def14a
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
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Watson Pharmaceuticals, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Persons who are to respond to the collection of information
contained in this form are not required to respond unless the
form displays a currently valid OMB control number.
TABLE OF
CONTENTS
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March 31,
2009
To Our Stockholders:
You are cordially invited to attend the 2009 Annual Meeting of
Stockholders of Watson Pharmaceuticals, Inc. The meeting will be
held at the Westin South Coast Plaza Hotel located at 686 Anton
Boulevard, Costa Mesa, California on May 8, 2009 at
9:00 a.m. local time.
The Secretarys Notice of Meeting and the proxy statement,
which follow, describe the matters to come before the meeting.
During the meeting, we will also review the activities of the
past year and items of general interest about the company.
We appreciate your continued interest and support as a Watson
Pharmaceuticals, Inc. stockholder. We hope that you will be able
to attend the meeting in person and we look forward to seeing
you. For your convenience, we are also offering a webcast of the
meeting. The webcast will be available by accessing
www.watson.com shortly before the meeting time. You may
also listen to a replay of the webcast on our website for thirty
days after the end of the meeting.
Whether or not you plan to attend the annual meeting,
please vote your shares: (i) by calling the toll-free
telephone number on your proxy card, (ii) via the Internet,
by following the instructions on your proxy card, or
(iii) by marking, dating and signing the enclosed proxy
card and returning it in the accompanying postage paid envelope
as quickly as possible.
Sincerely,
Paul M. Bisaro
President and Chief Executive Officer
WATSON
PHARMACEUTICALS, INC.
311 Bonnie Circle
Corona, California 92880
2009
ANNUAL MEETING OF STOCKHOLDERS
May 8, 2009
Notice of Annual Meeting of Stockholders:
You are hereby notified that the 2009 Annual Meeting of
Stockholders (the Meeting) of Watson
Pharmaceuticals, Inc. (the Company) will be
held at the Westin South Coast Plaza Hotel, located at 686 Anton
Boulevard, Costa Mesa, California at 9:00 a.m. local time,
on May 8, 2009, for the following purposes:
1. To elect Ronald R. Taylor, Andrew L. Turner and Jack
Michelson to hold office until the 2012 Annual Meeting or until
each of their respective successors are duly elected and
qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP
as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2009.
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on
March 20, 2009 as the record date for the determination of
stockholders entitled to notice of and to vote at the Meeting.
Only stockholders of record at the close of business on
March 20, 2009 will be entitled to notice of and to vote at
the Meeting or any adjournment thereof. Your attention is
directed to the attached proxy statement for more complete
information regarding the matters to be acted upon at the
Meeting.
Whether or not you plan to attend the annual meeting,
please vote your shares: (i) by calling the toll-free
telephone number on your proxy card, (ii) via the Internet,
by following the instructions on your proxy card, or
(iii) by marking, dating and signing the enclosed proxy
card and returning it in the accompanying postage paid envelope
as quickly as possible.
By Order of the Board of Directors
David A. Buchen,
Secretary
Corona, California
March 31, 2009
i
WATSON
PHARMACEUTICALS, INC.
311 Bonnie Circle
Corona, California 92880
2009
ANNUAL MEETING OF STOCKHOLDERS
May 8, 2009
PROXY
STATEMENT
GENERAL
This proxy statement and the accompanying proxy are furnished to
stockholders of Watson Pharmaceuticals, Inc.
(Watson, we,
us and our) in connection
with the solicitation of proxies by our Board of Directors for
use at the 2009 Annual Meeting of Stockholders (the
Meeting) to be held at the Westin South Coast
Plaza Hotel, located at 686 Anton Boulevard, Costa Mesa,
California at 9:00 a.m. local time on May 8, 2009 for
the purposes set forth in the accompanying Notice of Annual
Stockholders Meeting. This proxy statement, the enclosed
form of proxy, and our 2008 Annual Report to Stockholders are
being mailed to stockholders on or about April 3, 2009.
Stockholders of record at the close of business on
March 20, 2009 (the record date) are
entitled to notice of and to vote at the Meeting. On such date,
there were outstanding 105,324,586 shares of our common
stock, par value $0.0033 per share. In deciding all questions,
each holder of common stock shall be entitled to one vote, in
person or by proxy, for each share held on the record date.
Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting to Be Held on May 8,
2009.
This proxy statement and our 2008 annual report to
stockholders and the means to vote by Internet are available on
our website at www.watson.com/proxy and at www.proxyvote.com.
Our website also contains the following documents: the
notice of the annual meeting, this proxy statement and proxy
card sample, and the 2008 Annual Report to Stockholders. You are
encouraged to review all of the important information contained
in the proxy materials before voting.
VOTING
RIGHTS AND SOLICITATION OF PROXIES
Voting by
Proxy or in Person
The method of voting by proxy differs for shares held as a
record holder and shares held in street name. If you
hold your shares of common stock as a record holder, you may
vote by completing, dating and signing the enclosed proxy card
and promptly returning it in the enclosed, preaddressed, postage
paid envelope or otherwise mailing it to us, or by submitting a
proxy over the Internet or by telephone by following the
instructions on the enclosed proxy card. You may also vote by
attending the annual meeting and voting in person.
If you hold your shares of common stock in street
name, which means your shares are held of record by a
broker, bank or nominee, you will receive instructions from your
broker, bank or other nominee that you must follow in order to
vote your shares. Your broker, bank or nominee may allow you to
deliver your voting instructions over the Internet or by
telephone. Please see the voting instructions from your broker,
bank or nominee that accompany this proxy statement. If you hold
your shares in street name, you will need to obtain
a legal proxy from your bank, broker or nominee in order for you
to vote in person at the annual meeting.
Your vote is very important. Accordingly, please complete, sign
and return the enclosed proxy card or voting instruction card
whether or not you plan to attend the annual meeting in person.
You should vote your
proxy even if you plan to attend the annual meeting. Voting
instructions are included on your proxy card. If you properly
give your proxy and submit it to us in time to vote, one of the
individuals named as your proxy will vote your shares as you
have directed.
Voting by
Internet or Telephone
If your shares are registered in the name of a bank or brokerage
firm, you may be eligible to vote your shares electronically
over the Internet or by telephone. A large number of banks and
brokerage firms are participating in the Broadridge Investor
Communications Solutions, Inc. (Broadridge)
(formerly ADP Investor Communication Services) online program.
This program provides eligible stockholders the opportunity to
vote via the Internet or by telephone. If your bank or brokerage
firm is participating in Broadridges program, your voting
form will provide instructions. The Internet and telephone
voting facilities will close at 11:59 p.m. Eastern
Time on May 7, 2009. Stockholders who vote through the
Internet or telephone should be aware that they may incur costs
to access the Internet, such as usage charges from telephone
companies or Internet service providers, and that these costs
must be borne by the stockholder. Stockholders who vote by
Internet or telephone need not return a proxy card by mail. If
your voting form does not reference Internet or telephone
information, please complete and return the paper proxy in the
self-addressed postage paid envelope provided.
Revocation
of Proxy
A stockholder of record may revoke his or her proxy in one of
four ways at any time before the proxy is voted at the Meeting.
1. The stockholder may send a notice in writing, with a
date later than the date of the proxy, to our Secretary revoking
the proxy.
2. The stockholder may attend the Meeting and vote in
person. Attendance at the Meeting will not, by itself, revoke a
proxy.
3. The stockholder may execute a proxy, relating to the
same shares, with a later date and deliver it to our Secretary
before the voting at the Meeting.
4. The stockholder may submit another proxy by telephone or
the Internet (your latest telephone or Internet voting
instructions will be followed).
Any such notices and new proxies that are sent by mail should be
sent to Watson Pharmaceuticals, Inc., Corporate Secretary, 311
Bonnie Circle, Corona, California 92880.
Persons who hold their shares through a bank, brokerage firm or
other nominee, may revoke their proxy by following the
requirements of their bank or broker, or may vote in person at
the Meeting by obtaining a legal proxy from their bank or broker.
