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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
ANDRX CORPORATION
(Name of Registrant as Specified in Its Charter)
ANDRX CORPORATION
(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 the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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>
ANDRX CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1997
----------------
To the Shareholders of Andrx Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Andrx Corporation, a Florida corporation (the
"Company"), will be held at the Fort Lauderdale Airport Hilton, 1870
Griffin Road, Dania, Florida 33004 at 10:30 A.M., on May 19, 1997 for the
following purposes:
1. To elect three directors of the Company to serve until 2000;
2. To consider and vote upon approval of an amendment to the Company's 1993
Stock Incentive Plan (the "Plan") to increase the number of shares of
Common Stock issuable under the Plan to 2,000,000 shares;
3. To consider and vote upon a proposal to ratify the appointment of Arthur
Andersen LLP as the Company's independent certified public accountants for
the fiscal year ending December 31, 1997; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on April 11, 1997 as
the record date for determining those shareholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the pre-addressed envelope provided for that purpose as
promptly as possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
SCOTT LODIN, Secretary
Fort Lauderdale, Florida
April 21, 1997
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE
A PROXY CARD MAY NEVERTHELESS ATTEND THE ANNUAL MEETING, REVOKE THEIR PROXY AND
VOTE THEIR SHARES IN PERSON.
<PAGE>
ANDRX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 1997
----------------
PROXY STATEMENT
----------------
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Andrx Corporation, a Florida corporation (the
"Company"), of proxies from the holders of the Company's common stock,
par value $.001 per share (the "Common Stock"), for use at the Annual
Meeting of Shareholders of the Company to be held at 10:30 A.M., on May 19,
1997, at the Fort Lauderdale Airport Hilton, 1870 Griffin Road, Dania, Florida
33004, and at any adjournments or postponements thereof (the "Annual
Meeting") pursuant to the enclosed Notice of Annual Meeting.
The approximate date this Proxy Statement and the enclosed form of proxy
are first being sent to shareholders is April 21, 1997. Shareholders should
review the information provided herein in conjunction with the Company's Annual
Report to Shareholders which accompanies this Proxy Statement. The Company's
principal executive offices are located at 4001 S.W. 47th Avenue, Suite 201,
Fort Lauderdale, Florida 33314, and its telephone number is (954) 584-0300.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting and the enclosed proxy is to be borne by the Company.
In addition to the use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company's employees will receive no
compensation for soliciting proxies other than their regular salaries. The
Company may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy material to their principals and to
request authority for the execution of proxies. The Company may reimburse such
persons for their expenses in so doing.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
1. To elect three directors of the Company to serve until 2000;
2. To consider and vote upon approval of an amendment to the Company's 1993
Stock Incentive Plan (the "Plan") to increase the number of shares of
Common Stock issuable under the Plan to 2,000,000 shares;
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
December 31, 1997; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
<PAGE>
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director named
below and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event a shareholder specifies a different choice by means of the
enclosed proxy, his shares will be voted in accordance with the specification so
made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 11, 1997 as
the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 13,639,804 shares of Common Stock issued and
outstanding, all of which are entitled to be voted at the Annual Meeting. Each
share of Common Stock is entitled to one vote on each matter submitted to
shareholders for approval at the Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by plurality of the
votes cast by the shares of Common Stock represented in person or by proxy at
the Annual Meeting. The affirmative votes of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
will be required for approval of the proposals to approve the amendment to the
Company's plan increasing the number of shares issuable under the plan, ratify
the appointment of Arthur Andersen LLP as the Company's certified independent
certified public accountants for the year ending December 31, 1997 and any other
matter that may be submitted to a vote of the shareholders. If less than a
majority of the outstanding shares entitled to vote are represented at the
Annual Meeting, a majority of the shares so represented may adjourn the Annual
Meeting to another date, time or place, and notice need not be given of the new
date, time or place if the new date, time or place is announced at the meeting
before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more inspectors
of election for the meeting. Such inspector(s) shall determine the number of
shares of Common Stock represented at the meeting, the existence of a quorum and
the validity and effect of proxies, and shall receive, count and tabulate
ballots and votes and determine the results thereof. Abstentions will be
considered as shares present and entitled to vote at the Annual Meeting and will
be counted as votes cast at the Annual Meeting, but will not be counted as votes
cast for or against any given matter.
A broker or nominee holding shares registered in its name, or in the name
of its nominee, which are beneficially owned by another person and for which it
has not received instructions as to voting from the beneficial owner, may have
discretion to vote the beneficial owner's shares with respect to the election
of directors and other matters addressed at the Annual Meeting. Any such shares
which are not represented at the Annual Meeting either in person or by proxy
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
2
<PAGE>
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to beneficially own 5% or more of the
Company's outstanding Common Stock, (ii) the Company's Chief Executive Officer
("CEO") and each of the other "Named Executive Officers" (as defined
below in "Executive Compensation-Summary Compensation Table"), (iii) each
director of the Company, and (iv) all directors and executive officers of the
Company as a group. The Company is not aware of any beneficial owner of more
than 5% of the outstanding Common Stock other than as set forth in the following
table.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF CLASS
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OUTSTANDING
- ------------------- --------------------- ----------------
<S> <C> <C>
Alan P. Cohen(3) ..................... 1,828,339 13.4%
Elliot F. Hahn, Ph.D.(4) ............ 1,591,399 11.7%
Chih-Ming J. Chen, Ph.D.(5) ......... 1,858,814 13.6%
Scott Lodin(6) ..................... 42,500 *
Randy Glover(7) ..................... 25,000 *
Elaine Bloom(8) ..................... 20,275 *
Paul M. Donofrio(9) .................. 21,083 *
Irwin C. Gerson(10) .................. 27,375 *
Elliot Levine(11) .................. 31,740 *
Michael A. Schwartz, Ph.D.(12) ...... 17,375 *
Melvin Sharoky, M.D.(13) ............ 14,080 *
Watson Pharmaceuticals, Inc.(14)
311 Bonnie Circle
Corona, CA 91720 ..................... 2,428,869 17.8%
All directors and executive officers
as a group (12 persons)(15) ......... 5,488,780 40.2%
<FN>
- ----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
the Company, 4001 S.W. 47th Avenue, Suite 201, Fort Lauderdale, Florida
33314.
