UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the
Registrant
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Filed by a
Party other than the Registrant
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appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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FOREST LABORATORIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of person(s) filing proxy statement, if other than the registrant)
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Payment of Filing Fee (Check the appropriate box):
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x
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Date Filed:
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Explanatory Note
The Company currently has a no-action letter pending before the Securities and Exchange Commission (the
SEC
) seeking to exclude the following stockholder proposal submitted under Rule
14a-8 of the Securities Exchange Act of 1934, as amended (the
Exchange Act
): Proposal 4: Stockholder Proposal To Amend Bylaws To Allow Stockholders To Nominate Director Candidates For Inclusion In Proxy Materials. If the SEC
concurs with the Company that this proposal may be properly excluded from the Companys proxy statement under Rule 14a-8 of the Exchange Act, the Company will exclude such proposal from its definitive proxy statement.
PRELIMINARY PROXY STATEMENT
SUBJECT TO COMPLETION, DATED JUNE 28, 2012
July , 2012
Dear Forest Stockholders:
It is my pleasure to invite you to Forests 2012
Annual Meeting of Stockholders. The Annual Meeting will be held on August 15, 2012 at [
], at
[
]. Details regarding admission to the Annual Meeting and the business to be conducted are more fully described in the
accompanying Notice of 2012 Annual Meeting of Stockholders and Proxy Statement.
Your Board of Directors is recommending a
highly qualified, experienced and diverse slate of ten nominees for election at the 2012 Annual Meeting that will provide experience, leadership and continuity at a critical time for the Companys future. Since 2006, Forest has added five new
independent directors50% of your Boardwith four of these new directors joining since December 2009. In addition to infusing the Board with critical industry experience by adding Dr. Peter J. Zimetbaum in December 2009, a
Director of Clinical Cardiology at Beth Israel Deaconess Medical Center and an Associate Professor of Medicine at Harvard Medical School and Dr. Nesli Basgoz in 2006, the Associate Chief for Clinical Affairs, Division of Infectious Diseases at
Massachusetts General Hospital, our stockholders elected Christopher J. Coughlin, former Executive Vice President and Chief Financial Officer of Tyco International, Gerald M. Lieberman, former President and Chief Operating Officer of
AllianceBernstein, and Brenton L. Saunders, the current Chief Executive Officer and President of Bausch + Lomb to the Board at Forests 2011 Annual Meeting. Your Board believes the entire ten-member slate is extremely well qualified to
represent all of our stockholders and lead Forest through its next stage of growth and development.
Your management team and
Board are excited about Forest and about continuing to create value for you. At the Annual Meeting, you will be asked to elect the ten directors named in the accompanying Proxy Statement, to cast an advisory vote in favor of the compensation of our
named executive officers, to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm, and, if the following proposals are properly presented at the meeting, [to vote against a stockholder proposal requesting us to
amend our Bylaws to allow stockholders to nominate director candidates for inclusion in our proxy materials] and to vote against a stockholder proposal regarding the repeal of bylaw amendments that Icahn Capital LP and certain affiliated entities,
which are a group of hedge funds led by Carl C. Icahn (the Icahn Group), have indicated that they intend to propose at the Annual Meeting.
We hope you will be able to attend the Annual Meeting, but if you cannot do so it is important that your shares be represented. Your vote is very important to Forest.
We urge you to read the
accompanying Proxy Statement carefully, and to use the Companys WHITE proxy card to vote for the Boards nominees and in accordance with the Boards recommendations on the other proposals, as soon as possible, by telephone or
Internet, or by signing, dating, and returning the enclosed WHITE proxy card in the postage-paid envelope provided, whether or not you plan to attend the Annual Meeting. Further instructions on how to vote are provided on the WHITE proxy card.
You may have heard that members of the Icahn Group have stated their intention to propose four director nominees for election
at the Annual Meeting and a proposal to repeal any provision of the Companys bylaws in effect at the time of the Annual Meeting that was not included in the Companys bylaws as publicly filed prior to June 18, 2012 (the Icahn Bylaw Repeal
Proposal). Your Nominating and Governance Committee and Board urge you to vote only for your Boards proposed nominees and against the Icahn Bylaw Repeal Proposal by using the enclosed WHITE proxy card and not to sign or return or vote any
proxy card sent to you by the Icahn Group. If you vote using a proxy card sent to you by the Icahn Group, you can subsequently revoke it by using the instructions on the WHITE proxy card to vote by telephone or Internet, or by signing, dating and
returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only your latest-dated proxy will count, and any proxy may be revoked at any time prior to its exercise at the Annual Meeting as described in this Proxy Statement.
Thank you for your continued support. If you have any questions, please contact MacKenzie
Partners, Inc., our proxy solicitor that is assisting us in connection with the Annual Meeting, at (800) 322-2885.
Sincerely,
[
Signature
]
Howard Solomon
Chairman of the Board, President and
Chief Executive Officer
THIS PROXY STATEMENT AND PROXY CARD ARE
BEING DISTRIBUTED ON OR ABOUT JULY [
], 2012
- 2 -
FOREST LABORATORIES, INC.
NOTICE OF 2012 ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of the Stockholders of Forest Laboratories, Inc. will be held on August 15, 2012 at [ ], at
[ ]. We are holding this meeting to:
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1.
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Elect ten directors to the Companys Board of Directors, with the Companys nominees being those named in this Proxy Statement (Proposal 1);
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2.
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Conduct an advisory vote on the compensation of the Companys Named Executive Officers (Proposal 2);
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3.
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Ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2013 (Proposal 3);
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[4.
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Consider and act upon the stockholder proposal described at Proposal 4 if properly presented at the Annual Meeting (Proposal 4);]
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[4/5].
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Consider and act upon a stockholder proposal that Icahn Capital LP and certain affiliated entities, which are a group of hedge funds led by Carl C. Icahn (the Icahn
Group), have indicated that they intend to propose at the Annual Meeting that would repeal any provision of the Companys bylaws in effect at the time of Annual Meeting that was not included in the Companys bylaws as publicly filed prior
to June 18, 2012, if such stockholder proposal is properly presented at the Annual Meeting (Proposal [4/5] or the Icahn Bylaw Repeal Proposal); and
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[5/6].
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Consider and act upon such other matters as may properly be brought before the meeting or any postponements or adjournments thereof by or at the direction of the Board.
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Only Forest stockholders of record at the close of business on June 25, 2012 may vote at the meeting or
any postponements or adjournments of the meeting. A copy of the 2012 Annual Report to Stockholders has previously been mailed to Forest stockholders.
Please note that members of the Icahn Group have stated their intention to propose four alternative director nominees for election at the Annual Meeting and the Icahn Bylaw Repeal Proposal. We urge you to
vote for the nominees proposed by the Board and against the Icahn Bylaw Repeal Proposal by using the enclosed WHITE proxy card and not to sign or return or vote any proxy card sent to you by the Icahn Group. If you have already voted using a proxy
card sent to you by the Icahn Group, you can revoke it by using the instructions on the enclosed WHITE proxy card to vote by telephone or Internet, or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided. Only
your latest dated proxy will count, and any proxy may be revoked at any time prior to its exercise at the Annual Meeting as described in this Proxy Statement.
You are invited to attend the Annual Meeting. Whether or not you plan to attend the meeting in person, please vote by mail, by telephone or via the Internet in order to be certain your shares are
represented at the meeting.
By Order of the Board of Directors,
[
Signature
]
HERSCHEL S. WEINSTEIN,
Corporate Secretary
July [ ], 2012
New York, New York
Your Vote Is Very Important, No Matter How Many Or How Few Shares You Own
If you have questions about how to vote your shares, or need additional assistance, please contact
MacKenzie Partners, which is assisting us in the solicitation of proxies:
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
Or
Call Toll-Free: (800) 322-2885
Email: frxproxy@mackenziepartners.com
IMPORTANT
We urge you NOT to sign the [ ] proxy card sent to you by the Icahn Group, which has notified us it
intends to put forth its own slate. If you have already signed the Icahn Groups [ ] card, you have every legal
right
to change your vote by using the enclosed WHITE proxy card to vote TODAY by telephone, by Internet, or
by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided.
FOREST LABORATORIES, INC.
PROXY STATEMENT
TABLE OF CONTENTS
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FOREST LABORATORIES, INC.
909 THIRD AVENUE
NEW YORK, NEW YORK 10022
PRELIMINARY PROXY STATEMENT FOR 2012 ANNUAL
MEETING OF STOCKHOLDERS
DATED JUNE 28, 2012
This Proxy Statement contains information related to our Annual Meeting of Stockholders to be held on August 15, 2012 beginning at
[ ], at [ ], and at any postponements or adjournments thereof. This Proxy Statement is being sent to
stockholders on or about July , 2012. You should review this information together with our 2012 Annual Report to Stockholders, which was previously sent to you.
INFORMATION ABOUT THE MEETING
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Why did you send me this Proxy Statement?
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We sent you this Proxy Statement and the enclosed WHITE proxy card because the Board of Directors (the Board) of Forest Laboratories, Inc. (we or Forest or the
Company) is soliciting your proxy to vote at our 2012 Annual Meeting of Stockholders (the Annual Meeting) to be held on August 15, 2012 and at any postponements or adjournments of the Annual Meeting. This Proxy Statement summarizes information
that is intended to assist you in making an informed vote on the proposals described in this Proxy Statement.
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Has the Company been notified that a stockholder intends to propose alternative director nominees at the Annual Meeting?
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Yes. The Icahn Group, a group of affiliated hedge funds led by Carl C. Icahn, has notified the Company of its intention to propose four alternative director
nominees for election at the Annual Meeting. The Icahn Group nominees have NOT been endorsed by our Board. The Board unanimously recommends a vote FOR each of the Boards nominees for director on the enclosed WHITE proxy card.
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We are not responsible for the accuracy of any information provided by or relating to the Icahn Group contained
in any proxy solicitation materials filed or disseminated by, or on behalf of, the Icahn Group or any other statements that the Icahn Group may otherwise make.
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Who can vote at the Annual Meeting?
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Only stockholders of record as of the close of business on June 25, 2012 (the Record Date) are entitled to vote at the Annual Meeting. On that date, there
were 265,724,969 shares of our common stock (individually referred to in this Proxy Statement as a share) outstanding and entitled to vote.
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How many shares must be present to conduct the Annual Meeting?
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We must have a quorum present in person or by proxy to hold the Annual Meeting. A quorum is a majority of the outstanding shares entitled to vote.
Abstentions and broker non-votes (defined below) will be counted for the purpose of determining the existence of a quorum.
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What matters are to be voted upon at the Annual Meeting?
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[Five] [Four] proposals are scheduled for a vote:
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Election of ten directors to the Companys Board of Directors, with the Companys nominees being those named in this Proxy Statement;
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Approval, on an advisory basis, of the compensation of the Companys Named Executive Officers;
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Ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2013;
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If properly presented at the Annual Meeting, consider and act upon the non-binding stockholder proposal requesting us to amend our Bylaws to allow
stockholders to nominate director candidates for inclusion in our proxy materials as further described in Proposal 4 (the Stockholder Proposal); and
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If properly presented at the Annual Meeting, consider and act upon the stockholder proposal that the Icahn Group has indicated that it intends to
propose at the Annual Meeting that would repeal any provision of the Companys bylaws in effect at the time of Annual Meeting that was not included in the Companys bylaws as publicly filed prior to June 18, 2012 (Icahn Bylaw Repeal
Proposal).
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As of the date of this Proxy Statement, our Board does not know of any other business to be
presented at the Annual Meeting. If other business is properly brought before the Annual Meeting, the persons named on the enclosed WHITE proxy card will vote on these other matters in their discretion.
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How does the Board recommend that I vote?
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The Board recommends that you vote:
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1.
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FOR
the election of each of the director nominees named in this Proxy Statement;
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2.
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FOR
the proposal to approve (on an advisory basis) the compensation of the Companys Named Executive Officers;
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3.
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FOR
the proposal to ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2013; and
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[4.
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AGAINST
the Stockholder Proposal].
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[4/5].
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AGAINST
the Icahn Bylaw Repeal Proposal.
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What should I do if I receive a proxy card from the Icahn Group?
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The Icahn Group has stated its intention to propose four alternative director nominees for election at the Annual Meeting and to propose the Icahn Bylaw Repeal
Proposal. If the Icahn Group proceeds with its alternative nominations or the Icahn Bylaw Repeal Proposal you may receive proxy solicitation materials from the Icahn Group, including an opposition proxy statement and
[ ] proxy card. Your Board unanimously recommends you disregard these materials. If you have already voted using the
[ ] proxy card, you have every right to change your vote by executing and returning the enclosed WHITE proxy card or by voting by telephone or via the Internet by following the
instructions provided on the enclosed proxy card. Only the latest dated proxy you submit will be counted. If you vote to WITHHOLD your vote with respect to any Icahn Group nominee using the
[ ] proxy card, your vote will not be counted as a vote FOR the Boards nominees and will result in the revocation of any previous vote you may have cast on the
Companys WHITE proxy card. If you wish to vote pursuant to the recommendation of the Board, you should disregard any proxy card that you receive other than the WHITE proxy card. If you have any questions or need assistance voting, please call
MacKenzie Partners, Inc. at (800) 322-2885.
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How do I vote before the Annual Meeting?
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You may vote your shares by mail by filling in, signing and returning the enclosed WHITE proxy card or WHITE voting instruction form you receive from your
broker. For your convenience, you may also vote your shares by telephone or via Internet by following the instructions on the enclosed WHITE proxy card or your WHITE voting instruction form. If you vote by telephone or via the Internet, you do not
need to return your proxy card or voting instruction form. With respect to the election of directors, you may vote FOR all the nominees to the Board of Directors of Forest, you may withhold authority to vote for any nominee(s) you
specify and you may withhold authority to vote for all of the nominees as a group. For the advisory vote on the compensation of the Companys Named Executive Officers, the ratification of the selection of BDO USA, LLP as our independent
registered public accounting firm for the fiscal year ending March 31, 2013, [the vote on the Stockholder Proposal] and the vote on the Icahn Bylaw Repeal Proposal, you may vote FOR or AGAINST or abstain from voting. We
encourage you to disregard any non-WHITE proxy cards or non-WHITE voting instruction forms you may receive.
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May I vote at the Annual Meeting?
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Yes, you may vote your shares at the Annual Meeting if you attend in person. Even if you plan to attend the Annual Meeting in person, we recommend that you also
submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to attend the Annual Meeting in person.
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What is the difference between holding shares as a stockholder of record and as a beneficial owner?
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If your shares are registered in your name on the Companys books and records or with our transfer agent, Computershare, you are the stockholder of
record of those shares and this Notice of Annual Meeting and Proxy Statement and any accompanying documents have been provided directly to you by Forest. In contrast, if you purchased your shares through a brokerage or other financial
intermediary, the brokerage or other financial intermediary will be the stockholder of record of those shares. Generally, when this occurs, the brokerage or other financial intermediary will automatically put your shares into
street name, which means that the brokerage or other financial intermediary will hold your shares in its name or another nominees name and not in your name, but will keep records showing you as the real or beneficial
owner. If you hold shares beneficially in street name, this Notice of Annual Meeting and Proxy Statement and any accompanying documents have been forwarded to you by your broker, bank or other holder of record.
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How do I vote if my bank or broker holds my shares in street name?
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If you hold shares beneficially in street name, you may vote by submitting the enclosed voting instruction form. Telephone and Internet voting may be
available please refer to the voting instruction card provided by your broker.
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What should I do if I receive more than one WHITE proxy card or other set of proxy materials from the Company?
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If you hold your shares in multiple accounts or registrations, or in both registered and street name, you will receive a WHITE proxy card for each account.
Please sign, date and return all WHITE proxy cards you receive from the Company. If you choose to vote by phone or by Internet, please vote once for each WHITE proxy card you receive. Only your latest dated proxy for each account will be voted.
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If the Icahn Group proceeds with its previously announced alternative nominations, we will likely conduct
multiple mailings prior to the Annual Meeting date to ensure stockholders have our latest proxy information and materials to vote. We will send you a new WHITE proxy card with each mailing, regardless of whether you have previously voted. The latest
dated proxy you submit will be counted, and, if you wish to vote as recommended by the Board then you should only submit WHITE proxy cards.
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How many votes do I have?
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A:
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Each share of common stock that you own as of the close of business on the Record Date (June 25, 2012) entitles you to one vote on each matter voted upon at the
Annual Meeting. As of the close of business on the Record Date, there were 265,724,969 shares of our common stock outstanding.
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Yes, you may change your vote or revoke your proxy at any time before the vote at the Annual Meeting. You may change your vote prior to the
Annual Meeting by executing a valid WHITE proxy card bearing a later date and delivering it to us prior to the Annual Meeting at Forest Laboratories, Inc., Attention: Corporate Secretary, 909 Third Avenue, New York, New York 10022. Submitting a
WHITE proxy card will revoke votes you may have made on an Icahn Group proxy card. You may withdraw your vote at the Annual Meeting and vote in person by giving written notice to our Corporate Secretary. You may also revoke your
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vote without voting by sending written notice of revocation to our Corporate Secretary at the above address. Attendance at the meeting will not by itself revoke a previously granted proxy.
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If you have previously signed a [ ]
proxy card sent to you by the Icahn Group, you may change your vote by marking, signing, dating and returning the enclosed WHITE proxy card in the accompanying postage-paid envelope or by voting by telephone or via the Internet by following the
instructions on your WHITE proxy card. Submitting an Icahn Group proxy card will revoke votes you have made via the Companys WHITE proxy card.
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How are my shares voted if I submit a WHITE proxy card but do not specify how I want to vote?
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A:
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If you submit a properly executed WHITE proxy card but do not specify how you want to vote, your shares will be voted FOR the election of each of the
Companys nominees for director; FOR advisory approval of the compensation of the Companys Named Executive Officers; FOR the ratification of the selection of BDO USA, LLP as our independent registered public
accounting firm for the fiscal year ending March 31, 2013[; AGAINST approval of the Stockholder Proposal]; and AGAINST approval of the Icahn Bylaw Repeal Proposal.
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Will my shares be voted if I dont provide instructions to my broker?
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A:
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If you are the beneficial owner of shares held in street name by a broker, you must instruct your broker how to vote your shares. If you do not provide
voting instructions at least ten days prior to the Annual Meeting date, your broker will be entitled to vote the shares with respect to discretionary items but will not be permitted to vote the shares with respect to
non-discretionary items (we refer to the latter case as a broker non-vote). In the case of a broker non-vote, your broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a
quorum, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (NYSE).
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Under NYSE rules, the proposal to elect directors, the advisory vote relating to executive compensation, the proposal to ratify the appointment of BDO USA, LLP as Forests independent registered
public accounting firm for the fiscal year ending March 31, 2013, [the Stockholder Proposal] and the Icahn Bylaw Repeal Proposal are non-discretionary matters for which specific instructions from beneficial owners are required. As a result,
your broker will not be allowed to vote with respect to the election of directors, the proposal to approve (on an advisory basis) the compensation of the Companys Named Executive Officers, the proposal to ratify BDO USA, LLPs appointment
as independent registered public accounting firm, [the Stockholder Proposal] and the Icahn Bylaw Repeal Proposal on your behalf if you do not provide your broker with specific voting instructions on the proposals.
Your vote is important and we strongly encourage you to vote your shares by following the instructions provided on the enclosed voting
instruction form. Please vote promptly.
Q:
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What vote is required to elect directors?
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As a result of the Icahn Groups declared intention to propose alternative director nominees, assuming such nominees are in fact proposed for election at
the Annual Meeting and such nominees have not been withdrawn by the Icahn Group on or prior to the tenth day before we mail the Notice of Meeting in this Proxy Statement to our stockholders, there will be more nominees than available positions and,
as provided in the Companys Bylaws and Corporate Governance Guidelines, directors will be elected on a plurality basis. This means that the ten candidates receiving the highest number of FOR votes will be elected. A properly
executed proxy card marked WITHHOLD with respect to the election of a director nominee will be counted for purposes of determining if there is a quorum at the Annual Meeting, but will not be considered to have been voted for or against
the director nominee. Withhold votes and broker non-votes will have no effect on the outcome of the election.
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It will NOT help elect your Board if you sign and return proxies sent by the Icahn Group even if you vote to WITHHOLD your
vote with respect to their directors using the Icahn [ ] proxy card.
- 4 -
In fact, doing so may cancel any previous vote you cast on the Companys WHITE proxy card. The only way to support your Boards nominees is to vote FOR the Boards
nominees on the WHITE proxy card.
In the event that the Icahn Group withdraws its nominees on or prior to the tenth day
before we mail the Notice of Meeting in this Proxy Statement to our stockholders, we will disclose such withdrawal to our stockholders and, as provided by the Companys Bylaws and Corporate Governance Guidelines, our directors will be elected
by a vote of a majority of the votes cast. In the event that our directors are elected by a vote of a majority of the votes cast, you may vote FOR or AGAINST or abstain from voting with respect to each director nominee. A
majority of votes cast means that the number of shares cast FOR a directors election exceeds the number of votes cast AGAINST such directors election. Abstentions and broker non-votes will have no effect on the
outcome of the election.
Q:
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What happens in an uncontested election where the majority of votes cast standard applies and an incumbent director does not receive enough votes to be
elected?
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A:
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Pursuant to our Corporate Governance Guidelines, the Board expects an incumbent director to tender his or her irrevocable resignation if he or she fails to
receive the required number of votes cast for his or her re-election. In order to ensure that the Company always has a fully functioning Board, if an incumbent director fails to receive the required number of votes cast, he or she continues as a
holdover director except in a contested election where an alternative director has been duly elected. The Nominating and Governance Committee will act on an expedited basis to determine whether to accept or reject the directors resignation and
will submit such recommendation to the Board for prompt consideration. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a directors resignation. The Board will make
its decision public as soon as practicable following the Annual Meeting.
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Q:
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What vote is required to approve, on an advisory basis, the compensation of the Companys Named Executive Officers?
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A:
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This matter is being submitted to enable stockholders to approve, on an advisory basis, the compensation of the Companys Named Executive Officers. In order
to be approved on an advisory basis, this proposal must receive the FOR vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote against the
proposal. Broker non-votes will have no effect on this proposal as brokers are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.
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Q:
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What vote is required to ratify the selection of BDO USA, LLP as Forests independent registered public accounting firm for the fiscal year ending
March 31, 2013?
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A:
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For approval of this proposal, the proposal must receive the FOR vote of a majority of the shares present in person or by proxy and entitled to vote
on the matter. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on this proposal as brokers are not entitled to vote on this proposal in the absence of voting instructions from the beneficial
owner.
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[Q:
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What vote is required to approve the Stockholder Proposal?
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A:
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This matter is being submitted to enable stockholders to approve, on an advisory basis, the Stockholder Proposal. In order to be approved on an advisory basis,
this proposal must receive the FOR vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no
effect on this proposal as brokers are not entitled to vote on such proposals in the absence of voting instructions from the beneficial owner.]
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Q:
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What vote is required to approve the Icahn Bylaw Repeal Proposal?
|
A:
|
In order to be approved, the Icahn Bylaw Repeal Proposal must receive the FOR vote of a majority of the shares of common stock outstanding (which
constitutes the whole capital stock of the Company) entitled to vote at the Annual Meeting. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
|
Q:
|
Who will count the votes?
|
A:
|
Votes will be counted by an independent inspector of election appointed for the Annual Meeting by the Chairman of the Annual Meeting.
|
Q:
|
Do stockholders have any appraisal or dissenters rights on the matters to be voted on at the Annual Meeting?
|
A:
|
No, stockholders of Forest will not have rights of appraisal or similar dissenters rights with respect to any of the matters identified in this Proxy
Statement to be acted upon at the Annual Meeting.
|
Q:
|
What do I need for admission to the Annual Meeting?
|
A:
|
Attendance at the Annual Meeting or any adjournment or postponement thereof will be limited to record and beneficial stockholders as of the Record Date,
individuals holding a valid proxy from a record holder, and other persons authorized by the Company. If you are a stockholder of record, your name will be verified against the list of stockholders of record prior to your admittance to the Annual
Meeting or any adjournment or postponement thereof. You should be prepared to present photo identification for admission. If you hold your shares in street name, you will need to provide proof of beneficial ownership on the Record Date, such as a
brokerage account statement showing that you owned our stock as of the Record Date, a copy of a voting instruction form provided by your broker, bank or other nominee, or other similar evidence of ownership as of the Record Date, as well as your
photo identification, for admission. If you do not provide photo identification or comply with the other procedures described above upon request, you will not be admitted to the Annual Meeting or any adjournment or postponement thereof. For security
reasons, you and your bags will be subject to search prior to your admittance to the Annual Meeting.
|
Q:
|
Who pays for the Companys solicitation of proxies?
|
A:
|
We will pay for the entire cost of soliciting proxies on behalf of the Company. We will also reimburse brokerage firms, banks and other agents for the cost of
forwarding the Companys proxy materials to beneficial owners. In addition, our directors and employees may solicit proxies in person, by telephone, via the Internet or by other means of communication. Directors and employees will not be paid
any additional compensation for soliciting proxies, but MacKenzie Partners, Inc. (MacKenzie), our third party proxy solicitor, will be paid a fee, estimated to be about
$
[ ]
, for rendering solicitation services. MacKenzie expects that approximately [ ] of its employees
will assist in the solicitation. MacKenzie will ask brokerage houses and other custodians and nominees whether other persons are beneficial owners of our common stock.
|
Our aggregate expenses, including those of MacKenzie, related to our solicitation of proxies in excess of those normally spent for an
Annual Meeting as a result of the potential proxy contest and excluding salaries and wages of our regular employees, are expected to be approximately $
[ ]
, of which
approximately $
[ ]
has been spent to date. Appendix B sets forth information relating to certain of our directors, officers and employees who are considered
participants in our solicitation under the rules of the U.S. Securities and Exchange Commission (SEC) by reason of their position as directors of the Company or because they may be soliciting proxies on our behalf.
