. The Compensation Committee believes that stockholders in Cephalon
share a similar risk profile.
To ensure that the elements of an executive's compensation remain
competitive with other small biotechnology companies, the Company conducts and
subscribes to a number of compensation surveys. The surveys used for these
purposes are provided by outside consultants and do not identify the names of
participating companies. Using these surveys, the Company focuses primarily on
companies of similar size and stage of development in the biotechnology
industry, with the objective of setting a base salary which is generally above
average when compared with these companies. Because the number of Cephalon
employees exceeded 270 during the year, primary comparisons were made with
companies at a similar stage of product development with between 150 and 499
employees. Because the Company has controlled internal headcount by outsourcing
many positions relating to supply chain, reimbursement, customer service,
manufacturing,
10
<PAGE> 13
distribution, and accounting, the salaries of biotechnology companies with over
500 employees were also considered. Many of the survey participants are included
in the Index of NASDAQ Pharmaceutical Stocks used in the Comparative Stock
Performance Graph on page 15 of this proxy statement.
Base Salary. Executive salaries are reviewed by the Compensation Committee
at the end of each year, with any adjustments to base salary becoming effective
on January 1 of the succeeding year. During this review the Compensation
Committee considers, in addition to the information provided by the salary
surveys, the individual executive's contribution to the Company's achievements
and changes in role and responsibility of the executive during the year. Because
the Company is experiencing rapid growth and internal change, particular care is
taken to ensure that expanded responsibilities are recognized in the calculation
of base pay. Executive salary increases in 1997 ranged from 6% to 15% of base
salary.
In December 1997, the base salary of Dr. Baldino, the Company's President
and Chief Executive Officer, was increased to $416,000 from $385,000, effective
January 1998. The Compensation Committee reviewed the results of a survey of
executive salaries of other biotechnology companies of similar size, focus, and
stage of development and established Dr. Baldino's salary within the upper half
of the range of the comparison group. The Compensation Committee made this
adjustment after reviewing the progress made by the Company during 1997, as
described in this report under the caption "Overview of 1997". The Compensation
Committee noted that Cephalon had increased both in its worldwide operations and
complexity during the year, and that the CEO's role had expanded in scope and
importance commensurately. The Compensation Committee also noted there was
considerable progress in organizational development with the strengthening of
the management team through the addition of experienced executives in the
European marketing and clinical research and regulatory affairs staffs. Finally,
the Compensation Committee noted the strengthening of the Company's financial
condition due to the execution of an agreement for a $30 million private
placement of convertible notes.
Annual Incentive Bonus. Corporate and individual goals and milestones are
established at the beginning of the year, and include targets for progress in
the Company's research and drug development efforts and in entering into
corporate collaborations, financings, and organizational development. The
Compensation Committee provides bonus incentives for achievement of these goals
because it believes that attainment of these goals will ultimately lead to the
successful commercialization of the Company's product candidates and will be in
the best long-term interests of the Company's stockholders.
The granting of an annual incentive bonus is totally discretionary. The
Compensation Committee has targeted bonus amounts for 1998 to be up to 60% of
base salary for the CEO, 35% for the COO, and 30% for senior vice presidents.
The 1997 bonus award levels were 45% of base salary for the CEO, 27% for the
COO, and up to 19% for senior vice presidents. Bonus amounts for each executive
are dependent upon the level of achievement of the corporation and the
individual.
During 1997, Dr. Baldino was granted an annual incentive bonus in cash in
the amount of $173,300 representing 45% of his base salary at the time. The
Compensation Committee reviewed achievements against objectives in determining
that Dr. Baldino should be granted this bonus. Specifically, the Compensation
Committee noted the progress made by the Company as described above under the
captions "Overview of 1997" and "Compensation Components Base Salary".
Under the Deferred Compensation Plan for executives, individuals holding
the title of vice president or higher may defer receipt to a future year of all,
or a portion, of any annual bonus. Interest on the deferred amounts is
determined by the Compensation Committee on an annual basis. In 1997, the rate
of interest was 10% and will continue at that rate in 1998.
Long-Term Incentives. Long-term incentives have been provided by means of
periodic grants of stock options and restricted stock under the Option Plan and
the Equity Compensation Plan.