(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed, which include shares of Common Stock that such persons have the
right to acquire a beneficial interest in within 60 days.
(3) Includes 4,875 shares of Common Stock held jointly by Mr. Cohen and his
spouse, 1,718,347 shares held in family limited partnerships, and 62,500
shares of Common Stock owned by a general partnership of which Mr. Cohen is
a general partner. (4) Represents 738,895 shares of Common Stock held in
trust for the benefit of Dr. Hahn, 790,004 shares of Common Stock held in
trust for the benefit of Dr. Hahn's children and 62,500 shares of Common
Stock owned by a general partnership, of which Dr. Hahn is a general
partner.
(5) Includes 307,693 shares held in a family limited partnership, 1,300,000
shares of Common Stock held by a limited partnership for which Dr. Chen is
an officer of the corporate general partner, and 200,000 shares of Common
Stock issuable upon the exercise of stock options.
(6) Includes 37,500 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 20,000 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 17,375 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 8,250 shares of Common Stock issuable upon exercise of stock
options.
(10) Includes 17,375 shares of Common Stock issuable upon exercise of stock
options.
3
<PAGE>
(11) Represents (i) 10,620 shares of Common Stock held jointly with Mr.
Levine's spouse; (ii) 5,620 shares of Common Stock issuable upon the
exercise of warrants held jointly with Mr. Levine's spouse; and (iii)
15,500 shares of Common Stock issuable upon the exercise of stock options.
(12) Represents 17,375 shares of Common Stock issuable upon exercise of stock
options.
(13) Includes 8,250 shares of Common Stock issuable upon exercise of stock
options. Does not include shares of Common Stock beneficially owned by
Watson, in which shares Dr. Sharoky, the President and a director of
Watson, disclaims beneficial ownership.
(14) Includes 337,079 shares of Common Stock issuable upon the exercise of
warrants to purchase Common Stock held by Watson.
(15) Includes the shares of Common Stock and options to purchase shares of
Common Stock described in Notes (3) through (13) as well as 2,800 shares of
Common Stock and 8,000 shares of Common Stock issuable upon exercise of
stock options held by Angelo C. Malahias, the Company's Vice President and
Chief Financial Officer.
</FN>
</TABLE>
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the Board of
Directors be divided into three classes. Each class of directors serves a
staggered three-year term. Dr. Chih-Ming J. Chen, Irwin C. Gerson and Dr.
Michael A. Schwartz hold office until the 1997 Annual Meeting. Dr. Elliot F.
Hahn, Elaine Bloom and Elliot Levine hold office until the 1988 Annual Meeting
and Alan P. Cohen, Paul M. Donofrio and Dr. Melvin Sharoky hold office until the
1999 Annual Meeting.
Accordingly, at the Annual Meeting, three directors will be elected by the
shareholders to serve until the Annual Meeting to be held in 2000 or until their
successors are duly elected and qualified. The accompanying form of proxy when
properly executed and returned to the Company, will be voted FOR the election as
directors of the three persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement. Management has no reason to
believe that any of the nominees is unable or unwilling to serve if elected.
However, in the event that any of the nominees should become unable or unwilling
to serve as a director, the proxy will be voted for the election of such person
or persons as shall be designated by the Board of Directors.
NOMINEES
The persons nominated as directors are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
- ---- --- ------------------------- ----------------
<S> <C> <C> <C>
Chih-Ming J. Chen, Ph.D.(1) ...... 45 Vice President, Chief Scientist and Director 1992
Irwin C. Gerson(2) ............... 67 Director 1993
Michael A. Schwartz(2) ............ 66 Director 1993
<FN>
- ----------------
(1) Member of Executive Committee
(2) Member of Compensation Committee
</FN>
</TABLE>
DR. CHIH-MING J. CHEN has served as the Company's Vice President and Chief
Scientist since November 1992. In January 1992, Dr. Chen formed his own company,
ASAN Labs, Inc., which was acquired by the Company in November 1992. Dr. Chen
served as the Director of Product Development at IVAX from 1988 to 1992, where
he was the leader of a research team which specialized in the development of
drug formulations, including several controlled-release products. After
graduating with a Ph.D. degree in pharmaceutics from Ohio State University in
1981, Dr. Chen worked at Bristol-Myers and Berlex Labs.
IRWIN C. GERSON has been the Chairman of the Lowe McAdams Healthcare
division of the Interpublic Group (formerly William Douglas McAdams, Inc.), a
health care marketing,
4
<PAGE>
communications and public relations company, since 1987. Mr. Gerson is a member
of the board of trustees of academic institutions, including Long Island
University, Albany College of Pharmacy and is Chairman of the Council of
Overseers of the Arnold and Marie Schwartz College of Pharmacy. Mr. Gerson is
also a director of Cytoclonal Pharmaceutics, Inc., a biotechnology company.
DR. MICHAEL A. SCHWARTZ is currently Dean Emeritus and a Professor at the
College of Pharmacy at the University of Florida, having served as Dean of
college from April 1978 through May 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ALL OF THE
NOMINEES FOR ELECTION AS DIRECTORS.
