Forest Laboratories, Inc. (NYSE: FRX) (“Forest”) today issued
the following open letter to all Forest shareholders.
Forest’s Board of Directors continues to recommend that
shareholders vote for all 10 of the Company’s highly qualified
director nominees on the WHITE proxy card. For information about
Forest’s 2012 Annual Meeting of Shareholders, please visit:
www.FRX2012annualmeeting.com.
The text of the letter follows:
August 10, 2012
Dear Fellow Shareholders:
In the past few days, Carl Icahn has twisted the facts yet again
on two important topics: the industry-standard change of control
provisions contained in our licensing joint venture agreements and
the actions that Forest has taken to fulfill its commitments to
shareholders on corporate governance. We regret that Mr. Icahn is
making these false and misleading statements less than a week
before our annual meeting in an egregious and desperate attempt to
manipulate the results of the election, and we are compelled to set
the record straight. Here are the facts.
Industry-Standard Change of Control Provisions
The Cypress agreement to which Icahn refers was filed publicly
years ago, and Icahn is the one that caused the delay of which he
now complains by refusing the other joint venture agreements that
Forest offered to him weeks ago before Icahn chose to proceed to
trial. The timing of Forest’s disclosures has been set by the
Delaware Chancery Court, according to a schedule that Icahn himself
approved, and Forest is complying with its directives.
Forest’s joint venture agreements are not structured to deter a
potential acquisition. As Icahn and Ende should know, given their
purported pharma experience, change of control provisions in drug
licensing agreements are standard and conventional, and they are
required by our joint venture partners. These provisions provide an
important incentive for potential joint venture partners to entrust
Forest with the development and commercialization of proprietary
compounds, which are their “crown jewels.” Without these
provisions, Forest would not have been able to form the types of
partnerships that have enabled it to build one of the most robust
pipelines in the industry.
For example, these provisions address circumstances under which
someone trying to acquire Forest might have a directly competing
product or product in development and a possibility of disfavoring
the joint venture partner’s licensed product. Our joint venture
partner might not be confident that this new party would devote the
appropriate resources and support to its product.
That’s why these provisions, negotiated at arms’ length with
third parties, exist in some of our agreements – not to thwart
takeovers. As we have consistently told investors and analysts for
years, the provisions we have agreed to are appropriately tailored
to do just that.
In the very rare event of an acquisition never agreed to by the
Board, Forest’s joint venture partners would only be able to exit
upon paying Forest fair market value for the asset that is the
subject of the agreement. This means that any potential acquirer
would be fairly compensated for Forest’s investment in these
products.
Fulfillment of Corporate Governance Commitments
Icahn’s recent statements about our corporate governance
commitments are yet another complete distortion of the facts. As
Forest has said all along, our independent directors selected a
leading corporate governance expert, Dean Robert Clark of Harvard
Law School, who consulted with our independent directors and full
Board. After the Forest Board met with Dean Clark, the Board
further enhanced its corporate governance framework, and as
promised, the Company has also publicly committed to meet with a
leading corporate governance expert annually. The fact is that the
Forest Board has kept its promise.
With respect to his engagement with Forest, Dean Clark said, "I
was engaged by the independent directors of Forest Labs to review
their corporate governance practices. The process surrounding such
engagement was appropriate and typical for assignments of this
type. I am very pleased with the Forest Board's constructive
attitude, active participation and responsiveness to the governance
topics that we discussed.”
The details of the steps taken by Forest to fulfill its promise
follow:
Forest Laboratories Fulfilled Its Promise to
Shareholders
-- Following the 2011 annual meeting, the Nominating &
Governance Committee evaluated corporate governance experts and
selected Robert C. Clark to review Forest’s corporate governance
policies and advise the Board on best practices in corporate
governance. -- Robert C. Clark is a current professor
and former Dean of Harvard Law School and has been, among other
things, a member of the Board of Trustees of TIAA, Chairman of the
TIAA Nominating and Governance Committee, Chairman of the TIAA-CREF
ad hoc Committee on Corporate Governance, Chairman of the
Nominating and Governance Committee of Time Warner Inc., and Vice
Chairman of the Governance Committee of Omnicom Group Inc.