Solicitation
of Proxies
All expenses incurred in the solicitation of proxies will be
borne by us. In addition to the use of the mail, proxies may be
solicited on our behalf by our directors, officers and
employees, who will receive no additional consideration for such
services. Brokers, custodians, nominees and other stockholders
of record will forward copies of the proxy statement and other
soliciting materials to persons for whom they hold shares of our
common stock and to request authority for the exercise of
proxies. In such cases, we, upon the request of the stockholders
of record, will reimburse brokers, custodians and nominees for
their reasonable expenses.
Quorum
and Voting
At the close of business on March 20, 2009,
105,324,586 shares of our common stock were outstanding and
entitled to vote. Votes cast by proxy (including through the
Internet or by telephone) or in person at the Meeting will be
tabulated by the election inspector appointed for the Meeting
who will determine whether or not a quorum is present. The
presence, in person or by proxy, of the holders of a majority of
our common
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stock outstanding and entitled to vote at a meeting of
stockholders is necessary in order to constitute a quorum for
the conduct of business at the Meeting.
Brokers or other nominees who hold shares of common stock in
street name for a beneficial owner of those shares
typically have the authority to vote in their discretion on
routine proposals when they have not received
instructions from beneficial owners. However, brokers are not
allowed to exercise their voting discretion with respect to the
approval of matters which the New York Stock Exchange (the
NYSE) determines to be
non-routine, without specific instructions from the
beneficial owner. If a proxy is received but marked abstention
or if a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a
particular matter and has not been instructed on how to vote
(i.e. broker non-votes), those shares will be
considered as present and entitled to vote for purposes of
determining the presence of a quorum. The election of directors
and ratification of accountants are generally considered to be
routine proposals.
A properly executed proxy that is received before the polls are
closed at the Meeting and that is not revoked will be voted in
the manner directed by the stockholder submitting the proxy. If
no direction is made, such proxy will be voted:
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FOR the election of Ronald R. Taylor, Andrew L. Turner
and Jack Michelson as our directors; and
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FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm for the fiscal year ending December 31,
2009.
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As of the date of this proxy statement, the Board of Directors
knows of no other business that will be presented for
consideration at the Meeting. However, if other proper matters
are presented at the Meeting, it is the intention of the proxy
holders named in the enclosed form of proxy to take such actions
as shall be in accordance with their best judgment.
The enclosed proxy gives each of Paul M. Bisaro and David A.
Buchen discretionary authority to vote your shares in accordance
with his best judgment with respect to all additional matters
that might come before the annual meeting.
Householding
In an effort to reduce printing costs and postage fees, we have
adopted a practice approved by the Securities and Exchange
Commission (SEC) called
householding. Under this practice, stockholders of
record who have the same address and last name will receive only
one copy of our proxy materials, unless one or more of these
stockholders notifies us that he or she wishes to continue
receiving individual copies. Stockholders who participate in
householding will continue to receive separate proxy cards. If
you share an address with another stockholder and prefer to
receive separate copies of our proxy materials, please mail your
request to Watson Pharmaceuticals, Inc., Investor Relations, 311
Bonnie Circle, Corona, California 92880.
Information
on Our Website
Information on our website, other than our proxy statement and
form of proxy, is not part of the proxy soliciting material and
is not incorporated into this proxy statement by reference.
Assistance
If you need assistance in completing your proxy card or have
questions regarding the annual meeting, please contact our
investor relations department at 1-951-493-5563 or
info@watson.com or write to: Investor Relations, at Watson
Pharmaceuticals, Inc., 311 Bonnie Circle, Corona, California
92880.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Under our bylaws, the Board of Directors must consist of between
seven and fifteen directors, with the exact number determined by
the Board of Directors. The Board of Directors has set the
current number of authorized directors at nine. Our articles of
incorporation provide that the Board of Directors will be
divided into three classes. One class is elected each year for a
three-year term, expiring at our annual meeting of stockholders.
At the Meeting, three directors, who will comprise the
Class II directors, are to be elected to serve until the
2012 annual meeting or until their successors are duly elected
and qualified. Based upon the recommendation of the Nominating
and Corporate Governance Committee, the Board of Directors has
nominated Ronald R. Taylor, Andrew L. Turner and Jack Michelson,
each of whom was elected by the stockholders to their present
term, for re-election as Class II directors.
Dr. Allen Chao, Ph.D., our co-founder and former Chief
Executive Officer, retired as a director and Chairman of our
Board of Directors on May 12, 2008, in order to pursue
other business activities. Our Board of Directors appointed one
of our existing directors, Mr. Turner, to succeed
Dr. Chao as a non-executive Chairman of the Board. The
Board of Directors decided not to fill Dr. Chaos
vacant board position and reduced the number of authorized
directors from ten to nine. Also, with the consent of the Board
of Directors, Paul M. Bisaro voluntarily moved himself from
Class I to Class III, where Dr. Chao formerly
served, in order to balance the class sizes as evenly as
possible.
Our Class III directors, Paul M. Bisaro, Michel J. Feldman
and Fred G. Weiss, are scheduled to serve as directors until the
2010 Annual Meeting. Our Class I directors, Michael J.
Fedida, Albert F. Hummel and Catherine M. Klema, are scheduled
to serve as directors until the 2011 Annual Meeting. There are
no vacant positions on the Board of Directors.
Information about the nominees for director and our directors
whose term of office will continue after the Meeting is set
forth in the following paragraphs and is based on information
provided to us as of March 2, 2009.
Class II
Director Nominees for Election at the Meeting:
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Jack Michelson
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Director since 2002
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Jack Michelson, age 74, was our consultant from February
2001 to June 2003. Mr. Michelson served for twenty-four
years as an officer of G.D. Searle & Co., a
pharmaceutical company, as the Corporate Vice President and
President, Technical Operations from 1993 to 2001; Senior Vice
President of Technical Operations from 1981 to 1993; and Vice
President of Production and Engineering from 1977 to 1981.
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Ronald R. Taylor
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Director since 1994
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Ronald R. Taylor, age 61, has been President of Tamarack
Bay, LLC, a private consulting firm, since 2001. Mr. Taylor
has been a director of Red Lion Hotels Corporation, a hotel
operating company, since 1998 and a director of ResMed Inc., a
medical device manufacturer, since 2005. Mr. Taylor was a
limited partner of Enterprise Partners Venture Capital
(Enterprise), a venture capital firm, from
April 2001 until September 2002, and was formerly a general
partner of Enterprise from April 1998 to March 2001.
Mr. Taylor is a limited partner of several Enterprise
funds. Mr. Taylor was also a consultant to Cardinal Health,
Inc., a provider of healthcare products and services, from May
1996 to May 2002.
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Andrew L. Turner
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Director since 1997
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Andrew L. Turner, age 62, was appointed as the Chairman of
our Board in May 2008. He also serves as Chairman of the Board
of EnduraCare Therapy Management, Inc. (formerly known as
EnduraCare, LLC), a provider of rehabilitation and therapy
management services founded by Mr. Turner in 2000.
Mr. Turner has also been a director of The Sports Club
Company, Inc., an upscale workout company, since September 1994.
Mr. Turner has been a director of Streamline Health
Solutions, a provider of software for document solutions in
hospitals, since 2007.
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The Board of Directors knows of no reason why any of the
foregoing nominees will be unavailable to serve, but in the
event of any such unavailability, the proxies received will be
voted for such substitute nominees as the Board of Directors may
recommend.
Required
Vote for Election of Directors
At this years annual meeting, directors will be elected by
a favorable vote of a plurality of the shares of our common
stock present and entitled to vote, in person or by proxy, at
the Meeting. Thus, the three nominees receiving the largest
number of votes will be elected. Accordingly, abstentions will
not affect the outcome of the election of directors. In
addition, the election of directors is a matter on which a
broker or other nominee generally has discretionary voting
authority, and thus broker non-votes are not expected to result
from this proposal. Proxies cannot be voted for a greater number
of persons or different persons than the nominees named.
Beginning with next years annual meeting, persons
nominated to serve on our Board of Directors in an uncontested
election must receive a greater number of votes cast
FOR than votes cast AGAINST in order to
be elected, or re-elected, to the Board of Directors.