Set forth below is certain information concerning the directors who are not
currently standing for election:
<TABLE>
<CAPTION>
YEAR FIRST YEAR CURRENT
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR TERM EXPIRES
- ---- ---- ------------------------- ---------------- ------------
<S> <C> <C> <C> <C>
Alan P. Cohen(1) ............ 42 Chairman of the Board 1992 1999
and Chief Executive Officer
Elliot F. Hahn, Ph.D(1) ...... 52 President and Director 1993 1998
Rep. Elaine Bloom(2) ......... 59 Director 1993 1998
Paul M. Donofrio(2)(3) ...... 36 Director 1995 1999
Elliot Levine(2) ............ 60 Director 1994 1998
Melvin Sharoky, M.D.(1) ...... 46 Director 1995 1999
<FN>
- ----------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
</FN>
</TABLE>
ALAN P. COHEN has been Chairman of the Board and Chief Executive Officer of
the Company, which he founded in August 1992. He holds several degrees from the
University of Florida and is a registered pharmacist. In 1984, Mr. Cohen founded
Best Generics, Inc., a generic drug distribution firm ("Best"), which was
sold to IVAX in 1988. Mr. Cohen served as President of Best from April 1989
until June 1990. Alan P. Cohen and certain members of his family control Corner
Drugstore, a privately-held retail drugstore chain, which also is a shareholder
and customer of the Company. Corner Drugstore filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in December 1994.
DR. ELLIOT F. HAHN has been President of the Company since February 1993.
From June 1990 to February 1993, Dr. Hahn was employed as Vice President,
Scientific Affairs of IVAX, where he was involved in the evaluation and
international licensing of product opportunities and was responsible for
maintaining the intellectual property of IVAX. From 1988 to 1993, Dr. Hahn also
served as the Vice President of Research of Baker Norton Pharmaceuticals, a
subsidiary of IVAX. Prior to that, he was an Associate Professor at The
Rockefeller University from 1977 to 1988. From 1972 until 1977, Dr. Hahn was an
Assistant Professor at Albert Einstein College of Medicine and a member of the
Institute for Steroid Research at Montefiore Hospital in New York City. Since
1988, he has been an adjunct Associate Professor at the University of Miami
School of Medicine. Dr. Hahn holds a B.S. degree from City College of New York
and a Ph.D. degree in chemistry from Cornell University.
REPRESENTATIVE ELAINE BLOOM is the former Speaker Pro-Tempore of the
Florida House of Representatives, of which she has been a member from 1974 to
1978 and since 1986. She currently chairs the Joint Legislative Management
Committee and serves on the Health Care, Aging and Human Services and Government
Operations Committees.
PAUL M. DONOFRIO has been a Senior Vice President, Investment Banking, at
Dillon Read & Co. Inc., since January 1997 and a Vice President since December
1994, specializing in health care. Mr. Donofrio served in the same capacity with
Kidder, Peabody & Co. from 1990 to 1994.
5
<PAGE>
ELLIOT LEVINE is a private investor. Mr. Levine was Executive Vice
President and Chief Financial Officer of Cheyenne Software, Inc., a developer
and marketer of proprietary network software products from September 1989
through November 1996. From February 1988 to September 1989, Mr. Levine was
president of VTX Electronics, a distributor of electronic networking products,
and, from March 1986 to February 1988, he was a Managing Director of Ladenburg,
Thalmann & Co. Inc., an investment banking firm.
DR. MELVIN SHAROKY has been the President and a director of Watson since
July 1995 and the President and Chief Executive Officer of Circa since February
1993. From June 1988 to January, 1993, Dr. Sharoky was employed in various other
executive capacities at Circa.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and holders of more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "Commission") and The
Nasdaq National Market. Such persons are required to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
oral or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that, with respect to the
fiscal year ended December 31, 1996 ("Fiscal 1996"), all filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were complied with.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During Fiscal 1996, the Board of Directors held four formal meetings and
took actions by written consent on one occasion. During Fiscal 1996, no director
attended fewer than 75% of the number of meetings of the Board of Directors and
each Committee of the Board of Directors held during the period such director
served on the Board.
The only standing committees of the Board of Directors are the Audit
Committee, the Compensation Committee and the Executive Committee. The Board
does not have a nominating or similar committee.
The Audit Committee is presently comprised of Representative Elaine Bloom,
Paul M. Donofrio and Elliot Levine. The duties and responsibilities of the Audit
Committee include (a) recommending to the Board of Directors the appointment of
the Company's independent certified public accountants and any termination of
engagement, (b) reviewing the plan and scope of independent audits, (c)
reviewing the Company's significant accounting and reporting policies and
operating controls, (d) having general responsibility for all related auditing
matters, and (e) reporting its recommendations and findings to the full Board of
Directors. The Audit Committee met on two occasions during Fiscal 1996.
The Compensation Committee is presently comprised of Paul M. Donofrio,
Irwin C. Gerson and Dr. Michael A. Schwartz. The Compensation Committee reviews
and approves the compensation of the Company's executive officers and
administers the Plan. The Compensation Committee met on two occasions during
Fiscal 1996 and took action by written consent on one occasion. The Executive
Committee is presently comprised of Alan P. Cohen, Dr. Elliot F. Hahn, Dr.
Chih-Ming J. Chen and Dr. Melvin Sharoky.
The Executive Committee consults from time to time concerning industry
trends, the direction of the Company, potential collaborations, and other
potential opportunities. The Executive Committee had no formal meetings during
Fiscal 1996.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal year ended
December 31, 1995 and Fiscal 1996, the cash and certain other compensation paid
by the Company to the Company's CEO and the four most highly compensated other
executive officers whose annual salary and bonus exceeded $100,000 during Fiscal
1996 (together with the CEO, collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------------------------- ---------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(1) COMPENSATION($)(2) OPTIONS(#)(3)
- --------------------------- ----- ---------- ----------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Alan P. Cohen, Chairman 1996 141,900 50,000 18,000(2) -
of the Board and CEO 1995 124,250 - 10,601(2) -
Elliot F. Hahn, Ph.D., President 1996 141,900 45,000 19,900(2) -
1995 124,250 - 13,371(2) -
Chih-Ming J. Chen, Ph.D. 1996 141,900 45,000 19,400(2) -
Vice President and Chief Scientist 1995 124,250 108,500(3) 14,909(2) -
Scott Lodin, Vice President, 1996 137,500 25,000 3,500(4) 7,500
General Counsel and Secretary 1995 111,817 - - 10,000
Randy Glover, Vice President 1996 107,700 37,500 - 50,000
of Manufacturing Operations(5)
<FN>
- ----------------
(1) Represents options to purchase Common Stock granted to the Named Executive
Officer under the Plan.
