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
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
ANDRX CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on 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:
[ ] 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>
ANDRX CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 29, 1998
----------------
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 9:00 A.M., on June 29, 1998 for the following purposes:
1. To elect two directors of the Company to serve until 2001;
2. 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, 1998; and
3. 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 27, 1998
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
June 5, 1998
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 JUNE 29, 1998
----------------
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 9:00 A.M., on June 29, 1998, 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 June 5, 1998. 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, 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 two directors of the Company to serve until 2001;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the fiscal year ending
December 31, 1998; and
3. 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 27, 1998 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 14,998,289 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 to ratify the appointment of Arthur Andersen LLP as the
Company's independent certified public accountants for the year ending December
31, 1998 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.
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<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) ....................... 1,628,964 10.9%
Elliot F. Hahn, Ph.D.(4) ............... 992,947 6.6%
Chih-Ming J. Chen, Ph.D.(5) ............ 1,693,414 11.2%
Randy Glover(6) ........................ 26,000 *
Angelo C. Malahias(7) .................. 21,300 *
Elaine Bloom(8) ........................ 24,775 *
Irwin C. Gerson(9) ..................... 24,375 *
Elliot Levine(10) ...................... 29,120 *
Michael A. Schwartz, Ph.D.(11) ......... 24,375 *
Melvin Sharoky, M.D.(12) ............... 31,080 *
Watson Pharmaceuticals, Inc.(13)
311 Bonnie Circle
Corona, CA 91720 ....................... 3,028,869 19.8%
All directors and executive officers
as a group (11 persons)(14) .......... 4,543,850 29.6%
</TABLE>
- ----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
the Company, 4001 S.W. 47th Avenue, 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 and 1,624,089 shares held in family limited partnerships.
(4) Represents 582,945 shares of Common Stock held in trust for the benefit of
Dr. Hahn and 410,002 shares of Common Stock held in trusts for the benefit
of Dr. Hahn's children.
(5) Includes 1,200,000 shares of Common Stock and 257,693 shares of Common
Stock held by limited partnerships 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 20,000 shares of Common Stock issuable upon exercise of stock
options.
(7) Includes 18,500 shares of Common Stock issuable upon the exercise of stock
options, 2,000 shares of Common Stock held jointly by Mr. Malahias and his
spouse, and 800 shares of Common Stock held by Mr. Malahias as custodian
for his minor children.
(8) Includes 12,875 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 24,375 shares of Common Stock issuable upon exercise of stock
options.
(10) Represents 4,620 shares of Common Stock held jointly by Mr. Levine and his
spouse, 2,000 shares of Common Stock issuable upon the exercise of
warrants held jointly by Mr. Levine and his spouse, and 22,500 shares of
Common Stock issuable upon the exercise of stock options.
3
<PAGE>
(11) Represents 24,375 shares of Common Stock issuable upon exercise of stock
options.
(12) Includes 15,250 shares of Common Stock issuable upon exercise of stock
options and 830 shares of Common Stock held by Dr. Sharoky as custodian
for his minor children. Does not include shares of Common Stock
beneficially owned by Watson, in which shares Dr. Sharoky disclaims
beneficial ownership.
(13) Includes 337,079 shares of Common Stock issuable upon the exercise of
warrants to purchase Common Stock held by Watson.
(14) Includes the shares of Common Stock described in notes (3), (4), (5), (7),
(10) and (12) 338,875 shares of Common Stock issuable upon the exercise
of the stock options and warrants described in notes (5) through (12); and
2,500 shares of Common Stock and 45,000 shares of Common Stock issuable
upon the exercise of stock options held by Scott Lodin, the Company's Vice
President, General Counsel and Secretary.
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. Elliot F. Hahn, Representative Elaine Bloom and
Elliot Levine hold office until the 1998 Annual Meeting. Alan P. Cohen and Dr.
Melvin Sharoky hold office until the 1999 Annual Meeting. Dr. Chih-Ming J.
Chen, Irwin C. Gerson and Dr. Michael A. Schwartz hold office until the 2000
Annual Meeting.