Q:
|
How can I find out the results of the voting at the Annual Meeting?
|
A:
|
We will announce results promptly once they are available and will report final results in a filing with the SEC on Form 8-K.
|
- 6 -
Q:
|
What is the deadline to propose actions for consideration at next years Annual Meeting of Stockholders?
|
A:
|
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting
their proposals in writing to the Company in a timely manner. Proposals should be addressed to our principal executive offices: Forest Laboratories, Inc., Attention: Corporate Secretary, 909 Third Avenue, New York, New York 10022. For a stockholder
proposal to be considered for inclusion in our proxy statement for our 2013 Annual Meeting of Stockholders, we must receive the written proposal no later than March [ ], 2013. In addition, stockholder proposals must otherwise
comply with the requirements of Rule 14a8 promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act).
|
Our Bylaws also establish an advance notice procedure for stockholders who wish to present a proposal, including the nomination of directors, before an annual meeting of stockholders but do not intend for
the proposal to be included in our proxy statement. Pursuant to our Bylaws, a proposal may be brought before the meeting by a stockholder who was a stockholder of record at the time notice is given and is entitled to vote at the annual meeting, and
who complied with the notice procedures specified in our Bylaws. To be timely for our 2013 Annual Meeting, we must receive the written notice at our principal executive offices between the close of business on May [ ], 2013
and the close of business on June [ ], 2013. For further information on how a stockholder may nominate a candidate to serve as a director, please see the disclosure appearing under the heading, Selection of Nominees for
Election to the Board on Page 21.
If a stockholder who has notified us of his or her intention to present a proposal at
an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
Q:
|
What is householding and how does it work?
|
A:
|
The SECs householding rules permit us to deliver only one set of proxy materials to stockholders who share an address unless otherwise
requested. This procedure reduces printing and mailing costs. If you share an address with another stockholder and have received only one set of proxy materials, you may request a separate copy of these materials at no cost to you by writing to
Forest Laboratories, Inc., Attention: Corporate Secretary, 909 Third Avenue, New York, New York 10022, or by calling us at (212) 421-7850. Alternatively, if you are currently receiving multiple copies of the proxy materials at the same address
and wish to receive a single copy in the future, you may contact us by calling or writing to us at the telephone number or address given above.
|
If you are a beneficial owner (i.e., your shares are held in the name of a bank, broker or other holder of record), the bank, broker or other holder of record may deliver only one copy of the Notice of
Annual Meeting and Proxy Statement to stockholders who have the same address unless the bank, broker or other holder of record has received contrary instructions from one or more of the stockholders. If you wish to receive a separate copy of the
Notice of Annual Meeting and Proxy Statement, now or in the future, you may contact us at the address or telephone number above and we will promptly deliver a separate copy. Beneficial owners sharing an address, who are currently receiving multiple
copies of the Notice of Annual Meeting and Proxy Statement and wish to receive a single copy in the future, should contact their bank, broker or other holder of record to request that only a single copy be delivered to all stockholders at the shared
address in the future.
- 7 -
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of June 25, 2012, the number of shares of common stock owned beneficially by any
persons we know to be beneficial owners of more than five percent of our outstanding shares, each of our directors and each of our executive officers named in the Summary Compensation Table below and all of our directors and executive officers as a
group: The percentage of ownership is calculated based upon the 265,724,969 shares of common stock issued and outstanding as of June 25, 2012.
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
|
Percent
of Class (1)
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Wellington Management Company, LLP (2)
280 Congress Street
Boston, MA 02210
|
|
|
34,137,700
|
|
|
|
12.85
|
%
|
Icahn Capital LP (3)
c/o Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153
|
|
|
26,361,686
|
|
|
|
9.92
|
%
|
Vanguard Specialized Funds Vanguard (4)
Health Care Fund
100 Vanguard Boulevard
Malvern, PA 19355
|
|
|
25,903,000
|
|
|
|
9.75
|
%
|
BlackRock, Inc. (5)
40 East 52nd Street
New York, NY 10022
|
|
|
20,953,169
|
|
|
|
7.89
|
%
|
Morgan Stanley (6)
1585 Broadway
New York, NY 10036
|
|
|
18,579,695
|
|
|
|
6.99
|
%
|
ClearBridge Advisors, LLC (7)
620 8th Avenue
New York, NY 10018
|
|
|
17,714,848
|
|
|
|
6.67
|
%
|
Capital Research Global Investors (8)
333 South Hope Street
Los Angeles, CA 90071
|
|
|
14,730,948
|
|
|
|
5.54
|
%
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Howard Solomon
|
|
|
2,835,915
|
(9)
|
|
|
1.07
|
%
|
Elaine Hochberg
|
|
|
689,811
|
(10)
|
|
|
*
|
|
Francis I. Perier, Jr.
|
|
|
500,178
|
(11)
|
|
|
*
|
|
Marco Taglietti, M.D.
|
|
|
212,818
|
(12)
|
|
|
*
|
|
David F. Solomon
|
|
|
251,486
|
(13)
|
|
|
*
|
|
Nesli Basgoz, M.D.
|
|
|
44,569
|
(14)
|
|
|
*
|
|
Christopher J. Coughlin
|
|
|
10,000
|
(15)
|
|
|
*
|
|
Dan L. Goldwasser
|
|
|
68,099
|
(16)
|
|
|
*
|
|
Kenneth E. Goodman
|
|
|
199,294
|
(17)
|
|
|
*
|
|
Gerald M. Lieberman
|
|
|
10,000
|
(18)
|
|
|
*
|
|
Lawrence S. Olanoff, M.D., Ph.D.
|
|
|
330,175
|
(19)
|
|
|
*
|
|
Lester B. Salans, M.D.
|
|
|
62,679
|
(20)
|
|
|
*
|
|
Brenton L. Saunders
|
|
|
10,000
|
(21)
|
|
|
*
|
|
Peter J. Zimetbaum, M.D.
|
|
|
25,448
|
(22)
|
|
|
*
|
|
All directors and executive officers as a group
|
|
|
6,476,171
|
(23)
|
|
|
2.44
|
%
|
- 8 -
(1)
|
For purposes of computing the percentage of outstanding shares of common stock held by each person named in the table on a given date, any security which such person
has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
|
(2)
|
Based on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on February 14, 2012 by Wellington Management Company, LLP
(Wellington Management). Wellington Management reported that it has shared voting power with respect to 5,243,970 shares of common stock and shared dispositive power with respect to 34,137,700 shares of common stock. Wellington Management acts as
investment advisor to various clients who have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares of common stock deemed to be beneficially owned by Wellington Management. Other
than Vanguard Specialized Funds Vanguard Health Care Fund, no such client of Wellington Management was known to have such right or power with respect to more than five percent of the shares of our common stock.
|
(3)
|
Based on the information provided pursuant to Amendment No. 3 to a statement on a Schedule 13D filed with the SEC on May 30, 2012 (the Icahn Schedule 13D) by
Icahn Capital LP with respect to itself, the other members of the Icahn Group, Carl C. Icahn and certain other affiliated entities of Carl C. Icahn (collectively, the Reporting Persons). The Reporting Persons reported that (i) High River
Limited Partnership, a Delaware limited partnership (High River), has sole voting power and sole dispositive power with regard to 5,272,335 shares of common stock; (ii) Icahn Partners LP, a Delaware limited partnership (Icahn Partners), has
sole voting power and sole dispositive power with regard to 8,077,405 shares of common stock; (iii) Icahn Partners Master Fund LP, a Cayman Islands exempted limited partnership (Icahn Master), has sole voting power and sole dispositive power
with regard to 8,749,838 shares of common stock; (iv) Icahn Partners Master Fund II L.P., a Cayman Islands exempted limited partnership (Icahn Master II), has sole voting power and sole dispositive power with regard to 2,960,767 shares of
common stock; and (v) Icahn Partners Master Fund III L.P., a Cayman Islands exempted limited partnership (Icahn Master III), has sole voting power and sole dispositive power with regard to 1,301,341 shares of common stock. Carl C. Icahn,
by virtue of his relationship to High River, Icahn Partners, Icahn Master, Icahn Master II and Icahn Master III, is deemed to beneficially own the shares of common stock which High River, Icahn Partners, Icahn Master, Icahn Master II and Icahn
Master III directly beneficially own. Per the Icahn Schedule 13D, each of the Reporting Persons may have shared voting and/or dispositive power over all or some of such shares.
|
(4)
|
Based on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on January 26, 2012 by Vanguard Specialized Funds Vanguard
Health Care Fund (Vanguard). Vanguard reported that it has sole voting power with respect to 25,903,000 shares of common stock.
|
(5)
|
Based on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on February 13, 2012 by BlackRock, Inc. (BlackRock). BlackRock
reported that it has sole voting and dispositive power with respect to 20,953,169 shares of common stock.
|
(6)
|
Based on the information provided pursuant to a statement on Schedule 13G filed with the SEC on February 10, 2012 by Morgan Stanley and Morgan Stanley &
Co. LLC (MS & Co.). Morgan Stanley reported that it has sole voting power with respect to 18,128,738 shares of common stock, shared voting power with respect to 21,005 shares of common stock, and sole dispositive power with respect to
18,579,695 shares of common stock. MS & Co. reported that it has sole voting and dispositive power with respect to 14,318,580 shares of common stock. Morgan Stanley further reported that in accordance with SEC Release No. 34-39538
(January 12, 1998) (the Release), its filing reflected securities beneficially owned, or that may be deemed to be beneficially owned, by certain operating units (collectively, the MS Reporting Units) of Morgan Stanley and its subsidiaries and
affiliates (collectively, MS), but did not reflect securities, if any, beneficially owned by any operating units of MS whose ownership of securities is disaggregated from that of the MS Reporting Units in accordance with the Release.
|
- 9 -
(7)
|
Based on the information provided pursuant to a statement on a Schedule 13G/A filed with the SEC on February 14, 2012 by ClearBridge Advisors, LLC (ClearBridge).
ClearBridge reported that it has sole voting power with respect to 15,085,513 shares of common stock and sole dispositive power with respect to 17,714,848 shares of common stock.
|
(8)
|
Based on the information provided pursuant to a statement on a Schedule 13G filed with the SEC on February 14, 2012 by Capital Research Global Investors (Capital
Research), a division of Capital Research and Management Company (CRMC). Capital Research reported that it has sole voting and dispositive power with respect to 14,730,948 shares of common stock, and is deemed to be the beneficial owner of
14,730,948 shares of common stock as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.
|
(9)
|
Includes 107,856 shares of stock that are subject to a risk of forfeiture, 1,740,000 shares issuable pursuant to options that were exercisable on June 25, 2012 or
which become exercisable within 60 days of June 25, 2012 and 58,431 shares held by a 501(c)(3) charitable foundation, as to which Mr. Solomon disclaims beneficial ownership. Does not include a target grant of 95,800 performance stock units
granted on December 5, 2011 which vest, if at all, following the conclusion of fiscal year 2015 based on the achievement of certain performance metrics.
|
(10)
|
Includes 48,600 shares of stock that are subject to a risk of forfeiture, 540,000 shares issuable pursuant to options that were exercisable on June 25, 2012 or
which become exercisable within 60 days of June 25, 2012 and 24,560 shares which are pledged as security. Does not include a target grant of 23,850 performance stock units granted on December 5, 2011 which vest, if at all, following
the conclusion of fiscal year 2015 based on the achievement of certain performance metrics.
|
(11)
|
Includes 77,636 shares of stock that are subject to a risk of forfeiture and includes 370,500 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012. Does not include a target grant of 22,400 performance stock units granted on December 5, 2011 which vest, if at all, following the conclusion of fiscal year 2015 based on
the achievement of certain performance metrics.
|
(12)
|
Includes 88,950 shares of stock that are subject to a risk of forfeiture and includes 92,250 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012. Does not include a target grant of 19,100 performance stock units granted on December 5, 2011 which vest, if at all, following the conclusion of fiscal year 2015 based on
the achievement of certain performance metrics.
|
(13)
|
Includes 89,150 shares of stock that are subject to a risk of forfeiture and includes 71,500 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012. Does not include a target grant of 19,100 performance stock units granted on December 5, 2011 which vest, if at all, following the conclusion of fiscal year 2015 based on
the achievement of certain performance metrics.
|
(14)
|
Includes 3,262 shares of stock that are subject to a risk of forfeiture and includes 37,667 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012.
|
(15)
|
Includes 10,000 shares issuable pursuant to options that were exercisable on June 25, 2012 or which become exercisable within 60 days of June 25, 2012.
|
(16)
|
Includes 3,262 shares of stock that are subject to a risk of forfeiture and includes 41,167 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012. Does not include 21,680 shares owned by Mr. Goldwassers wife of which Mr. Goldwasser disclaims beneficial ownership.
|
(17)
|
Includes 3,262 shares of stock that are subject to a risk of forfeiture and includes 23,167 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012.
|
(18)
|
Includes 10,000 shares issuable pursuant to options that were exercisable on June 25, 2012 or which become exercisable within 60 days of June 25, 2012.
|
(19)
|
Includes 1,683 shares of stock that are subject to a risk of forfeiture and includes 240,546 shares issuable pursuant to options that were exercisable
on June 25, 2012 or which become exercisable within 60 days of
|
- 10 -
|
June 25, 2012. Does not include 10,000 shares beneficially owned by a charitable remainder trust as to which Dr. Olanoff disclaims beneficial ownership.
|
(20)
|
Includes 3,262 shares of stock that are subject to a risk of forfeiture and includes 41,167 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012.
|
(21)
|
Includes 10,000 shares issuable pursuant to options that were exercisable on June 25, 2012 or which become exercisable within 60 days of June 25, 2012.
|
(22)
|
Includes 3,012 shares of stock that are subject to a risk of forfeiture, 20,546 shares issuable pursuant to options that were exercisable on June 25, 2012 or which
become exercisable within 60 days of June 25, 2012.
|
(23)
|
Includes 841,215 shares of stock that are subject to a risk of forfeiture and includes 3,829,260 shares issuable pursuant to options that were exercisable on
June 25, 2012 or which become exercisable within 60 days of June 25, 2012. Does not include a target grant of 180,250 performance stock units granted on December 5, 2011 which vest, if at all, following the conclusion of fiscal
year 2015 based on the achievement of certain performance metrics.
|
Section 16(a) Beneficial
Ownership Reporting Compliance
Federal securities laws require our executive officers and directors and persons owning
more than 10% of our common stock to file certain reports on ownership and changes in ownership with the SEC. Based on a review of our records and other information, we believe that during fiscal year 2012, our executive officers and directors and
all persons holding more than 10% of our common stock timely filed all such Section 16(a) reports except for (1) a report on Form 4 filed by Dr. Lawrence Olanoff reporting the forfeiture of 21,250 shares of restricted stock effective
upon his resignation as President and COO of the Company December 31, 2010 was inadvertently filed late and (2) a report on Form 4 filed by William Meury reporting the grant of restricted stock and options on December 5, 2011 and the
delivery of shares to the Company on December 6 and 7, 2011 in satisfaction of Mr. Meurys tax obligations upon the vesting of previously granted restricted stock awards was inadvertently filed late.
- 11 -
PROPOSAL 1
ELECTION OF DIRECTORS
Overview of Election of Directors
Our entire Board is elected each year at the Annual Meeting of Stockholders, and we are recommending a highly qualified, experienced and diverse slate of ten nominees for election at the 2012 Annual
Meeting, each of whom has been recommended by our Nominating and Governance Committee and approved by our Board. The ten nominees listed below include eight independent directors as defined in the NYSE rules and regulations. We are confident that
our Board of Directors consists of the right group to best serve the interests of all of our stockholders.
Each nominee
elected as a director will continue in office until the next Annual Meeting of Stockholders or until his or her successor has been elected or appointed. Each person nominated below has consented to be named in this Proxy Statement and has agreed to
serve if elected.
Background to the Boards Recommendation in Favor of Forests Nominees
Our Board of Directors has been engaged in a long-term effort to strengthen its composition in service of the best
interests of Forest stockholders. In the last six years, we bolstered our Board with five new independent directors who have brought valuable experience and leadership in critical areas our five newest independent directors, who
comprised 50% of our Board, are Dr. Peter J. Zimetbaum, a Director of Clinical Cardiology at Beth Israel Deaconess Medical Center and an Associate Professor of Medicine at Harvard Medical School, who joined in December 2009; Dr. Nesli
Basgoz, the Associate Chief for Clinical Affairs, Division of Infectious Diseases at Massachusetts General Hospital, who joined in 2006; Christopher J. Coughlin, former Executive Vice President and Chief Financial Officer of Tyco International,
who joined in 2011; Gerald M. Lieberman, former President and Chief Operating Officer of AllianceBernstein, who joined in 2011; and Brenton L. Saunders, Chief Executive Officer and President of Bausch + Lomb, who also joined in 2011. Each of these
independent directors serve significant roles on our Board committees. In light of their complementary experience, relevant expertise, and diverse industry and educational backgrounds, these nominees, who bring executive leadership and insights from
the fields of pharmaceuticals, research and development, healthcare, law, finance and accounting, will serve as a superior and independent board best suited to lead Forest into the future.
We believe that each of our nominees has professional experience in areas relevant to our strategy and operations and offers experience,
leadership and continuity at a critical time for the Companys future. We also believe that our nominees have other attributes necessary to create an effective board: high personal and professional ethics, integrity and values; vision and
long-term strategic perspective; experience with regulatory and government processes; practical judgment and excellent decision-making skills; the ability to devote significant time to serve on our board and its committees and to work in a
collaborative manner with other board members; and a commitment to representing the long-term interests of all our stockholders.
The names of our Board nominees and certain other information about them is set forth further below.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE BOARDS TEN NOMINEES FOR DIRECTOR ON THE ENCLOSED WHITE PROXY CARD.
The persons named as proxies intend to vote the proxies FOR the election of each of these nominees unless you indicate on the
WHITE proxy card a vote to WITHHOLD your vote with respect to any of the nominees. If for some reason any director nominee is unable to serve, or for good cause will not serve if elected, the persons named as proxies may vote for a
substitute nominee recommended by the Board, and unless you indicate otherwise on the WHITE proxy card, the proxies will be voted in favor of the remaining nominees. If any substitute nominees are designated, we will file an amended proxy statement
that, as applicable, identifies
- 12 -
the substitute nominees, discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected, and includes certain biographical and other information
about such nominees required by SEC rules.
Background to Potential Contested Solicitation
On May 30, 2012, Icahn Capital LP and certain affiliated entities, a group of hedge funds led by
Carl C. Icahn (collectively, the Icahn Group) announced their intention to nominate a slate of directors for election to Forests Board of Directors at the 2012 Annual Meeting that would constitute less than a majority of the
Board. By letter dated June 18, 2012, the Icahn Group submitted a request pursuant to Section 220 of the General Corporation Law of the State of Delaware to inspect certain books and records of the Company. On June 19, 2012,
the Icahn Group delivered a notice to the Company advising the Company of its intent to nominate a slate of four directors for election to the Board and to propose that stockholders adopt the Icahn Bylaw Repeal Proposal. On June 26, 2012, the Icahn
Group submitted a request pursuant to Section 220 of the General Corporation Law of the State of Delaware to inspect certain stocklist and related ancillary materials of the Company. From May 30
th
to June 19
th
, Carl Icahn and Howard Solomon, Chairman of Forests Board, had
several conversations concerning Icahns perspectives on the Company and the upcoming annual election, including Mr. Icahns desire for representation on the Board. No agreements or understandings resulted from these conversations.
Biographical Information for Nominees
In addition to the information set forth below, Appendix B sets forth information relating to our directors and certain of our officers
and employees who are considered participants in our solicitation under the rules of the SEC by reason of their position as directors of the Company or because they may be soliciting proxies on our behalf. The following persons have been
nominated as directors:
Howard Solomon
Director since 1964
Mr. Solomon, 84, is Chairman, Chief Executive Officer and President of Forest. He began his career as an attorney at leading law firms in New York and joined Forest in 1964 as a director and
secretary of the Board while serving as outside counsel for the Company. He became CEO of Forest in 1977 and Chairman in 1998. Mr. Solomon is a Trustee of the New York Presbyterian Hospital and previously served on the Board of Cold Spring
Harbor Laboratories. He is currently a member of the Executive Committee of the Board of Directors of the Metropolitan Opera and Chairman of its Finance Committee. He also serves on the Board of the New York City Ballet. Mr. Solomon graduated
from the City College of New York and holds a J.D. from Yale University.
We believe that Mr. Solomons experience
as a senior executive and leader in our industry, his in-depth knowledge of our Company and its day-to-day operations and his strong record and strategic vision for the Company qualify him to serve on our Board.
Nesli Basgoz, M.D.
Director since 2006
Dr. Basgoz, 54, is the Associate Chief for Clinical Affairs, Division of Infectious Diseases at Massachusetts General Hospital (MGH) and serves on the hospitals Board of Trustees. In addition,
Dr. Basgoz is an Associate Professor of Medicine at Harvard Medical School. Previously, she served as Clinical Director in the Infectious Diseases Division of MGH for six years. Dr. Basgoz earned her M.D. Degree and completed her residency
in internal medicine at Northwestern University Medical School. She also completed a fellowship in the Infectious Diseases Division at the University of California at San Francisco. She is board certified in both infectious diseases and internal
medicine.
Dr. Basgozs broad medical expertise and nationally recognized leadership in the
medical field, as well as her extensive clinical trial experience has equipped her to effectively advise the Board and management with respect to many strategic matters, including navigating regulatory approvals and the clinical trial process.
Moreover, her particular expertise in infectious diseases has enabled Dr. Basgoz to advise the Board and management with respect to the Companys current and potential portfolio of drugs within the relevant indications, including
Forests recently launched Teflaro
®
product and other antibiotics under development at the Company.
- 13 -
Christopher J. Coughlin
Director since 2011
Mr. Coughlin, 59, most recently served as Executive Vice President and Chief Financial Officer of Tyco International from 2005 to
2010 and remains an advisor to Tyco. During his tenure, he played a central role in the separation of Tyco into three independent, public companies and provided financial leadership surrounding major transactions, including the $2 billion
acquisition of Broadview Security, among many other responsibilities and accomplishments. Prior to joining Tyco, he worked as the Chief Operating Officer of the Interpublic Group of Companies from June 2003 to December 2004, as Chief Financial
Officer from August 2003 to June 2004 and as a director from July 2003 to July 2004. Previously, Mr. Coughlin was Executive Vice President and Chief Financial Officer of Pharmacia Corporation from 1998 until its acquisition by Pfizer in 2003.
Prior to that, he was Executive Vice President of Nabisco Holdings and President of Nabisco International. From 1981 to 1996 he held various positions, including Chief Financial Officer, at Sterling Drug. Mr. Coughlin is currently serving as
the lead independent director on the board of Dun & Bradstreet, where he is a member of the Audit Committee and the Compensation and Benefits Committee. He also serves on the board of Covidien plc, where he is Chair of the Compliance
Committee and a member of its Transaction Committee. In addition, Mr. Coughlin previously served on the boards of the Interpublic Group of Companies, Monsanto Company and Perrigo Company. Mr. Coughlin has a B.S. in accounting from Boston
College.
A veteran of service and leadership on public company boards, Mr. Coughlins wide array of senior
management positions in global companies, pharmaceutical background, finance experience and compliance and governance expertise enhances the Boards ability to make strategic decisions for the long-term growth of the Company.
Dan L. Goldwasser
Director since 1977
Mr. Goldwasser, 72, is a retired attorney. During the early part of his legal career he practiced corporate and securities law representing both public and private corporations. From 1992 through
2011 he was a shareholder in the law firm Vedder Price, P.C. where he was a member of the firms Accounting Law Practice Group. During this period Mr. Goldwasser served as Chairman of the American Bar Associations Business Law
Sections Committee on Law and Accounting and as the American Bar Associations Co-Chairman of the National Conference of Lawyers and Certified Public Accountants. Each year from 1994 through 2004 he was named by the editors of Accounting
Today as one of the 100 most influential people in accounting. From 2003 to 2006, he also was a member of the Auditing Standards Board of the American Institute of Certified Public Accountants. Mr. Goldwasser holds a B.A. from
Harvard University and an LL.B from Columbia Law School where he taught Accounting for Lawyers.
Mr. Goldwassers knowledge of federal and state corporate and securities laws, leadership roles in accounting organizations,
service on the AICPAs Auditing Standards Board, expertise in legal, regulatory and accounting matters and his deep understanding of Forests business make him a valuable contributor to the Board.
Kenneth E. Goodman
Director since 1998
Mr. Goodman, 64, is the former President and Chief Operating Officer of Forest, a position that he held from 1998 to 2006. For eighteen years prior thereto, Mr. Goodman served as Forests
Vice President, Finance and Chief Financial Officer and was named Executive Vice President, Operations in February 1998. From 1975 to 1980, he served as a senior financial officer at Wyeth, and before that, as a C.P.A. at Main Hurdman, which is now
part of KPMG LLP. Mr. Goodman currently serves Syracuse University as Vice Chairman of the Board of Trustees, a member of the Executive Committee and Chairman of the Audit Committee; he previously served as Chairman of the Budget Committee. He
is also Chairman of the International Board of Directors of the Israel Cancer Research Fund and Co-Chairman of its New York Board. Mr. Goodman is a C.P.A. and holds a B.S. degree from The Whitman School of Management at Syracuse University.
- 14 -
Mr. Goodmans intimate knowledge of the Companys operations, having served
as President and Chief Operating Officer of Forest with broad responsibility for sales, commercial operations, compliance, manufacturing operations, information technology and other areas, his substantial expertise in financial matters, and his
service as an important interface between management and the Board as its presiding independent director, make him a valuable member of the Board.