(2) Represents an automobile allowance, premiums for a $1 million life insurance
policy, the beneficiary of which is designated by the Named Executive
Officer, certain medical expense reimbursement and the premiums for a
disability policy (other than for Mr. Cohen), the beneficiary of which is
designated by the Named Executive Officer.
(3) Represents compensation to Dr. Chen arising from the forgiveness of an
interest-bearing loan made by the Company to Dr. Chen. See "Certain
Transactions-Transactions with Dr. Chen."
(4) Represents reimbursement for medical insurance.
(5) Mr. Glover joined the Company as Vice President of Manufacturing Operations
in March 1996.
</FN>
</TABLE>
COMPENSATION OF DIRECTORS
Non-employee directors of the Company do not receive cash compensation for
their services. On June 1 of each year non-employee directors of the Company are
granted stock options under the Plan to purchase 7,000 shares of Common Stock.
Each person who becomes a non-employee director after June 1 of any year will be
granted an option on the date such person becomes a director (the
"Appointment Date") to purchase that number of shares equal to 7,000
multiplied by a fraction, the numerator of which is the number of full months
between the Appointment Date and the following June 1, and the denominator of
which is twelve. These options are exercisable in ten equal monthly installments
(unless such director's term commences after June 1, in which case the options
shall vest equally over the number of full months they serve as a director until
the following June 1), beginning the first day of the month following the date
of grant, provided the optionee has continuously served as a non-employee
director. All options granted to employee directors are granted at fair market
value on the date of the grant and expire ten years from the date of the grant.
The following sets forth information with respect to options previously granted
to non-employee directors under the Plan.
7
<PAGE>
<TABLE>
<CAPTION>
NAME OF OPTIONEE NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C>
Elaine Bloom .................. 2,500 $ 3.00 May 12, 2003
9,000 $ 6.50 August 7, 2004
5,875 $12.00 May 31, 2006
Paul M. Donofrio ............... 2,500 $11.00 November 11, 2005
5,750 $12.00 May 31, 2006
Irwin C. Gerson ............... 2,500 $ 3.00 May 12, 2003
9,000 $ 6.50 August 7, 2004
5,875 $12.00 May 31, 2006
Elliot Levine .................. 2,500 $ 8.00 January 23, 2004
9,000 $ 6.50 August 7, 2004
4,000 $12.00 May 31, 2006
Michael A. Schwartz, Ph.D ...... 2,500 $ 3.00 May 12, 2003
9,000 $ 6.50 August 7, 2004
5,875 $12.00 May 31, 2006
Melvin Sharoky, M.D ............ 2,500 $11.00 November 11, 2005
5,750 $12.00 May 31, 2006
</TABLE>
INDEMNIFICATION AGREEMENTS
The Company has entered into an indemnification agreement with each of its
directors and executive officers. Each indemnification agreement provides that
the Company will indemnify such person against certain liabilities (including
settlements) and expenses actually and reasonably incurred by him or her in
connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of the Company) to
which he or she is, or is threatened to be, made a party by reason of his or her
status as a director, officer or agent of the Company, provided that such
director or executive officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal proceedings, had no reasonable cause to
believe his or her conduct was unlawful. With respect to any action brought by
or in the right of the Company, a director or executive officer will also be
indemnified, to the extent not prohibited by applicable law, against expenses
and amounts paid in settlement, and certain liabilities if so determined by a
court of competent jurisdiction, actually and reasonably incurred by him or her
in connection with such action if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company.
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement with each of Mr. Cohen, Dr.
Hahn and Dr. Chen. The employment agreements, which expire in February 1998,
currently provide for a base salary determined by the Compensation Committee,
which has been set at $200,000 for 1997. Under the employment agreements, Mr.
Cohen, Dr. Hahn and Dr. Chen are also entitled to such bonuses and increases as
may be awarded by the Board of Directors. Each agreement includes
confidentiality and non-competition provisions.
The Company is also party to an employment agreement with Angelo C.
Malahias, its Vice President and Chief Financial Officer, which expires in
January 2001. Mr. Malahias currently receives a base salary of $132,000 per
year. The agreement includes provisions regarding confidentiality and non-
solicitation.
The Company has an agreement with Mr. Lodin which provides that in the
event Mr. Lodin's employment is terminated by the Company without cause prior
to December 31, 1998, Mr. Lodin will receive a lump-sum payment equal to 100% of
his then annual compensation. Mr. Lodin is also party to a confidentiality
agreement with the Company.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during Fiscal 1996 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERMS
OPTIONS TO EMPLOYEES IN BASE PRICE ------------------------
GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%(1) 10%(1)
------------- ------------------ -------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Scott Lodin ...... 7,500 2.0% 11.00 April 3, 2006 $134,384 $213,984
Randy Glover ...... 50,000 13.2% 11.00 March 10, 2006 $737,053 $974,359
<FN>
- ----------------
(1) Based upon the exercise price, which was equal to the fair market value on
the date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of the future stock
price. Actual gains, if any, are contingent upon the continued employment of
the Named Executive Officer through the expiration date, as well as being
dependent upon the general performance of the Common Stock. The potential
realizable values have not taken into account amounts required to be paid
for federal income taxes.