-- Gerald Lieberman, Chairman of the Nominating and Governance
Committee, and Presiding Director Ken Goodman led this process,
contacted Dean Clark and consulted with him regarding the nature of
the engagement. -- Forest’s Board of Directors retained Dean
Clark in January 2012 and invited him to make a presentation to the
full Board in March 2012. Forest believes that good governance is
the responsibility of the entire board of directors. --
The Nominating and Governance Committee,
the Compensation Committee as well as the ad hoc committee charged
with succession planning responsibilities – all of which are
composed only of independent directors – had meetings after Dean
Clark’s presentation to the Board to discuss the topics
presented.
--
In the months leading up to the
presentation, Dean Clark reviewed Forest’s corporate governance
materials and public filings and interviewed members of the board
and management.
--
At a Board meeting in March 2012, Dean
Clark reviewed Forest’s practices, indicated his general approval
of our corporate governance position, and discussed for
consideration by the Board the following:
-- For succession planning: -- Engaging an outside
search firm to identify and assess potential external candidates.
Forest’s independent directors selected and engaged Spencer Stuart.
-- A regularly scheduled review by a committee of
independent directors (Dean Clark mentioned the Compensation
Committee) of succession planning matters. Forest’s Board created a
committee of the three newest independent directors and the
presiding director, to spearhead succession planning matters, and
such committee is actively engaged in this process. -- Clear
public communication to investors of Forest’s succession-planning
process. Forest publicly outlined in its white paper and in other
communications its succession planning process. -- With
respect to compensation practices, Clark indicated they seem “very
good, substantively and (now, after recent changes) formally.” Dean
Clark indicated that the structure and process of Forest’s current
compliance program is quite good. -- With respect to board
and committee structures, composition, independence and processes,
Forest’s practices “seem quite good, especially with respect to the
skills and backgrounds of committee members (A+ on this
dimension!)”. He noted that possible “tweaks or improvements”
(quotations in original) could include: (i) more regular and formal
executive sessions after all board and committee meetings; (ii)
having four members on every committee; and (iii) stock ownership
guidelines. -- Forest’s independent directors already meet
in executive sessions at each meeting (in addition to the committee
meetings of independent directors) and have formalized their
commitment to this practice. -- Forest has four members on
the Compensation Committee, the Compliance Committee and succession
planning committee and three on the Audit Committee and Nominating
and Governance Committee. -- Forest has implemented stock
ownership guidelines for directors and senior management. --
Dean Clark indicated that Forest “has already adopted the most
clearly important good governance features…specifically, it has
annual election of all directors, rather than a staggered board; a
majority voting standard for uncontested director elections; no
poison pill plan in place; provision for shareholders to act by
written consent; no supermajority voting requirements with respect
to mergers, sales of all assets, charter amendments and the like.”
Forest remains committed to executing and enhancing our strong
corporate governance policies, with active involvement and input
from our independent directors and in particular our three newest
directors, all of whom serve on the Compensation Committee and two
of whom now chair the Nominating & Governance Committee and the
Audit Committee. We have publicly committed to meet with an
independent corporate governance expert on an annual basis, and we
have recently enhanced our policies, including following our
consultation with Dean Clark, by adopting the following:
- Majority voting standards for
uncontested director elections
- Stock ownership guidelines of 6x annual
base salary for the CEO, 3x annual base salary for executive
officers reporting to the CEO, and 3x annual retainer fee for
non-executive directors
- An anti-hedging policy and no-repricing
policy
- Minimum vesting requirements of 24
months for options, SARs, and restricted stock awards
- Performance metrics attached to certain
executive pay packages
- Clawback policies on certain
compensation
- Enhanced succession planning and review
practices
We encourage you to read the white paper detailing many recent
governance enhancements we have made to our corporate governance
and compensation policies, which is available on our website:
http://www.frx.com/pdf/Corporate_Governance_Continuing_Priority.pdf
PLEASE VOTE THE WHITE CARD TO SUPPORT
FOREST’S HIGHLY QUALIFIED NOMINEES
Forest Laboratories’ August 15th Annual Meeting is rapidly
approaching and support for your Board is more important than ever.
Carl Icahn is again seeking to replace four of your highly
qualified and experienced directors with hand-picked nominees who
we believe are not as qualified to serve on Forest’s Board.
