-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D6xvJBOCLrcs04XhqHnhGFOeui/JeZhNq7Mcd6Zw8KFNNIhlX6EkUib90g19Fl61 8T4KV8SBwbNfQzb/qetx+w== 0000912057-96-013317.txt : 19960805 0000912057-96-013317.hdr.sgml : 19960805 ACCESSION NUMBER: 0000912057-96-013317 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960812 FILED AS OF DATE: 19960627 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREST LABORATORIES INC CENTRAL INDEX KEY: 0000038074 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 111798614 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-05438 FILM NUMBER: 96587256 BUSINESS ADDRESS: STREET 1: 909 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124217850 MAIL ADDRESS: STREET 1: 909 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 DEF 14A 1 DEF 14A 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 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.___________________________ (Name of Registrant as Specified in its Charter) ____________________________Forest Laboratories, Inc.___________________________ (Name of Person(s) Filing Proxy Statement) Payment of filing fee (Check the appropriate box): [X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2). [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ________________________________________________________________________________ 2) Aggregate number of securities to which transaction applies: ________________________________________________________________________________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (1) ________________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: ________________________________________________________________________________ [ ] 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: ________________________________________________________________________________ - - ------------------------ (1) Set forth the amount on which the filing fee is calculated and state how it was determined. FOREST LABORATORIES, INC. ---------------- NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS ------------------------ The Annual Meeting of the Stockholders of Forest Laboratories, Inc. (the "Company") will be held on August 12, 1996 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 five Directors to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified (Proposal 1); 2. To ratify the appointment of BDO Seidman, L.L.P. as the Company's independent auditors for the fiscal year ending March 31, 1997 (Proposal 2); and 3. To transact such other business as may properly be brought before the Meeting. Stockholders of record at the close of business on June 21, 1996 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, 1996 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 28, 1996 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 12, 1996, 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 28, 1996. 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 five nominees for election as directors listed below (Proposal 1) and FOR the ratification of the appointment of BDO Seidman, L.L.P. as the Company's independent auditors (Proposal 2). 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 21, 1996, the record date fixed for the determination of stockholders entitled to notice of and to vote at the Annual Meeting, there were outstanding 44,513,307 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 one-third of the 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 majority of the votes cast in person or by proxy is necessary for the election of directors (Proposal 1). The affirmative vote of a majority of the shares of Common Stock present in person or by proxy is necessary for the approval of the ratification of the appointment of independent auditors (Proposal 2). 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 majority 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 the ratification of the appointment of independent auditors (Proposal 2), 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 1 are received from beneficial owners with respect to the election of directors (Proposal 1) and the ratification of the appointment of independent auditors (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 21, 1996 will be entitled to vote at the Meeting or any adjournment or adjournments thereof. 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 21, 1996 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.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - - -------------------------------------- ---------------------- ------------ Howard Solomon 2,550,171(1) 5.48% 909 Third Avenue New York, New York Brinson Partners, Inc. 2,295,200(2) 5.16% 209 South LaSalle Street Chicago, Illinois J.P. Morgan & Co., Incorporated 4,448,343(3) 9.99% 60 Wall Street New York, New York
- - ------------------------ (1) Includes 1,990,164 shares subject to options exercisable by Mr. Solomon within 60 days from the date hereof, which shares are deemed to be outstanding for purposes of calculating Mr. Solomon's percentage ownership, but not for purposes of calculating any other person's percentage ownership. (2) Based upon information supplied by Brinson Partners, Inc. ("BPI"), a registered investment advisor and wholly owned subsidiary of Brinson Holdings, Inc. Includes 595,800 shares beneficially owned by Brinson Trust Company, a wholly owned subsidiary of BPI. (3) Based upon information supplied by J.P. Morgan & Co, Incorporated ("J.P. Morgan") with respect to accounts maintained by third persons at J.P. Morgan. 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 five. Unless otherwise specified, each proxy received will be voted for the election as directors of the five nominees named below (each of whom was elected at the 1995 Annual Meeting of Stockholders) to 2 serve until the 1997 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 A DIRECTOR NAME AND PRINCIPAL OCCUPATION OR POSITION AGE SINCE - - ------------------------------------------------------------------------ --- ------------- Howard Solomon 68 1964 President and Chief Executive Officer of the Company since 1977. William J. Candee, III 69 1959 Partner, Rivkin, Radler & Kremer, Attorneys at Law, since May 1989. George S. Cohan 72 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 56 1977 Partner, Vedder, Price, Kaufman, Kammholz & Day, Attorneys at Law since May 1992. For more than five years prior thereto, Mr. Goldwasser served as a shareholder, officer and director of the New York law firm of Solinger Grosz & Goldwasser, P.C. Joseph M. Schor 67 1980 Dr. Schor is a private investor and consultant. For more than five years prior to January 1, 1995, Dr. Schor served as Vice President -- Scientific Affairs of the Company.
