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 1, 1999
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 1, 1999 for the following purposes:
1. To elect two directors of the Company to serve until 2002;
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,
1999; 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 23,
1999 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
May 7, 1999
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 1, 1999
---------------------
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 1, 1999, 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 May 7, 1999. 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 2002;
2. To ratify the appointment of Arthur Andersen LLP as the
Company's independent certified public accountants for the
fiscal year ending December 31, 1999; 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 23, 1999
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 15,264,582 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, 1999, 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.
On May 3, 1999, the Board of Directors of the Company declared a
2-for-1 stock split in the form of a stock dividend to be distributed on or
about June 1, 1999 to shareholders of record on May 17, 1999. Information with
respect to number of shares and per share data in this Proxy Statement does not
give effect to this stock split.
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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>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OUTSTANDING
- ---------------------------------------------------- --------------------------- --------------------
<S> <C> <C>
Alan P. Cohen(3)......................................... 1,628,964 10.7%
Chih-Ming J. Chen, Ph.D.(4).............................. 1,692,514 10.9
Elliot F. Hahn, Ph.D.(5)................................. 582,945 3.8
Randy Glover(6).......................................... 37,500 *
Scott Lodin(7)........................................... 55,500 *
Elaine Bloom(8).......................................... 28,275 *
Irwin C. Gerson(9)....................................... 22,375 *
Michael A. Schwartz, Ph.D.(10)........................... 19,875 *
Melvin Sharoky, M.D.(11)................................. 48,080 *
Watson Pharmaceuticals, Inc.(12)
311 Bonnie Circle
Corona, CA 91720......................................... 3,028,848 19.4
All directors and executive officers
as a group (10 persons)(13)............................ 4,138,828 26.4
</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 1,568,347 shares held by family limited partnerships.
(4) Includes 1,457,693 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.
(5) Represents 582,945 shares of Common Stock held in trust for the benefit
of Dr. Hahn.
(6) Includes 31,500 shares of Common Stock issuable upon exercise of stock
options.
(7) Represents 55,500 shares of Common Stock issuable upon the exercise of
stock options.
(8) Includes 19,875 shares of Common Stock issuable upon exercise of stock
options.
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<PAGE>
(9) Represents 22,375 shares of Common Stock issuable upon exercise of
stock options.
(10) Represents 19,875 shares of Common Stock issuable upon exercise of
stock options.
(11) Includes 22,250 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.
(12) Includes 337,079 shares of Common Stock issuable upon the exercise of
warrants to purchase Common Stock held by Watson.
(13) Includes the shares of Common Stock described in notes (3) through (6),
(8) and (11); 389,875 shares of Common Stock issuable upon the exercise
of the stock options and warrants described in notes (4) and (6)
through (11); 22,000 shares of Common Stock issuable upon the exercise
of stock options held by Angelo C. Malahias, the Company's Vice
President and Chief Financial Officer; and 800 shares held by Angelo C.
Malahias as custodian for his minor children.
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. 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. Dr. Elliot F.
Hahn and Representative Elaine Bloom hold office until the 2001 Annual Meeting.
At the Annual Meeting, two directors will be elected by the
shareholders to serve until the Annual Meeting to be held in 2002 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>
Alan P. Cohen (1)........................... 44 Co-Chairman of the Board, 1992
Chief Executive Officer and
Director
Melvin Sharoky, M.D. (2).................... 48 Executive Director and Director 1995
</TABLE>
- --------------
(1) Member of Executive Committee
(2) Member of Audit Committee
ALAN P. COHEN is Co-Chairman of the Board, Chief Executive Officer and
a director of the Company, which he founded in August 1992. Mr. Cohen has also
served as a director of Cybear, Inc., the Company's Internet-based healthcare
communications technology subsidiary ("Cybear"), since February 1997. From
February 1997, through August 1998, Mr. Cohen served as Chairman of the Board of
Cybear. In 1984, Mr. Cohen founded Best Generics, Inc., a generic drug
distribution firm ("Best"), which
4
<PAGE>
was sold to IVAX Corporation ("IVAX") in 1988. Mr. Cohen served as President of
Best from April 1989 until June 1990. He is a graduate of the University of
Florida and is a registered pharmacist. Alan P. Cohen and certain members of his
family controlled 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. MELVIN SHAROKY, a director of the Company since November 1995,
joined the Company as Executive Director on March 1, 1999. Dr. Sharoky has also
served as a director of Cybear since April 1999. In addition, Dr. Sharoky is
President of Somerset Pharmaceuticals, Inc., which is 50% owned by Watson
Pharmaceuticals, Inc. ("Watson"). 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 Pharmaceuticals, Inc., which was
acquired by Watson in July 1995.