Gerald M. Lieberman
Director since 2011
Mr. Lieberman, 65,
most recently served as the President and Chief Operating Officer, as well as a member of the board of directors of AllianceBernstein from 2004 to 2009, where he oversaw several critical functions for AllianceBernstein, including finance, global
risk management, technology, operations, human resources and investor and public relations. In addition, he was instrumental in developing AllianceBernsteins global integrated platform and enhancing its corporate governance and financial
transparency. Prior to joining AllianceBernstein in 1998, Mr. Lieberman held a number of senior positions at Fidelity Investments from 1993 to 1998, including Chief Financial Officer and Chief of Administration and he was a member of
Fidelitys operating committee, reporting directly to the Chairman. Before joining Fidelity, Mr. Lieberman spent 14 years with Citicorp, where he served as Senior Human Resources Officer and a member of the policy committee, reporting to
the Companys Chairman and Chief Executive Officer. At Citicorp, he also held several other senior leadership positions, including Chief Executive Officer of Citibank Mexico and Division Head of Latin America. Mr. Lieberman is currently
serving as a director at Computershare. He served 9 years as a trustee of the University of Connecticut Foundation and was a practicing C.P.A with Arthur Anderson. He received a B.S. from the University of Connecticut and attended New York
Universitys Graduate School of Business Administration.
Mr. Liebermans senior roles at AllianceBernstein and
Fidelity Investments, premier investment and asset management firms, and his breadth and depth of experiences, including his finance and accounting expertise and career-long focus on risk management, enable him to provide important and valuable
perspectives to the Board.
Lawrence S. Olanoff, M.D., Ph.D.
Director since 2006
Dr. Olanoff, 60, served as Forests Chief Operating Officer from 2006 to 2010 and currently serves as Senior Scientific Adviser
to the Company. From July 2005 to October 2006, Dr. Olanoff was President and Chief Executive Officer at Celsion Corporation, an oncology drug development company. He also served as Executive Vice President and Chief Scientific Officer of
Forest from 1995 to 2005. Prior to joining Forest in 1995, Dr. Olanoff served as Senior Vice President of Clinical Research and Development at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group) and at the Upjohn Company in
a number of positions including Corporate Vice President of Clinical Development and Medical Affairs. Over his entire career, he was involved in 30 product approvals. In addition, he is currently an adjunct Assistant Professor and Special Adviser to
the President for Corporate Affairs at the Medical University of South Carolina (MUSC), a Director Emeritus of the MUSC Foundation for Research Development, which is a non-profit foundation created to benefit the university, as well as the Chairman
of the Board of Ariel Pharmaceuticals, Inc., a private, development-stage pharmaceutical company. He holds a Ph.D. in biomedical engineering and an M.D. degree from Case Western Reserve University.
Dr. Olanoffs detailed knowledge of the pharmaceutical industry, his broad operational experience and research and development
leadership over the course of his career at Forest, Sandoz and Upjohn, including with respect to thirty product approvals, and his service as a senior executive and intimate knowledge of Forests operations combine to make him an important
asset to the Board.
Lester B. Salans, M.D.
Director since 1998
Dr. Salans, 76, is a Clinical Professor and member of the Clinical Attending Staff of Internal Medicine at the Mount Sinai Medical
School. Prior thereto, Dr. Salans was a senior executive at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group). Dr. Salans is a former Director of the National Institutes of
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Arthritis, Diabetes, Digestive and Kidney Diseases of the National Institutes of Health. He was dean of the faculty of Medicine, Senior Vice President and Professor of Medicine at Mt. Sinai
Medical Center in New York. He served as Professor of Medicine and Director of the Division of Endocrinology at the Dartmouth Hitchcock Medical Center, Hanover, from 1968-1975. He also founded and is president of LBS Advisors, Inc., a consultancy
serving several pharmaceutical and biotechnology companies, academic institutions, the National Institutes of Health and many investment firms. He serves on the board of directors of PharmaIN Corporation, a biopharmaceutical company. Dr. Salans
earned a B.A. from University of Michigan and M.D. from University of Illinois.
Dr. Salans recognized leadership
in the medical field, his varied positions in the pharmaceutical sector, and particular medical expertise in the fields of diabetes mellitus, obesity and endocrinology and clinical research experience bring valuable perspectives to the Board on
research and development matters generally and with respect to the Companys current and potential portfolio drugs within such indications. As a practicing physician in addition to his other roles, Dr. Salans bridges the gap between basic
science and clinical medicine, enabling him to offer valuable insights to the Board.
Brenton L. Saunders
Director since 2011
Mr. Saunders, 42, has been the Chief Executive Officer and President of Bausch + Lomb and a board director since
March 2010. Previously, Mr. Saunders served as a senior executive with Schering-Plough from 2003 to 2010, most recently as President of Global Consumer Health Care. He also served as Head of Integration for both Schering-Ploughs merger
with Merck & Co. and for its $16 billion acquisition of Organon BioSciences. Before joining Schering-Plough, Mr. Saunders was a Partner and Head of the Compliance Business Advisory Group at PricewaterhouseCoopers LLP from 2000 to 2003.
Prior to that, he was Chief Risk Officer at Coventry Health Care between 1998 and 1999 and a co-founder of the Health Care Compliance Association in 1995. Mr. Saunders began his career as Chief Compliance Officer for the Thomas Jefferson
University Health System. In addition to the Bausch + Lomb board, he serves on the boards of ElectroCore LLC and the Overlook Hospital Foundation. He is also the former Chairman of the New York chapter of the American Heart Association.
Mr. Saunders was also recently named to the Federal Reserve Bank of New Yorks Upstate New York Regional Advisory Board. He received a B.A. from the University of Pittsburgh, an M.B.A. from Temple University School of Business, and a J.D.
from Temple University School of Law.
Mr. Saunders leadership experience as CEO of a global, branded healthcare
company and deep pharmaceutical experience make him an asset to the Board. In addition to his other attributes, his 15 years of senior compliance experience and broad regulatory expertise at a number of different companies, including Bausch + Lomb
and Schering-Plough, are particularly valuable.
Peter J. Zimetbaum, M.D.
Director since 2009
Dr. Zimetbaum, 48, has served as Director of Clinical Cardiology at Beth Israel Deaconess Medical Center in Boston (BIDMC) since 2005
and is the Director of ECG and Arrhythmia Core Laboratory at the Harvard Clinical Research Institute. Additionally, since 2006, Dr. Zimetbaum has been an Associate Professor of Medicine at the Harvard Medical School (HMS), and he currently
serves on the HMS Standing Committee on Conflicts of Interest. Dr. Zimetbaum received his M.D. degree from the Albert Einstein College of Medicine in 1990 and is board certified in both cardiovascular medicine and cardiovascular
electrophysiology.
Dr. Zimetbaums extensive experience in the practice of medicine and clinical trials provides
the Board and management with the perspectives of physicians and other healthcare providers who use the Companys products and with insight into the clinical trial process. His expertise in cardiology, including the cardiovascular safety
profile of products, is a valuable resource to the Board and management in analyzing and developing current and potential portfolio drugs. In addition, his service on Harvard Medical Schools conflict of interest committee provides the Company
with important insights on the ethics of healthcare.
- 16 -
CORPORATE GOVERNANCE
We seek to follow best practices in corporate governance in a manner that is in the best interests of our business and our stockholders.
We are in compliance with the corporate governance requirements imposed by the Sarbanes-Oxley Act, the SEC and the NYSE and will continue to review our policies and practices to meet ongoing developments in this area.
Code of Business Conduct and Ethics
All of our employees, including our Chief Executive Officer (CEO), Chief Financial Officer (CFO), all other senior financial officers and all other executive officers, are required to comply with our Code
of Business Conduct and Ethics. You can access our Code of Business Conduct and Ethics by clicking on the Corporate Governance link in the Investors section of our website at
www.frx.com
. The Code of Business Conduct
and Ethics is also available in print to any requesting stockholder. We post amendments to, and waivers of, our Code of Business Conduct and Ethics, as applicable, on our website.
Corporate Governance Guidelines
Our Corporate Governance Guidelines reflect the principles by which we operate. From time to time, the Nominating and Governance Committee and the Board review and revise our Corporate Governance
Guidelines in response to regulatory requirements and evolving best practices. In 2012, the Corporate Governance Guidelines were revised to implement stock ownership guidelines for our executive officers and non-employee directors, a holding period
requirement for certain shares of common stock acquired by our executive officers, and an anti-hedging policy for our executive officers and non-employee directors. In particular, under our stock ownership guidelines, our executive officers are
required to hold shares of Company common stock in amounts ranging from one times to six times their annual base salary, depending upon their seniority, on or before December 31
st
of the year which includes the fifth anniversary of the date they became subject to the stock ownership guidelines,
and our non-employee directors are required to hold shares of Company common stock in amounts equal to three times their annual retainer fee on or before December 31
st
of the year which includes the seventh anniversary of the date they became subject to the stock ownership guidelines.
Under the holding period requirement adopted in 2012, our executive officers who are subject to the stock ownership guidelines are also required to hold all shares obtained upon the exercise of Company stock options and shares acquired through
restricted stock awards and performance stock units until they have satisfied the stock ownership guidelines, with exceptions provided for shares required to be sold in order to exercise the option or pay the taxes accruing as a result of the
exercise of the option or the vesting of the restricted stock award or performance stock unit and in connection with corporate transactions that are generally available to stockholders. Finally, our anti-hedging policy prohibits our executive
officers and directors from hedging their ownership in Company common stock, including trading in options, puts, calls or other derivative instruments designed to limit or eliminate the risk from owning the Companys common stock.
You can access our Corporate Governance Guidelines by clicking on the Corporate Governance link in the Investors
section of our website at
www.frx.com
. The Corporate Governance Guidelines are also available in print to any requesting stockholder.
Disclosure, Legal Compliance and Risk Management Committee
The Disclosure, Legal Compliance and Risk Management Committee (the Disclosure Committee) is made up of the following members of senior
management: CFO, Chief Commercial Officer, Senior Vice President General Counsel and Senior Vice President Research and Development. The primary purpose of the Disclosure Committee is to review and evaluate our disclosure documents, to
develop and monitor a program of risk assessment and management and to evaluate legal compliance and compliance with our Code of Business Conduct and Ethics. The Disclosure Committee met 4 times during the fiscal year ended March 31, 2012. The
- 17 -
Disclosure Committee does not have oversight responsibility for financial matters, including financial statements and systems of internal control over financial reporting, which are monitored by
the Companys Audit Committee.
Compliance Committee
We have established a Compliance Committee chaired by our Vice President Compliance and Chief Compliance Officer. Our Compliance
Committee is responsible for overseeing our program for compliance with applicable laws and regulations specific to the pharmaceutical industry. The Compliance Committee includes senior management and senior departmental personnel from various
corporate divisions (marketing, contract-customer operations, medical and scientific affairs, sample policy compliance, operations, corporate quality management, internal audit and legal counsel). Other personnel are invited to participate from time
to time as specific issues warrant. The Compliance Committee meets approximately every six weeks to review issues related to our Comprehensive Compliance Program, establish and approve compliance policies and provide support, guidance and advice to
our Chief Compliance Officer regarding the compliance program.
Certain Relationships and Related Persons
Transactions
Related Person Transactions.
David F. Solomon, our Senior Vice President Corporate Development and Strategic Planning, is the son of Howard Solomon, Chairman of the Board, CEO, President and a director of the Company.
In connection with his retirement as the Companys Chief Operating Officer, the Company and Dr. Olanoff entered
into a Consultant Services Letter Agreement dated January 1, 2011, pursuant to which Dr. Olanoff may provide consulting services to Forest on a project-by-project basis relating to the evaluation of products and potential product
opportunities. Under his Consultant Services Letter Agreement, Dr. Olanoff is compensated at the rate of $500 per hour and, in the event the Company requires Dr. Olanoff to travel in connection with the performance of such services, the
Company will reimburse Dr. Olanoff for out-of-pocket expenses, including the reasonable cost of transportation, meals and lodging, where applicable.
The compensation paid to Mr. Solomon during fiscal year 2012 is reported in the Summary Compensation Table on Page 41 of this Proxy Statement and the compensation paid to Dr. Olanoff in
connection with his Consultant Services Letter Agreement is reported in the Director Compensation Table on Page 48 of this Proxy Statement.
Related Persons Transaction Procedures.
The Companys written Code of Business Conduct and Ethics provides that all conflicts of interest, including transactions with Related Persons (as
defined in Item 404 of Regulation S-K), are prohibited unless approved by the Companys Board or a Committee of the Board. In addition, all directors and executive officers are required to annually complete a questionnaire to identify
their related interests and are required to notify the Company of changes in that information. These reports are reviewed in the first instance by the Companys outside counsel. If members of management or the Board become aware of a related
person transaction, then with respect to matters other than executive officer compensation, the Audit Committee is responsible for reviewing and approving or ratifying any transaction or series of transactions in which the Company or a subsidiary is
a participant, the amount involved exceeds $120,000 and a Related Person has a direct or indirect material interest. The Compensation Committee is responsible for annually reviewing and approving compensation arrangements with executive officers of
the Company whose annual compensation exceeds $120,000.
- 18 -
BOARD MATTERS; COMMITTEES
Board of Directors Meetings and Attendance of Directors
The Board held thirteen meetings during the fiscal year ended March 31, 2012. During fiscal year 2012, each of the directors attended
75% or more of the combined total meetings of the Board and the respective committees on which he or she served. Directors are required to make every reasonable effort to attend the Annual Meeting of Stockholders. All members of the Board attended
our 2011 Annual Meeting of Stockholders.
Board Leadership Structure
The Board believes the interests of all stockholders are best served at the present time through a leadership model with a combined
Chairman and CEO position. However, the Board retains authority to amend the Bylaws to separate the positions of Chairman and CEO at any time.
Mr. Solomon, the current Chairman and CEO, possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company, and is thus best positioned to develop agendas
that ensure that the Boards time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability and enhances the Companys ability to communicate its message and
strategy clearly and consistently to stockholders, employees, partners and customers. Furthermore, the Board believes that Mr. Solomons experiences as CEO and other insights put him in the best position to provide broad leadership to the
Board as it considers strategy and as it exercises its fiduciary responsibilities to stockholders.
The Companys
Corporate Governance Guidelines provide for the position of a presiding director. Mr. Goodman currently serves as the presiding director and is responsible for, among other things, presiding at all meetings at which the Chairman is not present,
including the executive sessions of the independent directors that are held after each Board meeting, and apprising the Chairman of the issues considered and decisions made at such meetings; being available for consultation and direct communication
with the Companys stockholders; calling meetings of the independent directors when necessary and appropriate; and, in consultation with the other independent directors, advising the Chairman as to an appropriate schedule of Board meetings and
reviewing and providing the Chairman with input regarding the agenda for Board meetings. In addition, the Board believes that its governance practices support its independent oversight, including having open and direct communication with management,
encouraging independent director input on meeting agendas, performing annual evaluations of director performance and holding regular executive sessions after each Board meeting. In addition, each independent director has access to the CEO and other
Company executives upon request, and may call meetings of the independent directors and may request agenda topics to be added or dealt with in more detail at meetings of the full Board or an appropriate Board committee.
The Boards Role in Risk Oversight
In order to assist the Board in overseeing risk management, we use enterprise risk management (ERM), a company-wide initiative overseen by the Disclosure Committee, which in turn reports to the Audit
Committee, that involves management and other personnel in an integrated effort to identify, assess, prioritize and manage a broad range of risks (e.g., financial, operational, business, reputational, governance and managerial) that may affect our
ability to execute on our corporate strategy and fulfill our business objectives. The ERM approach is designed to enable the Board to establish a mutual understanding with management of the effectiveness of the Companys risk management
practices and capabilities, to review the Companys risk exposure and to elevate certain key risks for discussion at the Board or Audit Committee level.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of our Board and the Disclosure Committee also have responsibility for risk management. Our
Board is advised by the committees of significant risks and managements response via periodic updates. The Audit Committee oversees our financial risk exposures, including monitoring the integrity of our financial statements,
- 19 -
financial reporting process and systems of internal controls, accounting and legal compliance and the independence and qualifications of our independent registered public accounting firm, and
receives an annual internal controls assessment report from our independent registered public accounting firm. Additionally, as discussed below in Executive Compensation Compensation Discussion and Analysis, the
Compensation Committee attempts to design compensation standards for the Companys personnel in a way that discourages behavior that may lead to excessive risk-taking. Finally, as discussed above, the Disclosure Committee is responsible for
developing and monitoring a program of risk assessment and management and overseeing our ERM program.
Director
Independence
The Board has affirmatively determined that the following directors have no material relationship with us and
are independent within the meaning of the NYSE definition of independence: Nesli Basgoz, M.D., Christopher J. Coughlin, Dan L. Goldwasser, Kenneth E. Goodman, Gerald M. Lieberman, Lester B. Salans, M.D., Brenton L. Saunders and Peter J.
Zimetbaum, M.D. To assist in making the independence determination, the Board has adopted Director Qualification Standards as part of our Corporate Governance Guidelines. The Director Qualification Standards satisfy the NYSE independence
requirements, and a copy of these standards is attached to this Proxy Statement as Appendix A. In determining that Dr. Zimetbaum was independent within the meaning of the NYSE definition of independence, the Board considered the
Consultant Services Letter Agreement that Dr. Zimetbaum and the Company entered into on October 21, 2010, pursuant to which Dr. Zimetbaum may provide consulting services to Forest on a project-by-project basis relating to the
evaluation of products and potential product opportunities. The Agreement provides that the total annual fees payable to Dr. Zimetbaum for such services cannot exceed $100,000 per annum. Independent directors receive no compensation from us for
service on the Board or the Committees other than directors fees and non-discretionary grants under our 2007 Equity Incentive Plan.
Executive Sessions
As required by the NYSE listing standards, our non-management directors meet in executive session
at which only non-management directors are present on a regularly scheduled basis. As discussed above, Mr. Goodman, as Presiding Director, presides over each meeting of the independent directors in executive session (see Board Leadership
Structure above at Page 19).
Communications with Directors
You may contact the entire Board, any Committee, the non-management directors as a group or any individual director by calling our Audit
Committee Hotline at 1-800-461-0825. An outside vendor collects all reports or complaints and delivers them to the Audit Committee. The Audit Committee will forward all correspondence to the appropriate director or group of directors. You are also
welcome to communicate directly with the Board at the Annual Meeting of Stockholders.
Board Committees
The Board has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance
Committee and the Board Compliance Committee. All of the members of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Board Compliance Committee are independent directors within the meaning of the NYSE
Listing Standards and Securities Exchange Act of 1934, as amended (the Exchange Act), Rule 10A-3. Each of the committees has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by the Company.
The Board-approved charters of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and
the Board Compliance Committee are available on our website by clicking on the Corporate Governance link under the Investors section at
www.frx.com
. The charters are also available in print to any requesting
stockholder.
- 20 -
Audit Committee.
For the fiscal year ended March 31, 2012, the Audit Committee
consisted of Christopher J. Coughlin (the Chairman), Dan L. Goldwasser and Lester B. Salans, M.D. The Board has determined that each of Mr. Coughlin and Mr. Goldwasser qualifies as an audit committee financial expert for
purposes of the federal securities laws.
The Audit Committees primary responsibilities are to: (i) oversee our
financial reporting principles and policies and internal control systems, including review of our quarterly and annual financial statements; (ii) review and monitor the performance and independence of our independent registered public
accounting firm and the performance of the internal audit department; (iii) oversee our compliance with legal and regulatory requirements; (iv) provide an open avenue of communication among the independent registered public accounting
firm, financial and senior management, the internal audit department and the Board; and (v) appoint (subject to stockholder ratification), evaluate, compensate and, where appropriate, terminate and replace our independent registered public
accounting firm. The Audit Committee held eight meetings during fiscal year 2012.
Compensation Committee.
The
Compensation Committee is composed of Mr. Coughlin, Mr. Goldwasser (the Chairman), Mr. Gerald M. Lieberman, and Mr. Brenton L. Saunders. Pursuant to the Compensation Committee Charter, the Committee is responsible for
(i) discharging the Boards responsibilities relating to compensation of our executive officers and (ii) producing an annual report on executive compensation for inclusion in our Proxy Statement in accordance with applicable rules and
regulations. During the fiscal year ended March 31, 2012, the Compensation Committee held three meetings at which the Committee made recommendations concerning compensation for our executive officers for the 2012 calendar year and discussed and
approved the change in the Companys compensation cycle effected in furtherance of the implementation of our formula based Annual Incentive Plan and performance stock units as further described under the heading Compensation Discussion
and Analysis beginning on Page 25 of this Proxy Statement, and granted stock options, stock awards and performance stock units under the 2007 Equity Incentive Plan. The Committee approved all equity awards granted during the year at regularly
scheduled Board meetings.
Nominating and Governance Committee.
The Nominating and Governance Committee is composed of
Nesli Basgoz, M.D., Mr. Lieberman (the Chairman) and Peter J. Zimetbaum, M.D. The Committees responsibilities include (i) identifying individuals qualified to become Board members consistent with criteria approved by the Board
and recommending that the Board select the director nominees for the next Annual Meeting of Stockholders; (ii) developing and recommending to the Board the Corporate Governance Guidelines; and (iii) overseeing evaluation of the Board and
management. The Nominating and Governance Committee held two meetings during fiscal year 2012.
Board Compliance
Committee.
The Board Compliance Committee is composed of Dr. Basgoz, Lester B. Salans, M.D. (the Chairman), Mr. Saunders and Peter J. Zimetbaum, M.D. The Committees responsibilities include (i) reviewing and
overseeing matters relating to our compliance with Federal health care program requirements, FDA requirements and the obligations imposed by the Corporate Integrity Agreement dated September 15, 2010 that we entered into with the Office of
Inspector General of the U.S. Department of Health and Human Services; (ii) appointing, compensating, retaining (or terminating) and overseeing the work of an independent Compliance Expert; and (iii) providing an additional avenue of
communication among Compliance Department personnel, including the Chief Compliance Officer, the Compliance Committee described at Page 18 of this Proxy Statement, our management and the Board. The Board Compliance Committee was formed in December
2010 and held three meetings during fiscal year 2012.
Selection of Nominees for Election to the Board
The Nominating and Governance Committee has established a process for identifying and evaluating nominees for director.
The Nominating and Governance Committee believes that its process for identifying and evaluating nominees is designed to produce nominees that possess the educational, professional, business and personal attributes that are best suited to further
Forests purposes. The Nominating and Governance Committee
- 21 -
will consider nominees recommended by stockholders in accordance with our Bylaws as well as those recommended by management or consultants retained by the Nominating and Governance Committee.
Under our Bylaws and as described in this Proxy Statement under the heading, What is the deadline to propose actions for consideration at next years Annual Meeting of Stockholders?, any interested person may recommend a nominee by
submitting the nomination within the timeframe specified by our Bylaws, together with the information and materials required by our Bylaws, to the Companys Secretary at Forest Laboratories, Inc., Attention: Corporate Secretary, 909 Third
Avenue, New York, New York 10022. All recommended candidates submitted in accordance with our Bylaws will be considered using the criteria set forth in our Corporate Governance Guidelines.
The Nominating and Governance Committee will consider, among other factors, the following to evaluate recommended nominees:
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The Boards current composition, including expertise, diversity, balance of management and non-management directors;
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Independence and other qualifications required or recommended by applicable laws, rules and regulations (including NYSE requirements) and Forests
policies and procedures; and
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The general qualifications of potential nominees, including, but not limited to: personal integrity, loyalty to Forest and concern for its success and
welfare; experience at strategy and policy setting, high-level leadership experience in business; breadth of knowledge about issues affecting Forest; an ability to work effectively with others; sufficient time to devote to Forest; and freedom from
conflicts of interest.
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The Nominating and Governance Committee annually reviews the individual expertise
and skills of the directors as well as the composition of the Board as a whole. The Corporate Governance Guidelines expressly provide for the Board to consider the configuration of the Board in evaluating qualifications of potential Board members.
In this regard, the Nominating and Governance Committee strives to nominate directors with diverse business and professional experience and skills relevant to the Companys current and anticipated needs. The Nominating and Governance Committee
does not follow any fixed ratio or formula to determine the appropriate mix, but rather uses its judgment to seek directors whose attributes and experience taken as a whole will contribute to the high standards of Board service at the Company.
Named Executive Officers of Forest
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Name
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Age
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Position with Forest
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Howard Solomon
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84
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Chairman of the Board, CEO and President
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Elaine Hochberg
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55
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Executive Vice President and Chief Commercial Officer
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Francis I. Perier, Jr.
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52
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Executive Vice President Finance and Administration and CFO
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Marco Taglietti, M.D.
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52
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Senior Vice President Research and Development and President, Forest Research Institute, Inc.
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David F. Solomon
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45
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Senior Vice President Corporate Development and Strategic Planning
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Set forth below is certain biographical information concerning our executive officers who are not also
directors:
Elaine Hochberg has served as the Executive Vice President and Chief Commercial Officer of the Company since
December 31, 2010. Prior thereto, Ms. Hochberg served as our Senior Vice President Marketing from
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December 1999 through December 2010 and has also served as our Chief Commercial Officer since December 2007. Ms. Hochberg joined us in June 1997 as Vice President Marketing of
our wholly-owned subsidiary Forest Pharmaceuticals, Inc. In February 1998, she was promoted to Vice President Marketing of the Company. Prior to joining us in 1997, Ms. Hochberg was Assistant Vice President Marketing at
Wyeth-Lederle Laboratories.
Francis I. Perier, Jr. has served as the Executive Vice President Finance and
Administration and CFO of the Company since December 31, 2010. Prior thereto, Mr. Perier served as our Senior Vice President Finance from September 2004 through December 2010 and has also served as our CFO since September 2004. From
March 2004 until joining us in September 2004, Mr. Perier was Vice President Finance Operations Planning Americas Medicines at Bristol-Myers Squibb. For eight years prior to March 2004, Mr. Perier served in senior
financial positions at Bristol-Myers Squibb including four years as Vice President Finance, Planning, Business Development and Information Technology at its ConvaTec Division. Prior to that, Mr. Perier had been a partner at
Deloitte & Touche, LLP.