Stock options: The options generally have exercise prices equal to the
fair market value of the underlying shares of Common Stock on the date of grant,
vest over a four-year period and expire ten years from the date of grant. The
Compensation Committee considers stock options to be a valuable and necessary
compensation tool that aligns the long-term financial interests of the Company's
executives with the financial
11
<PAGE> 14
interests of its stockholders. Further the vesting provisions of the Option Plan
and the Equity Compensation Plan serve to retain qualified employees, providing
continuing benefits to the Company beyond those achieved in the year of grant.
Stock options are generally granted at the time of employment, and may be
granted periodically at the discretion of the Compensation Committee. The
Compensation Committee determines the number of options to be granted by
comparison to other biotechnology companies at similar stages of development. A
survey of competitors reviewed by the Compensation Committee consisted of
publicly traded biotechnology firms. Some but not all of these companies are
included in the Index of NASDAQ Pharmaceutical Stocks in the Comparative Stock
Performance Graph. A secondary objective is to ensure that valued executives
have significant numbers of unvested options as an incentive to continue their
employment and investment in the enterprise.
Restricted stock awards: Restricted stock awards have also been granted
periodically at the discretion of the Compensation Committee. Restrictions on
the transfer of shares granted under restricted stock awards of Company Stock
are based on service, performance and/or such other factors or criteria as the
Compensation Committee may determine in its sole discretion. The Compensation
Committee considers restricted stock awards to be a valuable and necessary
compensation tool and an important component of the Company's long-term
incentives. The vesting provisions of the restricted stock awards serve to
retain qualified employees, providing continuing benefits to the Company beyond
those achieved in the year of grant.
In November 1997, Dr. Baldino was granted a stock option grant of 60,000
shares. The stock option grant vests over four years, at a 25% per year rate, on
the anniversary of the award. In granting this award, the Compensation Committee
believed it important that a continuing long-term incentive for retention of his
services be provided. In addition, the Compensation Committee believes that the
achievement of both short and long-term objectives over the next few years will
place considerable demands on the executive team, and that their retention and
motivation are crucial to long-term corporate value. Accordingly a stock option
grant of 40,500 shares was also granted in November 1997 to the Executive Vice
President and Chief Operating Officer. In addition, restricted stock awards for
4,000 shares of common stock and stock option grants of 10,300 to 13,000 shares
were also granted in November 1997 to the Senior Vice Presidents.
Other Compensation. The Compensation Committee continued the matching
contributions made by the Company under the Cephalon, Inc. 401(k) Profit Sharing
Plan covering all of the Company's eligible employees. The match consists of
$0.50 in cash and $0.50 in Common Stock for each $1.00 of employee contribution
under the plan. This matching contribution is made only on the first 6% of
employee contributions. In the absence of a defined benefit pension plan, this
arrangement allows Cephalon to remain competitive with other companies in the
biotechnology and pharmaceutical industries in providing for retirement savings.
Payments during 1997 to the Company's executives under the various programs
discussed above were made with regard to the provisions of section 162(m) of the
Code which became effective on January 1, 1994. Section 162(m) limits the
deduction that may be claimed by a "public company" for compensation paid to
certain individuals to $1 million except to the extent that any excess
compensation is "performance-based compensation". In accordance with current
regulations, the amounts received upon the exercise of stock options under
either the Option Plan or the Equity Compensation Plan will qualify as
"performance-based compensation", but the value of the shares received when the
shares of Restricted Stock become transferable will not qualify as
"performance-based compensation".
Respectfully submitted,
Stock Option and Compensation
Committee:
Robert J. Feeney, Ph.D.
Horst Witzel, Dr.-Ing.
12
<PAGE> 15
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY HOLDINGS OF CERTAIN BENEFICIAL OWNERS
The following information indicates the beneficial owners of five percent
or more of the outstanding shares of Common Stock of the Company as of December
31, 1997, and the number of shares and percentage of all outstanding shares
beneficially owned by such persons.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
------------------- ----------------------- -----------
<S> <C> <C>
Amerindo Investment Advisors, Inc.(3)....................... 2,672,200 9.8%
One Embarcadero, Suite 2300
San Francisco, CA 94111-3162
State of Wisconsin Investment Board......................... 2,475,300 9.0%
P.O. Box 7842
Madison, WI 53707
Wellington Management Company, LLP(4)....................... 1,719,400 6.3%
75 State Street
Boston, MA 02109
Chiron Corporation.......................................... 1,550,000 5.7%
4560 Horton Street
Emeryville, CA 94608-2916
</TABLE>
- ---------------
(1) Except as indicated below, each beneficial owner named in this table has
sole voting and investment power with respect to all shares of Common Stock
set forth opposite its name above. The information in this table is
presented in reliance on information contained in the stock records of the
Company or disclosed by the beneficial owners in Schedules 13D and 13G
reporting as of December 31, 1997, as filed with the Company.