The Board of Directors unanimously recommends a vote FOR
the election of Ronald R. Taylor, Andrew L. Turner and Jack
Michelson.
Class III
Directors whose Terms Expire at the 2010 Meeting:
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Paul M. Bisaro
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Director since 2007
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Paul M. Bisaro, age 48, has served as our President and
Chief Executive Officer and on our Board of Directors since
2007. Prior to joining us, Mr. Bisaro was President and
Chief Operating Officer of Barr Pharmaceuticals, Inc., a global
specialty pharmaceutical company (Barr), from
1999 to 2007. Between 1992 and 1999, Mr. Bisaro served as
General Counsel of Barr and from 1997 to 1999 served in various
additional capacities including Senior Vice
President Strategic Business Development of Barr.
Prior to joining Barr, he was associated with the law firm
Winston & Strawn and a predecessor firm, Bishop, Cook,
Purcell and Reynolds from 1989 to 1992. Mr. Bisaro received
his undergraduate degree in General Studies from the University
of Michigan in 1983 and a Juris Doctor from Catholic University
of America in Washington, D.C. in 1989.
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Michel J. Feldman
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Director since 1985
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Michel J. Feldman, age 66, is a member of the law firm of
Seyfarth Shaw LLP, where he has practiced since October 2003.
Previously, Mr. Feldman was a member of the law firm of
DAncona & Pflaum LLC, where he practiced from
June 1991 to October 2003. Effective October 2003,
DAncona & Pflaum LLC merged with Seyfarth Shaw
LLP. From time to time in the past, Seyfarth Shaw LLP provided
legal services to us. Mr. Feldman also served as our
Secretary from 1995 to 1998 and Acting Secretary and Interim
General Counsel from May 2002 to November 2002.
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Fred G. Weiss
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Director since 2000
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Fred G. Weiss, age 67, has been the managing director of
FGW Associates, Inc., a consulting firm, since 1997.
Mr. Weiss served as Vice President, Planning, Investment
and Development of Warner-Lambert from 1983 to 1996 and prior to
that served as Vice President and Treasurer of Warner-Lambert
from 1979 to 1983, where he was involved in both strategic
planning and corporate development. Mr. Weiss is also an
Independent Vice-Chairman of the Board and Chairman of the Audit
Committee of numerous BlackRock-sponsored mutual funds.
Additionally, Mr. Weiss has been a Director of the Michael
J. Fox Foundation for Parkinsons Research since 2000.
Class I
Director whose Terms Expire at the 2011 Meeting:
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Michael J. Fedida
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Director since 1995
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Michael J. Fedida, age 62, a registered pharmacist, has
served for the past twenty-seven years as an officer and
director of several retail pharmacies wholly or partially owned
by him, including J&J Saint
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Michaels Pharmacy from 2005 to present; J&J Pharmacy
and Classic Pharmacy from 1987 to present; Perfect Pharmacy from
1980 to 2000; and Phoster Pharmacy from 1985 to 2000.
Mr. Fedida served on the Board of Directors of Circa
Pharmaceuticals, Inc. (Circa) , from 1988 to
1995, at which time Circa was acquired by us. Mr. Fedida
was a Director of Bradley Pharmaceuticals, Inc., a specialty
pharmaceutical company, from April 2004 to February 21,
2008.
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Albert F. Hummel
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Director since 1986
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Albert F. Hummel, age 64, has been our director since March
1986, except for a period from July 1991 to October 1991.
Mr. Hummel has been President of Pentech Pharmaceuticals,
Inc., a development stage pharmaceutical company, since July
1998. Since November 2005, Mr. Hummel has been a director
for Obagi Medical Products, Inc., a specialty pharmaceutical
company focused on the aesthetic and therapeutic skin health
markets. Additionally, Mr. Hummel served as a partner in
Affordable Residential Communities, a property management firm,
from January 1994 through March 2006.
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Catherine M. Klema
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Director since 2004
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Catherine M. Klema, age 50, is currently President of
Nettleton Advisors LLC, a consulting firm established by
Ms. Klema in 2001. Ms. Klema served as Managing
Director, Healthcare Investment Banking, at SG Cowen Securities
from 1997 to 2001. While at SG Cowen, Ms. Klema had advised
us on investment banking matters. Ms. Klema also served as
Managing Director, Healthcare Investment Banking, at Furman Selz
LLC from 1994 until 1997, and was employed by Lehman Brothers
from 1987 until 1994. Ms. Klema has been a director of
Pharmaceutical Product Development, Inc., a global contract
research organization, since 2000.
CORPORATE
GOVERNANCE
Corporate
Governance Guidelines and Code of Conduct
Our Board of Directors has adopted Corporate Governance
Guidelines. These guidelines address the
make-up and
functioning of the Board of Directors and its committees, which
include determining director independence, criteria for Board
membership, and authority to retain independent advisors.
Our Board of Directors has also adopted a Code of Conduct which
applies to all of our Board members and all of our officers and
employees. The code sets forth and summarizes certain of our
policies related to legal compliance and honest and ethical
business practices. The code is intended to comply with the
standards set forth in Section 303A.10 of the NYSEs
Listed Company Manual and SEC rules and regulations. Any
amendments to, or waivers from, provisions of the Code of
Conduct that apply to our directors or executive officers,
including our Chief Executive Officer and Chief Financial
Officer and persons performing similar functions, will be
promptly posted on our website at
http://www.watson.com.
You can find links to our Corporate Governance Guidelines and
our Code of Conduct under the Investors section of our website
at
http://www.watson.com.
Copies of these materials are available to stockholders without
charge upon request sent to Investor Relations at Watson
Pharmaceuticals, Inc., 311 Bonnie Circle, Corona, CA 92880.
Director
Independence
On an annual basis our Board of Directors reviews the
independence of all directors and affirmatively makes a
determination as to the independence of each director. For a
director to be considered independent, the Board must determine
that the director does not have any direct or indirect material
relationship with Watson. To assist in making this
determination, the Board has adopted independence guidelines
which are designed to conform to, or be more exacting than, the
independence requirements set forth in the listing standards of
the NYSE. You may find these guidelines on our website at
www.watson.com. In addition to applying these guidelines,
the Board considers any and all additional relevant facts and
circumstances in making an independence determination.
6
Our Board has determined that at least a majority of its
directors has no direct or indirect material relationship with
us (other than as our director) and such directors are
independent within the meaning of the independence standards
promulgated by the SEC and the NYSE. Specifically, on
March 5, 2009, the Board determined, based on our Director
Independence Standards and the NYSE standards for independence,
that Michael Fedida, Michel Feldman, Albert Hummel, Catherine
Klema, Jack Michelson, Ronald Taylor, Andrew Turner and Fred
Weiss, or eight out of our nine directors, have no relationship
with us that would interfere with the exercise of independent
judgment and are independent directors. Mr. Bisaro was
determined to be not independent, because he is our President
and Chief Executive Officer.
The relationships and transactions reviewed by the Board
included the following:
(i) Mr. Fedidas ownership of pharmacies that
from time to time purchase pharmaceuticals from Anda, Inc., one
of our subsidiaries, that is a wholesaler distributor,
(ii) Mr. Feldmans partnership with Seyfarth Shaw
LLP, a law firm which has provided services for us in the past,
(iii) Ms. Klemas directorship with
Pharmaceutical Product Development, Inc., a contract research
organization that has provided services for us in the
past, and
(iv) Mr. Taylors directorship of 3e Company, a
privately-held compliance information services company that has
provided services for us in the past.
The Board has determined that these transactions were made in
the ordinary course, were below the thresholds set forth in our
director independence standards and did not affect the
independence of the directors involved.
BOARD OF
DIRECTORS AND COMMITTEES
Executive
Sessions
We schedule regular executive sessions in which non-management
directors meet without management participation. The Chairman of
the Nominating and Corporate Governance Committee presides at
these meetings.