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 on the Board of Directors.
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>
Chih-Ming J. Chen, Ph.D.(1)............ 47 Co-Chairman, Chief Scientific 1992 2000
Officer and Director
Elliot F. Hahn, Ph.D.(1)............... 54 President and Director 1993 2001
Rep. Elaine Bloom(2)................... 61 Director 1993 2001
Irwin C. Gerson(3)..................... 69 Director 1993 2000
Michael A. Schwartz, Ph.D.(3).......... 68 Director 1993 2000
</TABLE>
- -------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
DR. CHIH-MING J. CHEN has served as the Company's Co-Chairman since
November 1998. Dr. Chen has also been the Company's Chief Scientific Officer 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.
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, 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
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<PAGE>
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 November
1993, 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.
IRWIN C. GERSON, a director of the Company since November 1993, was
formerly 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.
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, 1998 ("Fiscal 1998"), 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 1998, the Board of Directors held four formal meetings and took
actions by written consent on one occasion. During 1998, 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 Melvin Sharoky, M.D. The duties and responsibilities of the Audit
Committee include (a) recommending to the
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<PAGE>
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 1998.
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 four
occasions during Fiscal 1998 and took action by written consent on five
occasions.
The Executive Committee is presently comprised of Alan P. Cohen, Dr.
Elliot F. Hahn and Dr. Chih-Ming J. Chen. 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 1998.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal year ended
December 31, 1996 and 1997 and Fiscal 1998, 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
$100,000 during Fiscal 1998 (together with the CEO, collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------------------- ------------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(1)
- ----------------------------------- --------- ------------ ------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Alan P. Cohen, Co-Chairman 1998 241,200 50,000 17,300(2) 25,000
and CEO 1997 188,400 55,000 13,300(2) --
1996 141,900 50,000 18,000(2) --
Chih-Ming J. Chen, Ph.D. 1998 241,200 50,000 31,900(2)(3) 25,000
Co-Chairman and Chief Scientific 1997 188,400 50,000 15,900(2) --
Officer 1996 141,900 45,000 19,400(2) --
Elliot F. Hahn, Ph.D., President 1998 241,200 50,000 18,800(2) 25,000
1997 188,400 50,000 14,700(2) --
1996 141,900 45,000 19,900(2) --
Randy Glover, Vice President 1998 210,000 15,000 86,800(5) 3,000
of Operations(4) 1997 171,700 38,000 265,000(6) 4,000
1996 108,000 37,800 -- 50,000
Scott Lodin, Vice President, 1998 178,000 40,000 12,200(7) 6,000
General Counsel and Secretary 1997 148,200 30,000 4,000 7,500
1996 136,600 25,000 5,000 7,500
</TABLE>
- -----------------
(1) Represents options to purchase shares of Common Stock granted to the Named
Executive Officer under the Plan.
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<PAGE>
2) Represents an automobile allowance, premiums for a $1 million life
insurance policy (the beneficiary of which is designated by the Named
Executive Officer) other than Dr. Hahn, 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) Includes compensation of $11,700 for taxes resulting 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 3,000 shares of Common Stock
with an exercise price of $11.00 per share and group term life insurance
benefits.
(6) Represents exercise of options to purchase 11,000 shares of Common Stock
with an exercise price of $11.00 per share.
(7) Represents reimbursement of premiums and medical and dental insurance
policies and group term life insurance benefits. For 1998 amount also
includes an automobile allowance.