At the Annual Meeting, two directors will be elected by the shareholders
to serve until the Annual Meeting to be held in 2001 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 two 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 are 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>
Elliot F. Hahn, Ph.D.(1) ......... 53 President and Director 1993
Rep. Elaine Bloom(2) ............. 60 Director 1993
</TABLE>
- ----------------
(1) Member of Executive Committee
(2) Member of Audit Committee
DR. ELLIOT F. HAHN has been President and a director of the Company since
February 1993. From June 1990 to February 1993, Dr. Hahn was employed as Vice
President, Scientific Affairs of IVAX Corporation ("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, a director of the Company since October 1993,
is the former Speaker Pro-Tempore of the Florida House of Representatives, of
which she has been a member from
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<PAGE>
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.
Elliot Levine has declined to run for re-election to the Board of
Directors so that he may pursue certain other opportunities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF BOTH 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
Chih-Ming J. Chen, Ph.D.(1) ........... 46 Vice President, Chief Scientist 1992 2000
and Director
Irwin C. Gerson(2) .................... 68 Director 1993 2000
Michael A. Schwartz, Ph.D.(2) ......... 67 Director 1993 2000
Melvin Sharoky, M.D.(3) ............... 47 Director 1995 1999
</TABLE>
- ----------------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Previously a member of the Executive Committee and to become a member of
the Audit Committee.
ALAN P. COHEN has been Chairman of the Board and Chief Executive Officer
and a director of the Company, which he founded in August 1992. He is a
graduate of 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, Inc., a privately-held retail drugstore chain,
which was a shareholder and customer of the Company. Corner Drugstore, Inc.,
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
December 1994.
DR. CHIH-MING J. CHEN has served as the Company's Vice President, Chief
Scientist and a director 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, a director of the Company since November 1993 and
currently Chairman Emeritus, was the Chairman of the Lowe McAdams Healthcare
division of the Interpublic Group (formerly William Douglas McAdams, Inc.), a
health care marketing, communications and public relations company, from 1987
through January 1998. 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, a director of the Company since November 1993, is
currently Dean Emeritus and a Professor at the College of Pharmacy at the
University of Florida having served as Dean of that college from April 1978
through May 1996.
5
<PAGE>
DR. MELVIN SHAROKY, a director of the Company since November 1995, has
been the President of Somerset Pharmaceuticals, Inc. since July 1995. Dr.
Sharoky was President of Watson from July 1995 through January 1998 and a
director of Watson from July 1995 through May 1998. From February 1993 through
January 1998, Dr. Sharoky served as the President and Chief Executive Officer
of Circa. While Dr. Sharoky previously served on the Company's Board of
Directors as the designee of Watson, neither he nor anyone else currently
serves as Watson's designee to the Board of Directors.
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, 1997 ("Fiscal 1997"), 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 1997, the Board of Directors held six formal meetings and
took actions by written consent on one occasion. During Fiscal 1997, 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
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 1997.
The Compensation Committee is presently comprised of 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 Company's
1993 Stock Incentive Plan (the "Plan"). The Compensation Committee met on three
occasions during Fiscal 1997 and took action by written consent on seven
occasions.
The Executive Committee is presently comprised of Alan P. Cohen, Dr.
Elliot F. Hahn, Dr. Chih-Ming J. Chen and Melvin Sharoky. The Executive
Committee informally 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
1997.
Elliot Levine has declined to run for re-election to the Board of
Directors. Thus, after the Annual Meeting, Elliot Levine will no longer be a
member of the Audit Committee. After the Annual Meeting, Mr. Sharoky will
transfer to and serve on the Audit Committee.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal year ended
December 31, 1995 and 1996 and Fiscal 1997, 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
$100,000 during Fiscal 1997 (together with the CEO, collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------------- --------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(1)
- ------------------------------------- ------ ----------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Alan P. Cohen, Chairman 1997 188,400 55,000 13,300(2) --
of the Board and CEO 1996 141,900 50,000 18,000(2) --
1995 124,300 -- 10,600(2) --
Elliot F. Hahn, Ph.D., President 1997 188,400 50,000 14,700(2) --
1996 141,900 45,000 19,900(2) --
1995 124,300 -- 13,400(2) --
Chih-Ming J. Chen, Ph.D. 1997 188,400 50,000 15,900(2) --
Vice President and Chief Scientist 1996 141,900 45,000 19,400(2) --
1995 124,300 108,500(3) 14,909(2) --
Randy Glover, Vice President 1997 171,700 38,000 265,000(5) 4,000
of Operations(4) 1996 108,000 37,800 -- 50,000
Angelo C. Malahias, Vice President 1997 129,700 25,000 38,600(7) 7,500
and Chief Financial Officer(6) 1996 110,800 20,000 12,900(7) 40,000
</TABLE>
- ----------------
(1) Represents options to purchase shares of 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 reimbursements 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.
