SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
FOREST LABORATORIES,
INC.
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(Name of Registrant as Specified In Its Charter)
FOREST LABORATORIES,
INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(1) Set forth the amount on which the filing fee is calculated and
state how it was determined
FOREST LABORATORIES, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of the Stockholders of Forest Laboratories, Inc. (the
"Company") will be held on August 14, 2000 at 10:00 a.m., at Chase Manhattan
Corporate Headquarters, 270 Park Avenue, New York, New York for the following
purposes:
1. To elect a Board of seven Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified (Proposal 1);
2. To consider and vote upon a proposal to ratify the adoption by the
Board of Directors of the Company's 2000 Stock Option Plan (Proposal 2);
3. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending March 31, 2001 (Proposal 3);
and
4. To transact such other business as may properly be brought before
the Meeting.
Stockholders of record at the close of business on June 23, 2000 shall be
entitled to notice of and to vote at the Meeting. A copy of the Annual Report
for the fiscal year ended March 31, 2000 is being mailed to stockholders
simultaneously herewith.
YOU ARE INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO BE
PRESENT, KINDLY FILL IN AND SIGN THE ENCLOSED PROXY EXACTLY AS YOUR NAME APPEARS
ON YOUR STOCK CERTIFICATES, AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
IN ORDER THAT YOUR VOTE CAN BE RECORDED. THIS MAY SAVE THE COMPANY THE EXPENSE
OF FURTHER PROXY SOLICITATION.
By Order of the Board of Directors
WILLIAM J. CANDEE, III,
SECRETARY
June 30, 2000
New York, New York
FOREST LABORATORIES, INC.
909 THIRD AVENUE
NEW YORK, NEW YORK 10022
PROXY STATEMENT
Your proxy is solicited by the Board of Directors of the Company for use at
the Annual Meeting (the "Meeting") of Stockholders to be held on Monday,
August 14, 2000, or any adjournment or adjournments thereof, for the purposes
set forth in the attached Notice of Meeting. This Proxy Statement and form of
proxy are being mailed to stockholders on or about June 30, 2000.
Any stockholder giving a proxy may revoke it at any time prior to its use at
the Meeting by giving written notice of revocation to the Secretary of the
Company; mere attendance at the Meeting, without such notice, will not revoke
the proxy. Properly executed proxies will be voted in the manner directed by a
stockholder and, if no direction is made, will be voted for the election of each
of the seven nominees for election as directors and in favor of the other
proposals described herein.
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those set forth in this Proxy Statement, nor does the Board
of Directors know of any other matters which may come before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote it in accordance
with their judgment.
As of June 23, 2000, the record date fixed for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting, there were
outstanding 87,202,809 shares of the Company's common stock, par value $.10 per
share (the "Common Stock") which is the only outstanding class of voting
securities of the Company. Each outstanding share of Common Stock is entitled to
one vote on each matter to be voted upon.
The Company's by-laws provide that stockholders holding a majority of the
outstanding shares of Common Stock shall constitute a quorum at meetings of the
stockholders. Shares represented in person or by proxy as to any matter will be
counted toward the fulfillment of a quorum. The affirmative vote of a plurality
of the votes cast in person or by proxy is necessary for the election of
directors. The affirmative vote of a majority of the shares of Common Stock
present in person or by proxy is necessary for the approval of Proposals 2 and
3.
Votes at the Annual Meeting will be tabulated by two independent inspectors
of election appointed by the Company or the Company's transfer agent. As the
affirmative vote of a plurality of votes cast is required for the election of
directors, abstentions and "broker non-votes" will have no effect on the outcome
of such election. As the affirmative vote of a majority of shares of Common
Stock present in person or represented by proxy is necessary for the approval of
Proposals 2 and 3, an abstention will have the same effect as a negative vote,
but "broker non-votes" will have no effect on the outcome of the vote.
Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from beneficial owners. If
specific instructions are not received, brokers may vote those shares in their
discretion, depending on the type of proposal involved. The Company believes
that, in accordance with New York Stock Exchange rules applicable to such voting
by brokers, brokers will have discretionary authority to vote with respect to
any shares as to which no instructions are received from beneficial owners with
respect to the election of directors and Proposal 3, and will not have
discretionary authority with respect to Proposal 2. Shares as to which brokers
have not exercised such discretionary authority or received instructions from
beneficial owners are considered "broker non-votes."
Only stockholders of record at the close of business on June 23, 2000 will
be entitled to vote at the Meeting or any adjournment or adjournments thereof.
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IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE STOCKHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. THEREFORE, EVEN IF YOU INTEND TO BE
PRESENT AT THE MEETING, YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY
TO INSURE THAT YOUR STOCK WILL BE REPRESENTED. IF YOU ARE PRESENT AT THE MEETING
AND DESIRE TO DO SO, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON BY GIVING
WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. PLEASE RETURN YOUR EXECUTED
PROXY PROMPTLY.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of June 23, 2000 the name, address and
holdings as to each person (including any "group" as defined in Section 13(d) of
the Securities Exchange Act of 1934) known by the Company to be the beneficial
owner of more than five percent of the Common Stock.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ---------- --------
AMVESCAP PLC 4,694,300(1) 5.38%
1315 Peachtree Street N.E.
Atlanta, Georgia 30309
Capital Group International, Inc. 4,519,900(2) 5.18%
11100 Santa Monica Boulevard
Los Angeles, California 90025
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(1) Based upon information set forth in an Information Statement on
Schedule 13G filed by AMVESCAP PLC with the SEC.
(2) Based upon information set forth in an Information Statement on
Schedule 13G filed by Capital Group International, Inc. with the SEC.
2
PROPOSAL 1
ELECTION OF DIRECTORS
The by-laws of the Company provide that there shall be three to eleven
directors, with such number to be fixed by the Board of Directors. Effective at
the time and for the purposes of the Meeting, the number of directors of the
Company, as fixed by the Board of Directors pursuant to the by-laws of the
Company, is seven.
Unless otherwise specified, each proxy received will be voted for the
election as directors of the seven nominees named below (each of whom was
elected at the 1999 Annual Meeting of Stockholders) to serve until the 2001
Annual Meeting of Stockholders and until his successor shall be duly elected and
qualified. Each of the nominees has consented to be named a nominee in the Proxy
Statement and to serve as a director if elected. Should any nominee become
unable or unwilling to accept a nomination or election, the persons named in the
enclosed proxy will vote for the election of a nominee designated by the Board
of Directors or will vote for such lesser number of directors as may be
prescribed by the Board of Directors in accordance with the Company's by-laws.
The following persons have been nominated as directors:
HAS BEEN
NAME AND PRINCIPAL A DIRECTOR
OCCUPATION OR POSITION AGE SINCE
- ---------------------- -------- ----------
Howard Solomon 72 1964
Chairman of the Board and Chief Executive Officer. Mr.
Solomon has served as Chief Executive Officer of the
Company since 1977.
William J. Candee, III 73 1959
Of Counsel, Rivkin, Radler & Kremer, Attorneys at Law,
where Mr. Candee had been a partner since May 1989.