</FN>
</TABLE>
STOCK OPTIONS HELD AT END OF FISCAL 1996
The following table indicates the total number and value of exercisable and
unexercisable stock options held by each of the Named Executive Officers listed
as of December 31, 1996. No options to purchase stock were exercised by any of
the Named Executive Officers in Fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END
------------------------------ ------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Chih-Ming J. Chen, Ph.D. ...... 200,000 0 $1,925,000 $ 0
Scott Lodin .................. 22,500 25,000 $ 184,688 $186,250
Randy Glover .................. 0 50,000 $ 0 $256,250
<FN>
- ----------------
(1) Based on a fair market value of $16.125 per share at December 31, 1996.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, the Company is required to
provide a report explaining the rationale and considerations that led to
fundamental compensation decisions affecting the Company's executive officers
(including the Named Executive Officers) during the past fiscal year. The report
of the Company's Compensation Committee is set forth below.
COMPENSATION PHILOSOPHY
The three principal components of the Company's executive compensation are
salary, bonus and stock options. These components are designed to facilitate
fulfillment of the compensation objectives of the Company's Board of Directors
and the Compensation Committee, which objectives include (i) attracting and
retaining competent management, (ii) recognizing individual initiative and
achievement, (iii) rewarding management for short and long term accomplishments,
and (iv) aligning management compensation with the achievement of the Company's
goals and performance.
9
<PAGE>
The Compensation Committee endorses the position that equity ownership by
management is beneficial in aligning management's and shareholders' interests
in the enhancement of shareholder value. This alignment is amplified by the
extensive holdings by management of Company Common Stock and stock options. Base
salaries for new management employees are determined initially by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for managerial talent, including a
comparison of base salaries for comparable positions at similar companies of
comparable sales and capitalization. Annual salary adjustments are determined by
evaluating the competitive marketplace, the performance of the Company, the
performance of the executive, and the responsibilities assumed by the executive.
The Compensation Committee intends to annually review the Company's
existing management compensation programs and plans (i) to meet with the chief
executive officer to consider and set mutually agreeable performance standards
and goals for members of senior management and/or the Company, as appropriate or
as otherwise required pursuant to any such officer's employment agreement and
(ii) to consider and, as appropriate, approve modifications to such programs to
ensure a proper fit with the philosophy of the Compensation Committee and the
agreed-upon standards and goals.
EXECUTIVE OFFICER COMPENSATION
Fiscal 1996 base salary, bonus and stock options for the Company's
executive officers were determined by the Compensation Committee. This
determination was made after a review and consideration of a number of factors,
including each executive's level of responsibility and commitment, level of
performance (with respect to specific areas of responsibility and on an overall
basis), past and present contribution to and achievement of Company goals and
individual performance during Fiscal 1996, compensation levels at competitive
similarly situated publicly held companies and the Company's historical
compensation levels. Although Company performance was one of the factors
considered, the approval of the Compensation Committee was based upon an overall
review of the relevant factors, and there was no specific relationship or
formula by which compensation was tied to Company performance.
STOCK OPTIONS
The Company maintains the Plan which is designed to attract and retain
executive officers, directors and other employees of the Company and to reward
them for delivering long-term value to the Company.
Paul M. Donofrio
Irwin C. Gerson
Michael A. Schwartz, Ph.D.
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total stockholder return on the
Nasdaq Stock Market-US Index and The S&P Pharmaceutical Preparations Industry
Index commencing on June 14, 1996 (the first day the Common Stock began trading
on The Nasdaq National Market) and ending December 31, 1996.
COMPARISON OF 32 MONTH CUMULATIVE TOTAL RETURN*
AMONG ANDRX CORPORATION, THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE S&P PHARMACEUTICAL PREPARATIONS INDUSTRY INDEX
[PU GRAPH]
JUNE 14, 1996 DECEMBER 31, 1996
---------------- -------------------
Andrx ............... $100 $134.42
Nasdaq Market ...... 100 102.89
Industry Index ...... 100 113.21
- ----------------
* Assumes that $100 was invested on June 14, 1996 in the Company's Common
Stock, in The Nasdaq Stock Market Index, or The S&P Pharmaceutical
Preparations Industry Index, and that all dividends are reinvested.
11
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DR. CHEN
In November 1992, the Company entered into an agreement with Dr. Chih-Ming
J. Chen and ASAN Labs, Inc., his wholly-owned company ("ASAN"), pursuant
to which the Company acquired equipment from ASAN and certain patent rights and
"know how" owned by Dr. Chen. Dr. Chen assigned to the Company a portion
of a royalty payable to him pursuant to a separate agreement in principle he had
entered into with a pharmaceutical manufacturer. In consideration for the
foregoing, the Company issued to Dr. Chen 1,737,450 shares of Common Stock. The
terms of the transaction were determined by negotiation between Dr. Chen and the
Company. ASAN's and Dr. Chen's cost for the equipment, patent rights and
"know how" purchased by the Company was approximately $100,000. In
February 1993, the Company also made a non-interest bearing advance of $50,000
to Dr. Chen with no specified maturity date and at such time the agreement in
principle between Dr. Chen and the pharmaceutical manufacturer was terminated.