Marco Taglietti, M.D. has served as the Senior Vice President Research and
Development of the Company and President, Forest Research Institute, Inc. since December 31, 2010. Prior thereto, Dr. Taglietti served as our Vice President Research and Development since December 2008. Dr. Taglietti
joined Forest in August 2007 as Executive Vice President Research and Development and Chief Medical Officer of our wholly-owned subsidiary Forest Research Institute, Inc. Prior to joining us, Dr. Taglietti was Senior Vice President and
Head of Global Research and Development at Stiefel Laboratories for three years. Prior to that, Dr. Taglietti was at Schering-Plough for twelve years in positions of increasing responsibilities including Vice President Worldwide
Clinical Research for Anti-Infectives, Oncology, CNS, Endocrinology and Dermatology.
David F. Solomon has served as the
Senior Vice President Corporate Development and Strategic Planning since December 31, 2010. Prior thereto, Mr. Solomon served as our Vice President Business Development and Strategic Planning from December 2007 through
December 2010. From June 2006 through December 2007, Mr. Solomon served as our Vice President Business Development. Mr. Solomon joined the Company in 2001.
- 23 -
EXECUTIVE COMPENSATION
C
OMPENSATION DISCUSSION AND ANALYSIS
Introduction
Our executive compensation
programs are designed to attract, reward and retain our executive officers. This Compensation Discussion and Analysis provides a detailed description of the Companys executive compensation philosophy and programs, the compensation decisions
made by the Compensation Committee of the Board (the Compensation Committee) and the issues considered in making such decisions. This Compensation Discussion and Analysis focuses on the compensation of our CEO, CFO, and the next three most highly
compensated executive officers (referred to herein as the Named Executive Officers) for the fiscal year ended March 31, 2012 (fiscal year 2012), who were:
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Name
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Title
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Howard Solomon
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Chairman of the Board, Chief Executive Officer and President
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Elaine Hochberg
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Executive Vice President and Chief Commercial Officer
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Francis I. Perier, Jr.
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Executive Vice President Finance and Administration and Chief Financial Officer
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Marco Taglietti, M.D.
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Senior Vice President Research and Development and President, Forest Research Institute, Inc.
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David F. Solomon
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Senior Vice President Corporate Development and Strategic Planning
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How Pay Ties to Company Performance:
Our executive compensation program is designed to align executive compensation with the interests of our stockholders through the
achievement of the Companys business objectives and individual executive contributions towards those objectives. The majority of compensation for our Named Executive Officers is variable compensation and is not guaranteed.
Executive
Compensation Program Highlights
In fiscal year 2012 we implemented a series of changes to our executive compensation
practices to drive performance and promote good corporate governance including (i) appointing three new independent directors elected at the 2011 Annual Meeting to our Compensation Committee; (ii) engaging an independent compensation
- 24 -
consultant to assist the Compensation Committee in designing and establishing the Companys executive compensation programs for the 2012 fiscal year; and (iii) restructuring our
compensation programs to further align pay with performance and provide greater transparency with respect to how we implement our pay for performance philosophy. The Compensation Committee continually assesses and updates our compensation practices
to ensure alignment with these goals. In addition to the general executive compensation practices that are highlighted below, we have also highlighted certain recent revisions to our compensation program which were implemented by the Compensation
Committee with the advice of the Compensation Committees independent compensation consultant. We have also highlighted certain practices in which the Company intentionally does not engage because we do not believe that such practices would
serve our stockholders long-term interests.
What We Do:
|
ü
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|
Majority of Pay is Performance Based.
The majority of the total compensation opportunity for our Named Executive Officers is not guaranteed. It
is based upon the achievement of corporate and individual performance objectives designed to enhance stockholder value or to promote continued service with the Company, which we believe is also in the best long-term interests of our stockholders.
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ü
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Pay for Performance Alignment
. The Compensation Committee has further aligned incentive pay with pre-established corporate and individual
performance goals, including by adopting an annual incentive plan and granting stock equivalent units that are performance based (also referred to as performance stock units). Pursuant to the annual incentive plan, our officers may be granted target
cash awards within a pre-determined range based on their position within the Company which may increase to a maximum of 200% of the target amount based on achievement of pre-established performance goals, fifty percent related to corporate
performance, thirty percent related to individual performance, and twenty percent related to subjective personal development goals. Under our performance stock units, executives may earn shares based on the satisfaction of pre-established corporate
performance goals. For fiscal year 2012, fifty percent of the CEOs equity compensation consisted of performance stock units, the vesting of which is dependent upon the achievement of pre-established revenue and total stockholder return
performance goals.
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ü
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Stock Ownership Guidelines.
We have stock ownership guidelines for our Directors and certain key executives, including each Named Executive
Officer. Our Chairman, Chief Executive Officer and President has a guideline requirement equal to six times his base salary.
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ü
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Holding Period for Stock Options, Restricted Stock and Performance Stock Units.
With certain limited exceptions, our stock ownership guidelines
require our key executives to hold all shares obtained upon the exercise of Company stock options or through Company restricted stock grants and performance stock units until such executive achieves the applicable ownership threshold under the stock
ownership guidelines.
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ü
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Minimum Vesting Periods.
The Compensation Committee amended the Companys equity plan to require that all stock options, stock appreciation
rights, and restricted stock awards granted to all executive officers have a vesting schedule which exceeds 24 months.
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ü
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Annual Risk Assessment.
In fiscal year 2012, as in previous years, the Compensation Committee concluded that our executive compensation programs
do not encourage behaviors that would create risks reasonably likely to have a material adverse effect on the Company.
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ü
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Clawback Policy.
The Compensation Committee may recoup certain incentive- or commission-based payments which were based upon any financial
results or operating metrics that were impacted by such executive officers knowing or intentional fraudulent or illegal conduct.
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ü
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Reasonable Change of Control Severance Provisions.
We believe we have reasonable post-employment and change of control cash severance provisions
that do not exceed three times base salary plus bonus.
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ü
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Minimal Perquisites.
We provide our Named Executive Officers with minimal perquisites.
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- 25 -
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ü
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Independent Compensation Consulting Firm.
The Compensation Committee benefits from its utilization of an independent compensation consulting
firm that provides no other services to the Company.
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What We Dont Do:
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×
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No-Hedging Policy.
Our Directors and executive officers, including our Named Executive Officers, are prohibited from hedging their ownership of
the Companys stock, including trading in options, puts, calls or other derivative instruments related to Company stock or debt.
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×
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No Tax Gross-Ups.
We do not provide tax gross-ups on perquisites or any severance or change-in-control payments to any of our executive
officers.
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×
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No Repricing of Awards.
The Company does not have a history of repricing equity incentive awards, and in May 2012, the Board amended the
Companys 2007 Equity Incentive Plan to expressly prohibit such practices, as well as repurchases of underwater stock options or stock appreciation rights.
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×
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No Above Market Returns.
We do not offer preferential or above market returns on deferred compensation.
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×
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No Underpriced Stock Options.
We do not grant stock options with exercise prices that are below the fair market value of the Companys
common stock on the date of grant.
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Fiscal Year 2012 Business Highlights
The Companys 2012 performance included increases in the key financial measures of net sales and revenues; the completion of clinical
development for two candidates in the Companys drug pipeline; the launch of three new products; and business development activities resulting in the acquisition of additional candidates for the Companys drug pipeline. The Compensation
Committee took into consideration the following key developments in fiscal year 2012 in evaluating executive compensation:
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Net sales increased 4.3% to $4.4 billion in fiscal year 2012 from $4.2 billion in fiscal year 2011;
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Net revenues increased 3.8% to $4.6 billion in fiscal year 2012 from $4.4 billion in fiscal year 2011;
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Reported earnings per share (EPS) decreased 0.6% to $3.57 in fiscal year 2012 as compared to EPS of $3.59 fiscal year 2011. Excluding amortization
arising from business combinations and acquisitions of product rights, charges related to a settlement with the United States Department of Justice, and certain licensing payments, non-GAAP EPS in fiscal 2012 equaled $3.88 as compared with $4.43 in
fiscal 2011. See Appendix C for a reconciliation of non-GAAP EPS to our EPS as reported under GAAP;
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Launched Teflaro in March 2011 and the Companys two most recent new primary care products, Daliresp
®
and Viibryd
®
, in August 2011;
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Filed New Drug Applications (NDAs) for aclidinium, a novel long-acting inhaled anticholinergic bronchodilator for the long-term, maintenance treatment
of bronchospasm associated with chronic obstructive pulmonary disease (COPD), in June 2011 and linaclotide, a guanylate cyclase type-C (GC-C) receptor, for the treatment of irritable bowel syndrome with constipation (IBS-C) and chronic constipation
(CC), in August 2011;
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Completion of the acquisition of Clinical Data, Inc. on April 13, 2011;
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Acquired the worldwide rights to azimilide, a novel Class III antiarrhythmic agent, in April 2011;
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Buyout of
Bystolic
®
royalties from Janssen Pharmaceutica NV in March 2012;
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Successful completion of studies required to file an NDA for cariprazine, pertaining to the treatment of schizophrenia and acute mania associated with
bipolar I disorder, and levomilnacipran, a treatment for major depressive disorder (MDD); and
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- 26 -
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Entered into two accelerated share repurchase transactions with Morgan Stanley & Co. LLC in June and August 2011 totaling $850 million
pursuant to which the Company repurchased approximately 21,500,000 shares.
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Our
Compensation
Philosophy and Objectives
Philosophy
Our executive compensation philosophy seeks to align executive compensation with the achievement of the Companys business objectives
and with individual performance towards obtaining those objectives. Consequently, the Companys compensation program is designed to reward our executives respective contributions to the Companys achievements and is intended to
facilitate long-term strategic management and the enhancement of stockholder value. In considering the elements of the compensation program, the Compensation Committee emphasizes pay for performance on both an annual and long-term basis and
consideration of marketplace best practices.
Objectives
Our compensation program is designed to achieve the following objectives:
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Attract and retain highly qualified executives;
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Motivate individual performance;
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Align incentives with business objectives;
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Create incentives that focus executives on, and reward them for, increasing stockholder value;
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Maintain equitable levels of overall compensation both among executives and as compared to executives with similar positions at companies in the
Comparator Group (as defined on Page 36 of this Proxy Statement);
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Create an ownership culture which instills long-term perspective; and
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Improve overall Company performance.
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Al
ignment of Fiscal Year-End and Compensation Cycle
In order to provide greater transparency with respect to how we align pay with performance, in December 2011, the Compensation Committee decided to change the Companys compensation cycle to
match the Companys fiscal year end of March 31 (the Transition). This modification was instituted so that a review of and changes in the executive compensation program may annually be made following the Compensation Committees
assessment of fiscal year-end performance and achievement of financial goals. The Transition will allow the Compensation Committee to set performance metrics for the annual incentive plan and long-term incentive awards that are in line with the
Companys fiscal year performance goals established by the Board at the start of each year. Prior to this modification, the compensation cycle concluded annually on September 30; accordingly, evaluation of the compensation program
generally and adjustments to compensation were made in light of the Compensation Committees assessment of corporate and individual performance over the 12-month period ended September 30 and not the same 12-month period as our fiscal
year.
To accomplish the Transition, the Compensation Committee established a six-month transition period commencing on
October 1, 2011 and ending on March 31, 2012 (the Transition Period). Consistent with past practice, during fiscal year 2012, the Compensation Committee completed its annual review of compensation in December 2011, and as a result,
rewarded merit-based increases in base salaries, awarded annual incentive bonuses and granted long-term equity. Following the conclusion of the Transition Period, in May 2012, the
- 27 -
Compensation Committee again completed a review of compensation based upon the six-month Transition Period. Based upon the results of this review, the Compensation Committee awarded merit-based
increases in base salaries, annual incentive bonuses and granted long-term equity, as appropriate. In accordance with the new compensation cycle, the next compensation review will occur in May 2013.
Elements of Executive Compensation
The three principal components of compensation for the Companys Named Executive Officers in fiscal year 2012 were:
In addition, each Named Executive Officer is also eligible to receive certain benefits which are generally provided to all other eligible employees, and certain minimal perquisites as described below.
B
ase Salary
General
Base salary provides a fixed element of executive compensation, which is intended to attract and retain key executives and provide an element of security to the executive officers on an ongoing basis.
Executive salaries are reviewed on an annual basis as well as at the time of a promotion or other material change in responsibilities. Prior to the Transition, such annual reviews were conducted in December of each year. In connection with the new
compensation cycle, annual base salary reviews are expected to occur in the first quarter of the succeeding fiscal year.
Base salaries of the
Named Executive Officers are individually determined by the Compensation Committee and are based on:
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Assessment of the Named Executive Officers performance;
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Level of pay compared to the salaries paid to persons in similar positions by companies in the Comparator Group;
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Tenure and experience; and
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- 28 -
Merit Increases
An increase in base salary is not automatic or guaranteed. In December 2011, merit increases for the Named Executive Officers were
approved for some executives. These increases, which took effect January 1, 2012, were awarded based on performance reviews and with a view to establishing base salary compensation around the median of the Comparator Group. In particular,
Mr. D. Solomons base salary was adjusted upwards to bring it closer to the median of the Comparator Group. The merit increases awarded in December 2011 for the Named Executive Officers were as follows: Mr. H. Solomons base
salary was not increased, at Mr. Solomons request; Ms. Hochberg received a 3.43% increase; Mr. Perier received a 3.78% increase; Dr. Taglietti received a 3.35% increase; and Mr. D. Solomon received a 9.09% increase. These
increases were generally in line with merit increases for all the Companys employees.
In May 2012, the Compensation
Committee reviewed performance during the Transition Period in order to establish base salaries which would apply from July 2012 through June 2013. The merit increases awarded in May 2012 for the Named Executive Officers were as follows: Mr. H.
Solomons base salary was not increased, at Mr. Solomons request; Ms. Hochberg, Mr. Perier, Dr. Taglietti and Mr. D. Solomon each received a 1.75% increase. Again, these increases were generally in line with merit
increases for all employees.
Promotions or Change of Role:
Base salary may be adjusted to recognize a promotion or change in the individuals role, however, increases are not guaranteed upon
such events. No increases were awarded to any Named Executive Officer in fiscal year 2012 due to promotion or changes in role.
Annual Incentives
General
Annual incentives are intended to motivate executives to achieve key operational goals and to reward executives for their contributions to achieving those goals. The Compensation Committee has
historically assessed corporate and individual performance during the year, taking into account achievement of significant strategic accomplishments including product pipeline development and progress of ongoing research and development, changes in
the Companys EPS, financial performance including marketing and sales achievements, intellectual property management, leadership and other individual performance factors including the ability to deliver business results, enhance organizational
performance and recruit and develop personnel. The Compensation Committee believes that as executives become more senior at the Company, the percentage of their cash compensation represented by the annual incentive (the at-risk component of cash
compensation) should increase since the decisions and performance of senior employees have a more meaningful short-term and long-term impact on Company performance. Accordingly, for fiscal year 2012, the Compensation Committee awarded an annual
incentive payment to the CEO that was approximately 75% of his base salary, and annual incentive payments between 55% and 65% of base salary for the Companys Executive Vice Presidents and Senior Vice Presidents and between 45% and 55% of base
salaries for all other officers. In the course of determining the size of such annual incentive awards, the Compensation Committee generally reviews and considers market practice and typically establishes cash compensation at or below the median of
the cash compensation paid to executives in similar positions in companies in the Comparator Group.
In order to more closely
align variable cash compensation awarded to the Companys executives with corporate performance, commencing with fiscal year 2013, the Compensation Committee approved the use of an annual incentive plan which bases a predetermined portion of
the bonus on achievement of pre-established corporate and individual level performance goals. The annual incentive plan is further described below under the heading Changes to Annual Incentive Program for Fiscal Year 2013.
In
order to implement financial metrics measured on a fiscal year basis under the annual incentive plan, the Company changed its compensation cycle, which historically covered the twelve month period ending September 30, to its fiscal year ending
March 31 as described above under Alignment of Fiscal Year-End and Compensation Cycle.
- 29 -
Annual Incentive Awards in Fiscal Year 2012
Annual incentives have historically been awarded to the Named Executive Officers in December of each year based upon the Compensation
Committees assessment of corporate and individual performance over the 12-month period ending September 30. Accordingly, during fiscal year 2012 the Named Executive Officers received the following annual incentive awards in December 2011
based upon performance for the 12-month period from October 1, 2010 to September 30, 2011: Mr. H. Solomon received $1,015,000; Ms. Hochberg received $395,000; Mr. Perier received $360,000; Dr. Taglietti received
$320,000; and Mr. D. Solomon received $250,000. In connection with the Transition, the Named Executive Officers received the following six-month incentive bonus in May 2012 for their performance during the Transition Period (i.e., the last six
months of fiscal year 2012): Mr. H. Solomon received $506,385; Ms. Hochberg received $204,500; Mr. Perier received $186,810; Dr. Taglietti received $165,500; and Mr. D. Solomon received $136,500.
The incentive payments made in December 2011 and May 2012 (as described above) were awarded to the Named Executive Officers based upon the Compensation
Committees assessment of corporate achievements disclosed above under Fiscal Year 2012 Business Highlights and individual performance factors described above under Annual Incentives General. Annual Incentive
Awards will next be granted in May 2013.
Changes to Annual Incentive Program for Fiscal Year 2013
In May 2012, the Board adopted the Forest Laboratories, Inc. Annual Incentive Compensation Plan (the Incentive Plan). In accordance with
the terms of the Incentive Plan, starting in fiscal year 2013, target performance and payouts have been established for each Named Executive Officer and the actual payout under the Incentive Plan has been based upon the Compensation Committees
assessment of (i) multiple pre-determined financial and corporate growth objectives and (ii) personal performance objectives, which may include individual contributions to corporate objectives and subjective performance measures. The
corporate business performance objectives and personal performance objectives will be determined by the Compensation Committee annually at the beginning of the performance period. The annual incentive plan permits the Compensation Committee to
select appropriate metrics each year from metrics similar to those considered by the Compensation Committee in years prior to adoption of the Incentive Plan, including achievement of significant strategic accomplishments, including product pipeline
development and progress of ongoing research and development, changes in the Companys EPS, financial performance including marketing and sales achievements, intellectual property management, and other individual performance factors including
the ability to deliver business results, enhance organizational performance, and recruit and develop personnel. The Compensation Committee established target awards for the Named Executive Officers for fiscal year 2013 in a range between 60% and 75%
of base salary, depending on the executives position. Pursuant to the Incentive Plan, actual awards may increase or decrease within a payout range of 0% to 200% of the target award depending upon the Companys and the executives
achievement of the specific performance objectives.
Long-Term In
centives
General; The Equity Plan
We believe that most of a Named Executive Officers compensation should come from long-term incentive components that are tied to an increase in the Companys market value or other
pre-determined performance measures. These awards are intended to reward performance over a multi-year period, align the interests of executives with those of stockholders, instill an ownership culture, enhance the personal stake of executive
officers in the growth and success of the Company and provide an incentive for continued service at the Company. Long-term incentive awards are made under our stockholder-approved 2007 Equity Incentive Plan, as amended to date (the Equity Plan).
Equity awards have historically been granted each year at the regularly
- 30 -
scheduled Board meeting in December. As a result of the Transition, equity awards will be granted annually following the conclusion of each fiscal year at the Boards regularly scheduled May
meeting commencing with the fiscal year ended March 31, 2012 with respect to the Transition Period and commencing with the fiscal year ended March 31, 2013 with respect to each full fiscal year.
Pursuant to the Equity Plan, employees, including the Named Executive Officers, may be granted stock options to purchase shares of common
stock, stock awards, stock appreciation rights and stock equivalent units (together, the Awards). The exercise price of all options, including incentive stock options as defined by Section 422 of the Internal Revenue Code of 1986, as amended
(the Code), is the fair market value of the shares on the grant date. All of our employees, our subsidiaries employees and our non-employee directors are eligible to receive Awards under the Equity Plan.
Long-Term Incentive Vehicles Awarded in Fiscal Year 2012
Mix of Long-Term Awards
We grant our executives, including our Named Executive Officers, a package of long-term incentive awards that is designed to incentivize, reward and retain them. The Compensation Committee, with the
advice of its independent compensation consultant, established each executives long-term incentive target award opportunity as a multiple of such executives base salary, with that multiple generally being approximately six times base
salary for the CEO, three to three and one-half times base salary for the Companys Senior Vice Presidents and Executive Vice Presidents, and one to two times base salary for the Companys Vice Presidents. For each Named Executive Officer
other than the CEO, the Compensation Committee in December 2011 granted a mix of long term awards which allocated approximately equal amounts (based on value) to stock equivalent units that are performance based (performance stock units or PSUs),
Stock Options and Time-based Restricted Stock Awards. In light of his more direct responsibility for the Companys performance, the Compensation Committee determined that a larger portion of the CEOs equity award should be in the form of
PSUs and allocated approximately 50% (based on value) of his equity awards to PSUs with the remaining 50% allocated approximately equally to each category of Stock Options and Time-based Restricted Stock Awards. Prior to December 2011, the mix of
long-term equity did not include PSUs; however, in an effort to more closely align incentive pay with corporate performance goals, the Compensation Committee awarded PSUs to key executives, including the Named Executive Officers.
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Performance Stock Units.
PSUs granted in December 2011 will vest, if at all, at the end of the performance period based upon the level of
achievement of two equally weighted performance metrics, one related to total shareholder return (TSR) and one related to revenues of certain pipeline products (Revenues). The performance period is 36 months for the Revenue measure and 39 months for
the TSR measure. The PSUs are paid out in shares of the Companys common stock at a one-to-one ratio in accordance with the terms of the individual award agreement. The terms of the PSUs, including the metrics underlying the PSU are further
described below.
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Stock Options.
Non-qualified stock options granted in December 2011 vest in four equal annual installments beginning on the first anniversary of
the date of grant. These stock options have an exercise price of $29.995 (the average of the high and low prices of the Companys common stock on December 5, 2011).
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Time-based Restricted Stock Awards.
Time-based restricted stock awards granted in December 2011 vest in three annual installments with 33%, 33%
and 34% vesting on the first, second and third anniversary of the date of grant, respectively.
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The
Companys long-term equity awards are subject to a grantees continued employment, but contain exceptions in certain cases in the event of the grantees death, disability, or retirement or the occurrence of a change of control. The
value of the PSUs, Stock Options and Restricted Stock Awards granted to each Named Executive Officer (NEO) during fiscal year 2012 is reported in the Summary Compensation Table on Page 41 of this Proxy Statement and the specific number of shares
awarded with respect to each type of equity award is set forth in the Grants of Plan-Based Awards Table on Page 42 of this Proxy Statement.
- 31 -
Performance Metrics for Performance Stock Units
The PSUs granted in December 2011 vest, if at all, based upon the level of achievement of two performance metrics:
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The Revenues metric is based on the comparison of the Companys total revenues from its cumulative sales of Bystolic, Daliresp
®
, Savella
®
, Teflaro
®
and Viibryd
®
for the period between April 1, 2012 and March 31, 2015 to the total projected Revenues for the same
period as included in the budget prepared by the Company and approved by the Board at its May 2012 meeting; and
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The TSR metric is based on the change in the total stockholder return (TSR) of the Company during the period between January 1, 2012 and
March 31, 2015 relative to the change in the TSR of the other companies in the NYSE Arca Pharmaceutical Index. To minimize the effect of a single days stock price volatility on the TSR calculations, stock prices are calculated using the
20-day volume weighted average closing stock prices prior to and including the beginning and end of the performance period.
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The Compensation Committee believes that both Revenues and TSR are appropriate performance metrics that properly incentivize the Companys executive officers to achieve the Companys long-term
financial and strategic goals while simultaneously aligning their interests with the long-term interests of the Companys stockholders. In particular, the Compensation Committee selected Revenues as a performance metric because they tie a
portion of the compensation opportunity for the Companys executives to a factor that is largely within their control i.e., the ability to execute the Companys strategic plan in order to generate projected Revenues and TSR
because it focuses the Companys executives on improving the Companys stock price. In addition, the products chosen by Compensation Committee as the basis for the Revenue performance metric were selected because they represent the five
most recent products that the Company commercially launched in the United States. While the Compensation Committee determines an executives total compensation opportunity by assuming that he or she will earn 100% of the PSUs initially awarded
in the compensation cycle (the Target Award), the number of PSUs that will actually be earned could be between 0% and 150% of the Target Award depending on the level of achievement of both performance metrics. The percentage of the Target Award that
is earned is determined by calculating the percentage of achievement for each metric and averaging the two percentages. The following table shows the percentage of achievement that is earned with respect to each metric based on the performance level
achieved:
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Revenues Metric
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TSR Metric
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Performance
Level
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|
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Percentage of
Achievement
|
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Performance
Level
|
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Percentage of
Achievement
|
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1
|
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< 70
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%
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0
|
%
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< 25
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%
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0
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%
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2 (Threshold)
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70
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%
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50
|
%*
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(
Threshold
)
|
|
|
25
|
%
|
|
|
50
|
%*
|
3
|
|
|
80
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%
|
|
|
60
|
%*
|
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|
|
|
|
|
|
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4
|
|
|
90
|
%
|
|
|
80
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%*
|
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5 (Target)
|
|
|
100
|
%
|
|
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100
|
%*
|
|
(
Target
)
|
|
|
50
|
%
|
|
|
100
|
%*
|
6
|
|
|
110
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%
|
|
|
120
|
%*
|
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|
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|
|
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7 (Maximum)
|
|
|
³
120
|
%
|
|
|
150
|
%*
|
|
(
Maximum
)
|
|
|
³
75
|
%
|
|
|
150
|
%*
|
*
|
For performance falling between two performance levels, the Percentage of Achievement will be interpolated to reflect the actual performance level
|
With respect to the Revenues metric, we are not disclosing total projected Revenues over the performance
period because we believe such disclosure would cause us competitive harm in that it would reveal confidential future business plans and objectives. In particular, we set our Revenue targets based on our confidential 5-year business plan and budget
that is developed in the ordinary course of our fiscal planning process and approved by the Board on an annual basis. Because our revenue projections are based on our internal forecasts and confidential information about our business and developed
primarily as a tool to facilitate strategic planning, disclosure of this target would cause us significant competitive harm. For example, in a highly competitive industry such as
- 32 -
pharmaceuticals, a competitors knowledge of our strategic business plans could provide information about our plans for investment in the specified products that could be used to implement
competitive research and marketing strategies that may force us to invest significantly higher levels of research and marketing resources. Moreover, such disclosure could adversely affect the Companys negotiating leverage with its distributors
and suppliers since such agreements frequently involve negotiation of minimum volumes and tiered pricing schemes which are based on projected volumes. Based on our historical experience in achieving projected product line revenues, we believe that
it will be difficult but achievable to meet or exceed the Revenues Target.