George S. Cohan 76 1977
President, The George Cohan Company, Inc. consultants,
since June 1989. For more than five years prior thereto,
Mr. Cohan served as President of Doremus & Co., Inc. and
its predecessors, an advertising and public relations
firm.
Dan L. Goldwasser 60 1977
Partner, Vedder, Price, Kaufman, Kammholz & Day, Attorneys
at Law, since May 1992.
Kenneth E. Goodman 52 1998
President and Chief Operating Officer of the Company since
December 1998. For eighteen years prior thereto, Mr.
Goodman served as Vice President-Finance and Chief
Financial Officer of the Company and in addition served as
Executive Vice President-Operations since February 1998.
Lester B. Salans, M.D. 64 1998
Clinical Professor and member of the Clinical Attending
Staff Internal Medicine, Mount Sinai Medical School and
member of the Adjunct faculty, Rockefeller University. Dr.
Salans was formerly Vice President-Academic and Scientific
Affairs and Vice President-Preclinical Research at Sandoz
Pharmaceutical Corporation.
Phillip M. Satow 59 1998
Independent Consultant. Prior to his resignation in
December 1998, Mr. Satow served as Executive Vice
President of the Company since February 1998. Prior
thereto, Mr. Satow served as Executive Vice
President-Marketing since 1985.
3
Certain information regarding the beneficial ownership of Common Stock by
each such director and nominee is set forth below at "Security Ownership of
Management."
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION WITH THE COMPANY
- ---- -------- ------------------------------------------
Howard Solomon 72 Chairman of the Board and Chief Executive
Officer
Kenneth E. Goodman 52 President and Chief Operating Officer
Lawrence S. Olanoff, M.D., Ph.D. 48 Executive Vice President-Scientific
Affairs
Elaine Hochberg 43 Senior Vice President-Marketing
John E. Eggers 38 Vice President-Finance and Chief Financial
Officer
See the table of nominees for election as directors for biographical data
with respect to Messrs. Solomon and Goodman.
Dr. Lawrence S. Olanoff was elected Executive Vice President-Scientific
Affairs of the Company in December 1998. From October 1995 through
February 1998, Dr. Olanoff served as Vice President-Scientific Affairs and
served as Senior Vice President-Scientific Affairs from and after
February 1998. From 1993 until he joined the Company in 1995, Dr. Olanoff was
Senior Vice President-Clinical Research and Development at Sandoz Pharmaceutical
Corporation. For nine years prior thereto, Dr. Olanoff was employed by The
Upjohn Company, where his last position was Corporate Vice President-Clinical
Development and Medical Affairs.
On December 17, 1999, Elaine Hochberg was elected Senior Vice
President-Marketing. From February 1998 through December 1999, Ms. Hochberg
served as Vice President-Marketing of the Company. From June 1997 through
February 1998, Ms. Hochberg served as Vice President-Marketing of Forest
Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company. Prior to
joining the Company in 1997, Ms. Hochberg was Assistant Vice President-Marketing
at Wyeth-Lederle Laboratories.
John E. Eggers was elected Vice President-Finance and Chief Financial
Officer of the Company effective December 1998. From February 1998 until
December 1998, Mr. Eggers served as Vice President-Treasurer. For five years
prior thereto, Mr. Eggers was the Director of Finance at the Company.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of Common
Stock of the Company as of June 23, 2000 of (i) the Chief Executive Officer and
each of the Company's other executive officers at March 31, 2000, (ii) each
director and nominee to serve as a director and (iii) all directors and
executive officers of the Company as a group:
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------- -------------------- ----------
Howard Solomon 3,720,468(1) 4.27%
William J. Candee, III 35,416(2) *
George S. Cohan 32,600(3) *
Dan L. Goldwasser 39,340(4) *
Kenneth E. Goodman 977,950(5) 1.12%
Lester B. Salans, M.D. 25,000(6) *
Phillip M. Satow 35,768(7) *
Dr. Lawrence S. Olanoff 64,627(8) *
Elaine Hochberg 19,636(9) *
John E. Eggers 22,000(10) *
All directors and executive officers as a group 4,972,805(11) 5.70%
- ------------------------
* less than 1%
(1) Includes 1,450,000 shares subject to options exercisable within 60 days of
the date hereof.
(2) Includes 32,000 shares subject to options exercisable within 60 days of the
date hereof.
(3) Includes 28,000 shares subject to options exercisable within 60 days of the
date hereof.
(4) Includes 32,000 shares subject to options exercisable within 60 days of the
date hereof. Does not include 1,300 shares owned by Mr. Goldwasser's wife as
to which shares Mr. Goldwasser disclaims beneficial ownership.
(5) Includes 746,980 shares subject to options exercisable within 60 days of the
date hereof.
(6) Includes 25,000 shares subject to options exercisable within 60 days of the
date hereof. Does not include 800 shares owned by Dr. Salans' wife as to
which shares Dr. Salans disclaims beneficial ownership.
(7) Includes 2,000 shares subject to options exercisable within 60 days of the
date hereof. Also includes 6,890 shares held in trusts, of which Mr. Satow
is a trustee, for the benefit of Mr. Satow's children.
(8) Includes 50,250 shares subject to options exercisable within 60 days of the
date hereof.
(9) Includes 15,000 shares subject to options exercisable within 60 days of the
date hereof.
(10) Includes 22,000 shares subject to options exercisable within 60 days of the
date hereof.
(11) Includes 2,403,230 shares subject to options exercisable within 60 days of
the date hereof.
5
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require that the individuals and groups listed in
the preceding table must report to the SEC and the Company, within certain
periods, how many shares of the Company's equity securities they own and if they
conducted certain transfers in such securities. Based upon information furnished
by these stockholders, the Company believes that all required filings for the
most recent fiscal year and prior fiscal years have been made.
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended March 31, 2000,
1999 and 1998, compensation paid by the Company to the Chief Executive Officer
and to each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer during fiscal year 2000 who were
serving at the end of such fiscal year, including salary, bonuses, stock options
and certain other compensation:
6
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS(1)
--------------------- ------------------------
ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(2)
- --------------------------- -------- -------- -------- --------- ------------
Howard Solomon, 2000 731,271 200,000 300,000 23,499
Chairman and Chief 1999 667,521 100,000 150,000 29,191
Executive Officer 1998 621,271 60,000 200,000 28,987
Kenneth E. Goodman, 2000 488,014 150,000 200,000 17,841
President and Chief 1999 444,264 75,000 75,000 22,936
Operating Officer 1998 413,014 50,000 100,000 18,780
Dr. Lawrence S. Olanoff, 2000 451,247 100,000 100,000 15,345
Executive Vice President- 1999 413,750 75,000 75,000 20,109
Scientific Affairs 1998 382,500 50,000 40,000 17,903
Elaine Hochberg, 2000 291,500 70,000 75,000 17,792
Senior Vice President- 1999 257,000 40,000 20,000 18,929
Marketing 1998(3) 187,615 20,000 80,000 3,887
John E. Eggers, Vice President-Finance 2000 186,253 25,000 25,000 16,783
and Chief Financial Officer 1999(4) 45,001 20,000 -- --
- ------------------------
(1) The Company has no long-term incentive compensation plan other than its
several Employee Stock Option Plans described herein and various
individually granted options. The Company does not award stock appreciation
rights, restricted stock awards or long term incentive plan pay-outs.