In consideration for his agreeing to terminate this agreement, the Company
entered into a new royalty agreement (the "February 1993 Agreement") with
Dr. Chen which provided for payment to Dr. Chen of royalties on two generic
pharmaceuticals under development, the generic version of Cardizem CD- and the
generic version of Seldane D-. In March 1994, the Company and Dr. Chen entered
into an amendment (the "March 1994 Agreement") to the February 1993
Agreement to reduce the amount of royalties relating to these products to be
paid to Dr. Chen. Under the terms of the March 1994 Agreement, Dr. Chen will
receive 3.33% of the net revenues received by the Company from sales of these
products, less, in the case of the generic version of Seldane D-, the Company's
investment in this product. Under the terms of the March 1994 Agreement, the
Company also (i) paid Dr. Chen $50,000; (ii) canceled his obligation to repay
the $50,000 advance; and (iii) agreed to recommend to the Compensation Committee
that Dr. Chen be paid a bonus upon each of the filing of an ANDA relating to the
Company's generic version of Cardizem CD- and FDA approval of the ANDA. In
August 1994, the bonus arrangement was modified to provide Dr. Chen with a
$100,000 loan and to grant to Dr. Chen ten-year options under the Stock
Incentive Plan to purchase 200,000 shares of Common Stock, which options are
fully vested. These options were granted at an exercise price of $6.50 per
share, representing the fair market value on the date of grant. In March 1996,
following the filing of an ANDA relating to the Company's generic version of
Dilacor XR-, the Compensation Committee of the Board of Directors agreed to
forgive Dr. Chen's indebtedness to the Company.
APPROVAL OF AFFILIATED TRANSACTIONS
No further transactions between the Company and its executive officers,
directors, principal shareholders or their affiliates are contemplated. The
Company has adopted a policy that any material transactions between the Company
and its executive officers, directors, principal shareholders or their
affiliates take place on an arms-length basis and require the approval of a
majority of the independent directors of the Company.
12
<PAGE>
AMENDMENT TO 1993 STOCK INCENTIVE PLAN
The Board of Directors has approved, and is submitting to the shareholders
for approval, an amendment to the Company's 1993 Stock Incentive Plan (the
"Plan"). The proposed amendment would increase the number of shares of
Common Stock issuable under the Plan from 1,250,000 to 2,000,000.
DESCRIPTION OF THE PLAN
The Plan currently authorizes the award of up to 1,250,000 shares (subject
to adjustment as provided in the Plan as adjusted for stock dividends and
splits) of Common Stock in the form of stock options, stock appreciation rights,
restricted stock, deferred stock, performance units, loans and/or tax offset
payments. As of the Record Date, stock options to purchase 990,563 shares of
Common Stock were outstanding under the Plan. In addition, as of the Record
Date, stock options to purchase 157,349 shares of Common Stock have been
exercised. Accordingly, 102,088 shares of Common Stock are available for future
awards under the Plan.
The purpose of the Plan is to enable the Company and any corporation,
partnership, joint venture or other entity in which the Company owns, directly
or indirectly, at least a 50% beneficial ownership interest (a "Related
Company") to attract and retain qualified and competent employees and to
enable such persons to participate in the long-term success and growth of the
Company by giving them an equity interest in the Company, and to enable the
Company to pay all or part of the compensation of the directors of the Company
or a Related Company other than a director who is an officer or employee of the
Company (each, an "Outside Director"), consultants and advisors with
options to purchase shares of the Company's Common Stock, thereby increasing
such person's proprietary interest in the Company.
All employees of the Company or a Related Company are eligible to be
granted awards under the Plan. Consultants of and advisors to the Company or a
Related Company are eligible to be granted awards under the Plan if their
services (such services being the "Participation Status") are of a
continuing nature or otherwise contribute to the long-term success and growth of
the Company. Section 15 of the Plan governs awards to be made to Outside
Directors. The participants under the Plan shall be selected from time to time
by the Compensation Committee (the "Committee"), in its sole discretion,
from among those eligible.
The Plan is administered by the Committee or such other committee of
directors as the Board shall designate. The Committee consists of not less than
two "disinterested" directors. The Committee makes all decisions or
determinations by either a majority vote of its members at a meeting or by the
unanimous written approval of its members. The Committee may adopt, alter or
repeal any administrative rules, guidelines and practices for carrying out the
purposes of the Plan, and its determination, interpretation and construction of
any provision of the Plan are final and conclusive. The Committee has the right
to determine, among other things, the persons to whom awards are granted, the
terms and conditions of any awards granted, the number of shares of Common Stock
covered by the awards, the exercise price of options and the term thereof.
The mean of the closing bid and ask prices for the Common Stock on The
Nasdaq National Market on the Record Date was $21.625 per share. Based upon such
price, on the Record Date, the aggregate market value of the 990,563 shares
reserved under outstanding stock options granted under the Plan was
approximately $21,421,000.
STOCK OPTIONS
The exercise price, term and exercise period of each stock option shall be
fixed by the Committee at the time of grant. Notwithstanding the fixed option
price, no Incentive Stock Option (as defined below) shall (i) have an option
price which is less than 100% of the fair market value of the Common Stock on
the date of the award of the stock option, (ii) be exercisable more than ten
years after the date
13
<PAGE>
such Incentive Stock Option is awarded, or (iii) be awarded more than ten years
after the Plan is adopted by the Board. See "Executive Compensation-Stock
Options Held at the End of Fiscal 1996" with respect to outstanding stock
options granted to Named Executive Officers under the Plan.
STOCK OPTIONS FOR OUTSIDE DIRECTORS
On June 1 of each year, each Outside Director is granted a stock option to
purchase 7,000 shares of Common Stock. One tenth of such option shares vest and
become exercisable on the first day of each month thereafter, provided such
Outside Director remains a director on each such vesting date. Each Outside
Director who is elected to the Board after June 1 of any year shall receive a
stock option to purchase that number of shares as is equal to 7,000 multiplied
by a fraction, the numerator of which is the number of full months between the
date such person becomes an Outside Director and the following June 1, and the
denominator of which is 12. Stock options granted to Outside Directors vest in
equal monthly increments on the date of appointment and the first day of the
month thereafter through May 1 PROVIDED such Outside Director remains a director
on each such vesting date. See "Executive Compensation-Compensation of
Directors" with respect to outstanding stock options granted to Outside
Directors under the Plan.
The exercise price per share of Common Stock purchasable under the stock
option is equal to the fair market value of the Company's Common Stock on the
date of the grant to the Outside Director. The term of the stock options are ten
years, subject to earlier termination in the event of termination of service as
an Outside Director for cause, and subject to the earlier or later termination
in the event of the Outside Director's death, as set forth in the Plan.