Long-Term Incentive Vehicles Awarded in
Fiscal Year 2013
In connection with the Transition, in May of 2012 the Compensation Committee approved grants to the
Named Executive Officers of PSUs, Stock Options and Restricted Stock Awards during fiscal year 2013 as set forth in Table 3 below:
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|
Name
|
|
Grant
|
|
|
Estimated Future Payouts Under Equity
Incentive Plan Awards(1)
|
|
|
All Other Stock
Awards: Number
of Shares of Stock
or
Units
(#)(2)
|
|
|
All Other Option
Awards: Number of
Securities
Underlying
Options
(#)(3)
|
|
|
Exercise or Base
Price of Option
Awards ($)
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
Howard Solomon
|
|
|
5/7/2012
|
|
|
|
21,606
|
|
|
|
43,212
|
|
|
|
64,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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21,606
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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71,676
|
|
|
|
34.035
|
|
Elaine Hochberg
|
|
|
5/7/2012
|
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5,500
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|
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11,000
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16,500
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|
|
|
|
|
|
|
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|
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|
|
5/7/2012
|
|
|
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|
|
|
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|
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|
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11,000
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|
5/7/2012
|
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|
|
|
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36,300
|
|
|
|
34.035
|
|
Francis I. Perier, Jr.
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|
|
5/7/2012
|
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|
5,118
|
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10,236
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|
|
15,354
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,236
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,956
|
|
|
|
34.035
|
|
Marco Taglietti, M.D.
|
|
|
5/7/2012
|
|
|
|
4,300
|
|
|
|
8,600
|
|
|
|
12,900
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
8,600
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,500
|
|
|
|
34.035
|
|
David F. Solomon
|
|
|
5/7/2012
|
|
|
|
4,400
|
|
|
|
8,800
|
|
|
|
13,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,800
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,300
|
|
|
|
34.035
|
|
(1) The amounts in this column represent shares of our Common Stock
underlying performance-based restricted stock units (PSUs) granted under our 2007 Equity Incentive Plan. These awards vest based on the achievement of certain corporate objectives, specifically revenue and TSR performance, which were approved by the
Compensation Committee. The Threshold amounts assume achievement of 70% of the Revenue target and performance in the top 75% of the TSR range, although with respect to each metric, the actual range of the award potential is between 0% and 150%. The
Target amounts assume achievement of 100% of the Revenue target and performance in the top 50% of the TSR range. The Maximum amounts assume achievement of 120% of the Revenue target and performance in the top 25% of the TSR range.
(2) The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the
award on May 15, 2013, 33% of the shares on May 15, 2014 and 34% of the shares on May 15, 2015.
(3)
The stock option has a term of ten years and becomes exercisable as to 25% of the shares covered by the option on each of the first four anniversaries of the grant date.
The terms of the PSUs granted in May 2012 are identical to those granted in December 2011, except that the performance period for the TSR
grant is the three year period commencing on April 1, 2012. For each Named Executive Officer other than the CEO, the fiscal year 2013 equity grant was allocated in approximately equal amounts (based on value) of PSUs, Stock Options and
Time-based Restricted Stock Awards. In light of his more direct responsibility for the Companys performance, the Compensation Committee again determined that a larger portion of the CEOs equity award should be in the form of PSUs and
allocated approximately 50% (based
- 33 -
on value) of his equity awards to PSUs with the remaining 50% allocated approximately equally to each category of Stock Options and Time-based Restricted Stock Awards. The next annual grant of
equity awards to Named Executive Officers will occur after the end of the new compensation cycle in May of 2013.
Additional Compensation Elements
Benefits
The Named Executive Officers are also eligible to
participate in the same retirement plans and health and welfare benefit plans made available to the other benefits-eligible employees of the Company, including, for example, the Companys defined contribution plan, medical, dental, vision, life
insurance and disability coverage.
Perquisites
The Company provides certain executive officers, including the Named Executive Officers, with certain perquisites that the Compensation
Committee believes are reasonable and consistent with the Companys overall compensation program. We believe that the indirect benefit that the Company receives from providing these perquisites outweighs the cost of providing them. The specific
cost of perquisites paid by the Company for each Named Executive Officer in fiscal year 2012 is set forth in the Summary Compensation Table on Page 41 of this Proxy Statement under the heading All Other Compensation and
is described further in footnote 4 to the table. The Committee does not believe that the perquisites provided to executive officers form a material part of their compensation. The Company does not provide loans to executive officers.
Retiree Medical Benefits
On December 1, 1989, the Board authorized the grant of certain lifetime medical benefits to certain senior executive officers and their spouses upon the completion of ten years of service by such
officers. The benefit was subsequently discontinued and the only Named Executive Officer currently employed by the Company eligible for such benefit is Mr. Howard Solomon. This benefit is further described under the heading Benefits
Continuation Agreements on Page 47 of this Proxy Statement.
Deferred Compensation Plans
The Company maintains a nonqualified Deferred Compensation Plan for the benefit of certain highly compensated employees, including its
Named Executive Officers. Such plans are common within the Companys competitive peer group. Under this plan, full-time salaried employees who have an annual base salary of at least $150,000 may defer up to 50% of their annual base salary and
up to 100% of their annual bonus. Deferred amounts may be invested among several investment programs at the participants option. Deferred amounts are not subject to federal or state income tax until a participant withdraws amounts from the
plan. The Company does not match any of these funds. Further information on the deferred compensation payable to its Named Executive Officers can be found under the heading Nonqualified Deferred Compensation on Page 45 of this Proxy
Statement.
Contract
s and Agreements
Letter Agreements
The Company entered into letter agreements with Mr. Perier and Dr. Taglietti in connection with their employment with the Company. Pursuant to these letter agreements, Mr. Perier and
Dr. Taglietti are entitled to guaranteed severance payments for a one year period following a termination of employment, a bonus for the year in which the termination of employment occurs equal to the greater of the last bonus received from the
Company or 40% of salary target in the case of Mr. Perier and 30% of salary target in the case of Mr. Taglietti,
- 34 -
and continued medical and dental health care coverage for such officer and any eligible family members until the earlier of the expiration of the one year period or the date such officer obtains
alternate coverage. The guaranty is triggered if the executive is terminated by the Company without Cause or resigns for Good Reason (each as defined in the relevant letter agreement). A more detailed description of such severance arrangements
(including the amounts payable thereunder) can be found under the heading Post-Termination Benefits and Change in Control Payments on Page 46 of this Proxy Statement.
Change of Control Employment Agreements
The Company is party to change-in-control employment agreements with certain key executives, including each of the Named Executive Officers, which provide for severance (i) upon a termination due to
death or disability or a termination without Cause or for Good Reason or Adequate Reason, in each case during the three year period following a Change of Control (as such terms is defined in the applicable agreement) or (ii) in connection with
a termination of the agreement within 90 days following a Change of Control. Each individual covered by such an agreement has made a significant contribution to the Company and has knowledge and understanding of the Company and its operations and
these arrangements are provided to maintain continuity of such expertise and leadership during potentially disruptive negotiations relating to potential mergers, acquisitions or other business combinations. They also serve to protect the
stockholders interest in maintaining executive leadership so that goals and objectives in the best interest of stockholders are pursued. A more detailed description of such severance arrangements (including the amounts payable thereunder) can
be found under the heading Post-Termination Benefits and Change in Control Payments on Page 46 of this Proxy Statement.
How We
Make Compensation Decisions
The Role of Our Compensation Committee
The Compensation Committee
is responsible for establishing the Companys compensation strategy and overall program of executive compensation and for administering and monitoring compliance with the compensation program. The Compensation Committee seeks to ensure that the
total compensation paid to our Named Executive Officers is fair, reasonable and competitive. For fiscal years 2012 and 2013, the Compensation Committee also engaged an independent compensation consultant as described below under the heading
The Role of the Compensation Committees Independent Compensation Consultant.
The Compensation Committee
reviews the performance of and establishes compensation for the CEO and CFO. With respect to senior executives of the Company other than the CEO and CFO, including the other Named Executive Officers, the Compensation Committee reviews and assesses
managements evaluation of such executives performance and makes recommendations to the Board regarding their compensation.
The Role of Our Management
As part of the annual compensation
approval process and this year in connection with the Transition Period, the Compensation Committee considers the advice of the CEO and CFO with respect to the compensation of all Named Executive Officers other than the CEO and CFO. In addition,
management of the Company provided to the Compensation Committee managements recommendations on the proposed compensation, including annual cash incentive compensation, for the executive officers other than the CEO and CFO. The CEO and CFO
assisted the Compensation Committee and its independent compensation consultant in determining the Companys Comparator Group (as described on Page 36 of this Proxy Statement). Other members of management provided support to the Compensation
Committee as needed. Based upon a review of performance and historical compensation, recommendations and information from members of management, and discussions with its independent compensation consultant, the Compensation Committee determined and
recommended for Board approval compensation for the Named Executive Officers other than the CEO and CFO.
- 35 -
Our management was also involved in developing proposals regarding program design and
administration for the Compensation Committees review and approval. Management was responsible for responding to any Compensation Committee requests for information, analysis, or perspective as it related to topics that arose during the course
of the year. Lastly, management carries out certain responsibilities relating to administration of the compensation program.
The Role of the Compensation Committees Independent Compensation Consultant
In the fall of 2011, the Compensation Committee engaged an independent compensation consultant, Steven Hall & Partners, LLP
(SH&P). SH&P conducted a thorough review of the Companys executive compensation plans, policies and practices, as well as, market trends and current and pending legislation and evolving policies and procedures adopted by proxy advisory
services firms. As part of the review, SH&P reviewed current and historical practices of the Company and conducted interviews with members of the Board and management. The SH&P report to the Committee recommended the adoption of a comparator
group to be used for benchmarking of compensation and practices and specific recommendations based on the Companys long term objectives to create a stronger alignment with the interests of stockholders and in line with current best
practices. The Compensation Committee has also retained SH&P as its advisor for fiscal 2013.
Non-Binding Advisory Say on
Pay Proposal and Recent Changes in Compensation Practices
In August 2011, our stockholders approved a non-binding
advisory say-on-pay proposal at our 2011 Annual Meeting with over 73% of the votes cast voting in favor of that proposal. The Compensation Committee reviewed the results of the stockholder vote and took the percentage of votes in favor of the
proposal as an overall indication that our stockholders support our pay-for-performance approach.
With a view to continuing
to improve stockholder satisfaction with the Companys compensation program, the Compensation Committee adopted several new policies since the 2011 Annual Meeting intended to further align the Companys compensation program with its
objective of incentivizing employee performance while preserving good corporate governance. For fiscal year 2012 and 2013, the Compensation Committee began using more annual incentive awards which are in part earned based on pre-established
performance metrics and which are intended to more closely align incentive pay with general corporate performance goals (see description of the PSUs implemented in fiscal year 2012 on Pages 3133 of this Proxy Statement and the description of
the Incentive Plan implemented in fiscal year 2013 on page 30 of this Proxy). In addition, in 2012, the Compensation Committee adopted (i) executive and director stock ownership guidelines, (ii) a minimum holding period for shares of
common stock acquired upon the exercise of Company stock options or through Company restricted stock grants, (iii) an anti-hedging policy, and (iv) amendments to the Equity Plan to require that all stock options, stock appreciation rights,
and restricted stock awards granted to all executive officers have a vesting schedule which exceeds 24 months.
The Compensation Committee
will continue to monitor our current compensation structure and consider future advisory say-on-pay votes to ensure that there is continued support for our pay programs among our stockholders.
Competitive Marketplace Assessmen
t
As part of our executive compensation program, we periodically review executive compensation data from similar companies in order to ensure that our practices are fair and reasonable. At the Compensation
Committees request, the independent compensation consultant analyzed data from a broad range of publicly traded companies in providing assistance to the Compensation Committee. From this group, the Compensation Consultant recommended, and
based on such recommendation the Compensation Committee established, a peer group consisting of eleven publicly traded pharmaceutical health companies (the Comparator Group). The Comparator Group was selected based on industry focus, revenue size
and includes companies with which we compete for
- 36 -
talent. In addition, we considered an analysis of market capitalization and similarity of broad-based product and service offerings. The Comparator Group consists of:
|
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|
|
|
Allergan, Inc
|
|
Hospira, Inc.
|
|
|
Biogen Idec Inc.
|
|
Mylan Inc
|
|
|
Celgene Corporation
|
|
Perrigo Company
|
|
|
Cephalon Inc.
|
|
Warner Chilcott PLC
|
|
|
Endo Pharmaceuticals Holdings Inc.
|
|
Watson Pharmaceuticals, Inc.
|
|
|
Gilead Sciences, Inc.
|
|
|
The independent compensation consultant also prepared a market study which benchmarked elements of
compensation including base salaries, total cash compensation and total compensation for officers in comparable positions. The study included data derived from a number of sources, including the proxy statements of companies within the
Comparator Group and two surveys published by Towers Watson. In developing compensation levels for the Companys officers, the Compensation Committee used such data as a point of reference, and made adjustments based on differences in the
scope of responsibilities of the Companys executive as compared to their counterparts within the Comparator Group. The Compensation Committee further adjusted compensation levels based on the executives tenure, performance during
the compensation period and the relative strategic importance of such executives position within the Company.
Risk Conside
rations
The Compensation Committee has reviewed the Companys compensation policies and practices and analyzed
the potential business risks inherent in such policies and practices. The Compensation Committee believes that the Companys executive compensation policies and practices do not encourage our management, including our Named Executive Officers,
to take unnecessary business risks that are reasonably likely to have a material adverse effect on the Company. Specifically, the Companys historical practice of providing the majority of management compensation in the form of long-term equity
awards, and its recent additions to its compensation programs, including the issuance of PSUs which use multiple performance metrics and have a minimum three year performance period and the requirement that all awards granted to executive officers
under the Equity Plan have a vesting schedule which exceeds 24 months align the interests of our management with the long-term interests of the Companys stockholders and protect against inappropriate risk taking. In addition to the foregoing,
during the past year, the Company amended its Corporate Governance Guidelines to implement stock ownership guidelines, a holding period requirement with respect to shares acquired by executive officers from option exercises and restricted stock
grants, and an anti-hedging policy with a view to further aligning the interests of management with those of our stockholders thereby mitigating the taking of unnecessary risks.
Cla
wback Policy
The Company maintains a
clawback policy, which is set forth in our Corporate Governance Guidelines. The policy provides that, in addition to any other remedies that may be available to the Company, the Company may recover (in whole or in part) any bonus,
incentive payment, commission, equity award or other compensation received by an executive officer of the Company that is or was based on any financial results or operating metrics that were impacted by such executive officers knowing or
intentional fraudulent or illegal conduct.
Stock Ownership Guidelines
Our Corporate Governance Guidelines include stock ownership guidelines applicable to our non-employee Directors and our executive
officers, including the Named Executive Officers. These guidelines are intended to align the long-term interests of our non-employee Directors and executives with the interests of stockholders and promote an ownership culture and long-term
perspective.
- 37 -
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Role
|
|
Value of Common Stock to be Owned
|
Chairman of the Board, Chief Executive Officer and President
|
|
Six times base salary
|
Executive Vice President
|
|
Three times base salary
|
Other senior executives
|
|
One times base salary
|
Non-employee directors
|
|
Three times annual retainer fee
|
Each executive and non-employee Director is required to meet his or her target stock ownership threshold
on or before December 31 of the year which includes the fifth anniversary or seventh anniversary, respectively, of the date he or she became subject to the guidelines. All Named Executive Officers owned shares of Company stock exceeding their
respective target stock ownership thresholds.
Holding Period for St
ock Options, Restricted Stock and
Performance Stock Units
To further promote a culture of ownership and long-term investment, the Board has adopted a policy
requiring that shares obtained by executives, including the Named Executive Officers, upon the exercise of Company stock options or through Company restricted stock grants and performance stock units be held until such executive achieves the
applicable ownership threshold under the stock ownership guidelines, subject to exceptions for shares required to be sold in order to exercise the option or pay the taxes accruing as a result of the exercise of the option or the vesting of the
restricted stock award or performance stock unit and in connection with corporate transactions that are generally available to stockholders.
No Hedging
Policy
To further align our Directors and executive officers interests with the interests of the Companys stockholders, the Board has adopted a policy applicable to all Directors and executive
officers, including the Named Executive Officers, which prohibits transactions designed to limit or eliminate economic risks to our Directors or executive officers from owning the Companys stock, such as transactions involving any form of
margin arrangement, short sales or dealing in puts and calls or other derivative instruments related to Company stock or debt.
Tax and
Accoun
ting Implication of Compensation
Section 162(m) of the Code generally limits the
deductibility of compensation (other than qualified performance-based compensation) in excess of $1,000,000 paid in a taxable year to a companys chief executive officer and the four other most highly compensated executive officers. The Company
considers the impact of this deductibility limitation on its compensation program, but recognizes that there may be cases in which authorized compensation exceeds the limits contemplated in Section 162(m) of the Code.
Current accounting rules, including Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC 718),
Compensation-Stock Compensation, require the Company to record as an expense the estimated fair market value of stock option grants and stock awards, which reduces the Companys reported profits. The Committee considers this expense
when determining the types and values of equity awards to be granted to employees, including the Named Executive Officers.
- 38 -
REPORT OF THE COMPENSATION COMMITTEE(1)
With respect to the fiscal year ended March 31, 2012, the Compensation Committee hereby reports as follows:
1. The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis, set forth in
this proxy statement, as required by Item 402(b) of Regulation S-K; and
2. Based on the review and discussions
referred to in paragraph 1 above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Companys proxy statement on Schedule 14A filed with the SEC.
FOREST LABORATORIES, INC.
COMPENSATION COMMITTEE
Dan L. Goldwasser (Chairman)
Christopher J. Coughlin,
Gerald M. Lieberman, and
Brenton L. Saunders.
(1)
|
Notwithstanding anything to the contrary set forth in any of the Companys previous or future filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934, the Report on Executive Compensation by the Compensation Committee shall not be deemed incorporated by reference in any such filings.
|
- 39 -
TABULAR COMPENSATION DISCLOSURE
The following tables summarize our Named Executive Officer and non-employee director compensation as follows:
|
1.
|
Summary Compensation Table.
The Summary Compensation Table on Page 41 and related discussion summarize the compensation earned by or paid to our Named Executive
Officers for the fiscal years ended March 31, 2012, 2011 and 2010, including salary earned, the aggregate grant date fair value of performance stock units, stock awards and option awards granted to our Named Executive Officers, and all other
compensation paid to our Named Executive Officers, including perquisites.
|
|
2.
|
Grants of Plan-Based Awards Table.
The Grants of Plan-Based Awards Table on Page 42 and related discussion summarize all grants of plan-based awards made to our
Named Executive Officers for the fiscal year ended March 31, 2012.
|
|
3.
|
Outstanding Equity Awards at Fiscal Year-End Table.
The Outstanding Equity Awards at Fiscal Year-End Table on Page 44 and related discussion summarize the
unvested performance stock units, stock awards and all stock options held by our Named Executive Officers as of March 31, 2012. Please note that our Named Executive Officers ownership of vested shares of stock is set forth under
Security Ownership of Principal Stockholders and Management on Page 8 in this Proxy Statement.
|
|
4.
|
Option Exercises and Stock Vested Table.
The Option Exercises and Stock Vested Table on Page 45 and related discussion summarize our Named Executive
Officers option exercises and stock award vesting during the fiscal year ended March 31, 2012.
|
|
5.
|
Non-qualified Deferred Compensation Table.
The Nonqualified Deferred Compensation Table on Page 45 and related discussion summarize the contributions to and
account balances under our Deferred Compensation Plan during the fiscal year ended March 31, 2012.
|
|
6.
|
Potential Payments Upon Termination Table.
The Potential Payments Upon Termination Table on Page 46 and related discussion summarize payments and benefits that
would be made to certain of our Named Executive Officers in the event of certain employment terminations.
|
|
7.
|
Potential Payments Upon a Change in Control Table.
The Potential Payments Upon a Change in Control Table on Page 48 and related discussion summarize payments and
benefits that would be made to our Named Executive Officers in the event of a change in control.
|
|
8.
|
Director Compensation Table.
The Director Compensation Table on Page 48 and related discussion summarize the compensation paid to our non-employee directors
during the fiscal year ended March 31, 2012, including cash compensation and the aggregate grant date fair value of stock awards and option awards granted to our non-employee directors.
|
- 40 -
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for each of our Named Executive Officers for each of the fiscal years ended March 31,
2012, 2011 and 2010 during which such person qualified as a Named Executive Officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($) (1)
|
|
|
Stock
Awards
($) (2)
|
|
|
Option Awards
($) (2)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($) (3)
|
|
Howard Solomon,
|
|
|
2012
|
|
|
|
1,350,000
|
|
|
|
1,013,885
|
|
|
|
4,523,246
|
|
|
|
1,515,050
|
|
|
|
131,486
|
(4)
|
|
|
8,533,667
|
|
Chairman, CEO and President
|
|
|
2011
|
|
|
|
1,312,500
|
|
|
|
1,037,500
|
|
|
|
4,020,625
|
|
|
|
2,112,000
|
|
|
|
358,688
|
|
|
|
8,841,313
|
|
|
|
|
2010
|
|
|
|
1,277,500
|
|
|
|
980,000
|
|
|
|
3,908,125
|
|
|
|
2,077,138
|
|
|
|
104,473
|
|
|
|
8,347,236
|
|
|
|
|
|
|
|
|
|
Elaine Hochberg,
|
|
|
2012
|
|
|
|
682,587
|
|
|
|
402,000
|
|
|
|
1,430,762
|
|
|
|
783,580
|
|
|
|
45,449
|
(4)
|
|
|
3,344,378
|
|
Executive Vice President and
|
|
|
2011
|
|
|
|
650,321
|
|
|
|
385,000
|
|
|
|
1,769,075
|
|
|
|
1,056,000
|
|
|
|
46,432
|
|
|
|
3,906,828
|
|
Chief Commercial Officer
|
|
|
2010
|
|
|
|
622,939
|
|
|
|
350,000
|
|
|
|
1,719,575
|
|
|
|
890,202
|
|
|
|
41,571
|
|
|
|
3,624,287
|
|
|
|
|
|
|
|
|
|
Francis I. Perier, Jr.,
|
|
|
2012
|
|
|
|
632,243
|
|
|
|
366,810
|
|
|
|
1,343,776
|
|
|
|
723,750
|
|
|
|
48,252
|
(4)
|
|
|
3,114,831
|
|
Executive Vice President Finance
|
|
|
2011
|
|
|
|
603,956
|
|
|
|
344,000
|
|
|
|
1,608,250
|
|
|
|
1,056,000
|
|
|
|
48,885
|
|
|
|
3,661,091
|
|
and Administration and CFO
|
|
|
2010
|
|
|
|
579,250
|
|
|
|
314,000
|
|
|
|
1,406,925
|
|
|
|
681,048
|
|
|
|
44,152
|
|
|
|
3,025,375
|
|
|
|
|
|
|
|
|
|
Marco Taglietti, M.D.,
|
|
|
2012
|
|
|
|
578,091
|
|
|
|
325,500
|
|
|
|
1,145,809
|
|
|
|
599,265
|
|
|
|
33,643
|
(4)
|
|
|
2,682,308
|
|
Senior Vice President
|
|
|
2011
|
|
|
|
550,872
|
|
|
|
310,000
|
|
|
|
1,447,425
|
|
|
|
637,800
|
|
|
|
34,123
|
|
|
|
2,980,220
|
|
Research and Development and
|
|
|
2010
|
|
|
|
527,725
|
|
|
|
285,000
|
|
|
|
1,250,600
|
|
|
|
454,032
|
|
|
|
30,178
|
|
|
|
2,547,535
|
|
President of Forest Research
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institute
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David F. Solomon,
|
|
|
2012
|
|
|
|
450,000
|
|
|
|
261,500
|
|
|
|
1,145,809
|
|
|
|
552,945
|
|
|
|
25,255
|
(4)
|
|
|
2,435,509
|
|
Senior Vice President Corporate Development and
|
|
|
2011
|
|
|
|
396,875
|
|
|
|
230,000
|
|
|
|
1,447,425
|
|
|
|
584,650
|
|
|
|
22,359
|
|
|
|
2,681,309
|
|
Strategic Planning (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In December 2011, the Compensation Committee decided to align the Companys compensation cycle, which historically covered the twelve month period ending
September 30, with the Companys fiscal year end of March 31. The amounts set forth in the Bonus column for fiscal year 2012 represent the cash incentives issued as a bonus for the fiscal year ended March 31, 2012. To
facilitate comparisons among the three fiscal years, the cash incentive awards set forth in the Bonus column for each of fiscal years 2011 and 2010 have been restated to reflect the cash incentives earned as bonuses with respect to each
fiscal year as opposed to the amount earned with respect to the twelve-month period ended September 30.
|
(2)
|
Represents the aggregate grant date fair values of awards for the fiscal years ended March 31, 2012, 2011 and 2010 computed in accordance with FASB ASC 718. For a
discussion of valuation assumptions used in calculating the amounts for fiscal years 2012, 2011 and 2010, see Note 1 to our Consolidated Financial Statements included in our Annual Reports on Form 10-K for the fiscal years ended March 31, 2012,
2011 and 2010, respectively. For fiscal year 2012, the Stock Awards column reflects the grant date fair value for both grants of Restricted Stock and performance stock units (the PSUs) granted to the NEOs during that period. The value of
PSUs has been determined based on an assumed vesting of 100% of the target PSUs awarded, which is the performance threshold the Company believed as of the grant date was most likely to be achieved under the grants. The following is the maximum grant
date fair value of these awards for each of the following NEOs if, due to the Companys performance during the applicable performance cycle, the PSUs vested at their maximum level: Howard Solomon: $4,310,282, Elaine Hochberg: $1,073,071,
Francis I. Perier $1,007,832, Marco Taglietti $859,357 and David F. Solomon $859,357. Please see the Grants of Plan-Based Awards table on Page 42 of this Proxy Statement for more information regarding equity awards granted in fiscal year
2012.
|
- 41 -
(3)
|
There are no above-market or preferential earnings on deferred compensation. Consequently, the Summary Compensation Table does not include earnings on deferred amounts.