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 68 President and Chief Executive Officer Phillip M. Satow 55 Executive Vice President -- Marketing Kenneth E. Goodman 48 Vice President -- Finance Lawrence S. Olanoff, M.D., Ph.D. 44 Vice President -- Scientific Affairs
See the table of nominees for election as directors for biographical data with respect to Mr. Solomon. Phillip M. Satow has served as Executive Vice President -- Marketing of the Company since January 1985. Kenneth E. Goodman has served as Vice President -- Finance of the Company since April 1980. 3 Dr. Lawrence S. Olanoff was elected Vice President -- Scientific Affairs in October 1995. From 1993 until he joined Forest, 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. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth the beneficial ownership of shares of Common Stock of the Company as of June 21, 1996 of (i) the Chief Executive Officer and each of the Company's other executive officers at March 31, 1996, (ii) each director and nominee to serve as a director and (iii) all directors and executive officers of the Company as a group:
AMOUNT AND NATURE OF PERCENT OF NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS - - ------------------------------- ---------------------- ----------- Howard Solomon 2,550,171(1) 5.48% William J. Candee, III 19,708(2) * George S. Cohan 21,000(3) * Dan L. Goldwasser 20,370(4) * Joseph M. Schor 31,445 * Phillip M. Satow 583,754(5) 1.29% Kenneth E. Goodman 532,500(6) 1.18% Dr. Lawrence S. Olanoff -- -- All directors and executive officers as a group 3,758,948(7) 7.89%
- - ------------------------ * less than 1% (1) Includes 1,990,164 shares subject to options exercisable within 60 days of the date hereof. (2) Includes 18,000 shares subject to options exercisable within 60 days of the date hereof. (3) Includes 17,000 shares subject to options exercisable within 60 days of the date hereof. (4) Includes 20,000 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 567,000 shares subject to options exercisable within 60 days of the date hereof. Also includes 11,117 shares held in trusts, of which Mr. Satow is a trustee, for the benefit of Mr. Satow's children. (6) Includes 509,778 shares subject to options exercisable within 60 days of the date hereof. (7) Includes 3,121,942 shares subject to options exercisable within 60 days of the date hereof. 4 EXECUTIVE COMPENSATION The following table sets forth, for the fiscal years ended March 31, 1996, 1995 and 1994, compensation paid by the Company to the Chief Executive Officer and to each of the other executive officers of the Company during fiscal year 1996, including salary, bonuses, stock options and certain other compensation: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION (1) AWARDS ANNUAL COMPENSATION ------------------------ ------------------------------- ALL OTHER SALARY BONUS OPTIONS/ COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(2) - - --------------------------------- --------- --------- --------- --------- ------------- Howard Solomon, 1996 583,769 60,000 100,000 15,535 President and Chief Executive 1995 550,644 60,000 100,000 23,728 Officer 1994 518,140 60,000 100,000 26,908 Phillip M. Satow, 1996 415,764 50,000 75,000 15,959 Executive Vice President -- 1995 391,889 50,000 50,000 23,761 Marketing 1994 368,378 50,000 50,000 25,810 Kenneth E. Goodman, 1996 386,763 50,000 50,000 15,461 Vice President -- Finance 1995 362,888 50,000 50,000 23,761 1994 339,378 50,000 50,000 25,592 Ronald F. Albano, (3) 1996 214,483 30,000 50,000 13,655 Vice President -- Licensing 1995 217,257 35,000 25,000 21,264 1994 201,252 25,000 0 22,916 Dr. Lawrence S. Olanoff, (4) 1996 153,410 100,000 60,000 Vice President -- Scientific Affairs
- - ------------------------ (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 solely of 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 $150,000), 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 $50,000 or 10% of the total annual salary and bonus reported for such officers. (3) Ronald F. Albano resigned as Vice President -- Licensing of the Company on January 26, 1996. (4) Reflects compensation from the date Dr. Olanoff joined the Company. 5 OPTIONS GRANTED IN FISCAL 1996 The following information is furnished for the fiscal year ended March 31, 1996 with respect to the Company's Chief Executive Officer and each of the other executive officers of the Company for stock options granted during such fiscal year. Stock options were granted without tandem stock appreciation rights.