Communications
with the Board of Directors
Any interested party, including any stockholder, wishing to
contact the Board of Directors, the presiding director of the
non-management director meetings, or any other individual
director may do so in writing by sending a letter to:
Chairman, Nominating and Corporate Governance Committee
c/o Corporate
Secretary
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 92880
Our Corporate Secretary reviews all such written correspondence
and regularly forwards to the Board of Directors a summary of
all correspondence and copies of correspondence that, in the
opinion of the Corporate Secretary, deal with the functions of
the Board of Directors or its committees, or that the Corporate
Secretary otherwise determines requires Board attention.
Director
Nomination Process
The Nominating and Corporate Governance Committee considers
director candidates from diverse sources, including suggestions
from stockholders. From time to time, the Nominating and
Corporate Governance Committee may engage a third party for a
fee to assist in identifying potential director candidates. The
Nominating and Corporate Governance Committee looks for
candidates who (a) bring not only direct
7
experience, but also a variety of experience and background,
both professionally and personally, (b) will represent the
balanced, best interests of the stockholders as a whole rather
than special interest groups or constituencies, and
(c) have a reputation for integrity and satisfy the
independence requirements of the NYSE, our Director Independence
Standards and applicable law. The Nominating and Corporate
Governance Committees goal is to have a diverse, balanced
and engaged board whose members possess the skills and
background necessary to maximize stockholder value in a manner
consistent with all legal requirements and the highest ethical
standards. The Nominating and Corporate Governance
Committees Charter and our Corporate Governance
Guidelines, which are published on our website at
http://www.watson.com
under the Investors section, set forth in further detail the
criteria that guide the Committee in assessing potential
candidates for the Board of Directors.
In determining whether to recommend a director for re-election,
the Nominating and Corporate Governance Committee considers the
directors contributions to the Board and the Committees on
which such person serves, participation in and attendance at
meetings, and any changes in employment status, health,
community activity or other factors that may affect the
directors continuing contributions to the Board. The
Nominating and Corporate Governance Committee evaluates each
individual in the context of the Board as a whole, with the
objective of recommending a group that can best perpetuate the
success of the business and represent stockholder interests
through the exercise of sound judgment using its diversity of
experience in these various areas.
The Nominating and Corporate Governance Committee initially
evaluates a candidate for nomination to the Board based on
information supplied by the party recommending the candidate and
any additional public information that may be available. If the
initial evaluation is favorable, the Nominating and Corporate
Governance Committee gathers additional information on the
candidates qualifications, availability, probable level of
interest and any potential conflicts of interest. If the
subsequent evaluation is also favorable, the Nominating and
Corporate Governance Committee contacts the candidate directly
to better determine each partys level of interest in
pursuing the candidacy and checks the candidates
references. If, after discussions and meetings, the candidate
and the Nominating and Corporate Governance Committee establish
a mutual interest in pursuing the candidacy, the Committee makes
a final recommendation to the Board to nominate the candidate
for election by the stockholders (or to select the candidate to
fill a vacancy, as applicable). The Nominating and Corporate
Governance Committee employs the same process for evaluating all
candidates, including those properly submitted by stockholders
and will consider stockholder recommendations of candidates on
the same basis as it considers all other candidates.
Stockholders wishing to recommend a director candidate for
consideration by the Nominating and Corporate Governance
Committee may do so by sending the candidates name,
biographical information and qualifications, together with a
consent in writing signed by the recommended nominee that he or
she is willing to be considered as a nominee and, if nominated
and elected, he or she will serve as a director, to the Chair of
the Nominating and Corporate Governance Committee in care of the
Corporate Secretary, Watson Pharmaceuticals, Inc., 311 Bonnie
Circle, Corona, California 92880. The submission of a
recommendation by a stockholder in compliance with these
procedures does not guarantee the selection of the
stockholders candidate or the inclusion of the candidate
in our proxy statement; however, the Nominating and Corporate
Governance Committee will consider any such candidate in
accordance with the procedures and guidelines as described above
and as set forth in the Charter of our Nominating and Corporate
Governance Committee and in our Corporate Governance Guidelines.
Board
Meetings
During the fiscal year ended December 31, 2008, the Board
of Directors held seven meetings and executed two unanimous
written consents in lieu of meetings. Each director attended at
least 75% of the combined total of (i) all Board of
Directors and (ii) all meetings of Committees of which the
director was a member. We do not have a policy with regard to
board members attendance at annual meetings. All members
of the Board attended our 2008 Annual Meeting of Stockholders.
8
Committees
The Board of Directors has created four standing committees: the
Audit Committee, the Compensation Committee, the Nominating and
Corporate Governance Committee and the Regulatory Compliance
Committee. The Board of Directors has adopted a charter for each
of the four committees. The charters for each committee and
other materials related to corporate governance are available
under the Investors section of our website at
http://www.watson.com.
A copy is also available to stockholders upon request sent to
Investor Relations at Watson Pharmaceuticals, Inc., 311 Bonnie
Circle, Corona, CA 92880.
The
Audit Committee
We have an Audit Committee currently composed of Michel J.
Feldman, Catherine M. Klema, Ronald R. Taylor and Fred G. Weiss.
Mr. Feldman was appointed to the Audit Committee in May
2008 to succeed Andrew L. Turner, who became the Chairman of our
Board at that time. All other members of the Audit Committee
served as such throughout fiscal year 2008. Mr. Weiss
serves as the Chairman of the Audit Committee. All of the
members of the Audit Committee have been determined by the Board
of Directors to be independent and meet the audit
committee independence requirements of the NYSE listing
standards and SEC
Rule 10A-3.
The Board of Directors has determined that all of the current
members of the Audit Committee qualify as audit committee
financial experts within the meaning of the SEC rules, and
are financially literate as required under the NYSE listing
standards. The functions of the Audit Committee and its
activities during fiscal 2008 are described below under the
heading Report of the Audit Committee. The Audit
Committee is directly responsible for the engagement,
compensation and oversight of the work of PricewaterhouseCoopers
LLP (including resolution of disagreements between management
and PricewaterhouseCoopers LLP regarding financial reporting)
for the purpose of preparing or issuing an audit report or
related work. During the fiscal year ended December 31,
2008, the Audit Committee met six times.
The Board of Directors and Audit Committee will take appropriate
action, including reviewing and reassessing the adequacy of the
Audit Committee charter annually and periodically, as
appropriate, and as conditions dictate.
The
Compensation Committee
We have a Compensation Committee composed of Catherine M. Klema,
Ronald R. Taylor and Fred G. Weiss. Each were members of the
Compensation Committee throughout fiscal year 2008.
Mr. Taylor serves as the Chairman of the Compensation
Committee. All of the members of the Compensation Committee have
been determined by the Board of Directors to be
independent and meet the independence requirements
of the NYSE listing standards. Our Board has determined that all
current Compensation Committee members qualify as
non-employee directors within the meaning of
Section 16 of the Exchange Act and as outside
directors within the meaning of Section 162(m) of the
Internal Revenue Code (IRC). The primary
purpose of the Compensation Committee is to review, approve and
evaluate director and senior executive compensation plans,
policies and programs for us. The Compensation Committee has
engaged Towers Perrin, an independent compensation consulting
firm, to advise the Compensation Committee on an ongoing basis.
Towers Perrin reports directly to the Compensation Committee and
the Compensation Committee retains the right to terminate or
replace the consultant at any time. Towers Perrin conducts an
annual review of our total compensation program for our
executive officers and advises the Compensation Committee on
such compensation matters as requested by the Compensation
Committee. Additional information on the Compensation
Committees processes and procedures for consideration of
executive compensation, including the role of our chief
executive officer, are addressed in the Compensation Discussion
and Analysis on page 10. The Compensation Committee met
five times and executed four unanimous written consents in lieu
of meetings during the fiscal year ended December 31, 2008.