(2) Consists of group term life insurance and compensation credited to such
executive officers pursuant to the Forest Laboratories, Inc. Savings and
Profit Sharing Plan (the "Plan"), which covers employees of the Company and
certain of its subsidiaries. Under the Plan, all regular employees of the
Company and certain subsidiaries who are employed for at least six months
prior to the Plan year end become participants of the Plan. Contributions,
which are made at the discretion of the Company's Board of Directors, may
not exceed 25 percent of the individual Plan participant's gross salary (up
to a maximum salary of $170,000), including allocated forfeitures for the
Plan year. Plan participants vest over a period of 3 to 7 years of credited
service. The Company did not pay or provide other forms of annual
compensation (such as perquisites) to any of the named executive officers
having a value exceeding the lesser of $50,000 or 10% of the total annual
salary and bonus reported for such officers.
(3) Reflects compensation from the date Ms. Hochberg joined the Company.
(4) Reflects compensation from the date Mr. Eggers was appointed as an Executive
Officer of the Company.
OPTIONS GRANTED IN FISCAL 2000
The following information is furnished for the fiscal year ended March 31,
2000 with respect to the Company's Chief Executive Officer and the other
executive officers of the Company named in the Compensation Table above, for
stock options granted during such fiscal year. Stock options were granted
without tandem stock appreciation rights.
7
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK PRICE APPRECIATION FOR
OPTIONS OPTIONS GRANTED OPTION TERM($)(1)
GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------------
NAME (#) DURING FISCAL YEAR PER SHARE ($/S) DATE 5% 10%
- ---- -------- ------------------ --------------- ---------- ------------- -------------
Howard Solomon 300,000 18.12 52.5938 12/17/09 9,922,787 25,146,292
Kenneth E. Goodman 200,000 12.08 52.5938 12/17/09 6,615,192 16,764,194
Dr. Lawrence S. Olanoff 100,000 6.04 52.5938 12/17/09 3,307,596 8,382,097
Elaine Hochberg 75,000 4.53 52.5938 12/17/09 2,480,697 6,286,573
John E. Eggers 25,000 1.51 52.5938 12/17/09 826,899 2,095,524
- ------------------------
(1) Represents the potential value of the options granted at assumed 5% and 10%
rates of compounded annual stock price appreciation from the date of grant
of such options. The increase in shareholders' equity to all shareholders of
the Company measured over the same period at the same assumed rates of
appreciation and based upon the market price for the Common Stock on the
date such options were granted would be $2,799,900,569 and $7,095,497,768,
respectively.
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR END OPTION VALUES
The following information is furnished for the fiscal year ended March 31,
2000 with respect to the Company's Chief Executive Officer and the other
executive officers of the Company named in the Compensation Table above, for
stock option exercises during such fiscal year.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
SHARES OPTIONS AT 3/31/00 (#) MONEY OPTIONS AT 3/31/00 ($)
ACQUIRED VALUE ----------------------------- ------------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
- ---- -------------- ----------- ----------- --------------- ------------ ---------------
Howard Solomon 400,000 15,908,305 3,150,000 300,000 204,757,785 8,840,610
Kenneth E. Goodman 200,000 8,149,372 975,000 200,000 60,416,393 5,893,740
Dr. Lawrence S. Olanoff -- -- 50,250 254,750 2,813,177 10,829,465
Elaine Hochberg 12,000 601,211 3,000 148,000 101,156 6,171,370
John E. Eggers -- -- 21,200 53,800 1,337,450 2,426,018
BENEFITS AGREEMENTS
On December 1, 1989 the Board of Directors adopted a policy of granting
certain medical insurance benefits to senior corporate executive officers and
their spouses upon the completion of 10 years of service by such senior
officers. The benefit would be provided to such executives and their spouses for
their lifetimes following the termination of such executive's employment with
the Company, and would be equivalent to the medical insurance benefits provided
to such executives as of the date of their termination or as of December 1,
1989, if more favorable. The benefit need not be provided to the extent and for
any time that the executive obtained comparable insurance from a subsequent
employer. The Company has entered into formal written benefits agreements with
each of Messrs. Solomon, Goodman and Satow (who retired in December 1998)
granting the 10 year service benefit.
Effective March 31, 1994, the Company entered into "split dollar" life
insurance benefit agreements with each of Messrs. Solomon, Satow and Goodman.
Each of these agreements provides that the Company will pay the premiums on a
life insurance policy owned by and for the benefit of the executive. Upon the
death of the executive (or other realization by the executive upon the principal
amount of the policy),
8
proceeds of the life insurance policy will be applied to repay the Company for
all premiums paid on behalf of the executive. The Company is obligated to
continue to pay premiums under these agreements until the covered life insurance
policies are paid in full, notwithstanding the termination of the executive's
employment with the Company. The Company is further obligated to pay all such
premiums in a lump sum in the event the Company undergoes a "change in control."
The Company has entered into employment agreements with several key
employees, including each of Messrs. Solomon, Goodman, Dr. Olanoff, Mr. Eggers
and Ms. Hochberg. Each of these agreements becomes effective only upon the
occurrence of a "change in control" and provides that the executive is entitled
to salary, bonus and benefits for a three year period following a "change in
control" of the Company if the executive's employment terminates during such
period without cause or for good reason. Subject to certain exceptions, a
"change in control" is (i) an acquisition of 20% or more of the Common Stock or
voting securities of the Company by a person or group not acquiring their shares
directly from the Company, (ii) a change in the majority of the current Board of
Directors or their designated successors not consented to by such current Board
of Directors or designated successors, and (iii) a liquidation or dissolution of
the Company or merger, consolidation or sale of all or substantially all of the
Company's assets which involves a greater than 50% change in the shareholders of
the Company or the replacement of a majority of the current Board of Directors
or their designated successors.
STOCK OPTIONS
The Company's 1990 and 1994 Employee Stock Option Plan and the 1998 Stock
Option Plan (the "Plans") provide that options may be granted to employees,
including executive officers, to purchase shares of Common Stock at a price per
share fixed by the Board of Directors, provided that, in the case of Incentive
Stock Options ("ISO's"), as defined by Section 422 of the Internal Revenue Code
of 1986 (the "Code"), such price may not be less than fair market value on the
date of the option grant. All employees of the Company and its subsidiaries are
eligible to receive options under the Plans.
The Plans provide that the Board of Directors may determine the employees to
whom options are to be granted and the number of shares subject to each option.
The purchase price for shares must be paid in cash or by the tender of shares of
Common Stock having a fair market value, as determined by the Board, equal to
the option exercise price.