Forest’s Board and management team have delivered on the promises
we made to our shareholders over the last year and continue to
execute on our strategy. We urge you to vote
the WHITE CARD in support of all ten of Forest’s highly qualified
nominees, who are committed to serving your best interests and
maximizing shareholder value over the long term.
Your Board unanimously recommends that you vote for all ten of
our highly qualified director nominees on the WHITE proxy card.
Your vote is very important, no matter how many shares you own. You
may vote by telephone, Internet, or by signing, dating and
returning the enclosed WHITE proxy card in the postage-paid
envelope. Your Board also urges you to discard any GOLD proxy card
sent to you by Icahn or his affiliates. Any later vote using
Icahn’s GOLD proxy card, even to withhold votes from Icahn’s
nominees, can cancel a previous WHITE proxy submitted by
shareholders voting “FOR” Forest Board’s nominees. If you have
already voted using an Icahn GOLD proxy card, you have every right
to change your vote by executing and returning the enclosed WHITE
proxy card.
On behalf of the Board of Directors, we thank you for your
continued support of our Company.
Sincerely,
/s/Howard SolomonChairman of the Board and Chief Executive
Officer
/s/Kenneth E. GoodmanPresiding Independent Director
Forward-Looking Information
Except for the historical information contained herein, this
document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks and uncertainties, including
the difficulty of predicting FDA approvals, the acceptance and
demand for new pharmaceutical products, the impact of competitive
products and pricing, the timely development and launch of new
products, and the risk factors listed from time to time in Forest
Laboratories’ Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and any subsequent SEC filings.
Important Additional Information
Forest Laboratories, its directors, director nominees and
certain of its executive officers may be deemed to be participants
in the solicitation of proxies from Forest shareholders in
connection with the matters to be considered at Forest
Laboratories’ 2012 Annual Meeting. Forest Laboratories has filed
its definitive proxy statement (as it may be amended, the “Proxy
Statement”) with the U.S. Securities and Exchange Commission (the
“SEC”) in connection with such solicitation of proxies from Forest
shareholders. FOREST SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ
THE PROXY STATEMENT AND ACCOMPANYING PROXY CARD AS THEY CONTAIN
IMPORTANT INFORMATION. Information regarding the ownership of
Forest's directors and executive officers in Forest stock,
restricted stock and options is included in their SEC filings on
Forms 3, 4 and 5, which can be found at the Company's website
(www.frx.com) in the section "Investors." More detailed information
regarding the identity of potential participants, and their direct
or indirect interests, by security holdings or otherwise, is set
forth in the Proxy Statement and other materials to be filed with
the SEC in connection with Forest Laboratories' 2012 Annual
Meeting. Information can also be found in Forest's Annual Report on
Form 10-K for the year ended March 31, 2012, filed with the SEC on
May 25, 2012. Shareholders can obtain the Proxy Statement, any
amendments or supplements to the Proxy Statement and other
documents filed by Forest Laboratories with the SEC for no charge
at the SEC's website at www.sec.gov. Copies are also available at
no charge at Forest Laboratories' website at www.frx.com or by
writing to Forest Laboratories at 909 Third Avenue, New York, New
York 10022.
This document contains quotes and excerpts from certain
previously published material. Unless otherwise indicated, consent
of the author and publication has not been obtained to use the
material as proxy soliciting material.
If you have any questions, require assistance with voting
your WHITE proxy card, or need additional copies of the proxy
materials, please contact:
MACKENZIE
PARTNERS, INC
105 Madison Avenue New York, NY 10016
frxproxy@mackenziepartners.com
(212) 929-5500 (Call Collect) Or TOLL-FREE (800) 322-2885
About Forest Laboratories
Forest Laboratories' (NYSE: FRX) longstanding global
partnerships and track record developing and marketing
pharmaceutical products in the United States have yielded its
well-established central nervous system and cardiovascular
franchises and innovations in anti-infective, respiratory,
gastrointestinal and pain management medicine. Forest’s pipeline,
the most robust in its history, includes product candidates in all
stages of development across a wide range of therapeutic areas. The
Company is headquartered in New York, NY. To learn more, visit
www.FRX.com.
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