In addition, none of the Named Executive Officers is eligible for pension benefits because Forest does not have a defined benefit retirement program.
|
(4)
|
This amount includes the cost of group term life insurance and compensation credited to the Named Executive Officers pursuant to our Savings and Profit Sharing Plan,
each of which benefit is available on the same terms to all non-bargaining unit employees of the Company and its domestic subsidiaries. These employees become participants in the plan if they are employed for at least six months prior to the plan
year-end. The Company makes contributions to the plan at the Boards discretion. However, for fiscal year 2012, the contribution base may not exceed 25% of the individual plan participants gross salary (up to a maximum salary of
$245,000), including allocated forfeitures for the plan year. Plan participants vest over a period of one to five years of credited service. The amount disclosed also includes the costs of all perquisites provided to the Named Executive Officers,
including with respect Mr. David F. Solomon and Dr. Taglietti, amounts that did not exceed $10,000. The amount of such perquisites represent the cost associated with company cars (including insurance), company provided lunches and
membership dues. With respect to Mr. Howard Solomon this amount also includes $89,500 of medical expenses paid on behalf of Mr. Solomon under a supplemental medical plan.
|
(5)
|
Compensation for Mr. David F. Solomon is only shown for fiscal years commencing with fiscal year 2011, the year in which Mr. Solomon became a Named
Executive Officer.
|
GRANTS OF PLAN-BASED AWARDS
The following table sets forth certain additional information regarding grants of plan-based awards to our Named Executive Officers
during the fiscal year ended March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant(1)
|
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
|
|
|
All Other
Stock Awards:
Number of
Shares of
Stock or
Units
(#)(3)
|
|
|
All Other
Option Awards:
Number of
Securities
Underlying
Options
(#)(4)
|
|
|
Exercise or
Base Price of
Option
Awards
($)
|
|
|
Grant Date
Fair Value
of Stock
and Option
Awards ($)(5)
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Howard Solomon
|
|
|
12/05/11
|
|
|
|
47,900
|
|
|
|
95,800
|
|
|
|
143,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,873,521
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
1,649,725
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,000
|
|
|
|
29.995
|
|
|
|
1,515,050
|
|
Elaine Hochberg
|
|
|
12/05/11
|
|
|
|
11,925
|
|
|
|
23,850
|
|
|
|
35,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
715,381
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,850
|
|
|
|
|
|
|
|
|
|
|
|
715,381
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,200
|
|
|
|
29.995
|
|
|
|
783,580
|
|
Francis I. Perier, Jr.
|
|
|
12/05/11
|
|
|
|
11,200
|
|
|
|
22,400
|
|
|
|
33,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
671,888
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,400
|
|
|
|
|
|
|
|
|
|
|
|
671,888
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
29.995
|
|
|
|
723,750
|
|
Marco Taglietti, M.D.
|
|
|
12/05/11
|
|
|
|
9,550
|
|
|
|
19,100
|
|
|
|
28,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572,905
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,100
|
|
|
|
|
|
|
|
|
|
|
|
572,905
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,100
|
|
|
|
29.995
|
|
|
|
599,265
|
|
David F. Solomon
|
|
|
12/05/11
|
|
|
|
9,550
|
|
|
|
19,100
|
|
|
|
28,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
572,905
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,100
|
|
|
|
|
|
|
|
|
|
|
|
572,905
|
|
|
|
|
12/05/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,300
|
|
|
|
29.995
|
|
|
|
552,945
|
|
(1)
|
Grants reported in this table were awarded in respect of services performed during the 12-month period ended September 30, 2011 and will vest over time or based on
performance, as further described in footnotes 2-4 below.
|
(2)
|
The amounts in this column represent shares of our Common Stock underlying performance-based restricted stock units (PSUs) granted under our 2007 Equity Incentive Plan.
These awards vest based on the achievement of certain corporate objectives, specifically revenue and TSR performance, which were approved by the Compensation Committee and which are further described in the Compensation Discussion and Analysis
Elements of Executive Compensation Long-Term Incentives. The Threshold amounts assume achievement of 70% of the Revenue target and performance in the top 75% of the TSR range, although with respect to each metric, the actual
range of the award potential is between 0% and 150%. The Target amounts assume achievement of 100% of the Revenue target and performance in the top 50% of the TSR range. The Maximum amounts assume achievement in of 120% of the Revenue target and
performance in the top 25% of the TSR range.
|
- 42 -
(3)
|
The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the award on the first anniversary of the grant date, 33% of the
shares on the second anniversary of the grant date and 34% of the shares on the third anniversary of the grant date.
|
(4)
|
The stock option has a term of ten years and becomes exercisable as to 25% of the shares covered by the option on each of the first four anniversaries of the grant
date.
|
(5)
|
Represents the aggregate grant date fair value of awards computed in accordance with FASB ASC 718 and does not reflect whether the recipient has actually realized a
financial benefit from the awards. For additional information regarding the valuation methodology used by the Company, see Note 1 to our 2012 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended
March 31, 2012. The value of PSUs has been determined based on the vesting of 100% of the target PSUs awarded, which is the performance threshold the Company believed as of the grant date was most likely to be achieved under the grants.
|
Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards
Equity Plans
The only
long-term incentive compensation plan pursuant to which we presently grant equity awards is our 2007 Equity Incentive Plan (the Equity Plan). Pursuant to the Equity Plan, employees, including the Named Executive Officers, may be granted options to
purchase shares of common stock, stock awards, stock appreciation rights and stock equivalent units (the Awards). The exercise price of all options, including Incentive Stock Options (ISOs) as defined by Section 422 of the Internal Revenue Code
of 1986 (the Code), is the fair market value of the shares on the grant date. In fiscal 2012, we granted only performance based stock equivalent units (referred to as performance stock units or PSUs), restricted stock awards and stock options. All
of our employees, our subsidiaries employees and our non-employee directors are eligible to receive Awards under the Equity Plan. The Equity Plan provides that a Committee composed of no fewer than three (3) members of the Board, each of
whom meets the definition of outside director under the provisions of Section 162(m) of the Code and the definition of non-employee director under the provisions of the Exchange Act or rules and regulations promulgated
thereunder, shall administer the Equity Plan and determine which employees are granted Awards and the number of shares subject to each Award. A full description of the terms of the equity awards granted to our Named Executive Officers is described
in the Compensation Discussion and Analysis Elements of Executive Compensation Long-Term Incentives. Under the Equity Plan, the non-employee directors are eligible for automatic grants of stock awards and stock options as
further described in the narrative following the Director Compensation table on Page 48 of this Proxy Statement under the heading Director Compensation.
We have historically granted options to our employees and directors under our 1998 Stock Option Plan, our 2000 Stock Option Plan and our 2004 Stock Option Plan (the Prior Option Plans). Following the
adoption of the Equity Plan, we ceased issuing options under the Prior Option Plans, however all options previously issued under the Prior Option Plans which remain outstanding continue to be governed by the terms of such Prior Option Plans.
- 43 -
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information regarding each unexercised option and unvested stock award held by each of our Named Executive
Officers as of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
|
|
|
Equity
incentive
plan awards:
number of
unearned
shares, units
or other
rights
that
have not
vested (#)
|
|
|
Equity
incentive
plan awards:
market or
payout value
of unearned
shares, units
or
other
rights that
have not
vested ($)
|
|
Howard Solomon
|
|
|
|
|
|
|
157,000
|
(1)
|
|
|
29.9950
|
|
|
|
12/04/2021
|
|
|
|
55,000
|
(2)
|
|
|
1,907,950
|
|
|
|
47,900
|
|
|
|
1,661,651
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
32.1650
|
|
|
|
12/05/2020
|
|
|
|
31,250
|
(3)
|
|
|
1,084,063
|
|
|
|
|
|
|
|
|
|
|
|
|
140,000
|
|
|
|
|
|
|
|
31.2650
|
|
|
|
12/06/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
24.1200
|
|
|
|
12/08/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
|
|
37.2550
|
|
|
|
12/05/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
51.5350
|
|
|
|
12/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
40.2900
|
|
|
|
12/09/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
42.5350
|
|
|
|
12/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
59.0500
|
|
|
|
12/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
|
|
|
|
48.3400
|
|
|
|
12/13/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elaine Hochberg
|
|
|
|
|
|
|
81,200
|
(1)
|
|
|
29.9950
|
|
|
|
12/04/2021
|
|
|
|
23,850
|
(2)
|
|
|
827,357
|
|
|
|
11,925
|
|
|
|
413,678
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
32.1650
|
|
|
|
12/05/2020
|
|
|
|
13,750
|
(3)
|
|
|
476,988
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
31.2650
|
|
|
|
12/06/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
24.1200
|
|
|
|
12/08/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
20,000
|
(4)
|
|
|
37.2550
|
|
|
|
12/05/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
51.5350
|
|
|
|
12/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
40.2900
|
|
|
|
12/09/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
42.5350
|
|
|
|
12/13/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
59.0500
|
|
|
|
12/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
48.3400
|
|
|
|
12/13/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francis I. Perier, Jr.
|
|
|
|
|
|
|
75,000
|
(1)
|
|
|
29.9950
|
|
|
|
12/04/2021
|
|
|
|
22,400
|
(2)
|
|
|
777,056
|
|
|
|
11,200
|
|
|
|
388,528
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
32.1650
|
|
|
|
12/05/2020
|
|
|
|
12,500
|
(3)
|
|
|
433,625
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
|
|
42,000
|
(5)
|
|
|
31.2650
|
|
|
|
12/06/2019
|
|
|
|
22,500
|
(6)
|
|
|
780,525
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
27,500
|
(7)
|
|
|
24.1200
|
|
|
|
12/08/2018
|
|
|
|
10,000
|
(8)
|
|
|
346,900
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
20,000
|
(4)
|
|
|
37.2550
|
|
|
|
12/05/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
51.5350
|
|
|
|
12/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
40.2900
|
|
|
|
12/09/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
44.7400
|
|
|
|
09/30/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marco Taglietti, M.D.
|
|
|
|
|
|
|
62,100
|
(1)
|
|
|
29.9950
|
|
|
|
12/04/2021
|
|
|
|
19,100
|
(2)
|
|
|
662,579
|
|
|
|
9,550
|
|
|
|
331,290
|
|
|
|
|
9,000
|
|
|
|
51,000
|
(9)
|
|
|
32.1650
|
|
|
|
12/05/2020
|
|
|
|
33,750
|
(10)
|
|
|
1,170,788
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
28,000
|
(5)
|
|
|
31.2650
|
|
|
|
12/06/2019
|
|
|
|
20,000
|
(6)
|
|
|
693,800
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
13,750
|
(7)
|
|
|
24.1200
|
|
|
|
12/08/2018
|
|
|
|
7,500
|
(8)
|
|
|
260,175
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000
|
|
|
|
24,000
|
(11)
|
|
|
39.8800
|
|
|
|
08/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David F. Solomon
|
|
|
|
|
|
|
57,300
|
(1)
|
|
|
29.9950
|
|
|
|
12/04/2021
|
|
|
|
19,100
|
(2)
|
|
|
662,579
|
|
|
|
9,550
|
|
|
|
331,290
|
|
|
|
|
8,250
|
|
|
|
46,750
|
(9)
|
|
|
32.1650
|
|
|
|
12/05/2020
|
|
|
|
33,750
|
(10)
|
|
|
1,170,788
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
28,000
|
(5)
|
|
|
31.2650
|
|
|
|
12/06/2019
|
|
|
|
20,000
|
(6)
|
|
|
693,800
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
13,750
|
(7)
|
|
|
24.1200
|
|
|
|
12/08/2018
|
|
|
|
7,500
|
(8)
|
|
|
260,175
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
10,000
|
(4)
|
|
|
37.2550
|
|
|
|
12/05/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
50.9900
|
|
|
|
03/04/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
51.5350
|
|
|
|
12/08/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
46.1000
|
|
|
|
08/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The option was granted on December 5, 2011 and has a term of ten years. The option vests and is exercisable as to 25% of the shares underlying the option on each
of the first four anniversaries of the grant date.
|
(2)
|
The stock award was granted on December 5, 2011. The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the award on
the first two anniversaries of the grant date and 34% of the shares on the third anniversary of the grant date.
|
- 44 -
(3)
|
The stock award was granted on December 6, 2010. The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on
the six-month anniversary of the grant date, 50% of the shares on the first anniversary of the grant date and 25% on the second anniversary of the grant date.
|
(4)
|
The option was granted on December 6, 2007 and has a term of ten years. The option vests and is exercisable as to 15% of the shares underlying the option on each
of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
|
(5)
|
The option was granted on December 7, 2009 and has a term of ten years. The option vests and is exercisable as to 15% of the shares underlying the option on each
of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
|
(6)
|
The stock award was granted on December 7, 2009. The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on
each of the first four anniversaries of the grant date.
|
(7)
|
The option was granted on December 8, 2008 and has a term of ten years. The option vests and is exercisable as to 15% of the shares underlying the option on each
of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
|
(8)
|
The stock award was granted on December 8, 2008. The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on
each of the first four anniversaries of the grant date.
|
(9)
|
The option was granted on December 6, 2010 and has a term of ten years. The option vests and is exercisable as to 15% of the shares underlying the option on each
of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
|
(10)
|
The stock award was granted on December 6, 2010. The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on
each of the first four anniversaries of the grant date.
|
(11)
|
The option was granted on August 13, 2007 and has a term of ten years. The option vests and is exercisable as to 15% of the shares underlying the option on each of
the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
|
OPTION EXERCISES AND STOCK VESTED
The
following table provides information on stock option exercises and vesting of restricted stock during the 2012 fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Shares
Acquired on
Exercise (#)
|
|
|
Value Realized on
Exercise ($)
|
|
|
Number of Shares
Acquired on
Vesting (#)
|
|
|
Value Realized on
Vesting ($)
|
|
Howard Solomon
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
|
3,956,875
|
|
Elaine Hochberg
|
|
|
|
|
|
|
|
|
|
|
61,250
|
|
|
|
1,928,838
|
|
Francis I. Perier, Jr.
|
|
|
|
|
|
|
|
|
|
|
63,750
|
|
|
|
1,991,438
|
|
Marco Taglietti, M.D.
|
|
|
|
|
|
|
|
|
|
|
30,312
|
|
|
|
909,251
|
|
David F. Solomon
|
|
|
|
|
|
|
|
|
|
|
31,750
|
|
|
|
952,463
|
|
NON-QUALIFIED DEFERRED COMPENSATION
The following table shows the executive contributions, earnings and account balances for all Named Executive Officers who participate in
our Deferred Compensation Plan. The Deferred Compensation Plan allows full time salaried employees who have an annual base salary of at least $150,000, including the Named Executive Officers, to defer up to 50% of their annual base salary and up to
100% of their annual bonuses. Deferred amounts are not subject to federal or state income tax until a participant withdraws amounts from the Deferred Compensation Plan. We do not match any of these funds.
Employees who participate in the Deferred Compensation Plan may at their option invest deferred monies in a range of investment vehicles
that generally mirror the choices available to all employees in the Companys 401(k) Plan. The investment options in the Deferred Compensation Plan have returns that would be the same as
- 45 -
those earned on the same options in the Companys 401(k) Plan for the 2012 fiscal year. The rates of return for funds in the Deferred Compensation Plan ranged from: (15.77)% to 8.35%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions in
Last Fiscal
Year($) (1)
|
|
|
Aggregate Earnings in
Last
Fiscal Year ($) (2)
|
|
|
Aggregate
Withdrawals/
Distributions ($)
|
|
|
Aggregate
Balance at Last
Fiscal
Year End ($)
|
|
Elaine Hochberg
|
|
|
39,500
|
|
|
|
19,017
|
|
|
|
|
|
|
|
313,286
|
(3)
|
(1)
|
The amount set forth in this column has also been reported as Salary for the fiscal year 2012 in the Summary Compensation Table on Page 41 of this Proxy
Statement.
|
(2)
|
There are no above-market or preferential earnings on deferred compensation. Consequently, the amount set forth in this column has not been reported as
Salary for the fiscal year 2012 in the Summary Compensation Table on Page 41 of this Proxy Statement.
|
(3)
|
$37,500 and $32,500 of this amount were reported as Salary for the fiscal years 2011 and 2010, respectively, in the Summary Compensation Table on Page 41 of
this Proxy Statement.
|
POST-TERMINATION BENEFITS AND CHANGE IN CONTROL PAYMENTS
Severance Arrangements
The offer letters pursuant to which certain executive officers joined Forest, including certain of the Named Executive Officers, include a severance guarantee for the three year period commencing as of
the executives start date or if longer, a one year period following his or her termination of employment, limited to severance and certain benefits in the event of a termination of his or her employment by us without Cause or the
employees termination of employment for Good Reason, each as defined in the applicable offer letter (a Severance Payment Qualifying Termination). The offer letters also provide for continued health coverage until the earlier of the expiration
of a one year period or the date such officer obtains alternate coverage.
Mr. Perier and Dr. Taglietti each joined
the Company pursuant to offer letters which included severance guaranties and are currently the only Named Executive Officers who are entitled to severance benefits pursuant to offer letters. Upon a Severance Payment Qualifying Termination, each
such officer is entitled to receive base salary payments for the one year severance period following his termination, plus bonus for the year in which the termination of employment occurs equal to the greater of the last annual bonus that such
officer received from the Company or 40% of salary target in the case of Mr. Perier and 30% of salary target in the case of Mr. Taglietti, plus continued medical and dental health care coverage for such officer and any eligible family
members until the earlier of the expiration of the one year period or the date such officer obtains alternate coverage. The potential amounts payable to Dr. Taglietti and Mr. Perier pursuant to the severance obligations assuming a
termination date of March 31, 2012 are set forth in the below table:
Potential Payments Upon Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
Name (1)
|
|
Salary ($) (1)
|
|
|
Bonus ($)
|
|
|
Continued Health
Care Benefits ($) (2)
|
|
Francis I. Perier, Jr.
|
|
|
650,000
|
|
|
|
366,810
|
(3)
|
|
|
22,257
|
|
Marco Taglietti, M.D.
|
|
|
592,500
|
|
|
|
325,500
|
(4)
|
|
|
21,071
|
|
(1)
|
Each officer is entitled to 12 months of salary.
|
(2)
|
Includes amounts payable during the 12 month period following a termination of employment for health care coverage (medical and dental) for employee and employees
eligible family members.
|
(3)
|
This amount is the higher of Mr. Periers last annual bonus or 40% of his base salary.
|
(4)
|
This amount is the higher of Dr. Tagliettis last annual bonus or 30% of his base salary.
|
- 46 -
Benefits Continuation Agreements
On December 1, 1989, the Board authorized the grant of certain medical insurance benefits to certain senior executive officers and
their spouses upon the completion of ten years of service by such officers. The benefit is provided to these executives and their spouses for their lifetimes following termination of the executives employment with Forest. The benefit is
equivalent to the medical insurance benefits provided to the executives as of the date of their termination or as of December 1, 1989, if more favorable, together with payment of reasonable health care related costs. The benefit need not be
provided to the extent and for any time that the executive obtains comparable coverage from a subsequent employer. Mr. Howard Solomon is currently the only executive officer who is entitled to these benefits. The amounts payable on behalf of
Mr. Solomon during fiscal year 2013, assuming he had terminated his employment as of March 31, 2012, are reasonably estimated to be equal to $91,000.
Change in Control
As disclosed in the Compensation Disclosure and
Analysis section of this Proxy Statement, the Company has entered into Change in Control agreements with several key employees, including each of its Named Executive Officers. The current agreements automatically renew each year on January 1
for an additional three year period unless the Company provides the executive written notice at least 60 days prior to such date that the term of his or her Change in Control agreement will not be extended for an additional three year period. The
Board has determined that it is in both our best interests and the best interests of our stockholders to enter into Change in Control agreements with certain executive officers. In particular, these agreements enable management to evaluate and
support potential transactions that might be beneficial to stockholders without regard to the potential impact on their own job security or earned benefits. Additionally, the agreements provide for continuity of management in the event of a Change
in Control.
Each agreement 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 if the executives employment is terminated as a result of such Change in Control or during such three year period by the Company without Cause or
by the employee for Good Reason or for Adequate Reason (a Qualifying Termination). Cause is generally defined as one of the following: (i) refusal of the executive to comply with written instructions of our Board or CEO that are
consistent with the scope of the executives responsibilities; or (ii) willful engagement by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. Good Reason
includes a reduction in job responsibilities, or changes in pay and benefits as well as any material change in the geographic location at which the executive must perform services to the Company. The executive has 90 days to assert a claim for
payment in connection with a termination for Good Reason. Adequate Reason means the executives resignation for any reason or no reason during the 30-day period immediately following the first anniversary of the Change in Control.
Subject to certain exceptions, a Change in Control is generally defined as (i) an acquisition of more than
50% of our common stock or voting securities by a person or group not acquiring their shares directly from us, (ii) an acquisition during any 12-month period of 30% or more of our common stock by a person or group not acquiring their shares
directly from us, (iii) a change in the majority of the current Board or their designated successors not consented to by such current Board or designated successors, or (iv) a merger, consolidation or sale of all or substantially all of
our assets which involves a 50% or greater change in our stockholders or the replacement of a majority of the current Board or their designated successors or the acquisition by a person or group of more than 30% of our voting securities.
Upon such Qualifying Termination, executives subject to these agreements are eligible for the following amounts: (i) the amount of
any accrued compensation obligations to the executive through the termination date, consisting of unpaid base salary, a pro-rated bonus equal to the greater of the executives annualized current year bonus or the highest annual bonus received
by such executive during the three years preceding the Change in Control, and other accrued compensation through the termination date; plus (ii) an amount equal to three times the executives base salary and highest annual bonus during the
three years preceding the Change in Control; plus (iii) the actuarial equivalent of the employees benefit under any retirement plans in which the executive
- 47 -
participates, assuming continued participation for a three year period following the termination date. In addition, the executive will receive continued medical benefits for a three year period
for both the executive and his or her family, provided however that such coverage will be secondary to any coverage the executive obtains from a subsequent employer. Lastly, the employee will be provided with outplacement services and any other
amounts or benefits required to be paid or provided under any plan or program. In calendar 2008, these agreements were formally amended with the intention that they would comply with Section 409A of the Internal Revenue Code which may impose
additional taxes on executive officers for certain types of deferred compensation that are not in compliance with Section 409A.