COMPENSATION OF DIRECTORS
Effective June 1, 1999, non-employee directors of the Company will
receive cash compensation for their services. Non-employee directors will
receive $5,000 for each of the regularly scheduled quarterly meetings they
attend and an undetermined lesser amount for other participation (including
attendance at committee meetings or other special meetings of the Board). Prior
to that, on June 1 of each year non-employee directors of the Company were
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
7,000 33.88 June 1, 2008
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
7,000 33.88 June 1, 2008
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
7,000 33.88 June 1, 2008
8
<PAGE>
Melvin Sharoky, M.D.(1)...... 2,500 $ 11.00 November 11, 2005
5,750 12.00 May 31, 2006
7,000 23.00 May 31, 2007
7,000 33.88 June 1, 2008
</TABLE>
- ---------------------
(1) Dr. Sharoky joined the Company as Executive Director on March 1, 1999.
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.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during Fiscal 1998 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE
GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%(1) 10%(1)
---------------- ------------------ -------------- ------------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan P. Cohen.............. 25,000 5.1 27.375 September 14, 2008 $ 430,400 $1,090,700
Chih-Ming J. Chen, Ph.D.... 25,000 5.1 27.375 September 14, 2008 430,400 1,090,700
Elliot F. Hahn, Ph.D....... 25,000 5.1 27.375 September 14, 2008 430,400 1,090,700
Randy Glover............... 3,000 0.6 33.50 March 2, 2008 63,200 160,200
Scott Lodin................ 6,000 1.2 33.50 March 2, 2008 126,400 320,400
</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.
9
<PAGE>
STOCK OPTIONS HELD AT END OF FISCAL 1998
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, 1998.
<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>
Alan P. Cohen................ -- -- -- 25,000 $ -- $ 596,900
Chih-Ming J. Chen, Ph.D...... -- -- 200,000 25,000 8,950,000 596,900
Elliot F. Hahn, Ph.D......... -- -- -- 25,000 -- 596,900
Randy Glover................. 3,000 $84,000 18,000 25,000 700,500 914,800
Scott Lodin.................. -- -- 45,000 16,000 1,906,300 472,100
</TABLE>
- -----------------
(1) Based on a fair market value of $51.25 per share at December 31, 1998.
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 attempt to establish
10
<PAGE>
performance objectives for members of senior management and/or the Company, and
later to compare such objectives with the results obtained, 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 1998 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 1998, 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.
/s/ Michael A. Schwartz, Ph.D.
/s/ Irwin C. Gerson
<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, 1998.
COMPARISON OF 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, DECEMBER 31,
1996 1996 1997 1998
----------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Andrx................ $ 100 $ 134.42 $ 285.42 $ 427.08
SIC Code Index....... 100 113.21 164.49 233.31
Nasdaq Market Index.. 100 102.89 125.86 177.52
</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 DR. CHEN
The Company is party to a royalty agreement with Dr. Chen, which
provides for royalties to Dr. Chen upon the sale of certain products, including
Cardizem(R) CD, for which the Company received final approval in July 1998 from
the FDA. In August 1998, the Company amended that royalty agreement to account
for the various contingencies presented by the Stipulation and Agreement that
the Company entered into with Hoechst Marion Roussel, Inc. and Carderm Capital
L.P. in connection with their pending patent infringement litigation concerning
the Company's bioequivalent version of Cardizem(R) CD. Royalties paid to Dr.
Chen of $637,000 for Fiscal 1998 were based on 3.33% of the Stipulation fees.
Such royalties are included in "selling, general, and administrative expenses"
in the consolidated statement of operations. The Company is no longer attempting
to develop the other product included in that agreement as the referenced brand
product is no longer being marketed.
TRANSACTIONS WITH WATSON
The Company is a partner in ANCIRC Pharmaceuticals ("ANCIRC"), a joint
venture with 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 their terms, converted into 674,160
shares of Common Stock on April 30, 1995 and (ii) a Warrant to purchase up to
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
$25.50 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 Watson's
Warrant, which rights became exercisable commencing June 1997.
12
<PAGE>
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 1998. 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, 1999. 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 2000 Annual Meeting of Shareholders must deliver a proposal in
writing to the Company's principal executive office no later than January 8,
2000.
By Order of the Board of Directors
SCOTT LODIN, Secretary
Fort Lauderdale, Florida
May 7, 1999
13
<PAGE>
ANDRX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JUNE 1, 1999
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 23, 1999
at the Annual Meeting of Shareholders to be held on June 1, 1999 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.
Alan P. Cohen and Melvin Sharoky, M.D.
(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, 1999.
[ ] 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)
14
<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: ______________________, 1999
-----------------------------------
(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.