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE % OF TOTAL OPTIONS APPRECIATION FOR OPTIONS GRANTED TO EXERCISE PRICE OPTION TERM($)(3) GRANTED (1) EMPLOYEES DURING PER SHARE EXPIRATION ------------------------ NAME (#) FISCAL YEAR ($/S) DATE 5% 10% - - ------------------------------ ----------- ------------------- -------------- ---------- ----------- ----------- Howard Solomon (1) 100,000 7.22 44.1875 12/15/05 2,778,928 7,042,349 Phillip M. Satow (1) 75,000 5.42 44.1875 12/15/05 2,084,196 5,281,762 Kenneth E. Goodman (1) 50,000 3.61 44.1875 12/15/05 1,389,464 3,521,175 Lawrence S. Olanoff (2) 60,000 4.33 41.6875 10/24/05 1,573,023 3,986,348
- - ------------------------ (1) All such options granted to such officers have a term of 10 years and were granted under the Company's 1994 Employee Stock Option Plan. The exercise price per share of such options is the market value per share on the date of grant. The options are exercisable in full from and after the date of grant. (2) Dr. Olanoff's options have a term of 10 years and first become exercisable in installments over the five year period following the date of grant. The exercise price per share of such options is the market value per share on the date of grant. (3) 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 $1,260,813,810 and $3,195,149,741, respectively. AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR END OPTION VALUES The following information is furnished for the fiscal year ended March 31, 1996 with respect to the Company's Chief Executive Officer and each of the other executive officers of the Company for stock option exercises during such fiscal year.
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN THE AT 3/31/96 (#) MONEY OPTIONS AT 3/31/96 ($) SHARES ACQUIRED VALUE ----------------------------- ------------------------------- NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE - - ---------------------------- --------------- ----------- ----------- ---------------- ------------- ---------------- Howard Solomon 1,990,164 125,000 50,817,741 639,687 Phillip M. Satow 567,000 62,500 12,277,218 319,843 Kenneth E. Goodman 509,778 62,500 10,880,494 319,843 Ronald F. Albano 61,750 964,357 Dr. Lawrence S. Olanoff 60,000 431,250
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 6 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, Schor, Goodman and Satow 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, Schor, 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), 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, Satow, Goodman and Dr. Olanoff. 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 1988, 1990 and 1994 Employee Stock Option Plans (the "Plans") provide that options may be granted 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, 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 Amended Directors' Stock Option Plan (the "Directors' Plan") under which an initial grant of options covering 10,000 shares of Common Stock each were granted to each of the Company's non-employee directors at an exercise price of $9.90625 per share (being the average price for the Common Stock on the American Stock Exchange on August 15, 1988, the date of stockholder approval of the Directors' Plan) and pursuant to which an initial grant of options (having an exercise price equal to 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 Directors' Plan. The Directors' Plan expires on June 9, 1998 and options granted thereunder have a term of 10 years (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). Twenty-five percent of the options granted under the Directors' Plan become exercisable on the date of grant and on each anniversary of such date until all such options are exercisable. The Directors' 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 7 annual election or re-election by the Company's shareholders. Each such option grant will be at an exercise price equal to the average price of the Common Stock on the American Stock Exchange on the date of grant and will become exercisable six months after the date of option grant. Each such option shall 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). DIRECTORS' COMPENSATION In addition to automatic annual option grants under the Directors' Plan, each non-employee director of the Company received $22,500 for their services as director during the fiscal year ended March 31, 1996, except for (i) Mr. Candee who received $25,000 for his services as director and the Company's secretary and Chairman of the Audit Committee, and (ii) Dr. Schor who received consulting fees through