The
Nominating and Corporate Governance Committee
We have a Nominating and Corporate Governance Committee
currently composed of Catherine M. Klema, Ronald R. Taylor and
Fred G. Weiss. Ms. Klema was appointed to the Nominating
and Corporate
9
Governance Committee in May 2008 to succeed Andrew L. Turner,
who became the Chairman of our Board at that time. All other
members of the Nominating and Corporate Governance Committee
served as such throughout fiscal year 2008. Since her
appointment to the committee, Ms. Klema has served as the
Chairperson, a position previously held by Mr. Turner. All
of the members of the Nominating and Corporate Governance
Committee have been determined by the Board of Directors to be
independent and meet the independence requirements
of the NYSE listing standards. The key functions of the
Nominating and Corporate Governance Committee are to identify
and present qualified candidates to the Board of Directors for
election or re-election as directors of the Board and Board of
Directors committees, ensure that the size and composition
of the Board of Directors, its committees, and our Charter and
Bylaws are structured in a way that best serves our practices
and objectives, develop and recommend to the Board of Directors
a set of corporate governance guidelines and principles and
periodically review and recommend changes to such guidelines and
principles as deemed appropriate, and oversee the evaluation of
the Board of Directors and senior management. The Nominating and
Corporate Governance Committee met two times during the fiscal
year ended December 31, 2008.
The
Regulatory Compliance Committee
We have a Regulatory Compliance Committee composed of Michael J.
Fedida, Albert F. Hummel, Michel J. Feldman and Jack
Michelson. Each were members of the Regulatory Compliance
Committee throughout fiscal year 2008. Mr. Michelson serves
as the Chairman of the Regulatory Compliance Committee. The
primary purpose of the Regulatory Compliance Committee is to
assist the Board of Directors with the Boards oversight
responsibilities regarding our compliance with applicable
regulatory requirements related to product safety and quality
and environmental, health and safety matters. The Regulatory
Compliance Committee met three times during the fiscal year
ended December 31, 2008.
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Compensation Program
The Compensation Committee (which we refer to in this
Compensation Discussion and Analysis as the
Committee) of our Board of Directors is
responsible for establishing, implementing and continually
monitoring our adherence with our compensation philosophy for
our executive officers, including Paul M. Bisaro, our chief
executive officer. The Committee seeks to ensure that the total
compensation paid to our executive officers is fair, reasonable
and competitive.
Throughout this proxy statement, references to our Named
Executive Officers refer to Paul M. Bisaro, our President and
Chief Executive Officer, Mark W. Durand, our Senior Vice
President and Chief Financial Officer, Thomas R. Russillo, our
Executive Vice President and President, Generic Division, David
A. Buchen, our Senior Vice President, General Counsel and
Secretary, Edward F. Heimers, our Executive Vice President, and
President, Brand Division, and David C. Hsia, our former Senior
Vice President, Scientific Affairs, who retired from that
position on September 30, 2008.
Compensation
Philosophy and Objectives
The Committee believes that its primary objectives with respect
to Named Executive Officer compensation are to:
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tie a significant portion of our Named Executive Officers
total compensation to the achievement of measurable individual
and corporate performance goals;
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align our Named Executive Officers cash and equity
incentives with company performance and provide equity
incentives that focus our executives efforts on the
creation of stockholder value; and
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attract and retain the most talented and dedicated executives
possible in a competitive labor market.
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10
To these ends the Committee believes that the most effective
executive compensation program is one that (i) links a
significant portion of an executives total compensation to
the achievement of specific individual and corporate performance
goals, including annual and long-term strategic goals and
(ii) provides such compensation in a mix of both cash and
equity-based compensation such that our executives continue to
have the creation of short- and long-term stockholder value as a
primary objective. The Committee evaluates individual,
departmental, segment and corporate performance to determine the
proper mix of executive total compensation with the goal of
setting executive total compensation at levels the Committee
believes are competitive relative to the total compensation paid
to similarly situated executives of our peer companies.
As a result of our compensation objectives outlined above we
allocate a significant percentage of our total compensation to
annual cash incentives and long-term equity incentives. We have
no pre-established policy or target for the allocation between
either cash and non-cash or short-term and long-term incentive
compensation. Rather, the Committee continually reviews many
factors, as discussed more fully below, to determine the
appropriate level and mix of incentive compensation.
Role of
Executive Officers in Compensation Decisions
On an annual basis, in concert with our chief executive officer,
our Named Executive Officers engage in a process whereby they
each set individual, departmental and company-wide goals for the
year to come. Following the completion of our fiscal year, our
Named Executive Officers are formally required to assess whether
these goals were achieved and set values to express the extent
to which the Named Executive Officer believes his or her goals
were met. Our chief executive officer reviews and discusses
these self-assessments with each of our Named Executive Officers
and, with the assistance of our human resources department,
makes recommendations to the Committee concerning compensation
of the Named Executive Officers. While the Committee considers
these recommendations in determining base salaries, adjustments
to base salaries, cash incentive awards and equity-based awards
for our Named Executive Officers, it may modify any such
recommendations in its discretion. Our Senior Vice President,
Human Resources, also works closely with the Committee and
management to ensure that the Committee is provided with
appropriate information upon which to base its decisions and
communicate those decisions to management for implementation.
Independent
Compensation Advisor
The Committee has engaged Towers Perrin, an independent global
professional services consulting firm, to advise the committee
on matters related to chief executive officer and other
executive compensation. In this capacity, Towers Perrin conducts
an annual benchmark review of our compensation program for our
Named Executive Officers and provides the Committee with
relevant market data and structuring alternatives to consider
when making compensation decisions.
Working with Towers Perrin, the Committee compares the elements
of our total compensation program against programs provided for
similarly situated executives at peer companies, as discussed
more fully below. The Committee generally assesses the
competitiveness of our total target and actual direct
compensation (salary, bonus and equity) for our Named Executive
Officers by comparing these amounts with the
50th percentile of total direct compensation paid to
similarly situated executives of our peer companies.
In June 2008, Towers Perrin conducted a competitive pay
assessment of the compensation of our Named Executive Officers
other than Dr. Hsia using benchmarks from compensation data
reported in the then-most recent proxy statements of the
following twelve (12) peer group companies:
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Allergan, Inc.
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King Pharmaceutical, Inc.
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APP Pharmaceuticals, Inc. (subsidiary of
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Medicis Pharmaceutical Corp.
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Fresenius Kabi Pharmaceuticals Holding, Inc.)
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Mylan Laboratories Inc.
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Barr Pharmaceuticals, Inc.
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Par Pharmaceutical Companies, Inc. (Par)
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Biovail Corporation
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Perrigo Company
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Forest Laboratories, Inc.
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Valeant Pharmaceuticals International (Valeant)
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Hospira, Inc.
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11
Since the last assessment of compensation performed by Towers
Perrin in June 2007, we added APP Pharmaceuticals, Inc.,
Hospira, Inc., and Par to our peer group based on our selection
criteria of public companies competing primarily in the
pharmaceutical sector that had between 50% and 200% of our
revenue or our market capitalization at the time of the study.
Except for Par and Valeant, the peer companies met either the
revenue or market capitalization criteria. Par and Valeant fell
below these criteria but our the Committee added Par to, and
retained Valeant in, our peer group in order to get additional
data points for comparison and because Towers Perrin and the
Committee considered them to be very similar to us in terms of
their business model, and in the case of Valeant, their
geographic location. Excluding these two companies from our peer
group would have generally resulted in no or a slight increase
to the
50th percentile
of the peer group for the all of the compensation factors
discussed in the following discussion for our Named Executive
Officers. The Committee does not rely exclusively on statistical
compilations and may vary on a
case-by-case
basis from our compensation target objectives as dictated by the
experience of the individual and market factors.