The non-employee directors of the Company participate in the 1998 Stock
Option Plan (the "1998 Plan"). Under the 1998 Plan an initial grant of options
covering 14,000 shares of Common Stock are automatically granted to persons who
become non-employee directors from and after the adoption of the 1998 Plan.
Twenty-five percent of the foregoing options become exercisable on the date of
grant and on each anniversary of such date until all such options are
exercisable.
The 1998 Plan further provides for the automatic annual grant to each of the
Company's non-employee directors of options to purchase 2,000 shares of Common
Stock on the date of their annual election or re-election by the Company's
stockholders. Each such option grant is at an exercise price equal to the
average price of the Common Stock on the New York Stock Exchange on the date of
grant and become exercisable six months after the date of option grant. All
options granted under the 1998 Plan to non-employee directors have a term of
10 years from the date of grant (but in no event more than three months
following the optionee's ceasing to serve as a member of the Company's Board of
Directors). Upon shareholder approval, non-employee directors will participate
in the 2000 Stock Option Plan on the same basis as previously provided by the
1998 Plan.
DIRECTORS' COMPENSATION
In addition to automatic annual option grants under the 1998 Plan, each
non-employee director of the Company received $24,375 for his services as
director during the fiscal year ended March 31, 2000, except for Mr. Candee who
received $27,500 for his services as director and the Company's secretary and
Chairman of the Audit Committee.
9
COMMITTEES; BOARD MEETINGS
The Company has an audit committee composed of Messrs. Candee and
Goldwasser. During the fiscal year ended March 31, 2000, the audit committee met
on three occasions for the purpose of (i) approving the selection of the
Company's independent auditors; (ii) reviewing the arrangements and scope of the
audit; and (iii) reviewing the Company's internal accounting procedures and
controls and recommendations of the Company's auditors.
The Company has a compensation and stock option committee composed of
Messrs. Candee, Cohan, Goldwasser and Dr. Salans, each of whom are non-employee
directors of the Company. During the fiscal year ended March 31, 2000, the
compensation committee met on one occasion to make recommendations concerning
salary and bonus for the Company's executive officers for the 2000 year and to
make recommendations as to the grant of stock options to such executive
officers.
The Company does not have a nominating committee.
The Board of Directors of the Company held four meetings during the fiscal
year ended March 31, 2000 and no incumbent director attended fewer than 75% of
the aggregate of such meetings and the number of meetings of each committee of
which he is a member.
REPORT ON EXECUTIVE COMPENSATION
BY THE BOARD OF DIRECTORS
AND THE COMPENSATION COMMITTEE
COMPENSATION POLICY
The Company's Board of Directors (the "Board") is responsible for setting
and administering the policies which govern annual executive salaries, raises
and bonuses and the award of stock options (in the case of options to be granted
under the Company's Stock Option Plans, such responsibility is limited to the
recommendation of awards to the Company's Stock Option Committee). The Board is
currently composed of seven members, five of whom are non-employee directors and
two of whom, Messrs. Solomon and Goodman, are, respectively, the Chairman and
Chief Executive Officer, and President and Chief Operating Officer, of the
Company. In addition, four of the non-employee directors, Messrs. Goldwasser,
Candee, Cohan and Dr. Salans, serve as a Compensation Committee and Stock Option
Committee which recommends salary increases and bonuses to the Board and
administers the granting of options under the Company's Stock Option Plans,
including the award of options to the Company's executive officers.
The policy of the Board is to provide compensation to the Chief Executive
Officer and the Company's other executive officers reflecting the contribution
of such executives to the Company's growth in sales and earnings, the
implementation of strategic plans consistent with the long-term growth
objectives of the Company and the enhancement of shareholder value as reflected
in the growth of the Company's market capitalization. Contributions to specific
Company objectives, including the development and acquisition of new product
opportunities, the progress of clinical and other studies and development
activities required to bring new ethical pharmaceutical products to market and
the successful marketing of the Company's principal products are evaluated in
setting compensation policy. Executive compensation decisions have traditionally
been made on a calendar year basis.
Long-term incentive compensation policy consists exclusively of the award of
stock options under the Company's Stock Option Plans and individual option
grants, which serve to identify the reward for executive performance with
increases in value created for shareholders.
COMPANY PERFORMANCE AND CEO COMPENSATION
Executive compensation for the fiscal year ended March 31, 2000 consisted of
base salary, an annual bonus and the award of stock options by the Stock Option
Committee as indicated at "Options Granted in Fiscal 2000." The Board met in
December 1999 to review executive compensation for the calendar year commencing
January 1, 2000. The Board reviewed data relating to operating and financial
goals and
10
achievements and specifically relating to the continuing growth of Celexa-TM-
(citalopram HBr), the Company's selective serotonin reuptake inhibitor ("SSRI")
for the treatment of depression, the growth of the Company's sales,
manufacturing and administrative infrastructures in light of the growth of
Celexa, growth in sales of Tiazac-Registered Trademark-, the Company's
once-daily diltiazem for the treatment of hypertension and angina, the launch of
Infasurf-Registered Trademark-, the Company's lung surfactant for neonatal
respiratory distress syndrome, and the conclusion of additional clinical studies
for Celexa which are expected to enhance the marketing of the product, a survey
of compensation of biopharmaceutical executives prepared by an executive
compensation consulting firm, the recent history of compensation granted by the
Board to the Company's highest paid executive officers, the compensation policy
of the Board and the rules of the SEC with respect to disclosure of the
compensation and compensation policies applicable to executive officers of the
Company.
The Compensation Committee and the Board noted the achievement of the
following: continuing strong sales growth of Celexa, the expansion of the
Company's sales, manufacturing and administrative facilities in light of the
growth of Celexa and the rapid expansion of the Company's salesforce in light of
the anticipated termination of the Company's co-promotion arrangement with the
Parke-Davis division of the Warner-Lambert Company, the progress of the
Company's development program for the S-enantiomer version of Celexa and other
research and development programs and the status of potential future product
opportunities.
The Compensation Committee and the Board considered several key factors in
determining the executive compensation of the highest paid officers, including,
the accomplishment of strategic objectives during the past year described above,
and the fact that the compensation of the Company's executive officers was below
compensation paid to officers in other pharmaceutical companies, based on a
survey and report prepared by an executive compensation consulting firm and
presented to the Board in connection with the year's compensation review.
Accordingly, the Board approved an increase in base compensation and granted
bonus and stock options for the Company's senior executive officers, including
the Chief Executive Officer.
During fiscal 2000, the Stock Option Committee awarded stock options to
Howard Solomon, Chairman and Chief Executive Officer, Kenneth E. Goodman,
President and Chief Operating Officer, Dr. Lawrence S. Olanoff, Executive Vice
President-Scientific Affairs, Elaine Hochberg, Senior Vice President-Marketing
and John E. Eggers, Vice President-Finance and Chief Financial Officer as set
forth in the table set forth at "Options Granted in Fiscal 2000" in the amount
set forth therein. The Stock Option Committee resolved to continue the Company's
long-standing policy of utilizing the award of stock options (which provide
value to the executive over time as growth in the market price of the Company's
shares reflects the successful achievement of the Company's business objectives)
to identify the success of the Company's executives with the growth in equity
value to the Company's shareholders. The size of the award made was determined
based upon such officer's contribution to the achievement of the performance
objectives described above and the Committee's view of an appropriate equity
position to be maintained by the Company's executive officers in light of the
Company's market capitalization. Each of these factors was equally considered.