STOCK APPRECIATION RIGHTS
A stock appreciation right shall entitle the holder thereof to receive
payment of an amount, in cash, shares of Common Stock or a combination thereof,
as determined by the Committee, equal in value to the excess of the fair market
value of the shares as to which the award is granted on the date of exercise
over an amount specified by the Committee. Any such award shall be in such form
and shall have such terms and conditions as the Committee may determine.
RESTRICTED STOCK
A restricted stock award shall specify the number of shares of restricted
stock to be awarded, the price, if any, to be paid by the recipient of the
restricted stock and the date or dates on which, or the conditions upon the
satisfaction of which, the restricted stock will vest. The vesting of restricted
stock may be conditioned upon the completion of a specified period of service
with the Company or a Related Company, upon the attainment of specified
performance goals or upon such other criteria as the Committee may determine.
DEFERRED STOCK AWARDS
A deferred stock award shall specify the number of shares of deferred stock
to be awarded to any Eligible Participant and the duration of the period (the
"Deferral Period") during which, and the conditions, if any, under which,
receipt of the Common Stock will be deferred. The Committee may condition the
award of deferred stock, or receipt of Common Stock or cash at the end of the
Deferral Period, upon the attainment of specified performance goals or such
other criteria as the Committee may determine.
PERFORMANCE UNITS
Performance units expressed as an amount of cash may be granted by the
Committee in such form and upon such terms and conditions as the Committee, in
its discretion, may determine. Each award of a performance unit shall specify
the amount and nature of the performance unit to be received by the participant
subject to satisfaction of specified management objectives within a specified
performance period.
14
<PAGE>
LOANS
The Committee may provide that the Company shall make, or arrange for, a
loan or loans to an eligible participant with respect to the exercise of any
stock option awarded under the Plan, with respect to the payment of the purchase
or exercise price, if any, of any restricted stock awarded hereunder, or with
respect to any taxes arising from an award hereunder; provided, however, that
the Company shall not loan to an eligible participant more than the excess of
the purchase or exercise price of an award (together with the amount of any
taxes arising from such award) over the par value of any shares of Common Stock
issued. The Committee shall have full authority to decide whether a loan will be
made and to determine the amount, term and provisions of any such loan,
including the interest rate, if any, to be charged, whether the loan will be
with or without recourse against the borrower, any security for the loan, the
terms on which the loan is to be repaid and the conditions, if any, under which
the loan may be forgiven.
TAX OFFSET PAYMENTS
The Committee may provide for a tax offset payment by the Company to the
eligible participant in an amount specified by the Committee, which shall not
exceed the amount necessary to pay the federal, state, local and other taxes
payable with respect to any award and receipt of the tax offset payment assuming
the participant is taxed at the maximum tax rate applicable to such income. The
tax offset payment may be paid in cash, Common Stock or a combination thereof,
as determined by the Committee.
FEDERAL INCOME TAX EFFECTS
The Plan is not qualified under the provisions of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), nor is it subject
to any of the provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
An optionee granted a stock option under the Plan which is not an Incentive
Stock Option (a "Nonqualified Stock Option") will generally recognize, at
the date of exercise, ordinary income equal to the difference between the
exercise price and the fair market value of the shares of Common Stock
purchased. This taxable ordinary income may be subject to Federal income tax
withholding. A Federal income tax deduction will be allowed to the Company in an
amount equal to the ordinary income to be recognized by the optionee, provided
that such amount constitutes an ordinary and necessary business expense to the
Company and is reasonable, assuming the Company satisfies its reporting and
withholding obligation with respect to such income. To date, all options granted
by the Company under the Plan have been Nonqualified Stock Options.
If an optionee exercises a Nonqualified Stock Option by delivering other
shares, the optionee will not recognize gain or loss with respect to the
exchange of such shares, even if the then fair market value is different from
the optionee's tax basis. However, the optionee will be taxed as described
above with respect to the exercise of the Nonqualified Stock Option as if he had
paid the exercise price in cash, and the Company likewise generally will be
entitled to an equivalent tax deduction. Provided a separate identifiable stock
certificate is issued therefor, the optionee's tax basis in that number of
shares received on such exercise which is equal to the number of shares
surrendered on such exercise will be equal to his or her tax basis in the shares
surrendered and his or her holding period for such number of shares received
will include his or her holding period for the shares surrendered. The
optionee's tax basis and holding period for the additional shares received on
exercise of a Nonqualified Stock Option paid for, in whole or in part, with
shares will be the same as if the optionee had exercised the Nonqualified Stock
Option solely for cash.
Incentive Stock Options are "incentive stock options" as defined in
Section 422 of the Code. Under the Code, an optionee generally is not subject to
ordinary income tax upon the grant or exercise of an Incentive Stock Option.
However, an optionee who exercises an Incentive Stock Option by delivering
15
<PAGE>
shares of Common Stock previously acquired pursuant to the exercise of an
Incentive Stock Option is treated as making a Disqualifying Disposition (as
defined below) of such shares if the Optionee delivers such shares before the
expiration of the holding period applicable to such shares. The applicable
holding period is the longer of (a) two years from the date such Incentive Stock
Option was granted or, if later, (b) one year from the date of exercise (the
"Required Holding Period"). The effect of this provision is to prevent
"pyramiding" the exercise of an Incentive Stock Option (i.e., the exercise
of the Incentive Stock Option for one share and the use of that share to make
successive exercises of the Incentive Stock Option until it is completely
exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an Incentive Stock Option exceeds the purchase price of the
shares under such option will be treated as an item of adjustment included in
the optionee's alternative minimum taxable income for purposes of the
alternative minimum tax. If, however, there is a Disqualifying Disposition in
the year in which the option is exercised, the maximum amount of the item of
adjustment for such year is the gain on the disposition of the Common Stock. If
there is a Disqualifying Disposition in a year other than the year of exercise,
the disposition will not result in an item of adjustment for such other year.