In assessing competitiveness, Towers Perrin generally considered
if a Named Executive Officers compensation was within,
above or below the range of competitive market practices. That
range was defined as: (a) base salary within plus or minus
10% of the
50th percentile
of the market, (b) target and actual total cash
compensation within plus or minus 15% of the
50th percentile
of the market, and (c) target and actual total direct
compensation within plus or minus 20% of the
50th percentile
of the market. Towers Perrins determinations made in the
June 2008 study of compensation of our Named Executive Officers
are indicated in the following table:
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Total Cash
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Total Direct
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Base
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Compensation(1)
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Compensation(2)
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Named Executive Officer and Title
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Salary
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Target
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Actual
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Target
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Actual
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Paul M. Bisaro
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Within
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Within
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(3)
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Below
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(3)
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Within
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(4)
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Below
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(4)
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President and Chief Executive Officer
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Mark W. Durand
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Within
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Within
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(5)
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Below
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(5)
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Senior Vice President and Chief Financial Officer
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Thomas R. Russillo
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Above
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Above
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Above
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Above
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Above
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Executive Vice President and President,
Generic Division
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David A. Buchen
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Above
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Within
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Within
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Within
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Within
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Senior Vice President, General Counsel and Secretary
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Edward F. Heimers
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Within
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Within
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Within
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Within
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Within
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Executive Vice President, and President,
Brand Division
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David C. Hsia
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(6)
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(6)
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(6)
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(6)
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(6)
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former Senior Vice President,
Scientific Affairs
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(1) |
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Total Cash Compensation equals base salary plus annual cash
incentive compensation. |
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(2) |
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Total Direct Compensation equals Total Cash Compensation plus
the expected value of long-term incentive grants, including the
expected value of stock options estimated in accordance with
Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123 (revised 2004), Share
Based Payment, as amended (SFAS 123(R))
as-reported values, restricted stock, and long-term performance
plan awards. |
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Includes only the actual bonus paid to Mr. Bisaro of
$330,000, which was prorated to reflect his service from his
date of hire in September 2007 to the end of the year. All but
one of the other members of Mr. Bisaros peer group
received bonuses for the full year. |
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Excludes the value of a one-time option grant to purchase
400,000 shares of our common stock received by
Mr. Bisaro when we hired him in 2007. Only one other chief
executive officer in his peer group received a similar new-hire
grant. As a result, Towers Perrin performed its assessment for
Mr. Bisaro with |
12
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and without the value of his grant. Both assessments included
the value of the other chief executive officers new-hire
grant because the value of that grant was not isolated from his
other compensation in his companys proxy filing, resulting
in an increase to the
50th
percentile for Total Direct Compensation for the peer group.
Including the value of such grant, Mr. Bisaros target
total direct compensation was slightly above the range of
competitive market practices and his actual total direct
compensation was within the range of competitive market
practices. |
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(5) |
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Mr. Durand was hired on November 16, 2007 and was not
eligible for a cash incentive award in 2007. As a result, a
comparison of his Total Cash Compensation and Total Direct
Compensation to the market would not be meaningful, and no such
comparison was made or reviewed by the Committee. |
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(6) |
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Dr. Hsia was excluded from the scope of Towers
Perrins June 2008 competitive pay assessment because data
for Dr. Hsias peer group was unavailable. |
2008
Executive Compensation Components
For the fiscal year ended December 31, 2008, the principal
components of compensation for our Named Executive Officers were:
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base salary;
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annual cash incentive awards;
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long-term equity incentive compensation; and
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perquisites and other personal benefits.
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Base
Salary
A significant component of our Named Executive Officers
compensation is base salary, which provides our Named Executive
Officers with a degree of financial certainty and stability. In
setting base salaries and determining merit increases for our
Named Executive Officers the Committee takes into account a
variety of factors, including:
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level of responsibility;
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individual and team performance;
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internal review of the Named Executive Officers
compensation, individually and relative to our other officers
and executives with similar responsibilities in our peer group;
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general levels of salaries and salary changes at peer group
companies; and
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our corporate financial results.
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With regard to individual and team performance, the Committee
relies to a large extent on our chief executive officers
evaluation of each other Named Executive Officers
individual performance. Salary levels are typically considered
annually as part of our performance review process as well as
upon a promotion or other change in job responsibility. Merit
based increases to the salaries of our Named Executive Officers
are based on the Committees and the chief executive
officers assessment of the individuals performance
and market conditions.
After taking into consideration (a) the factors listed
above, (b) the Towers Perrin competitive pay assessment
from June 2008, (c) the recommendations from our chief
executive officer in the case of the other Named Executive
Officers, and (d) the portion of the year that
Mr. Durand and Mr. Bisaro had worked with us, in 2008,
the Committee did not change Mr. Bisaros base salary
and increased Mr. Durands base salary by 3.3%,
Mr. Russillos base salary by 4%,
Mr. Buchens base salary by 4%, Mr. Heimers
base salary by 4.8%, and Dr. Hsias base salary by
4.0%.
13
Annual
Cash Incentive Awards
The purpose of our annual cash incentive program is to provide
cash compensation on an annual basis that is at-risk and
contingent on the achievement of measurable annual individual,
departmental, business and strategic objectives and corporate
and segment financial goals. These cash incentives are intended
to link a substantial portion of executive compensation to our
performance and provide executive officers with a competitive
level of compensation if they achieve their objectives.
Each year, the Committee adopts guidelines pursuant to which it
calculates the annual cash incentive awards available to our
Named Executive Officers, subject to the Committees
oversight and modification. The Committee believes that our
annual incentive program provides our Named Executive Officers
with a team incentive to both enhance our financial performance
and perform at the highest level. The terms of these programs
are not contained in a formal written plan.
Annual
Cash Incentive Awards for our Chief Executive
Officer.
The Committee met on February 25, 2008 to discuss the
annual cash incentive program for Mr. Bisaro for fiscal
year 2008. At this meeting, the Committee reviewed the then-most
recent Towers Perrin competitive pay assessment for its chief
executive officer from February 2007, which is described in our
proxy from the prior year, noting that the average bonus payment
for chief executive officers in that assessment was
approximately 104% of their base salary. The Committee also
considered our historical and projected revenues and Adjusted
EBITDA relative to the appropriate cash incentives for
Mr. Bisaro to achieve those projections.
Based on the factors above, the Committee adopted an annual cash
incentive program on February 25, 2008 pursuant to which
Mr. Bisaro was eligible to receive a cash bonus of up to
100% of his then current salary. Up to 70% of
Mr. Bisaros award was based upon our financial
performance in 2008 as measured by Adjusted EBITDA, and up 30%
of Mr. Bisaros award was at the discretion of the
Committee, taking into account Mr. Bisaros success in
2008 in:
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setting and implementing strategies to develop and grow the our
Generic, Brand and Distribution business segments;
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|
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|
implementing our global supply chain cost improvement
initiatives, including the integration of our offshore
operations;
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|
|
improving our quality systems and procedures; and
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|
|
|
identifying and retaining key executives, recruiting key
executives and developing succession plans for our senior
leaders.
|
The Committee also considered other relevant factors in its sole
discretion in making awards under the program.
The Committee met on March 5, 2009 to evaluate
Mr. Bisaros performance under the measures above.
Based on our actual Adjusted EBITDA for 2008 of
$567.1 million and the Committees evaluation of
Mr. Bisaros achievement of the goals above, the
Committee determined that a cash incentive of $997,200 would be
awarded to Mr. Bisaro for performance in 2008.
Also at the March 5, 2009 meeting, the Committee approved
the annual cash incentive program for Mr. Bisaro for fiscal
year 2009. That program is materially the same as his cash
incentive program for 2008, other than changes to the Adjusted
EBITDA targets for 2009 to be consistent with changes in
company-wide targets, and the addition of a fifth goal to
determine his discretionary bonus component which takes into
account the success in 2009 of new business strategies both
globally and in biologics. The Committee will determine whether,
and to what extent, a bonus will be paid to Mr. Bisaro for
fiscal year 2009 after the end of 2009.
14
Annual
Cash Incentive Awards for our other Named Executive
Officers.
The Committee met on January 28, 2008 and February 25,
2008 to discuss the annual cash incentive program for each of
our Named Executive Officers, other than our chief executive
officer, for fiscal year 2008. At these meetings, the Committee
reviewed the then-most recent Towers Perrin competitive pay
assessment for its Named Executive Officers (other than the
chief executive officer) from July 2007, which is described in
our proxy from the prior year, noting that the target total cash
compensation for three of these four Named Executive Officers
was below the range of competitive market practices. The
Committee also considered that Mr. Durands employment
contract requires that his target bonus opportunity be not less
than 50% of his base salary. Based on this review, the Committee
decided to increase the annual cash bonus target for each of our
Named Executive Officers, other than our chief executive
officer, as a percentage of his base salary by five percentage
points. The resulting target bonus percentages were: 55% for
Mr. Durand; 70% for Mr. Russillo; 50% for
Mr. Buchen; 50% for Mr. Heimers; and 40% for
Dr. Hsia.