THE BOARD OF DIRECTORS
Howard Solomon
George S. Cohan(1)
William J. Candee, III(1)
Dan L. Goldwasser(1)
Kenneth E. Goodman
Dr. Lester B. Salans(1)
Phillip M. Satow
- ------------------------
(1) Compensation Committee and Stock Option Committee Member.
11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Howard Solomon, the Company's Chairman and Chief Executive Officer, and
Kenneth E. Goodman, the Company's President and Chief Operating Officer, are
members of the Board and participated in deliberations concerning executive
compensation. Each of such executive officers abstained from voting with respect
to his own compensation.
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock for the last five fiscal years with the cumulative total return on
the Standard & Poors Health Care Drugs Index and the Standard & Poors MIDCAP 400
Index over the same period (assuming the investment of $100 in the Common Stock,
the S&P Health Care Drugs Index and the S&P MIDCAP 400 on March 31, 1995, and
the reinvestment of all dividends).
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG FOREST LABORATORIES, INC., THE S&P MIDCAP 400 INDEX
AND THE S&P HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
3/95 3/96 3/97 3/98 3/99 3/00
FOREST LABORATORIES, INC. 100.00 102.36 79.00 157.48 236.75 354.86
S & P MIDCAP 400 100.00 128.49 142.13 211.83 204.41 282.27
S & P HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) 100.00 159.01 204.36 362.81 492.53 383.91
DOLLARS
*$100 INVESTED ON 3/31/95 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDED MARCH 31.
12
PROPOSAL 2
2000 STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, and
recommends the adoption of the Company's proposed 2000 Stock Option Plan ("2000
Plan"), under which options may be granted for an aggregate of 4,000,000 shares
of Common Stock prior to May 22, 2010. All of the Company's employees and
non-employee directors are eligible to participate in the 2000 Plan.
The Board of Directors believes that the Company's traditional policy of
providing employees and non-employee directors with options (and thereby
additional incentive and proprietary interest in the Company's success) has been
a material factor in the Company's ability to attract, retain and motivate
managerial and professional personnel as well as non-employee directors. As of
the date of this Proxy Statement, approximately 992 of the Company's employees,
and all five of the Company's non-employee directors, hold options granted under
the Company's previously adopted Plans. Only an aggregate of 1,425,466 shares
remain available for option grant under the previously adopted Plans. There are
presently stock options outstanding for 7,066,193 shares of Common Stock for
employees and 126,000 shares for Directors pursuant to option grants under
previous stock option plans and individual stock option grants. Of the 7,192,193
options outstanding, 2,727,980 options (37.9%) were granted from five to nine
years ago and remain unexercised by the Company's senior management. During the
past three fiscal years the Company granted a total of 4,165,770 options net of
cancellations, of which 1,448,000 options (34.8%) were granted to officers and
the remainder were granted to other employees.
The Board of Directors believes that the adoption of the 2000 Plan will
enable the Company to continue the Company's policy of offering a competitive
compensation package that includes, as a significant element, stock option based
compensation which strongly identifies the optionee's personal financial success
with the success of the Company as a whole and motivates employees to maximize
the potential of the Company's products. The Board of Directors further believes
that, partly as a result of recent industry consolidation, competition for
executive talent and experienced sales representatives has increased and that
stock option based compensation is an increasingly important element in the
Company's ability to attract and retain such personnel. The Company further
believes that with the recent 70% expansion of the Company's salesforce, other
staff additions and a competitive employment environment, the number of shares
remaining for grant in the Company's stock option plans would be inadequate for
such purposes. The Company is also of the opinion that affording the Board of
Directors the right to determine the employees to be granted options and the
number of shares as to which options will be granted, will permit the Board of
Directors to take into account various factors as well as special circumstances
with respect to attracting and retaining particular persons, in making its
decision regarding the grant of options.
The following description of the 2000 Plan is qualified in its entirety by
reference to such Plan, a copy of which is attached to this Proxy Statement as
Exhibit A and is incorporated by reference herein. Attention is particularly
directed to the description thereof in the prices, expiration dates and other
material conditions upon which the options may be granted and exercised.
The 2000 Plan provides, among other things, that options may be granted to
employees to purchase shares of Common Stock at a price per share fixed by a
committee (the "Committee") composed of the non-employee members of the Board of
Directors and, in the case of an ISO, at not less than the fair market value of
the applicable class of the Company's Common Stock on the date of option grant
(110% of such fair market value in the case of optionees holding 10% or more of
the combined voting rights of the Company's securities ("10% Holders")). The
Committee may determine, with respect to options granted to employees, the
employees to whom options are to be granted, the number of shares subject to
each option and the term of each option. The term of options granted to
employees may not exceed ten years, five years in the case of an ISO granted to
a 10% Holder.
13
An initial grant of options (having an exercise price equal to the average
price of the Common Stock on the date of grant) covering 14,000 shares of Common
Stock will automatically be granted to persons who become non-employee directors
from and after the adoption of the 2000 Plan. Twenty-five percent of such
options granted to non-employee directors will become exercisable on the date of
grant and on each anniversary of such date until all such options are
exercisable. The 2000 Plan also provides for the automatic annual grant to each
of the Company's non-employee directors of options to purchase 2,000 shares of
Common Stock on the date of their annual election or re-election by the
Company's shareholders. The provisions for the automatic grant of options to the
Company's non-employee directors will supercede and replace provisions for the
automatic grant of options to such directors contained in the 1998 Plan. Such
options will become exercisable six months after the date of option grant.
Options granted to non-employee directors will have a term of 10 years (but in
no event more than three months (six months in the event of death or disability)
following the optionee's ceasing to serve as a member of the Company's Board of
Directors) and will be at an exercise price equal to the average price of the
Common Stock on the New York Stock Exchange on the date of grant.
Options granted under the 2000 Plan may be exercised by the payment in full
in cash or by the tendering of shares of Common Stock having a fair market
value, as determined by the Committee, equal to the option exercise price. The
2000 Plan provides that the number of shares of Common Stock for which any
optionee may be granted options during any twelve month period may not exceed
600,000.