(4) Mr. Glover joined the Company as Vice President of Operations in March
1996.
(5) Represents exercise of options to purchase 11,000 shares of Common Stock
with an exercise price of $11.00 per share.
(6) Mr. Malahias joined the Company as Vice President and Chief Financial
Officer in January 1996.
(7) Represents relocation expenses and reimbursement of premium on medical and
dental insurance.
7
<PAGE>
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 non-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.
<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
7,000 $ 23.00 May 31, 2007
Irwin C. Gerson ..................... 2,500 $ 3.00 May 12, 2003
9,000 $ 6.50 August 7, 2004
5,875 $ 12.00 May 31, 2006
7,000 $ 23.00 May 31, 2007
Elliot Levine ....................... 2,500 $ 8.00 January 23, 2004
9,000 $ 6.50 August 7, 2004
4,000 $ 12.00 May 31, 2006
7,000 $ 23.00 May 31, 2007
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
7,000 $ 23.00 May 31, 2007
Melvin Sharoky, M.D. ................ 2,500 $ 11.00 November 11, 2005
5,750 $ 12.00 May 31, 2006
7,000 $ 23.00 May 31, 2007
</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.
8
<PAGE>
EMPLOYMENT AGREEMENTS
The Company was party to an employment agreement with each of Mr. Cohen,
Dr. Hahn and Dr. Chen which expired in February 1998.
The Company is party to an employment agreement with Mr. Malahias, its
Vice President and Chief Financial Officer, which expires in February 2001. Mr.
Malahias currently receives a base salary of $150,000 per year. The agreement
provides that if Mr. Malahias' employment is terminated by the Company without
cause, Mr. Malahias may receive a lump sum payment up to $90,000. Other amounts
are payable and acceleration of vesting of certain options may occur in the
event Mr. Malahias' employment is terminated pursuant to a change of control of
the Company. The agreement includes provisions regarding confidentiality and
non-solicitation.
The Company has an agreement with Mr. Lodin, its Vice President, General
Counsel and Secretary, 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 currently receives a base salary of $172,500.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during Fiscal 1997 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR FOR OPTION TERMS
OPTIONS TO EMPLOYEES IN BASE PRICE ------------------------
GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%(1) 10%(1)
------------ ----------------- ------------ ---------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Randy Glover ............... 4,000 1.8% 23.00 June 1, 2007 $ 58,000 $147,000
Angelo C. Malahias ......... 7,500 3.5% 20.25 March 2, 2007 $108,000 $275,000
</TABLE>
- ----------------
(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.
STOCK OPTIONS HELD AT END OF FISCAL 1997
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, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES ACQUIRED VALUE ----------------------------- ----------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ----------------------------- ----------------- ----------- ------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Chih-Ming J. Chen, Ph.D...... -- -- 200,000 -- $5,550,000 --
Randy Glover ................ 11,000 $265,000 9,000 34,000 209,300 $742,500
Angelo C. Malahias .......... -- -- 8,000 39,500 186,000 849,000
</TABLE>
- ----------------
(1) Based on a fair market value of $34.25 per share at December 31, 1997.
9
<PAGE>
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.
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 the Company's 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 1997 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 1997, 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.
Michael A. Schwartz, Ph.D.
Irwin C. Gerson
10
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock with the cumulative total shareholder 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, 1997.
COMPARISON OF 18 MONTH CUMULATIVE TOTAL RETURN*
AMONG ANDRX CORPORATION, THE S&P PHARMACEUTICAL PREPARATIONS
INDUSTRY INDEX AND THE NASDAQ STOCK MARKET--U.S. INDEX
[GRAPH OMITTED]
<TABLE>
<CAPTION>
JUNE 14, 1996 DECEMBER 31, 1996 DECEMBER 31, 1997
--------------- ------------------- ------------------
<S> <C> <C> <C>
Andrx ........................ $100 $ 134.42 $ 285.42
SIC Code Index ............... 100 113.21 164.49
Nasdaq Market Index .......... 100 102.89 125.86
</TABLE>
- ----------------
* Assumes that $100 was invested on June 14, 1996 in the Company's Common
Stock, in The S&P Pharmaceutical Preparations Industry Index, or The Nasdaq
Stock Market Index, and that all dividends are reinvested.