(2) The percentage for each beneficial owner is calculated based on (i) the
aggregate number of all shares reported to be beneficially owned by such
group or individual (including all shares issuable to such group or
individual upon the exercise of outstanding stock options or warrants
beneficially owned by them to the extent that such options or warrants are
exercisable within sixty days of the date as to which such information is
provided) and (ii) the aggregate number of shares of Common Stock
outstanding as of December 31, 1997 (27,395,254).
(3) Amerindo Investment Advisors, Inc. ("Amerindo"), Amerindo Investment
Advisors, Inc. ("Amerindo Panama") and Alberto W. Vilar and Gary A. Tanaka
state in a Schedule 13G/A, as amended that: (i) Amerindo is registered as an
investment advisor under the Investment Advisors Act of 1940, as amended;
(ii) Messrs. Vilar and Tanaka are the only directors and shareholders of
Amerindo Panama and of Amerindo; (iii) Messrs. Vilar and Tanaka have shared
voting and dispositive power as to all of the shares reported in such
Schedule 13G/A; (iv) Amerindo has shared voting and dispositive power as to
2,518,500 of the shares reported in such Schedule 13G/A; (v) Amerindo Panama
has shared voting and dispositive power as to 153,700 of the shares reported
in such Schedule 13G/A; and (vi) each of Amerindo, Amerindo Panama and
Messrs. Vilar and Tanaka disclaims membership in a group under Rule 13d-5
and disclaims beneficial ownership as to all of the shares reported in such
Schedule 13G/A.
(4) Wellington Management Company, LLP ("WMC"), in its capacity as investment
adviser, may be deemed to beneficially own 1,719,400 shares of the Company
which are held of record by clients of WMC. WMC has shared voting power for
1,249,700 shares and shared dispositive power for 1,719,400 shares.
13
<PAGE> 16
SECURITY HOLDINGS OF EXECUTIVE OFFICERS AND DIRECTORS
The following table summarizes the beneficial ownership of the Company's
Common Stock by the Company's executive officers and directors as of March 1,
1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME OWNERSHIP(1)(2) OF CLASS(3)
---- ----------------- -----------
<S> <C> <C>
Frank Baldino, Jr., Ph.D.(4)................................ 581,750 2.1%
William P. Egan(5).......................................... 103,734 *
Robert J. Feeney, Ph.D. .................................... 40,316 *
Peter E. Grebow, Ph.D. ..................................... 92,753 *
Martyn D. Greenacre......................................... 29,750 *
Kevin E. Moley.............................................. 21,000 *
Bruce A. Peacock............................................ 309,338 1.1%
Barbara S. Schilberg........................................ 57,182 *
Jeffry L. Vaught, Ph.D. .................................... 86,173 *
Horst Witzel, Dr.-Ing. ..................................... 28,750 *
Kenneth P.Wolski, M.D. ..................................... 6,414 *
All executive officers and directors as a group (11
persons).................................................. 1,357,160 4.8%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated below, the individual or groups named in this table have
sole voting and investment power with respect to all shares of Common Stock
indicated above.
(2) Includes shares which may be acquired upon the exercise of outstanding
options and warrants that were exercisable as of March 1, 1998 as follows:
Dr. Baldino 304,501 shares; Mr. Egan, Mr. Greenacre, Dr. Feeney, and Dr.
Witzel 28,750 shares each; Dr. Grebow 70,500 shares; Mr. Moley 20,000
shares; Mr. Peacock 289,000 shares; Ms. Schilberg 55,000 shares; Dr. Vaught
83,875 shares; Dr. Wolski 6,250 shares, and all executive officers and
directors as a group 944,126 shares.
(3) The percentage for each group or individual is based on the aggregate of the
shares outstanding as of December 31, 1997 (27,395,254) and all shares
issuable to such group or individual upon the exercise of outstanding stock
options to the extent that such options are exercisable by March 1, 1998.