The principal federal income tax consequences of the issuance and granting
of options will be as follows:
(a) ISO's: Although an individual can receive an unlimited number of ISO's
during any calendar year, the aggregate fair market value (determined at the
time of option grant) of the stock with respect to which ISO's first become
exercisable during any calendar year (under all of the Company's Plans) cannot
exceed $100,000. ISO tax treatment is denied by the Code to any options in
excess of such dollar limits. For purposes of computing an optionee's regular
tax liability, an optionee will not realize taxable income for federal income
tax purposes upon the grant or exercise of an ISO and the Company will not be
entitled to a deduction in connection with the grant or the exercise of the
option. For purposes of the alternative minimum tax only, stock acquired
pursuant to the exercise of an ISO will be subject to the rules applicable to
non-ISO's. Thus, in general, the amount by which the fair market value of the
option shares at the time of ISO exercise exceeds the option exercise price (the
"Option Spread") will be an item of tax preference for purposes of the federal
alternative minimum tax and thus the Option Spread may be subject to the
alternative minimum tax unless the shares are disposed of in a non-qualifying
disposition in the year of exercise. If the Optionee is subject to the
alternative minimum tax in the year of the option exercise, the shares purchased
upon the exercise of the ISO will generally have a tax basis equal to their fair
market value at the time of ISO exercise only for purposes of computing gain or
loss on a subsequent disposition of the option shares under the alternative
minimum tax. If instead, the Optionee is not subject to the alternative minimum
tax in the year of the disposition of his option shares, the shares purchased
upon the exercise of an ISO will have a tax basis (for purposes of calculating
gain or loss on such disposition under the regular tax) equal to their ISO
exercise price. Each Optionee should consult his tax advisor as to the
application of the alternative minimum tax to the exercise of ISO's and the
disposition of shares acquired thereby.
Provided that the optionee does not dispose of the shares acquired upon the
exercise of an ISO within two years from the date of grant or within one year
from the date of exercise, the net gain realized on the sale or other taxable
disposition of the shares is subject to tax at capital gains tax rates. If
Common Stock acquired pursuant to the exercise of an ISO is disposed of within
the two year or one year periods mentioned above, any gain realized by the
optionee generally will be taxable at the time of such disposition as
(i) ordinary income to the extent of the difference between the exercise price
and the lesser of (a) the fair market value of the Common Stock on the date the
ISO is exercised, or (b) the amount realized on such disposition, and
(ii) short-term, mid-term or long-term capital gain to the extent of any excess
of the
14
amount realized on the disposition over the fair market value of the Common
Stock on the date the ISO is exercised. The Company will be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee at
the time such income is recognized. The Company will be required to satisfy any
applicable withholding requirements in order to be entitled to a tax deduction.
If the optionee pays the option exercise price by transferring to the
Company shares of its stock, the optionee will generally not recognize any gain
or loss with respect to the transfer of such shares, and the optionee will have
a tax basis in the shares acquired equal to the amount of cash plus the adjusted
tax basis of any shares transferred by such optionee to the Company. (But see
the discussion above relating to the alternative minimum tax.) However, if the
transferred shares were themselves acquired by the Optionee upon the exercise of
an ISO and the transfer of such shares to the Company occurs within the two-year
period or the one-year period referred to above, the optionee will generally
recognize gain in connection with such transfer to the extent the fair market
value of the transferred shares exceeds the tax basis with respect to such
shares.
(b) Non-ISO's: There is no limit (subject to the limit contained in the 2000
Plan and described above with respect to the maximum number of options that may
be granted to an optionee) on the aggregate fair market value of stock covered
by options that do not qualify as ISO's that may be granted to an individual in
any year or on the aggregate fair market value of non-ISO's that first become
exercisable in any year. Generally, no taxable income will be recognized by the
employee and no deduction will be allowed to the Company upon the grant of a
non-ISO. Upon the exercise of a non-ISO, the optionee will realize an amount of
ordinary income equal to the excess of the fair market value of the shares at
the time of exercise over the option price (even though the optionee will have
received no cash), and the Company will be entitled to a deduction in the same
amount. Any difference between the higher of such market value or exercise price
and the price at which the optionee may subsequently sell the shares will be
treated as a short-term, mid-term or long-term capital gain or loss.
(c) Limitations on the Company's compensation deduction: Section 162(m) of
the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers of the Company to
the extent that compensation paid to such officers for such year exceeds
$1 million, unless such compensation is performance-based, is approved by the
Company's stockholders and meets certain other criteria. Although the Company
intends that the 2000 Plan will satisfy the requirements that option grants
thereunder be considered performance-based for purposes of Section 162(m) of the
Code, there can be no assurance such awards will satisfy such requirements.
(d) State and local income tax consequences may, depending on the
jurisdiction, differ from the federal income tax consequences of the granting
and exercise of an option and any later sale by the optionee of his option
stock. There may also be, again depending on the jurisdiction, transfer or other
taxes imposed in connection with a disposition, by sale, bequest or otherwise,
of options and option stock. Optionees should consult their personal tax
advisors with respect to the specific state, local and other tax effects on them
of option grants, exercises and stock dispositions.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE 2000 PLAN.
15
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The firm of BDO Seidman, LLP has audited the financial statements of the
Company for each of the three fiscal years ended March 31, 2000. The Board of
Directors desires to continue the services of BDO Seidman, LLP for the current
fiscal year ending March 31, 2001. Accordingly, the Board of Directors will
recommend at the Meeting that the stockholders ratify the appointment by the
Board of Directors of the firm of BDO Seidman, LLP to audit the financial
statements of the Company for the current fiscal year. Representatives of that
firm are expected to be present at the Meeting, shall have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE APPOINTMENT OF
BDO SEIDMAN, LLP.
16
MISCELLANEOUS
ANNUAL REPORT
The Company's 2000 Annual Report is being mailed to stockholders
contemporaneously with this Proxy Statement.
FORM 10-K
UPON THE WRITTEN REQUEST OF A RECORD HOLDER OR BENEFICIAL OWNER OF COMMON
STOCK ENTITLED TO VOTE AT THE MEETING, THE COMPANY WILL PROVIDE WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED MARCH 31, 2000. REQUESTS SHOULD BE MAILED TO
CORPORATE SECRETARY, FOREST LABORATORIES, INC., 909 THIRD AVENUE, NEW YORK, NEW
YORK 10022.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form has been or will be
paid by the Company. In addition to solicitation by mail, arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxy material to beneficial owners, and the Company will, upon request,
reimburse them for their reasonable expenses in doing so. To the extent
necessary in order to assure sufficient representation, officers and regular
employees of the Company and a commercial proxy solicitation firm may be engaged
to assist in the solicitation of proxies. Whether either measure will be
necessary depends entirely upon how promptly proxies are received. No outside
proxy solicitation firm has been selected or employed by the Company in respect
of the Meeting as of the date of this Proxy Statement, and the Company is unable
to estimate the costs to it of any such services.
PROPOSALS OF STOCKHOLDERS; STOCKHOLDER BUSINESS
Proposals of stockholders to be presented at the 2001 Annual Meeting must be
received by the Company for inclusion in the Company's proxy statement and form
of proxy relating to that meeting no later than March 5, 2001. In order to
comply with applicable provisions of the Company's By-Laws, stockholders
intending to present proposals at the 2001 Annual Meeting must give notice
thereof in writing to the Secretary of the Company not later than the close of
business on June 18, 2001 nor earlier than the close of business on May 16,
2001. In addition, in accordance with applicable rules of the Securities and
Exchange Commission, proxies submitted in connection with the 2001 Annual
Meeting may confer discretionary authority on individuals designated by the
Company to vote in respect of any matter to come before such meeting as to which
the Company has not received notice by May 15, 2001.