The bonus actually paid to these Named Executive Officers could
have ranged from 0% to 150% of his target bonus, depending to
varying degrees on (i) our financial performance in 2008 as
measured by Adjusted EBITDA, which we refer to as
Corporate Financial Performance, (ii) the
contribution of the Named Executive Officers business
segment to our performance (where applicable), which we refer to
as Segment Contribution, and (iii) the
evaluation of the Named Executive Officer and his or her
department during 2008 as determined by our chief executive
officer based on the executives and his departments
achievements during 2008, which we refer to as Individual
and Department Performance. For 2008, the above factors
were applied as follows in determining the annual cash incentive
award due to each of our Named Executive Officers:
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|
|
|
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Corporate Financial
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Segment
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|
Individual and
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Named Executive Officer and Title
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|
Performance
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Contribution
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|
Department Performance
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Mark W. Durand
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|
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60
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%
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|
|
0
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%
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|
|
40
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%
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Senior Vice President and Chief Financial Officer
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|
|
|
|
|
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|
|
|
|
|
Thomas R. Russillo
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|
|
40
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%
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|
|
40
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%
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|
|
20
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%
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Executive Vice President and President,
Generic Division
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|
|
|
|
|
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|
|
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|
David A. Buchen
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|
|
60
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%
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|
|
0
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%
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|
|
40
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%
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Senior Vice President, General Counsel and Secretary
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|
|
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|
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Edward F. Heimers
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|
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40
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%
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|
40
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%
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20
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%
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Executive Vice President, and President,
Brand Division
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|
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|
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David C. Hsia
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|
|
60
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%
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0
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%
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40
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%
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former Senior Vice President,
Scientific Affairs
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Corporate Financial Performance. The Committee
measures Corporate Financial Performance through Adjusted
EBITDA, which it believes is the best indicator of such
performance. The Committee used a performance grid that
established various Adjusted EBITDA milestones necessary for
full or partial funding of the annual incentive award for
Corporate Financial Performance which is summarized in the table
below.
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|
|
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|
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|
Adjusted EBITDA
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|
|
|
|
Scenario Name
|
|
Milestone
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|
Resulting Funding
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Threshold Funding
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$
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454.6 million
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|
|
|
50
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%
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Target Funding
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$
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568.2 million
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|
|
100
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%
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Maximum Funding
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$
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750.0 million
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|
|
150
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%
|
2007 Actual Adjusted EBITDA
|
|
$
|
545.4 million
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|
|
|
92.9
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%
|
2008 Actual Adjusted EBITDA
|
|
$
|
567.1 million
|
|
|
|
99.6
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%
|
15
Between threshold and maximum funding were intermediate levels
of funding that were generally proportionate to corresponding
Adjusted EBITDA milestones. For the purpose of measuring
Corporate Financial Performance, Adjusted EBITDA
meant our earnings before interest, taxes, depreciation and
amortization, adjusted for share-based compensation, acquisition
or licensing related charges, restructuring charges, litigation
charges, charges associated with our global supply chain
initiative, non-cash charges, gains or losses on debt
repurchase, gains or losses on sales of operating assets or
securities and such other special items as determined at the
discretion of our Board of Directors. A reconciliation of
Adjusted EBITDA to net income can be found on our Current Report
on
Form 8-K
filed with the SEC on February 19, 2009.
Segment Contribution. The Adjusted
Contribution to our overall corporate financial performance by
our Generic, Brand and Distribution business segments is given
significant weight in determining the overall cash incentive
award available to members of these business segments, including
Messrs. Russillo and Heimers. This weighting recognizes
that each business segment has its own measures of performance
and achievement that may differ from overall corporate measures
or from the measures used by our other segments. The Committee
believes that using these relative measures of performance is
key to specifically rewarding the performance of our executives
in these segments. For the purpose of measuring Segment
Contribution, Adjusted Contribution meant a business
segments contribution as reported in our filings with the
SEC adjusted for any reconciling item of the relevant segment
that was excluded in determining Adjusted EBITDA. In determining
the portion of a Named Executive Officers annual incentive
award attributable to Adjusted Contribution, the Committee uses
a performance grid that establishes threshold, target and
maximum contribution levels for each of our business segments,
like the performance grid used to measure Corporate Financial
Performance. Target Adjusted Contribution levels in 2008 were
set above actual Adjusted Contribution in fiscal 2007 for each
of Messrs. Russillo and Heimers and required sustained,
high-level performance by them. Actual Adjusted Contribution in
2008 for the Generic and Brand business segments resulted in a
92.9% payout level for Mr. Russillo and a 101.0% payout
level for Mr. Heimers, respectively.
Individual and Departmental Performance. The
Committee also recognizes that Individual and Departmental
Performance are key elements to consider in determining the
overall cash incentive award available to an executive. To this
end, our chief executive officer reviews the performance of each
of our executive officers and, with the assistance of our human
resources department, makes recommendations to the Committee
concerning compensation of the Named Executive Officers. While
the Committee considers these recommendations in determining
annual cash incentive awards, it may modify any such
recommendations in its discretion.
Using the three factors above, calculations of the cash
incentive awards and the recommendation of our chief executive
officer are submitted to the Committee for consideration and
approval. The total amount of cash bonus payable to a Named
Executive Officer may be further adjusted up or down by up to
twenty five percent (25%) at the discretion of the Committee.
The Committee did not exercise this discretion in awarding cash
bonuses for 2008 performance for any of our Named Executive
Officers, other than Mr. Heimers, whose bonus was increased
by 13.5% to reflect the particular success in the Brand segment
in 2008 which resulted in the filing of three New Drug
Applications and achieving growth on some key brand products.
The Committee determines whether and to what extent cash
incentive awards will be paid for a fiscal year after the end of
that fiscal year.
In March 2009, the Committee awarded cash bonuses in accordance
with the objective results and factors discussed above to
Mr. Durand of $255,136, Mr. Russillo of $430,486,
Mr. Buchen of $250,000, and Mr. Heimers of $250,299.
Dr. Hsia was not eligible to receive a cash bonus award
since his employment was terminated during 2008.
Our 2009 cash incentive award program is substantially similar
to our 2008 program, but features financial targets and
thresholds for Adjusted EBITDA and segment contribution based on
our 2009 operating plan as approved by our Board of Directors.
Meeting and exceeding these targets will require consistent and
superior performance by us, each of our business segments and
our Named Executive Officers.
16
Sign On
Bonus.
Pursuant to his new-hire employment agreement, Mr. Durand
received a $150,000 sign-on bonus of which $100,000 was paid in
March 2008. We agreed to provide this benefit following
negotiations with Mr. Durand taking into account, among
other things, his compensation opportunities with his previous
employer.
Long-Term
Equity Incentives
Our Named Executive Officers generally receive equity based
grants when they join us, upon promotions and generally
thereafter as part of the Committees determination of the
executive officers annual total compensation on annual
dates scheduled in advance. All equity awards are approved
before or on the date of grant. In determining the size of
equity-based grants, the Committee considers the number of
shares available under the Second Amendment and Restatement of
the 2001 Incentive Award Plan of Watson Pharmaceuticals, Inc.
(the Incentive Award Plan), the potential dilutive
impact of such grants on our shareholders, the individuals
position with us, the appropriate allocation of such grants
based on individual and corporate performance, and the level of
grants awarded by our peers.
While we do not require our employees to maintain any minimum
ownership interest in our stock, the Committee believes that
equity-based awards provide a valuable tool for aligning the
interests of management with our stockholders and focusing
managements attention on our long-term growth. In
addition, the Committee believes that equity-based awards are
essential to attract and retain the talented professionals and
managers needed for our continued success.