If, subsequent to the exercise of an Incentive Stock Option, the Optionee
holds the shares received upon exercise for a period that exceeds the Required
Holding Period, the difference (if any) between the amount realized from the
sale of such shares and their tax basis to the Optionee will be taxed as
long-term capital gain or loss. If the Optionee is subject to the alternative
minimum tax in the year of disposition, such Optionee's tax basis in his or her
shares will be increased for purposes of determining his or her alternative
minimum tax for such year by the amount of the item of adjustment recognized
with respect to such shares in the year the option was exercised.
In general, if, after exercising an Incentive Stock Option, an optionee
disposes of the shares so acquired before the end of the Required Holding Period
(a "Disqualifying Disposition"), such optionee would be deemed in receipt
of ordinary income in the year of the Disqualifying Disposition, in an amount
equal to the excess of the fair market value of the shares at the date the
Incentive Stock Option was exercised over the exercise price. If the
Disqualifying Disposition is a sale or exchange which would permit a loss to be
recognized under the Code (were a loss in fact to be sustained), and the sales
proceeds are less than the fair market value of the shares on the date of
exercise, the Optionee's ordinary income would be limited to the gain (if any)
from the sale. If the amount realized upon disposition exceeds the fair market
value of the shares on the date of exercise, the excess would be treated as
short-term or long-term capital gain, depending on whether the holding period
for such shares exceeded one year.
An income tax deduction is not allowed to the Company with respect to the
grant or exercise of an Incentive Stock Option or the disposition, after the
Required Holding Period, of shares acquired upon exercise. In the event of a
Disqualifying Disposition, a Federal income tax deduction will be allowed to the
Company in an amount equal to the ordinary income to be recognized by the
optionee, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable, assuming the Company
satisfies its reporting and withholding obligation with respect to such income.
Section 162(m) of the Code limits the deductibility of any compensation
expense in excess of $1,000,000 to certain executive officers of companies whose
securities are publicly traded. To the extent that compensation paid to certain
of the Company's executive officers were to approach this $1,000,000 limit, the
amount otherwise deductible by the Company upon the exercise of a Nonqualified
Stock Option or upon a Disqualifying Disposition of an Incentive Stock Option
could be limited by this Section.
The information set forth above is a summary only of the federal income tax
effects of Nonqualified Stock Options and Incentive Stock Options. It does not
discuss the tax consequences of stock appreciation rights, restricted stock,
deferred stock awards, performance units, loans, tax offset
16
<PAGE>
payments and election to defer awards and does not purport to be complete. In
addition, such information is based upon present Federal income tax laws and
thus is subject to change when laws change.
INCREASE IN ISSUABLE SHARES
The Plan, which was previously approved by the Company's shareholders,
currently authorizes the award of 1,250,000 shares of Common Stock (subject to
adjustment as provided in the Plan). Such shares may consist of authorized but
unissued treasury shares. The exercise of a stock appreciation right for cash or
the payment of any other award in cash shall not count against this share limit.
The Board of Directors has adopted an amendment to the Plan, subject to the
approval of the Company's shareholders, whereby the total number of shares of
Common Stock that may be awarded would be increased to 2,000,000 shares. The
Board of Directors believes that the purposes of the Plan and the best interests
of the Company will be furthered by increasing the aggregate number of shares
that may be awarded. The Board of Directors wishes to ensure the continued
availability of Common Stock that may be awarded to all current and future
officers, directors and employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent certified public accountants,
served as the Company's independent certified public accountants for Fiscal
1996. The Board of Directors has selected Arthur Andersen LLP as the Company's
independent certified public accountants for the current fiscal year ending
December 31, 1997. One or more representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1998 Annual Meeting of
Shareholders must deliver a proposal in writing to the Company's principal
executive offices no later than December 22, 1997.
By Order Of The Board of Directors
SCOTT LODIN, Secretary
Fort Lauderdale, Florida
April 21, 1997
17
<PAGE>
ANDRX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - MAY 19, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ANDRX CORPORATION
The undersigned hereby appoints Alan P. Cohen and Elliot F. Hahn, Ph.D.,
as Proxies, each with full power to appoint a substitute, to represent and
to vote, with all the powers the undersigned would have if personally present,
all the shares of common stock, $.001 par value per share, of Andrx Corporation
(the "Company") held of record by the undersigned on April 11, 1997 at the
Annual Meeting of Shareholders to be held on May 19, 1997 or any adjournment or
adjournments thereof.
Proposal 1. ELECTION OF DIRECTORS
[ ] FOR ALL THE NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below.
(INSTRUCTIONS: To withhold authority for any individual nominees, write that
nominee's name in the space below.)
Chih-Ming J. Chen, Ph.D., Irwin C. Gerson, Michael A. Schwartz, Ph.D.
_______________________________________________________________________________
Proposal 2: To approve an amendment to the Company's 1993 Stock Incentive Plan
to increase the number of shares issuable under the Plan to 2,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. To ratify the selection of Arthur Andersen LLP as independent
certified public accountants for the Company for the fiscal year ending
December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote upon other business as
may come before the meeting.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the Proxy
will be voted FOR Proposals 1 and 2.
Dated: _______________________________, 1997
_____________________________________________
(Signature)
_____________________________________________
(Signature)
PLEASE SIGN HERE
Please date this proxy and sign your name
exactly as it appears hereon.
Where there is more than one owner, each should
sign. When signing as an agent, attorney,
administrator, executor, guardian, or trustee,
please add your title as such. If executed
by a corporation, the proxy should be signed by
a duly authorized officer who should indicate his
office.
PLEASE DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