Potential Payments Upon Change in Control
The following table sets
forth our reasonable estimate of the potential payments to each of our Named Executive Officers under our Change in Control Agreements if a Change in Control occurred as of March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Salary($) (1)
|
|
|
Bonus
($) (2)
|
|
|
Continuation of
Benefits under
Retirement Plans
($) (3)
|
|
|
Continuation of
Welfare
Benefits ($) (4)
|
|
Howard Solomon
|
|
|
4,050,000
|
|
|
|
3,112,500
|
|
|
|
85,728
|
|
|
|
167,949
|
|
Elaine Hochberg
|
|
|
2,100,000
|
|
|
|
1,206,000
|
|
|
|
85,800
|
|
|
|
53,510
|
|
Francis I. Perier, Jr.
|
|
|
1,950,000
|
|
|
|
1,100,430
|
|
|
|
85,811
|
|
|
|
74,489
|
|
Marco Taglietti, M.D.
|
|
|
1,777,500
|
|
|
|
976,500
|
|
|
|
85,710
|
|
|
|
70,931
|
|
David F. Solomon
|
|
|
1,440,000
|
|
|
|
784,500
|
|
|
|
63,228
|
|
|
|
68,249
|
|
(1)
|
This amount is equal to three times the respective executive officers annual base salary in effect at March 31, 2012.
|
(2)
|
For all Named Executive Officers other than Mr. H. Solomon, this amount is equal to three times the respective executive officers fiscal year 2012 bonus,
which is highest bonus awarded to each such executive officer during the last three fiscal years. For Mr. H. Solomon, this amount is equal to three times his fiscal year 2011 bonus, which is highest bonus awarded to Mr. Solomon during the
last three fiscal years.
|
(3)
|
Amounts set forth represent estimated payments in connection with our Savings and Profit Sharing Plan for a three year period.
|
(4)
|
This amount represents estimated payments under welfare benefit plans including medical, dental and life insurance for a three year period. The amounts payable do not
include amounts payable in connection with Benefits Continuation Agreements described above.
|
DIRECTOR COMPENSATION
The table below summarizes the compensation for our non-employee directors during the fiscal
year ended March 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash ($)
|
|
|
Stock Awards
($) (1)
|
|
|
Option Awards
($) (1)
|
|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
Nesli Basgoz, M.D.
|
|
|
87,500
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
|
|
|
|
235,744
|
|
Christopher J. Coughlin
|
|
|
50,167
|
|
|
|
|
|
|
|
264,800
|
|
|
|
|
|
|
|
314,967
|
|
Dan L. Goldwasser
|
|
|
110,500
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
|
|
|
|
258,744
|
|
Kenneth E. Goodman
|
|
|
114,000
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
200,610
|
(2)
|
|
|
462,854
|
|
Gerald M. Lieberman
|
|
|
44,167
|
|
|
|
|
|
|
|
264,800
|
|
|
|
|
|
|
|
308,967
|
|
Lawrence S. Olanoff, M.D., Ph.D.
|
|
|
82,500
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
282,379
|
(3)
|
|
|
513,123
|
|
Lester B. Salans, M.D.
|
|
|
117,000
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
|
|
|
|
265,244
|
|
Brenton L. Saunders
|
|
|
44,167
|
|
|
|
|
|
|
|
264,800
|
|
|
|
|
|
|
|
308,967
|
|
Peter J. Zimetbaum, M.D.
|
|
|
88,500
|
|
|
|
74,815
|
|
|
|
73,429
|
|
|
|
|
|
|
|
236,744
|
|
- 48 -
(1)
|
Represents the aggregate grant date fair value of awards for the fiscal year ended March 31, 2012 computed in accordance with FASB ASC 718. For a discussion of
valuation assumptions used in calculating the amounts for the fiscal year 2012 award, see Note 1 to our 2012 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended March 31, 2012. Pursuant to the terms
of our Equity Plan, (A) each of our non-employee directors who was re-elected at our 2011 Annual Meeting of Stockholders (i.e., Dr. Basgoz, Dr. Olanoff, Dr. Salans, Dr. Zimetbaum, and Messrs. Goldwasser and Goodman) received
an automatic grant of (1) options having a value of $75,000 calculated on the grant date in accordance with the Black-Scholes option pricing model (utilizing the same assumptions that the Company utilizes in preparation of its financial
statements), with the number of options rounded up to the nearest whole share, and (2) common stock having a fair market value of $75,000 on the grant date, with the number of shares rounded up to the nearest whole share and (B) each of
our new non-employee directors who was elected at our 2011 Annual Meeting of Stockholders (i.e., Messers. Coughlin, Lieberman and Saunders) received an initial grant of options covering 20,000 shares of common stock. For a description of these
automatic grants and the changes proposed thereto, see Director Compensation Automatic Equity Grants below.
|
(2)
|
This amount reflects payments made to or on behalf of Mr. Goodman pursuant to his Benefits Continuation Agreement, a benefit to which Mr. Goodman is entitled
as a result of his prior service as President and COO of Forest, of which $86,781 represents amounts to offset taxes incurred with respect to such payments. The provisions of the Benefits Continuation Agreement are described on Page 47 of this Proxy
Statement under the heading Benefits Continuation Agreements.
|
(3)
|
This amount reflects payments made to Dr. Olanoff for consulting services rendered pursuant to his Consultant Services Letter Agreement with the Company.
|
Director Fees
During the 2012 fiscal year we had the following standard compensation arrangements with our non-employee directors: a $50,000 annual retainer fee for services as a director, a $2,500 fee for each Board
meeting attended, a $1,500 fee for attendance at a Committee meeting, a $15,000 annual retainer fee for the Audit Committee Chairperson, a $15,000 annual retainer fee for the Board Compliance Committee Chairperson, a $10,000 annual retainer fee for
the Compensation Committee Chairperson, and a $1,000 payment to any out-of-town non-employee director who is required to come to New York City for a meeting and an annual fee of $15,000 for the presiding director. Out-of-town non-employee directors
are also reimbursed for travel expenses incurred in connection with meetings.
Automatic Equity Grants
Our non-employee directors also participate in the 2007 Equity Incentive Plan (the Equity Plan). Under the Equity Plan, an
initial grant of options covering 20,000 shares of common stock is automatically granted to a non-employee director upon appointment to the Board. Each such option grant is at an exercise price equal to the average of the high and low prices of our
common stock on the NYSE on the grant date. The options become exercisable (assuming the non-employee director is then serving on the Board) as to 25% of the shares covered by the options on the six-month anniversary of the grant date and on each of
the first, second and third anniversaries of the grant date until all such options are exercisable.
The Equity Plan further
provides for the automatic annual grant to each of our non-employee directors of options having a value of $75,000 calculated on the grant date in accordance with the Black-Scholes option pricing model (utilizing the same assumptions that the
Company utilizes in preparation of its financial statements), with the number of options rounded up to the nearest whole share, on the date of such directors annual election or reelection by our stockholders. Each such option grant is at
an exercise price equal to the average of the high and low prices of our common stock on the NYSE on the grant date and becomes fully
- 49 -
exercisable (provided the nonemployee director is then serving on the Board) on the six-month anniversary of the grant date. All options granted under the Equity Plan to non-employee
directors have a term of ten years from the grant date.
The Equity Plan also provides for the automatic annual grant to each
of our non-employee directors of common stock having a fair market value of $75,000 on the grant date, with the number of shares rounded up to the nearest whole share. The annual stock award is subject to a risk of forfeiture which lapses (assuming
the nonemployee director is then serving on the Board) as to 25% of the shares covered by the award on the sixmonth anniversary of the grant date and on each of the first, second and third anniversaries of the grant date, except that
such risk of forfeiture will automatically lapse in the case of a non-employee director who dies while serving on the Board and who has served on the Board for at least one year following receipt of the stock grant.
- 50 -
AUDIT COMMITTEE REPORT(1)
For the fiscal year ended March 31, 2012, the Audit Committee (Committee) consisted of Christopher J. Coughlin (the
Chairman), Dan L. Goldwasser and Lester B. Salans, M.D. The Board of Directors (the Board) has affirmatively determined that Messrs. Coughlin, Goldwasser and Dr. Salans are independent as defined under the NYSE listing standards. The Committee
operates under a written charter adopted by the Board.
The Committee recommends to the Board, subject to stockholder
ratification, the selection of our independent registered public accounting firm. Management is responsible for our internal controls and the financial reporting process. The independent registered public accounting firm is responsible for
performing an independent audit of the Companys consolidated financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board and for issuing a report thereon. The Committee monitors and oversees
these processes.
In this context, the Committee has met and held discussions with management, the internal auditor and
BDO USA, LLP (BDO), our independent registered public accounting firm. Management represented that the consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
The Committee reviewed and discussed the audited consolidated financial statements, as well as the unaudited financial statements included in Quarterly Reports on Form 10-Q for each of the first three quarters of the fiscal year, with management,
the internal auditor and BDO. The Committee discussed with BDO the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company
Accounting Oversight Board in Rule 3200T, relating to communication with audit committees. BDO also provided the Committee with the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board
regarding BDOs communications with the Committee concerning independence, and the Committee discussed with BDO its independence from the Company and management.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included or incorporated by reference in the Annual
Report on Form 10-K for the fiscal year ended March 31, 2012 for filing with the Securities and Exchange Commission. The Board has adopted this recommendation.
Audit Committee
Christopher J. Coughlin
Dan L. Goldwasser
Lester B. Salans, M.D.
(1)
|
Notwithstanding anything to the contrary set forth in any of Forests previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, the Audit Committee Report shall not be deemed incorporated by reference in any such filings.
|
- 51 -
PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
(SAY-ON-PAY VOTE)
At our 2011 Annual Meeting of Stockholders, more than 73% of the votes cast supported our executive compensation policies and procedures and more than 92% of the votes cast supported our recommendation
for an annual frequency for conducting future advisory votes on executive compensation. In light of these results, the Board determined that the Company will hold an advisory vote on executive compensation every year until the next required
stockholder advisory vote on this matter, which will occur no later than the Companys Annual Meeting of Stockholders in 2017, unless the Board otherwise determines that a different frequency for such advisory votes is in the best interests of
the stockholders of the Company. Accordingly, we are again providing stockholders the opportunity to advise the Compensation Committee and the Board regarding the compensation of our Named Executive Officers, as such compensation is described in the
Compensation Discussion and Analysis section of this Proxy Statement, the tabular disclosure regarding such compensation and the accompanying narrative disclosure, beginning on Page 24 of this Proxy Statement. We urge our stockholders to review the
Compensation Discussion and Analysis section of this Proxy Statement and the executive-related compensation tables for more information.
Our executive compensation programs are designed to enable us to attract, motivate and retain executive talent, who are critical to our success. Consistent with our performance-based compensation
philosophy, we reserve the largest portion of potential compensation for performance- and equity-based programs. Our performance-based Incentive Plan rewards the Companys executive officers for achievement of key operational goals that we
believe will provide the foundation for creating long-term stockholder value, while our equity awards, mainly in the form of stock options, restricted stock and long-term performance stock units reward long-term performance and align the interests
of management with those of our stockholders.
As described in greater detail in the Compensation Discussion and Analysis
section of this Proxy Statement, the Company made several changes to its performance- and equity-based programs following the 2011 Annual Meeting to further align incentive pay with pre-established corporate performance goals, including
(i) adopting the Incentive Plan, which commencing in fiscal year 2013 will tie fifty percent of each of our executive officers annual cash bonus to the achievement of pre-established corporate performance goals; and (ii) granting a
portion of each of our key executives long-term equity awards in the form of performance stock units, one hundred percent of which are subject to pre-established corporate performance goals.
Among the various forms of performance-based compensation, we believe that equity awards, in particular, serve to align the interests of
our executives with those of our long-term stockholders by encouraging long-term performance. As such, equity awards are a key component of our executive compensation program. In fiscal year 2012, equity awards, mainly in the form of stock options,
restricted stock and our newly adopted long-term performance stock units, represented approximately 69% of our Named Executive Officers aggregate cash and equity compensation. Equity awards closely align the long-term interests of our
executives with those of our stockholders because the value of such awards is dependent upon the Companys stock price. In addition, equity awards align with our growth strategy and provide significant financial upside if our growth objectives
are achieved, while placing a significant portion of our executives compensation at-risk if our objectives are not achieved.
The Board believes that the information provided above and within the Compensation Discussion and Analysis section of this Proxy Statement demonstrates that our executive compensation program was designed
appropriately and is working to ensure that managements interests are aligned with our stockholders interests and support long-term value creation. Accordingly, the following resolution is to be submitted for a stockholder vote at the
Annual Meeting:
RESOLVED
, that the Companys stockholders approve, on an advisory basis, the compensation
of the Named Executive Officers, as disclosed in the Companys Proxy Statement for the 2012 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation
Discussion and Analysis, the 2012 Summary Compensation Table and the tabular disclosure regarding such compensation and the accompanying narrative disclosure.
- 52 -
Because the vote is advisory, it will not be binding on the Board. However, the Board and
the Compensation Committee will review the voting results and take into account the outcome when considering future executive compensation arrangements. The Board and management are committed to our stockholders and understand that it is useful and
appropriate to obtain the views of our stockholders when considering the design and initiation of executive compensation programs.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE COMPENSATION OF THE COMPANYS NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THE COMPENSATION DISCUSSION AND ANALYSIS,
COMPENSATION TABLES AND NARRATIVE DISCUSSION SET FORTH IN THIS PROXY STATEMENT.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The firm of BDO USA, LLP (BDO) has audited our consolidated financial statements for each of the three fiscal years ended March 31, 2012. In addition to retaining BDO to audit our consolidated
financial statements for fiscal year 2012, we and our affiliates retained BDO, as well as other accounting and consulting firms, to provide various consulting and other services in fiscal year 2012 and expect to continue to do so in the future.
The following table presents fees for professional audit services rendered by BDO for the audit of our annual financial
statements and review of financial statements included in our Quarterly Reports on Form 10-Q for fiscal years 2012 and 2011, and fees billed for other services rendered by BDO:
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Audit Fees
|
|
$
|
1,682,230
|
|
|
$
|
1,628,154
|
|
Audit Related Fees (1)
|
|
|
304,722
|
(2)
|
|
|
44,750
|
(2)
|
Tax Fees (1)
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,986,952
|
|
|
$
|
1,672,904
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Audit Committee has considered the non-audit services performed for us by BDO in the Committees evaluation of BDOs independence.
|
(2)
|
Audit related fees in 2011 were principally related to services rendered in connection with the audit of our Savings and Profit Sharing Plan. Audit related fees in 2012
were related to the audit of our Savings and Profit Sharing Plan and the audit related to the acquisition of Clinical Data, Inc.
|
The Audit Committees policy is to pre-approve all audit services and all non-audit services that our independent registered public accounting firm is permitted to perform for us under applicable
federal securities regulations. While the general policy of the Audit Committee is to make such determinations at full Audit Committee meetings, the Audit Committee may delegate its pre-approval authority to one or more members of the Audit
Committee, provided that all such decisions are presented to the full Audit Committee at its next regularly scheduled meeting.
The Board desires to continue the services of BDO for the current fiscal year ending March 31, 2013. Accordingly, the Board
recommends that you ratify the selection by the Board of BDO to audit the financial
statements of Forest for the current fiscal year.
Representatives of BDO are expected to be present at the meeting and will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from the stockholders.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE SELECTION OF BDO USA, LLP.
- 53 -
[PROPOSAL 4
STOCKHOLDER PROPOSAL
TO AMEND BYLAWS TO ALLOW
STOCKHOLDERS TO NOMINATE
DIRECTOR CANDIDATES FOR INCLUSION IN PROXY MATERIALS]
Kenneth Steiner, 14 Stoner Ave, 2M, Great Neck, NY 11021, who has continuously held at least 500 shares of our common stock having a
market value of at least $2,000 since January 1, 2011, intends to submit a resolution to stockholders for approval at the Annual Meeting. The proponents resolution and supporting statement are printed below:
Resolution and Supporting Statement
WHEREAS, Most long-term shareowners have no reasonable means to make board nominations, this is based on a standard proxy access proposal, as described in
http://proxyexchange.org/standard_004.pdf.
WHEREAS, The Corporate Library, an independent investment research firm rated our
company D with High Governance Risk, and High Concern in executive pay $8 million for our CEO/Chairman Howard Solomon, age 83. Annual bonuses continued to be discretionary and long-term equity pay
was time-vested not performance-based. Four directors had long tenure respectively of 14, 14, 35 and 48 years independence concern. Three directors were insiders or inside-related-more independence concern. Three
directors were age 71 to 83 succession planning concern. Only one director had current experience on an outside board-qualifications concern. Three directors owned no stock lack of incentive concern.
RESOLVED, Shareowners ask our board, to the fullest extent permitted by law, to amend our governing documents to allow shareowners to
make board nominations as follows:
1. The Company proxy statement, form of proxy, and voting
instruction forms shall include, listed with the boards nominees, alphabetically by last name, nominees of:
a.
Any party of one or more shareowners that has collectively held, continuously for two years, one percent of the Companys securities eligible to vote for the election of directors, and/or
b. Any party of shareowners of whom fifty or more have each held continuously for one year a number of shares of
the Companys stock that, at some point within the preceding 60 days, was worth at least $2,000.
2. Any such party may make one nomination or, if greater, a number of nominations equal to 12% of the current
number of board members, rounding down.
3. For any board election, no shareowner may be a member of
more than one such nominating party. Board members and officers of the Company may not be members of any such party.
4. All members of any party nominating under item 1(a), and at least fifty members of any party nominating under
item 1(b), must affirm in writing that they are not aware, and have no reason to suspect, that any member of their party has an explicit or implicit, direct or indirect, agreement regarding any nomination with any member of another nominating party,
including the Companys board.
5. All board candidates and members originally nominated under
these provisions shall be afforded treatment equivalent, to the fullest extent possible, to that of the boards nominees. Should the board determine that aspects of such treatment cannot be equivalent, the board shall establish and make public
procedures reasonably designed to ensure that such differences are both fair and necessary. Nominees may include in the proxy statement a 500 word supporting statement.
6. Each proxy statement or special meeting notice to elect board members shall include instructions for nominating under these provisions, fully explaining all legal requirements
for nominators and nominees under federal law, state law and the governing documents of our company.
Please encourage our
board to adopt this proposal 4.
- 54 -
Position of the Board
THE BOARD RECOMMENDS A VOTE
AGAINST
THIS PROPOSAL, WHICH IS IDENTIFIED AS PROPOSAL 4 ON THE WHITE PROXY CARD, FOR THE FOLLOWING REASONS:
|
|
|
The proposal is unnecessary because the Companys strong corporate governance practices (including the annual election of all directors under a
majority voting standard in uncontested director elections) provide effective Board accountability and responsiveness to stockholders;
|
|
|
|
The nominating and election process being proposed would be unwieldy, confusing and create uncertainty for stockholders and potentially expose the
Company to costly and disruptive election contests initiated by persons lacking a long-term financial interest in the Company or with their own private interests and agendas; and
|
|
|
|
Our Bylaws contain an effective mechanism for stockholders to propose nominees for consideration by the Companys Nominating and Governance
Committee or, alternatively, to propose nominees directly to the Companys stockholders.
|
The Board believes that
the proponents proxy access proposal (the Stockholder Proposal) is unnecessary and is not in the best interests of the Company or its stockholders. The Company has strong corporate governance practices that demonstrate the Boards
accountability and responsiveness to our stockholders and provide stockholders with a meaningful role in the election of directors.
|
|
|
All of the Companys directors are elected annually under a majority voting standard in uncontested director elections;
|
|
|
|
As described under the heading Selection of Nominees for Election to the Board, on Page 21 of this Proxy Statement, the Nominating and
Governance Committee will consider an individual recommended by one of our stockholders for nomination as a new director under the same process used for evaluating the Boards nominees;
|
|
|
|
Of the Boards 10 nominees, 8 directors, or 80%, are independent directors (five of whom 50% of the Board have
been added since 2006, with four of these new directors joining since December 2009), and the Board has an actively involved and independent Presiding Director who works closely with the Chairman, CEO and President and, among other things, calls
meetings of the independent directors when necessary and appropriate and is available for consultation and direct communication with major stockholders;
|
|
|
|
The Board and its Nominating and Governance Committee have demonstrated a commitment to strengthening the composition of the Board and critical Board
committees by balancing experience with fresh perspectives by, for example, just last year nominating (and the Companys stockholders then electing) three new independent directors to the Board, all three of whom serve on the Compensation
Committee, two of whom chair committees (the Audit Committee and the Nominating and Corporate Governance Committee) and one of whom serves on the Compliance Committee.
|
|
|
|
Our stockholders are provided an annual say-on-pay vote so they can promptly provide their views on executive compensation matters.
|
- 55 -
The Board further believes that, in addition to being unnecessary, the Stockholder Proposal
is flawed and, if approved by stockholders, would be harmful to the Company and its stockholders for many reasons, including the following:
|
|
|
The Stockholder Proposal would risk subjecting the Company to the costs and disruptions associated with director election contests and impaired
functioning of the Board, including contests initiated by persons lacking a significant long-term financial interest in the Company or with other private interests and agendas
.
|
Election contests require substantial attention and resources and would divert the time and attention of the Board and
management away from running the Companys businesses for the long-term benefit of all stockholders. In addition to the costs related to the preparation of required disclosures, printing and mailing, the U.S. Chamber of Commerce has noted that
proxy access would result in substantial additional expenditures related to significant media and public relations efforts, advertising, mass mailings, and other communication efforts, as well as the hiring of outside advisors and the
expenditure of significant time and effort by the Companys employees. Under the Stockholder Proposal, one or more stockholders holding as little as 1% of the Companys stock for a 2-year period or as few as fifty stockholders
holding as little as $100,000 of the Companys stock for a 1-year period would be permitted access to the Companys proxy materials. Since there can be numerous and unlimited nominations in any given year under the Stockholder Proposal,
significant Company resources would potentially need to be dedicated annually to verifying the eligibility and share ownership of numerous individuals each year to confirm that the requirements of the Stockholder Proposal have been met by the
nominee proponents, in addition to considering the qualifications of proposed nominees and advocating for the Boards recommended candidates. We believe there are better uses for the Companys resources.
Furthermore, the Stockholder Proposals low ownership and short holding period requirements make it more likely that
the proxy access provisions could be used to distract and burden the Company and to nominate director candidates who advance a nominating stockholders or stockholder groups own narrowly focused special interests or personal agenda. For
example, some stockholders may be motivated by private interests that conflict with the Companys long-term interests and may support corporate policies that would operate at the expense of the Boards efforts to maximize long-term value.
Unlike the Board, individual stockholders or stockholder groups that would be eligible to invoke the new powers suggested by the Stockholder Proposal owe no legal duties to any of their fellow stockholders to act in their best interests, and the
Board believes it is inadvisable for the Company to subsidize the proxy challenges that may be designed to further narrow agendas irrespective of stockholder interests generally. We further believe that proxy access could result in a field of
director candidates (and ultimately a Board) that includes fewer independent and qualified individuals as proxy access nominees under the Stockholder Proposal would not have to satisfy any stock exchange or Company-driven independence requirements
or other qualification standards or requirements, potentially jeopardizing the quality and effectiveness of the Board.
|
|
|
The Stockholder Proposal sets out an unwieldy and confusing nominating process and could create substantial uncertainty for stockholders in
electing directors
.
|
The Stockholder Proposal allows for an unlimited number of
qualifying stockholders or stockholder groups to submit one nominee each, all of whom would have to be included in the Companys proxy materials. As of the Record Date, the Company had at least
stockholders who beneficially owned at least 1% of the Companys outstanding common shares and therefore, if each stockholder satisfied the 2-year holding period
requirement and desired to nominate a candidate, the Company could be forced to include, in addition to the Companys 10 nominees, information about
- 56 -
additional proxy access nominees in its proxy materials. The absence of a limitation on the number of proxy access nominees
who would be required to be eligible for election each year and included in the Companys proxy materials would create the risk of the entire Board potentially being replaced in a single year, each and every year, undermining the benefits of
continuity for the long-term direction and value of the Company and without regard to the quality of the Board as a whole.
In addition, the Company could be forced to include information about many more nominees in its proxy materials if other stockholders formed groups to satisfy the Stockholder Proposals eligibility
requirements. The Board believes that a proxy statement containing information regarding numerous individuals competing for a relatively small number of positions would not be an effective way of electing competent, qualified directors who serve the
best interests of all stockholders.
|
|
|
The Stockholder Proposal bypasses the Companys Nominating and Governance Committee, which serves an important role in evaluating the
qualifications of potential director nominees
.
|
The Nominating and Governance
Committee has established a process for identifying and evaluating nominees for director that is designed to produce nominees that possess the educational, professional, business and personal attributes that are best suited to further the
Companys purposes, which, just last year, resulted in the Board nominating, and stockholders ultimately electing, three new independent directors to our Board.
In particular, and as described under the heading Selection of Nominees for Election to the Board, on Page 21
of this Proxy Statement, the Nominating and Governance Committee will consider, among other factors, (1) the Boards current composition, including expertise, diversity, balance of management and non-management directors;
(2) independence and other qualifications required or recommended by applicable laws, rules and regulations (including NYSE requirements) and the Companys policies and procedures; and (3) the general qualifications of potential
nominees, including, but not limited to: personal integrity, loyalty to the Company and concern for its success and welfare; experience at strategy and policy setting, high-level leadership experience in business; breadth of knowledge about issues
affecting the Company; an ability to work effectively with others; sufficient time to devote to the Company; and freedom from conflicts of interest. The Stockholder Proposal entirely bypasses the quality control mechanism provided by the Nominating
and Governance Committee, and could force the Company to include information about proxy access nominees irrespective of such nominees qualifications and concern for the composition of the Board as a whole.
The Board believes that each of the current members of the Board is a highly qualified and dedicated individual who brings to the Board
his or her own particular and substantial expertise and experience, including relevant regulatory, financial services, financial and accounting, legal, and/or risk management skills. This diverse expertise and experience, gained in most cases from
leading large, complex organizations, provide the Board as a whole with the ability to fulfill its oversight responsibilities to the Companys stockholders.
For the reasons described above, the Board believes that it is not in the best interests of the Company or its stockholders to adopt this proposal.
ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
AGAINST
THIS PROPOSAL.
PROPOSAL [FOUR/FIVE]: ICAHN BYLAW REPEAL PROPOSAL
The Icahn Group has notified the Company that it intends to submit a stockholder proposal (the Icahn Bylaw Repeal Proposal) for approval
at the Annual Meeting which would repeal any provision of the Companys Bylaws in effect at the time of the Annual Meeting that was not included in the Bylaws as publicly filed with the Securities and Exchange Commission prior to June 18, 2012.
- 57 -
The following is the text of the proposed resolution:
RESOLVED, that any provisions of the Amended and Restated Bylaws of Forest Laboratories, Inc. as of the effectiveness of this
resolution that was not included in the Amended and Restated Bylaws of Forest Laboratories, Inc. as publicly filed with the Securities and Exchange Commission prior to June 18, 2012, be and hereby are repealed.
Position of the Board
THE BOARD RECOMMENDS A VOTE
AGAINST
THE ICAHN BYLAW REPEAL PROPOSAL, WHICH IS IDENTIFIED AS PROPOSAL [4/5]
ON THE WHITE PROXY CARD, FOR THE FOLLOWING REASONS:
The Icahn Groups proposal seeks to repeal any and all
amendments to the Companys bylaws that may be implemented on or after June 18, 2012 and prior to the effectiveness of the above resolution, without regard to the subject matter of any bylaw amendment in question.
We believe that the automatic repeal of any bylaw amendment, irrespective of its content, duly adopted by the Board with or without
stockholder approval could have the effect of repealing one or more properly adopted bylaw amendments that the Board determined to be in the best interests of the Company and its stockholders and adopted in furtherance of its fiduciary duties,
including in response to future events not yet known to the Company. Furthermore, as a public company subject to the federal proxy rules, it might be impracticableif not impossiblefor the Company to obtain stockholder approval for a
necessary bylaw amendment within a timeframe necessary to serve the best interests of the Company and its stockholders. Even if such stockholder approval were received, the Icahn Bylaw Repeal Proposal would operate to automatically repeal all such
stockholder-approved bylaw amendments during the covered period, in addition to any bylaws approved only by the Board.