December 31, 1995 and now receives the compensation paid to other non-employee directors. COMMITTEES; BOARD MEETINGS The Company has an audit committee composed of Messrs. Candee and Goldwasser. During the fiscal year ended March 31, 1996, the audit committee met on two 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 does not have a nominating or compensation committee. The Board of Directors of the Company held six meetings during the fiscal year ended March 31, 1996 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 STOCK OPTION 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 Employee 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 five members, four of whom are non-employee directors and one of whom, Mr. Solomon, is the President and Chief Executive Officer of the Company. In addition, three of the non-employee directors, Messrs. Goldwasser, Candee and Cohan, serve as a Stock Option Committee which administers the granting of options under the Company's Employee Stock Option Plans, including the award of options to the Company's executive officers. The policy of the Board of Directors 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 Employee Stock Option Plans and individual option grants, which serve to identify the reward for executive performance with increases in value created for shareholders. 8 COMPANY PERFORMANCE AND CEO COMPENSATION Executive compensation for the fiscal year ended March 31, 1996 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 1996." The Board of Directors met in December 1995 to review executive compensation for the calendar year commencing January 1, 1996. The Board reviewed data relating to operating and financial goals and achievements (and specifically relating to the progress of various clinical development programs and the in-licensing and acquisition of products and product development opportunities). In addition, the Board reviewed information of compensation levels of senior executives of publicly traded companies engaged in the research, development, manufacture and distribution of pharmaceutical and diagnostic products. Such information was submitted to the Board with due regard to the sales and profitability levels of such companies. The Board noted that the average cash compensation paid to CEO's in the companies analyzed was $1,014,000, with the companies with greater sales volumes averaging $1,609,000 and the smaller companies (excluding the Company) averaging $761,000, in each case being greater than the cash compensation proposed for Mr. Solomon. The companies used for comparison by the Board are not identical to companies included in the Standard & Poors Health Care average included in the Performance Graph which follows this report. The Board further noted the achievement of the following strategic objectives during calendar year 1995: the conclusion of important licensing arrangements for Tiazac-Registered Trademark-, a once-daily formulation of diltiazem for the treatment of hypertension, and Citalopram, a selective serotonin reuptake inhibitor for the treatment of depression and the accomplishment of a co-marketing agreement for Climara-Registered Trademark-, a seven day transdermal estrogen patch, each of which are products with significant future potential. The Board further noted the expansion of the Company's salesforce by 45% to 650 representatives, as well as the implementation of new information systems in light of such expansion. The Board further considered the continuing efforts toward obtaining approved New Drug Applications for Infasurf-Registered Trademark-, a lung surfactant for the treatment of neonatal respiratory distress syndrome, and Monurol-Registered Trademark-, a single dose antibiotic for the treatment of uncomplicated urinary tract infections. The Board also noted the continued increase in sales of the Company's principal promoted products. Finally, the Board noted the selection of a new Scientific Affairs officer. In considering the recommended increases in compensation proposed for each of the Chief Executive Officer and the other executive officers of the Company, the Board also considered adjustments related to inflation, the level of increases given to the Company's employees generally, and that proposed increases were generally consistent among such executive officers, with the differences based upon executive positions and level of current base compensation. The Board considered the foregoing factors with particular emphasis upon the achievement of the specific Company objectives described above and the appropriateness of the