Stockholders are urged to send in their proxies without delay.
WILLIAM J. CANDEE, III,
SECRETARY
Dated: June 30, 2000
17
EXHIBIT A
2000 STOCK OPTION PLAN
OF
FOREST LABORATORIES, INC.
------------------------
1. THE PLAN. This 2000 Stock Option Plan (the "Plan") is intended to
encourage ownership of stock of Forest Laboratories, Inc. (the "Corporation") by
specified employees and non-employee directors of the Corporation and its
subsidiaries and to provide additional incentive for them to promote the success
of the business of the Corporation.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 14
hereof, the total number of shares of Common Stock, par value $.10 per share, of
the Corporation (the "Stock") which may be issued pursuant to Incentive Stock
Options (as hereinafter defined) and non-Incentive Stock Options granted under
the Plan (the "Options") shall be 4,000,000. Such shares of Stock may be in
whole or in part, either authorized and unissued shares or treasury shares as
the Board of Directors of the Corporation (the "Board") shall from time to time
determine. If an Option shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares covered thereby shall (unless the
Plan shall have been terminated) again be available for Options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee (the "Committee") composed of the non-employee members of the Board
which shall have plenary authority, in its discretion, to determine, with
respect to options granted to employees, the employees of the Corporation and
its subsidiaries to whom Options shall be granted ("Optionees"), the number of
shares to be subject to each Option (subject to the provisions of Paragraph 2)
and the terms of each Option, and the nature of the Option (i.e., whether an
Incentive Stock Option or a Non-Incentive Stock Option). The Board shall have
plenary authority, subject to the express provisions of the Plan, to interpret
the Plan, to prescribe, amend and rescind any rules and regulations relating to
the Plan and to take such other action in connection with the Plan as it deems
necessary or advisable. The interpretation and construction by the Board of any
provisions of the Plan or of any Option granted thereunder shall be final and no
member of the Board shall be liable for any action or determination made in good
faith with respect to the Plan or any Option granted thereunder by the
Committee.
4. PERSONS ELIGIBLE FOR OPTIONS.
A. All employees and non-employee directors of the Corporation or its
subsidiaries shall be eligible for Options. In making the determination as to
employees to whom Options shall be granted and as to the number of shares to be
covered by such Options, the Committee shall take into account the duties of the
respective employees, their present and potential contributions to the success
of the Corporation and such other factors as it shall deem relevant in
connection with accomplishing the purpose of the Plan.
B. An option to purchase 14,000 shares of Stock shall automatically be
granted under the Plan to each non-employee director who is appointed or elected
to the Board after the date hereof and prior to the expiration of the Plan on
the date of the appointment or election of such non-employee director. Each
Option granted under this Section 4B shall be exercisable immediately as to 25%
of the number of shares of Stock covered thereby and shall become exercisable
for an additional 25% of the number of shares of Stock covered thereby on each
of the three succeeding anniversaries of the grant of such Option.
C. An option to purchase 2,000 shares of Stock shall automatically be
granted under the Plan to each then serving non-employee member of the
Corporation's Board annually on the date of his election or re-election by the
Corporation's stockholders. Each option granted pursuant to this Section 4C
shall
A-1
become exercisable as to all shares of Stock covered thereby from and after the
expiration of six months from the date of option grant.
D. The provisions of Sections 4B and 4C above shall supersede and replace
provisions for the automatic grant of options to the Corporation's non-employee
directors contained in the Corporation's 1998 Stock Option Plan.
5. TERM OF PLAN. The Plan shall terminate on, and no Options shall be
granted after May 22, 2010 provided that the Committee may at any time terminate
the Plan prior thereto.
6. MAXIMUM OPTION GRANT. With respect to Options which are intended to
qualify as Incentive Stock Options, the aggregate fair market value (determined
as of the time the Option is granted) of the Stock with respect to which ISOs
granted to any employee (whether under this Plan or under any other stock option
plan of the Corporation) become exercisable for the first time in any calendar
year may not exceed $100,000. The number of shares of Stock for which any
employee may be granted Options under the Plan during any twelve-month period
shall not exceed 600,000.
7. OPTION PRICE. Each Option shall state the option price, which shall be,
in the case of Incentive Stock Options and Options granted to non-employee
directors, not less than 100% of the fair market value of the Stock on the date
of the granting of the Option, nor less than 110% in the case of an Incentive
Stock Option granted to an individual who, at the time the Option is granted, is
a 10% Holder (as hereinafter defined). The fair market value of shares of Stock
shall be determined by the Board and shall be the mean between the high and low
prices of the Stock on the New York Stock Exchange on the date of the granting
of the Option.
8. TERM OF OPTIONS.
A. The term of each Option granted to an employee shall be for a maximum of
ten years from the date of granting thereof, and a maximum of five years in the
case of an Incentive Stock Option granted to a 10% Holder, but may be for a
lesser period or be subject to earlier termination as hereinafter provided.
B. The term of each Option granted to a non-employee director shall be for
a period of ten years from the date of granting thereof.
9. EXERCISE OF OPTIONS. An Option may be exercised from time to time as to
any part or all of the Stock to which the Optionee shall then be entitled,
provided, however, that an Option may not be exercised as to less than 100
shares at any time (or for the remaining shares then purchasable under the
Option, if less than 100 shares). In addition, options granted to employees may
not be exercised, (a) prior to the expiration of at least six months from the
date of grant and (b) unless the Optionee shall have been in the continuous
employ of the Corporation or its subsidiaries from the date of the granting of
the Option to the date of its exercise, except as provided in Paragraph 12. The
purchase price of the Stock issuable upon exercise of an Option shall be paid in
full at the time of the exercise thereof (i) in cash or (ii) by the transfer to
the Corporation of shares of its Stock with a fair market value (as determined
by the Committee) equal to the purchase price of the Stock issuable upon
exercise of such Option, provided that such shares have been beneficially owned
by the Optionee for at least six months. The holder of an Option shall not have
any rights as a stockholder with respect to the Stock issuable upon exercise of
an Option until certificates for such Stock shall have been delivered to him
after the exercise of the Option.
10. NON-TRANSFERABILITY OF OPTIONS. Except as provided in the following
sentence, an Option shall not be transferable otherwise than by will or the laws
of descent and distribution and is exercisable during the lifetime of the
employee only by him or his guardian or legal representative. Options that do
not qualify as IS0's will be transferable to members of an Optionee's immediate
family, including trusts for the benefit of such family members and partnerships
or limited liability companies in which such family members are the only
partners. A transferred Option shall be subject to all of the same terms and
conditions as if such Option had not been transferred.