11
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH WATSON
The Company is a partner in ANCIRC Pharmaceuticals ("ANCIRC"), a joint
venture with Watson Pharmaceuticals, Inc. ("Watson"), for the development of up
to eight controlled-release pharmaceuticals. In connection with the
establishment of ANCIRC, the Company sold to Watson, for aggregate
consideration of $6.0 million, (i) 33,708 shares of preferred stock, which in
accordance with its terms, converted into 674,160 shares of Common Stock on
April 30, 1995 and (ii) the Watson Warrants to purchase 337,079 shares of
Common Stock exercisable through July 1999 at a price of $8.90.
In August 1995, Watson purchased an additional 90,909 shares of Common
Stock from the Company at a price of $11.00 per share and Watson was granted a
two-month option to purchase no less than 818,182 nor more than 1,454,545
shares of Common Stock from the Company, Mr. Cohen, trusts for the benefit of
Dr. Hahn's children (the "Trusts") and Dr. Chen at a price of $11.00 per share
(with no more than 181,818 shares being sold by selling shareholders). Watson
exercised such option in October 1995 and in December 1995, purchased 1,144,903
shares from the Company, 63,636 shares from Mr. Cohen, 54,546 shares from the
Trusts, and 63,636 shares from Dr. Chen, for a total of 1,326,721 shares of
Common Stock. In connection with the exercise of the option by Watson, the
ANCIRC joint venture agreement was amended to provide that the Company and
Watson would agree on two additional product candidates to be developed by
ANCIRC, and to restructure the respective interests of the Company and Watson
in ANCIRC so that ANCIRC became a 50/50 joint venture.
In June 1997, Watson purchased an additional 150,000 shares of Common
Stock from the Company and 450,000 shares from Andrx's founders at a price of
$22.50 per share, the closing price of the Common Stock on the business date
prior to the sale. Watson also entered into a standstill agreement with the
Company pursuant to which it agreed, among other matters, not to acquire more
than a 25% equity interest in the Company or engage in certain transactions
with the Company (including a merger), prior to June 13, 2000, without the
prior approval of the Company's Board of Directors.
The Company has also granted Watson certain demand and piggyback
registration rights, under the Securities Act of 1933, as amended, with respect
to the shares of Common Stock held by Watson and the shares underlying the
Watson Warrants, which rights became exercisable commencing June 1997.
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/registered trademark/ and 3.33% of the Company's net operating revenues
related to its generic version of Seldane D/registered trademark/. 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/registered trademark/, the Company's investment in this
12
<PAGE>
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 abbreviated new drug application
("ANDA") relating to the Company's generic version of Cardizem CD/registered
trademark/ and FDA approval of the ANDA. In August 1994, the bonus arrangement
referred to in (iii) was modified to provide Dr. Chen with a $100,000 loan and
to grant to Dr. Chen ten-year options under the 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 abbreviated new drug
application relating to the Company's generic version of Dilacor XR/registered
trademark/, the Compensation Committee agreed to forgive Dr. Chen's
indebtedness to the Company.
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
1997. 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, 1998. 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 Commission, a shareholder
intending to present a proposal to be included in the Company's proxy statement
for the Company's 1999 Annual Meeting of Shareholders must deliver a proposal
in writing to the Company's principal executive offices no later than February
4, 1999.
By Order Of The Board of Directors
SCOTT LODIN, Secretary
Fort Lauderdale, Florida
June 5, 1998
13
<PAGE>
ANDRX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JUNE 29, 1998
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 27, 1998
at the Annual Meeting of Shareholders to be held on June 29, 1998 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.
Elliot F. Hahn, Ph.D. and Rep. Elaine Bloom
(INSTRUCTIONS: To withhold authority for any individual nominees, write that
nominee's name in the space below.)
- --------------------------------------------------------------------------------
Proposal 2. To ratify the selection of Arthur Andersen LLP as independent
certified public accountants for the Company for the fiscal year ending December
31, 1998.
[ ] 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: _______________________________, 1998
____________________________________________
(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.