compensation levels in light of the comparable company analysis. The Board, therefore, concluded that increases proposed by management in compensation for each of the CEO and the other executive officers were justified. Based upon the foregoing, the Board approved a salary increase for Mr. Solomon of $35,000, representing an increase in cash compensation of 6.2% over such compensation for the previous year. The Board also approved a bonus for Mr. Solomon in the amount of $60,000, representing the same amount of bonus compensation that Mr. Solomon was awarded for the previous year. During fiscal 1996, the Stock Option Committee awarded stock options to Mr. Solomon and the other executive officers named in the table set forth at "Options Granted in Fiscal 1996" in the amounts set forth therein. The Stock Option Committee determined 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 awards made were determined based 9 upon the level of management responsibility of the various executive officers, their respective 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 Joseph M. Schor George S. Cohan* William J. Candee, III* Dan L. Goldwasser* - - ------------------------ *Stock Option Committee Member. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Howard Solomon, the Company's President and Chief Executive Officer, is a member of the Board and participated in deliberations concerning executive compensation. Mr. Solomon abstained from voting with respect to his own compensation. Joseph M. Schor, formerly Vice President -- Scientific Affairs of the Company until his retirement on December 31, 1994, is a member of the Board and participated in deliberations concerning executive compensation. 10 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, 1991, and the reinvestment of all dividends). COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG FOREST LABORATORIES, INC., THE S & P MIDCAP 400 INDEX AND THE S & P HEALTH CARE (DRUGS) INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FOREST LABS INC. S & P 500 S & P HEALTH CARE (DRUGS) 3/91 100 100 100 3/92 84 121 121 3/93 82 141 94 3/94 107 150 87 3/95 119 162 132 3/96 121 209 209 3/97
*$100 INVESTED ON 03/31/91 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF DIVIDENDS, FISCAL YEAR ENDING MARCH 31. 11 PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The firm of BDO Seidman, L.L.P. has audited the financial statements of the Company for each of the three fiscal years ended March 31, 1996. The Board of Directors desires to continue the services of BDO Seidman, L.L.P. for the current fiscal year ending March 31, 1997. Accordingly, the Board of Directors will recommend to the Meeting that the stockholders ratify the appointment by the Board of Directors of the firm of BDO Seidman, L.L.P. 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, L.L.P. MISCELLANEOUS ANNUAL REPORT The Company's 1996 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, 1996. 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 SECURITY HOLDERS Proposals of security holders to be presented at the 1997 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 2, 1997. Stockholders are urged to send in their proxies without delay. WILLIAM J. CANDEE, III, SECRETARY Dated: June 28, 1996 12 FOREST LABORATORIES, INC. Proxy - For the Annual Meeting of Stockholders - August 12, 1996 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 12, 1996 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 and 2, 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 and 2. (continued on reverse side) - - ------------------------------------------------------------------------------- FOLD AND DETACH HERE Please mark /X/ your votes as indicated in this example FOR ALL WITHHOLD NOMINEES AUTHORITY 1. Election of five Directors: Howard Solomon, / / / / William J. Candee, III, George S. Cohan, Dan L. Goldwasser and Joseph M. Schor FOR AGAINST ABSTAIN 2. Ratification of BDO Seidman, / / / / / / L.L.P. as Accountants
- - --------------------------------------------------------------- (INSTRUCTION: To withhold authority to vote for any individual nominee, write the nominee s name on the line provided above.) 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. PLEASE MARK BOXES IN BLUE OR BLACK INK PLEASE SIGN, DATE AND MAIL IN THE ENVELOPE PROVIDED Signature(s) ___________________________________________ Dated_________, 1996 NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. - - ------------------------------------------------------------------------------- FOLD AND DETACH HERE -----END PRIVACY-ENHANCED MESSAGE-----