A-2
11. FORM OF OPTION. Each Option granted pursuant to the Plan shall be
evidenced by an agreement (the "Option Agreement") which shall clearly identify
the status of the Options granted thereunder (i.e., whether an Incentive Stock
Option or non-Incentive Stock Option) and which shall be in such form as the
Committee shall from time to time approve. The Option Agreement shall comply in
all respects with the terms and conditions of the Plan and may contain such
additional provisions, including, without limitation, restrictions upon the
exercise of the Option, as the Committee shall deem advisable.
12. TERMINATION OF SERVICE OR DEATH OF OPTIONEE. Upon the termination of
Optionee's Service as an employee or director of the Company, or the death or
disability of Optionee, an Option shall be exercisable (to the extent that such
Option was exercisable at the time of the termination of service of the Optionee
or at the time of the death of the Optionee, as the case may be): (i) In the
case of a non-ISO, during the period that ends six months following the date the
Optionee ceases to be an employee of the Company due to the Optionee's
disability (within the meaning of Section 22(e)(3) of the Code) or death or
three months following the date the Optionee ceases to be an employee or
non-employee director of the Company for any other reason, or (ii) in the case
of an ISO, during the period that ends six months following the date the
Optionee ceases to be an employee of the Company due to the Optionee's
disability (within the meaning of Section 22(e)(3) of the Code) or death or
three months following the date the Optionee ceases to be an employee of the
Company for any reason other than disability or death.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in
the outstanding Stock of the Corporation by reason of stock dividends, splitups,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reorganizations or liquidations, the number and class of shares or
the amount of cash or other assets or securities available upon the exercise of
any Option granted hereunder and the maximum number of shares as to which
Options may be granted to an employee shall be correspondingly adjusted, to the
end that the Optionee's proportionate interest in the Corporation, any successor
thereto or in the cash, assets or other securities into which shares are
converted or exchanged shall be maintained to the same extent, as near as may be
practicable, as immediately before the occurrence of any such event. All
references in this Plan to "Stock" from and after the occurrence of such event
shall be deemed for all purposes of this Plan to refer to such other class of
shares or securities issuable upon the exercise of Options granted pursuant
hereto.
14. SHAREHOLDER AND STOCK EXCHANGE APPROVAL. This Plan is subject to and no
Options shall be exercisable hereunder until after (i) the approval by the
holders of a majority of the Stock of the Corporation voting at a duly held
meeting of the stockholders of the Corporation within twelve months after the
date of the adoption of the Plan by the Board and (ii) the approval by the New
York Stock Exchange, Inc. of a listing application covering the shares of Stock
covered by this Plan.
15. AMENDMENT OF THE PLAN. The Board shall have complete power and
authority to modify or amend the Plan (including the form of Option Agreement)
from time to time in such respects as it shall deem advisable; provided,
however, that the Board shall not, without the approval of the votes represented
by a majority of the outstanding Stock of the Corporation present or represented
at a meeting duly held in accordance with the applicable laws of the
Corporation's jurisdiction of incorporation and entitled to vote at a meeting of
stockholders or by the written consent of stockholders owning stock representing
a majority of the votes of the Corporation's outstanding stock, (i) increase the
maximum number of shares which in the aggregate are subject to Options under the
Plan (except as provided by Paragraph 13), (ii) extend the term of the Plan or
the period during which Options may be granted or exercised, (iii) reduce the
Option price, in the case of ISO's, below 100% (110% in the case of an ISO
granted to a 10% Holder) of the fair market value of the Stock issuable upon
exercise of Options at the time of the granting thereof, other than to change
the manner of determining the fair market value thereof, (iv) increase the
maximum number of shares of Stock for which any employee may be granted Options
under the Plan pursuant to Paragraph 6, (v) materially increase the benefits
accruing to participants under the Plan, (vi) modify the requirements as to
eligibility for participation in the Plan, or (vii) with respect to options
which are ISO's amend the plan in any respect which would cause such options to
no longer qualify for ISO treatment pursuant to the Internal
A-3
Revenue Code. No termination or amendment of the Plan shall, without the consent
of the individual Optionee, adversely affect the rights of such Optionee under
an Option theretofore granted to him or under such Optionee's Option Agreement.
16. TAXES. The Corporation may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any Options granted under the Plan. The Corporation may further
require notification from the Optionees upon any disposition of Stock acquired
pursuant to the exercise of Options granted hereunder.
17. CODE REFERENCES AND DEFINITIONS. Whenever reference is made in this
Plan to a section of the Internal Revenue Code, the reference shall be to said
section as it is now in force or as it may hereafter be amended by any amendment
which is applicable to this Plan. The term "subsidiary" shall have the meaning
given to the term "subsidiary corporation" by Section 425(f) of the Internal
Revenue Code. The terms "Incentive Stock Option" and "ISO" shall have the
meanings given to them by Section 422 of the Internal Revenue Code. The term
"10% Holder" shall mean any person who, for purposes of Section 422 of the
Internal Revenue Code owns more than 10% of the total combined voting power of
all classes of stock of the employer corporation or of any subsidiary
corporation.
A-4
FOREST LABORATORIES, INC.
Proxy - For the Annual Meeting of Stockholders - August 14, 2000
The undersigned stockholder of FOREST LABORATORIES, INC., revoking any previous
proxy for such stock, hereby appoints Howard Solomon and Kenneth E. Goodman, or
either of them, the attorneys and proxies of the undersigned, with full power of
substitution, and hereby authorizes them to vote all shares of Common Stock of
FOREST LABORATORIES, INC. which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held on August 14, 2000 at 10:00 A.M. at
Chase Manhattan Corporate Headquarters, 270 Park Avenue, New York, New York, and
any adjournments thereof on all matters coming before said meeting.
In the event no contrary instructions are indicated by the undersigned
stockholder, the proxies designated hereby are authorized to vote the shares as
to which this proxy is given FOR proposals 1, 2 and 3, each of which are set
forth on this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Board of Directors Recommends a Vote FOR proposals 1, 2 and 3.
(continued on reverse side)
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
Please mark
your votes as |X|
indicated in
this example
1. Election of seven Directors: Howard Solomon, William J. Candee, III,
George S. Cohan, Dan L. Goldwasser, Lester B. Salans, Kenneth E.
Goodman, Phillip M. Satow.
FOR all WITHHOLD AUTHORITY
nominees to vote for all nominees
|_| |_|
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name on the line provided.)
2. Ratification of 2000 Stock Option Plan FOR AGAINST ABSTAIN
|_| |_| |_|
3. Ratification of BDO Seidman, LLP as FOR AGAINST ABSTAIN
Accountants.
|_| |_| |_|
- --------------------------------------------------------------------------------
PLEASE MARK BOXES IN BLUE OR BLACK INK.
PLEASE SIGN, DATE AND MAIL IN THE ENVELOPE PROVIDED.
Signature(s) Dated , 2000
-------------------------------------------- -----------
Please sign here exactly as your name(s) appear(s) on this proxy. If signing for
an estate, trust or corporation, title or capacity should be stated. If shares
are held jointly, each holder should sign. If a partnership, sign in partnership
name by authorized person.
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^