(4) Includes 20,571 shares held in trusts for the benefit of Dr. Baldino's
children, with his spouse as trustee.
(5) Includes 31,661 shares of Common Stock held by trusts for the benefit of Mr.
Egan's children. Mr. Egan is not a trustee of these trusts. Also includes
33,323 shares of Common Stock held by trusts of which Mr. Egan is a trustee
and over which he shares voting and investment control. Mr. Egan disclaims
beneficial ownership as to all of such shares held in trusts.
14
<PAGE> 17
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock with the cumulative total stockholder return of (i) the NASDAQ
Stock Market (U.S.) Index (the "NASDAQ Index"), and (ii) the Index of NASDAQ
Pharmaceutical Stocks (the "Pharmaceutical Index"), assuming an investment of
$100 on December 31, 1992 in each of: the Common Stock of the Company; the
stocks comprising the NASDAQ Index; and the stocks comprising the Pharmaceutical
Index.
<TABLE>
<CAPTION>
NASDAQ Stock NASDAQ
Measurement Period Market (U.S.) Pharmaceutical
(Fiscal Year Covered) Cephalon Index Index
<S> <C> <C> <C>
12/31/92 100 100 100
91 102 72
6/30/93 109 104 76
133 112 82
12/31/93 146 115 89
121 110 73
6/30/94 80 105 64
95 113 71
12/30/94 73 112 67
62 122 72
6/30/95 164 140 84
244 157 105
12/29/95 362 159 123
230 166 128
6/28/96 176 179 106
214 186 127
12/31/96 182 195 123
187 185 117
6/30/97 102 218 126
104 255 142
12/31/97 101 239 127
</TABLE>
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and certain officers of the Company, and persons who own more than
ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock of the Company. Such directors, officers and more than
ten percent stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations of such directors
and officers that no other reports were required, all fiscal year 1997 Section
16(a) filing requirements applicable to its directors, officers and more than
ten percent stockholders were complied with.
OTHER MATTERS
The board of directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly comes
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Securities and Exchange Commission. To be considered for inclusion in the proxy
statement and form of proxy card relating to the 1999 annual meeting, such
proposals must be received by the Company not later than December 3, 1998.
Proposals should be directed to the attention of the Secretary of the Company.
15
<PAGE> 18
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, BUT EXCLUDING
EXHIBITS. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE DIRECTED TO INVESTOR
RELATIONS, CEPHALON, INC., 145 BRANDYWINE PARKWAY, WEST CHESTER, PENNSYLVANIA
19380.
By Order of the Board of Directors,
BARBARA S. SCHILBERG
Secretary
16
<PAGE> 19
PROXY
CEPHALON, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 15, 1998
The undersigned hereby appoints Frank Baldino, Jr., Ph.D. and Bruce A.
Peacock or either one of them acting singly in the absence of the other, with
full power of substitution, the proxy or proxies of the undersigned to attend
the Annual Meeting of Stockholders of Cephalon, Inc. to be held on May 15, 1998,
and any adjournment thereof, to vote all shares of stock that the undersigned
would be entitled to vote if personally present in the manner indicated below
and on any other matters properly brought before the meeting or any adjournment
thereof, all as set forth in the March 31, 1998 proxy statement.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CEPHALON, INC.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- -------------------------------------------------------------------------------
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<PAGE> 20
Please mark [X]
your votes as
indicated in
this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR.
FOR WITHHOLD
all nominees for all nominees
1. ELECTION OF DIRECTORS [ ] [ ]
Nominees: Frank Baldino, Jr., Ph.D., William P. Egan,
Robert J. Feeney, Ph.D., Martyn D. Greenacre,
Kevin E. Moley, Bruce A. Peacock and Horst Witzel, Dr.-Ing.
WITHHOLD for the following only: (Write in the name of the nominee(s) in the
space below)
- ----------------------------------------------------------------------------
I PLAN TO ATTEND MEETING [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS DIRECTED BY THE STOCKHOLDER. WHERE
NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED
PROXY IS RETURNED SUCH SHARES WILL BE VOTED
AT THE MEETING FOR ALL NOMINEES NAMED IN THE
PROPOSAL 1.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT
OF THE NOTICE OF ANNUAL MEETING, PROXY
STATEMENT AND ANNUAL REPORT OF CEPHALON, INC.
Signature(s) ________________________________________ Date ___________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
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