As the
Board is fully empowered by its corporate documents and applicable law to alter, amend, repeal or add provisions to the Companys bylaws in accordance with its fiduciary duties and no provision of the Companys bylaws is expected to be
impacted by the Icahn Bylaw Repeal Proposal, we believe this proposal represents no purpose other than to limit Board actions otherwise permitted by the Companys governing documents and Delaware law.
For the reasons described above, the Board believes that it is not in the best interests of the Company or its stockholders to adopt this
proposal.
ACCORDINGLY, THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE
AGAINST
THE ICAHN BYLAW REPEAL
PROPOSAL.
MISCELLANEOUS
Annual Report
A copy of Forests 2012 Annual Report has previously
been mailed to stockholders.
Form 10-K
AT YOUR WRITTEN REQUEST, WE WILL PROVIDE WITHOUT CHARGE A COPY OF OUR ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SEC FOR THE FISCAL YEAR ENDED
- 58 -
MARCH 31, 2012. PLEASE MAIL YOUR REQUEST TO CORPORATE SECRETARY, FOREST LABORATORIES, INC., 909 THIRD AVENUE, NEW YORK, NEW YORK 10022. YOU MAY ALSO ACCESS OUR FORM 10-K BY CLICKING ON THE
SEC FILINGS LINK UNDER THE INVESTORS SECTION OF OUR WEBSITE AT
WWW.FRX.COM
.
Proposals of Stockholders
If you wish to submit a proposal for consideration at our 2013 Annual Meeting of Stockholders, you should submit the
proposal in writing to us at the address set forth on Page 1 of this Proxy Statement. To be included in next years proxy materials, proposals must be received by us on or before March [ ], 2013, and must, in all other
respects, comply with Rule 14a-8 under the Exchange Act. If you intend to present a proposal at our 2013 Annual Meeting of Stockholders without inclusion of the proposal in our proxy materials, you are required to provide notice of such proposal to
us in accordance with our Bylaws no earlier than the close of business on May [ ], 2013 and no later than the close of business on June [ ], 2013. We may vote in our discretion as to any such
proposal all of the shares for which we have received proxies for the 2013 Annual Meeting of Stockholders in accordance with and subject to applicable rules under the Exchange Act.
Your vote is important. We urge you to vote the WHITE proxy by mail, by telephone, or via the Internet without delay.
Dated: July
[ ], 2012
59
APPENDIX A
DIRECTOR QUALIFICATION STANDARDS
|
|
|
No Director who is an employee or a former employee of Forest will be considered independent until three years after the employment has
ended.
|
|
|
|
No Director who receives more than $120,000 per year in direct compensation from Forest, other than director and committee fees and pension or other
form of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service) until three years after he or she ceases to receive more than $120,000 per year in such compensation will be considered
independent.
|
|
|
|
No Director who is, or in the past three years has been, part of an interlocking directorate in which an executive officer of Forest serves on the
compensation committee of another company that currently employs the Director will be considered independent.
|
|
|
|
No Director who during the prior three years, was an executive officer or an employee, or whose immediate family member was an executive officer, of a
company that made payments to, or received payments from Forest for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2% of such other companys consolidated gross assets will be
considered independent.
|
A-1
APPENDIX B
INFORMATION CONCERNING PARTICIPANTS
IN THE COMPANYS SOLICITATION OF PROXIES
The following tables set
forth the name and business address of our directors and the name, present principal occupation and business address of our officers and employees who, under the rules of the Securities and Exchange Commission, are considered to be
participants in our solicitation of proxies from our stockholders in connection with our 2012 Annual Meeting of Stockholders.
Directors
The principal
occupations of our directors who are considered participants in our solicitation are set forth under the section above titled PROPOSAL 1 ELECTION OF DIRECTORS of this Proxy Statement. The name and business
addresses, and address of the organization of employment, of our directors and nominees are as follows:
|
|
|
Name
|
|
Business Address
|
|
|
Howard Solomon
|
|
Forest Laboratories, Inc., 909 Third Avenue, New York, NY 10022
|
|
|
Nesli Basgoz, M.D.
|
|
Massachusetts General Hospital, 55 Fruit Street, Boston, MA 02114
|
|
|
Christopher J. Coughlin
|
|
Tyco International, 9 Roszel Road, Princeton, NJ 08540
|
|
|
Dan L. Goldwasser
|
|
c/o Forest Laboratories, Inc., 909 Third Avenue, New York, NY 10022
|
|
|
Kenneth E. Goodman
|
|
c/o Forest Laboratories, Inc., 909 Third Avenue, New York, NY 10022
|
|
|
Gerald M. Lieberman
|
|
1345 Avenue of the Americas, 8th Floor, New York, NY 10105
|
|
|
Lawrence S. Olanoff, M.D., Ph.D.
|
|
MUSC Foundation for Research Development, 19 Hagood Ave. Suite 909, Charleston, SC 29403
|
|
|
Lester B. Salans
|
|
620 Fifth Avenue 6th Floor, New York, NY 10020-2457
|
|
|
Brenton L. Saunders
|
|
One Bausch + Lomb Place, Rochester, NY 14604
|
|
|
Peter J. Zimetbaum
|
|
Beth Israel Deaconess Medical Center, Cardiovascular Division, 185 Pilgrim Road, Boston, MA 02215
|
Officers and Employees
The principal occupations of our executive officers and employees who are considered participants in our solicitation of proxies are set forth below. The principal occupation refers to such
persons position with the Company, and the business address for each person is Forest Laboratories, Inc., 909 Third Avenue, New York, NY 10022.
|
|
|
Name
|
|
Principal Occupation
|
|
|
Howard Solomon
|
|
Chairman of the Board, CEO and President
|
|
|
Elaine Hochberg
|
|
Executive Vice President and Chief Commercial Officer
|
|
|
Francis I. Perier, Jr.
|
|
Executive Vice President Finance and Administration and CFO
|
|
|
David F. Solomon
|
|
Senior Vice President Corporate Development and Strategic Planning
|
|
|
Marco Taglietti, M.D.
|
|
Senior Vice President Research and Development and President, Forest Research Institute, Inc.
|
|
|
Herschel S. Weinstein
|
|
Senior Vice President General Counsel and Corporate Secretary
|
|
|
Frank J. Murdolo
|
|
Vice President Investor Relations
|
B-1
Information Regarding Ownership of Forest Securities by Participants
The number of shares of our common stock held by our directors and named executive officers as of June 25, 2012
is set forth under the SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT section of this Proxy Statement.
1
The following table sets forth the number of shares held as of June 25, 2012 by our other employees who are deemed
participants in our solicitation of proxies. No participant owns any securities of the Company of record that such participant does not own beneficially.
|
|
|
Name of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
Herschel S. Weinstein
|
|
228,317(1)
|
Frank J. Murdolo
|
|
42,057(2)
|
(1)
|
Includes 80,450 shares of stock that are subject to a risk of forfeiture and includes 121,250 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012.
|
(2)
|
Included 26,400 shares of stock that are subject to a risk of forfeiture and includes 9,300 shares issuable pursuant to options that were exercisable on June 25,
2012 or which become exercisable within 60 days of June 25, 2012.
|
Information Regarding Transactions in Forest Securities by Participants
The following table sets forth information regarding purchases and sales of our securities by each of the participants listed above under
Directors and Nominees and Officers and Employees during the past two years. Unless otherwise indicated, all transactions were in the public market or pursuant to our equity compensation plans and none of the purchase price
or market value of those securities is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities..
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Purchased or Sold
(April 1, 2009 June 25, 2012)
|
Name
|
|
Date
|
|
|
# of Shares
|
|
|
Transaction Description
|
Howard Solomon
|
|
|
05/07/12
|
|
|
|
21,606
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
01/03/12
|
|
|
|
(42,373
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/20/11
|
|
|
|
(50,799
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/07/11
|
|
|
|
(15,772
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(31,544
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
55,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
11/30/11
|
|
|
|
(50,000
|
)
|
|
Disposition-Shares gifted
|
|
|
|
06/06/11
|
|
|
|
(15,772
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/22/10
|
|
|
|
(92,062
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/08/10
|
|
|
|
(15,291
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
1
The 2,835,915 shares of common stock reported as being beneficially owned by Mr. Howard
Solomon includes 58,431 shares beneficially owned by the Howard and Sarah D Solomon Foundation, a 501(c)(3) charitable foundation as to which Mr. Solomon disclaims beneficial ownership and which may be deemed to be an associate of
Mr. Solomon. The address of the Howard and Sarah D Solomon Foundation is c/o Howard Solomon, 909 Third Avenue, New York, NY 10022. The 330,175 shares of common stock reported as being beneficially owned by Dr. Olanoff does not include
10,000 shares beneficially owned by the Olanoff 2010 Charitable Remainder Trust, a charitable remainder trust as to which Dr. Olanoff disclaims beneficial ownership and which may be deemed to be an associate of Dr. Olanoff. The address of
the Olanoff 2010 Charitable Remainder Trust is c/o Credit Suisse (USA) LLC Securities, 11 Madison Ave, 7th Floor, New York, NY 10010. Pursuant to the trust instrument, Dr. Olanoff receives an annuity of 5% per year from the trust.
B-2
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Purchased or Sold
(April 1, 2009 June 25, 2012)
|
Name
|
|
Date
|
|
|
# of Shares
|
|
|
Transaction Description
|
|
|
|
12/07/10
|
|
|
|
(31,857
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(7,646
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
125,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
06/07/10
|
|
|
|
(15,206
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
04/14/10
|
|
|
|
(710
|
)
|
|
Disposition-Shares gifted
|
|
|
|
01/06/10
|
|
|
|
(1,250
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/30/09
|
|
|
|
(170,600
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/11/09
|
|
|
|
1,200,000
|
|
|
Acquisition-Stock option exercise
|
|
|
|
12/11/09
|
|
|
|
(859,959
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/08/09
|
|
|
|
(30,888
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
125,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(6,778
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
07/08/09
|
|
|
|
(3,560
|
)
|
|
Disposition-Shares gifted
|
|
|
|
06/08/09
|
|
|
|
(12,444
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
04/09/09
|
|
|
|
(13,375
|
)
|
|
Disposition-Shares gifted
|
Elaine Hochberg
|
|
|
05/11/12
|
|
|
|
(147
|
)
|
|
Disposition-Shares gifted
|
|
|
|
05/07/12
|
|
|
|
11,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/13/11
|
|
|
|
(14,898
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/13/11
|
|
|
|
(1,400
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/07/11
|
|
|
|
(6,940
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(15,386
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
23,850
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
06/21/11
|
|
|
|
(125
|
)
|
|
Disposition-Shares gifted
|
|
|
|
06/06/11
|
|
|
|
(5,565
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
04/05/11
|
|
|
|
(320
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/08/10
|
|
|
|
(6,372
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(12,602
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(2,561
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
55,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
11/29/10
|
|
|
|
(475
|
)
|
|
Disposition-Shares gifted
|
|
|
|
11/24/10
|
|
|
|
(300
|
)
|
|
Disposition-Shares gifted
|
|
|
|
06/07/10
|
|
|
|
(5,531
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/08/09
|
|
|
|
(11,211
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
55,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(2,593
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
06/08/09
|
|
|
|
(5,185
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
Francis I. Perier, Jr.
|
|
|
05/07/12
|
|
|
|
10,236
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/14/11
|
|
|
|
(10,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/08/11
|
|
|
|
(4,635
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/11
|
|
|
|
(5,215
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(13,856
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
22,400
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
06/06/11
|
|
|
|
(4,544
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/08/10
|
|
|
|
(4,635
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(5,192
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(2,295
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
50,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/08/09
|
|
|
|
(3,845
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
45,000
|
|
|
Acquisition-Award of restricted stock
|
B-3
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Purchased or Sold
(April 1, 2009 June 25, 2012)
|
Name
|
|
Date
|
|
|
# of Shares
|
|
|
Transaction Description
|
|
|
|
12/06/09
|
|
|
|
(1,923
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
Marco Taglietti
|
|
|
05/07/12
|
|
|
|
8,600
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/08/11
|
|
|
|
(3,477
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/11
|
|
|
|
(3,830
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(4,658
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
19,100
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
05/23/11
|
|
|
|
(3,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/08/10
|
|
|
|
(2,727
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(3,636
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(569
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
45,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
11/18/10
|
|
|
|
(3,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/08/09
|
|
|
|
(2,884
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
40,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(601
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
David F. Solomon
|
|
|
05/07/12
|
|
|
|
8,800
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/08/11
|
|
|
|
(3,786
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/11
|
|
|
|
(4,524
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(5,768
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
19,100
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
11/30/11
|
|
|
|
50,000
|
|
|
Acquisition shares received as a gift
|
|
|
|
12/08/10
|
|
|
|
(3,073
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(4,097
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(1,230
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
45,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/08/09
|
|
|
|
(3,111
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
40,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(1,245
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
Nesli Basgoz
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
08/09/10
|
|
|
|
2,658
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
07/22/10
|
|
|
|
(1,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
08/10/09
|
|
|
|
1,000
|
|
|
Acquisition-Award of restricted stock
|
Dan Goldwasser
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
08/09/10
|
|
|
|
2,658
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
03/11/10
|
|
|
|
8,000
|
|
|
Acquisition-Stock option exercise
|
|
|
|
08/10/09
|
|
|
|
1,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
05/26/09
|
|
|
|
8,000
|
|
|
Acquisition-Stock option exercise
|
Kenneth Goodman
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
08/09/10
|
|
|
|
2,658
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/19/09
|
|
|
|
(31,525
|
)
|
|
Disposition-Shares gifted
|
|
|
|
08/10/09
|
|
|
|
1,000
|
|
|
Acquisition-Award of restricted stock
|
Lawrence Olanoff
|
|
|
03/07/12
|
|
|
|
(561
|
)
|
|
Disposition-Open market sale
|
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/31/10
|
|
|
|
(21,250
|
)
|
|
Disposition-Shares forfeited upon resignation
|
|
|
|
12/20/10
|
|
|
|
(16,596
|
)
|
|
Disposition-Shares gifted
|
|
|
|
12/08/10
|
|
|
|
(9,644
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(20,168
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
B-4
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Purchased or Sold
(April 1, 2009 June 25, 2012)
|
Name
|
|
Date
|
|
|
# of Shares
|
|
|
Transaction Description
|
|
|
|
12/06/10
|
|
|
|
(4,496
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
06/07/10
|
|
|
|
(9,397
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/08/09
|
|
|
|
(21,488
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
85,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(3,845
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
06/08/09
|
|
|
|
(9,096
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
Lester Salans
|
|
|
04/18/12
|
|
|
|
(2,390
|
)
|
|
Disposition-Open market sale
|
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
08/23/10
|
|
|
|
(1,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
08/09/10
|
|
|
|
2,658
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
08/10/09
|
|
|
|
1,000
|
|
|
Acquisition-Award of restricted stock
|
Peter Zimetbaum
|
|
|
08/23/11
|
|
|
|
2,244
|
|
|
Acquisition-Stock option exercise
|
|
|
|
06/08/11
|
|
|
|
5,621
|
|
|
Acquisition-Stock option exercise
|
|
|
|
06/08/11
|
|
|
|
(5,621
|
)
|
|
Disposition-Open market sale
|
|
|
|
08/09/10
|
|
|
|
2,658
|
|
|
Acquisition-Award of restricted stock
|
Frank Murdolo
|
|
|
05/07/12
|
|
|
|
2,400
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/07/11
|
|
|
|
(680
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(906
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
11,500
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
09/15/11
|
|
|
|
(455
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(680
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
10,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
09/15/10
|
|
|
|
(453
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
09/15/09
|
|
|
|
(469
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
7,500
|
|
|
Acquisition-Award of restricted stock
|
Herschel S. Weinstein
|
|
|
05/07/12
|
|
|
|
7,500
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
04/17/12
|
|
|
|
(6,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/08/11
|
|
|
|
(2,889
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/11
|
|
|
|
(4,001
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/11
|
|
|
|
(4,981
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/05/11
|
|
|
|
16,700
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
03/10/11
|
|
|
|
(7,000
|
)
|
|
Disposition-Open market sale
|
|
|
|
12/08/10
|
|
|
|
(2,264
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/10
|
|
|
|
(3,622
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
(1,359
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/06/10
|
|
|
|
40,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/08/09
|
|
|
|
(2,343
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
|
|
|
12/07/09
|
|
|
|
40,000
|
|
|
Acquisition-Award of restricted stock
|
|
|
|
12/06/09
|
|
|
|
(1,406
|
)
|
|
Disposition-Surrender of shares for tax withholding
|
Miscellaneous Information Concerning Participants
Other than as set forth in this Appendix B or the Proxy Statement, none of the participants or their associates (i) beneficially
owns, directly or indirectly, any shares or other securities of the Company or any of our subsidiaries or (ii) has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the Annual
Meeting. In addition, except as set forth below, neither we nor any of the participants listed above has been within the past year a party to any contract, arrangement or understanding with any person with respect to any of our securities,
including, but not limited to, joint ventures, loan or option
B-5
arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits or the giving or withholding of proxies.
As described in more detail in the current report that we filed under the cover of a Form 8-K with the SEC on August 19, 2011 and
our Annual Report on Form 10-K that we filed with the SEC on May 25, 2012, we are party to two fixed dollar collared accelerated share repurchase (ASR) agreements with Morgan Stanley & Co. LLC (Morgan Stanley) under which we
repurchased an aggregate of $850 million of our common shares. In particular, on August 15, 2011, the Company paid $350 million for the purchase of its common stock under an ASR (August 2011 ASR) entered into with Morgan Stanley. As of
March 31, 2012, the Company received 9.7 million shares under the August 2011 ASR at an average price of $32.83 per share. Additional shares are expected to be delivered over the term of the August 2011 ASR which is expected to end no
later than the second quarter of the fiscal year ending March 31, 2013. Similarly, on June 3, 2011, the Company paid $500 million for the purchase of its common stock under an ASR (June 2011 ASR) entered into with Morgan Stanley. On
August 15, 2011, the June 2011 ASR was amended and restated to, among other things, extend the potential term of the June 2011 ASR. As of March 31, 2012, the Company received 11.8 million shares under the June 2011 ASR at an average
price of $38.59 per share. Additional shares are expected to be delivered over the term of the June 2011 ASR which is expected to end no later than the second quarter of the fiscal year ending March 31, 2013.
Other than as set forth in this Appendix B or the Proxy Statement, none of the participants listed above or any of their associates have,
other than the Change In Control Agreements with our executive officers and certain consulting agreements with Drs. Olanoff and Zimetbaum, each of which is described in the Proxy Statement, (i) any arrangements or understandings with any person
with respect to any future employment by the Company or our affiliates or with respect to any future transactions to which we or any of our affiliates will or may be a party or (ii) a direct or indirect material interest in any transaction or
series of similar transactions since the beginning of our last fiscal year or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party in which the amount involved exceeds
$120,000.
B-6
APPENDIX C
NON-GAAP EPS
Forest
provides Non-GAAP EPS financial measures as alternative views of the Companys performance, which exclude certain items (including costs, expenses, gains/(losses) and other specific items) due to their significant and/or unusual individual
nature and the impact they have on the analysis of underlying business performance and trends. Management reviews these items individually and believes excluding these items provide information that enhances investors understanding of the
Companys financial performance. The information on non-GAAP EPS should be considered in addition to, but not in lieu of, EPS prepared in accordance with generally accepted accounting principles in the United States (GAAP). Since
non-GAAP EPS is not a measure determined in accordance with GAAP, it has no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. A reconciliation between GAAP
financial measures and non-GAAP financial measures is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWELVE MONTHS ENDED
MARCH 31
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Reported diluted earnings per share:
|
|
$
|
3.57
|
|
|
$
|
3.59
|
|
|
$
|
2.25
|
|
Amortization arising from business combinations and acquisitions of product rights
|
|
|
0.16
|
|
|
|
0.02
|
|
|
|
|
|
DOJ Settlement
|
|
|
|
|
|
|
0.42
|
|
|
|
|
|
Licensing payment to TransTech Pharma, Inc. for glucose-lowering agents
|
|
|
|
|
|
|
0.17
|
|
|
|
|
|
Licensing payment to Nycomed for Daliresp
|
|
|
|
|
|
|
|
|
|
|
0.33
|
|
Licensing payment to Grünenthal for oral small molecule analgesics
|
|
|
|
|
|
|
0.23
|
|
|
|
|
|
Licensing payment to Blue Ash Therapeutics, LLC for azimilide
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
License payment received from AstraZeneca for ceftaroline
|
|
|
|
|
|
|
|
|
|
|
(0.13
|
)
|
Settlement payment to Caraco related to Lexapro
|
|
|
|
|
|
|
|
|
|
|
0.04
|
|
Restructuring costs
|
|
|
|
|
|
|
|
|
|
|
0.03
|
|
Licensing payment to Almirall for LAS100977
|
|
|
|
|
|
|
|
|
|
|
0.25
|
|
Licensing payment to AstraZeneca for avibactam and ceftazidime/avibactam
|
|
|
|
|
|
|
|
|
|
|
0.75
|
|
Rounding
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP earnings per share:
|
|
$
|
3.88
|
|
|
$
|
4.43
|
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C-1
PRELIMINARY FORM OF PROXY CARD FOLLOWS
Vote by Internet www.cesvote.com Use the Internet to appoint your proxy and transmit
your voting instructions until 11:59 p.m. Eastern Time on Tuesday, August 14, 2012. Have your proxy card available when you access the website www.cesvote.com, and follow the simple instructions to record your vote. Vote by Telephone
1-888-693-8683 Use any touch-tone telephone to appoint your proxy and transmit your voting instructions until 11:59 p.m. Eastern Time on Tuesday, August 14, 2012. Have your proxy card available when you call the Toll-Free number
1-888-693-8683 and follow the simple instructions to record your vote. Vote by Mail Please mark, sign, date and promptly mail your proxy card using the postage-paid envelope provided or return your proxy card to: Forest Laboratories, Inc.,
c/o Corporate Election Services, PO Box 3230, Pittsburgh PA 15230 to ensure that your vote is received prior to the Annual Meeting on August 15, 2012. Vote by Internet Access the Website and submit your proxy: www.cesvote.com Vote By
Telephone Call Toll-Free using a touch-tone telephone: 1-888-693-8683 Vote by Mail Sign and return your proxy in the postage-paid envelope provided. THE PROXY STATEMENT, AS WELL AS OTHER PROXY MATERIALS DISTRIBUTED BY THE PARTICIPANTS, ARE AVAILABLE
FREE OF CHARGE ONLINE AT WWW.VIEWOURMATERIAL.COM/FORESTLABS Control Number Forest Laboratories, Inc. Proxy for the Annual Meeting of Stockholders August 15, 2012 I appoint Howard Solomon and Francis I. Perier, Jr., or either of them, as my proxies,
with full power of substitution, to vote all shares of C DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED ONLY IF YOU ARE VOTING BY MAIL ommon Stock of FOREST LABORATORIES, INC. which I am entitled to vote at the Annual Meeting of Stockholders to
be held on August 15, 2012 at [ ] A.M. at [] and at any postponements or adjournments of the meeting on all matters coming before such meeting. My proxies will vote the shares represented by this proxy as directed on the other side of this
card, but in the absence of any instructions from me, my proxies will vote FOR the election of all the nominees listed under Proposal 1, FOR Proposals 2 and 3 [and AGAINST Proposal 4] and AGAINST
Proposal [4/5]. My proxies may vote according to their discretion on any other matter which may properly come before the meeting. I may revoke this proxy prior to its exercise. Stockholder Sign Here Date Stockholder (Joint Owner) Sign Here
Date 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.
FOREST LABORATORIES, INC. Annual Meeting of STOCKholders SIGN, DATE AND MAIL YOUR PROXY
TODAY, UNLESS YOU HAVE VOTED BY INTERNET OR TELEPHONE. IF YOU HAVE NOT VOTED BY INTERNET OR TELEPHONE, PLEASE DATE, MARK, SIGN AND RETURN THIS PROXY PROMPTLY. YOUR VOTE, WHETHER BY INTERNET, MAIL OR TELEPHONE, MUST BE RECEIVED NO LATER THAN 11:59
P.M. EASTERN TIME AUGUST 14, 2012 TO BE INCLUDED IN THE VOTING RESULTS. ALL VALID PROXIES RECEIVED PRIOR TO THE MEETING WILL BE VOTED. Forest Laboratories, Inc. Proxy for the Annual Meeting of Stockholders August 15, 2012 THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS. The Board of Directors Recommends a Vote FOR Proposals 1, 2 and 3 [ and AGAINST Proposal 4] and AGAINST Proposal [4/5]. Election of Directors The Board of Directors recommends a vote FOR the
listed nominees. 1. Election of ten Directors: For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below. Nominees:
(1) Howard Solomon (5) Kenneth E. Goodman (9) Brenton L. Saunders (2) Nesli Basgoz, M.D. (6) Gerald M. Lieberman (10) Peter J. Zimetbaum, M.D. (3) Christopher J. Coughlin (7) Lawrence S. Olanoff, M.D., Ph.D. (4) Dan L. Goldwasser (8) Lester B.
Salans, M.D. The Board of Directors recommends that you vote FOR the following: 2. Approval, on an advisory basis, of the compensation of the Companys Named Executive Officers. FOR AGAINST ABSTAIN The Board of Directors recommends that you
vote FOR the following: 3. Ratification of the selection of BDO USA, LLP as Independent Registered Public Accounting Firm for the fiscal year ending March 31, 2013. FOR AGAINST ABSTAIN [ The Board of Directors recommends that you vote AGAINST the
following: 4. Shareholder proposal regarding proxy access. FOR AGAINST ABSTAIN ] The Board of Directors recommends that you vote AGAINST the following: [4/5]. Icahn Group stockholder proposal regarding the repeal of Company bylaw provisions. FOR
AGAINST ABSTAIN (CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.) IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, DETACH ALONG THE PERFORATION, MARK, SIGN, DATE AND RETURN THE BOTTOM PORTION USING THE ENCLOSED ENVELOPE.
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