In accordance with our Incentive Award Plan, our long term
equity incentive program is a performance based program that can
provide for discretionary equity awards of restricted stock,
stock appreciation rights, dividend equivalents, restricted
stock units, deferred stock, stock payment awards and stock
options to our Named Executive Officers. Prior to 2005, our
long-term equity compensation awards generally took the form of
stock option awards. During 2005 and 2006, our long-term equity
compensation awards took the form of a mix of restricted stock
grants and stock option awards. The Committee determined that by
providing full-value shares in addition to options, the value of
the grant would remain competitive while the number of shares
granted could be reduced to manage our share usage. Using the
Black-Scholes pricing model for stock option valuation and the
market value of our common stock for restricted stock valuation,
we generally targeted our restricted stock awards and stock
option awards to each comprise approximately 50% of the total
value of our typical long-term equity award.
After further considering the cost and dilutive impact of our
long term equity awards, the negative effect our usage of stock
options was having on the total direct compensation of our Named
Executive Officers, the marginal retention value we were
achieving through our stock options and market trends relating
to long-term incentive compensation, the Committee further
revised our approach to long-term equity compensation in 2007
and continued this approach in 2008. This revised approach has
two key components. First, the Committee shifted our annual
long-term equity awards away from a mix of options and
restricted stock to restricted stock awards only. Second, the
Committee split our restricted stock awards into two classes:
(1) Time Awards that are based on individual
and corporate performance factors and (2) Performance
Awards pursuant to which each Named Executive Officer has
the right to receive a number of shares of restricted stock
granted after year end based on our performance against the same
Adjusted EBITDA targets upon which our annual cash incentive
compensation program is based. Any restricted stock issued
pursuant to a Performance Award vests on the same basis as the
Time Awards. The Committee may, in the future, adjust this mix
of award types or approve different award types as part of our
overall long-term equity incentive program.
Restricted
Stock
Time Awards. As part of our total compensation
program the Committee generally grants shares of restricted
stock to our Named Executive Officers on an annual basis (the
Time Awards). Each Named Executive Officer is
entitled to a grant of Time Award shares within a preset range
that varies in accordance with the Named Executive
Officers position of responsibility with us. While Time
Award grants are not tied to any specific financial targets, the
Committee determines the specific amount of Time Awards to be
granted
17
to each Named Executive Officer based on our performance and the
Committees evaluation of each officers individual
performance, taking into consideration the recommendation of our
chief executive officer. In recognition of their performance in
fiscal 2007, the Committee awarded Time Awards of restricted
stock in March 2008 in the following amounts: Mr. Bisaro
received 36,850 restricted shares, Mr. Durand received
8,500 restricted shares, Mr. Russillo received 7,500
restricted shares, Mr. Buchen received 7,500 restricted
shares, Mr. Heimers received 5,500 restricted shares, and
Dr. Hsia received 4,000 restricted shares.
Performance Awards. The Company provides
performance-based annual equity incentive awards to our chief
executive officer under a compensation program administered by
the Compensation Committee and for our executive officers under
the 2008 Senior Executive Equity Compensation Program. Under
these programs, our 16 senior executive officers, including our
Named Executive Officers, are eligible to receive an award of
shares of restricted stock based on the Companys
performance during the fiscal year as measured by Adjusted
EBITDA. The target number of restricted shares to be issued to a
Named Executive Officers under a Performance Award is
equal to his or her actual Time Share award granted in the
fiscal year for which performance is being measured. The actual
number of restricted shares issued by the Committee can range
from 0% to 150% of the target under the Performance Award for
each of our Named Executive Officers (other than our chief
executive officer which can range from 0% to 100% of the target)
based upon our financial performance for the fiscal year using
the same Adjusted EBITDA calculation used by the Committee in
determining our annual cash incentive payouts to such Named
Executive Officer. In March 2009, the Committee determined our
financial performance in 2008 as measured by Adjusted EBITDA
resulted in payout of 99.6% of the target issuance, resulting in
issuance to each Named Executive Officer of shares of restricted
stock in the following amounts: Mr. Bisaro received 36,703
restricted shares, Mr. Durand received 8,466 restricted
shares, Mr. Russillo received 7,470 restricted shares,
Mr. Buchen received 7,470 restricted shares, and
Mr. Heimers received 5,478 restricted shares. Dr. Hsia
was not eligible to receive restricted shares under his
Performance Award since his employment was terminated in 2008.
Our shares of restricted stock (including Time Awards and shares
issued pursuant to Performance Awards) generally have
restrictions on resale that lapse on the second and fourth
anniversaries of the grant date. On each of those dates 50% of
the total awards restrictions on resale lapse, contingent
on the continued employment with us by the Named Executive
Officer during the restriction period. In the future, the
Committee may adjust the restrictions on resale to which our
restricted stock is subject. The Committee will determine
whether and to what extent Performance Awards will be awarded
for fiscal year 2009 after the end of 2009.
New Hire
Awards.
Pursuant to their new-hire employment agreements, we agreed to
grant to Messrs. Bisaro and Durand 42,600 and
10,000 shares of restricted stock, respectively. These
awards have restrictions on resale that lapse (or are
eliminated) on the second and fourth anniversaries of their
grant date. On each of those dates 50% of the total awards
restrictions on resale lapse, contingent on the continued
employment with us by the Named Executive Officer. We agreed to
grant these shares of restricted stock in order to align the
interests of Mr. Bisaro and Mr. Durand with our
stockholders and focus their attention on our long-term growth.
Stock
Options
We award stock options with an exercise price equal to the last
closing price of our common stock on the NYSE on the day of the
award grant, in accordance with the terms of our Incentive Award
Plan. These options generally have a term of 10 years and
generally are subject to a four-year ratable vesting schedule.
Vesting rights cease upon termination of employment (except in
the case of a qualifying termination in connection with a
change-in-control,
in which case vesting rights accelerate upon termination of
employment) and exercise rights generally cease ninety
(90) days after the date of termination, except in the case
of death (subject to a one year limitation), disability or
retirement. In the case of vice-presidents who have been
employed by us for more than five (5) continuous years,
exercise rights cease two (2) years after the
vice-presidents termination of employment for awards made
on or after July 25, 2005. Prior to the exercise of an
18
option, the holder has no rights as a stockholder with respect
to the shares subject to such option, including voting rights
and the right to receive dividends or dividend equivalents.
We did not grant any options to any Named Executive Officers in
2008. In 2007, we granted 527,200 stock options to
Mr. Bisaro when he joined us. Notwithstanding our move from
granting a mix of stock options and restricted stock to granting
restricted stock only as our primary means of long-term equity
compensation, the Committee determined that in the circumstance
of a new hire of chief executive officer, the inclusion of stock
options as part of Mr. Bisaros new hire compensation
package was appropriate and desirable to the extent the higher
incentive value provided by a stock option award to increase our
stock value complemented the incentive and retention value of
Mr. Bisaros restricted stock awards.
We believe the term and vesting schedule of our stock options,
and the vesting schedule for our restricted stock awards,
provide additional incentive to management to remain with the
Company and to focus on long-term growth and corporate financial
performance.
Perquisites
and Other Personal Benefits
We provide our Named Executive Officers with perquisites and
other personal benefits that we and the Committee believe have a
business purpose, are reasonable and consistent with our overall
compensation program and better enable us to attract and retain
superior employees for key positions. The Compensation Committee
believes these benefits and perquisites provide a more tangible
incentive with a greater perceived value than an equivalent
amount of cash compensation. The Committee periodically reviews
the levels of perquisites and other personal benefits provided
to our Named Executive Officers.
The Named Executive Officers are provided with a monthly car
allowance, mandatory annual physical exams, financial planning
assistance and participation in the plans and programs described
below under the heading Other Benefits
Generally Available Benefits. Upon relocation, Named
Executive Officers may receive, at the discretion of the
Committee, a relocation allowance paid in installments. The car
allowance is intended to cover expenses related to the lease,
purchase, insurance and maintenance of a vehicle. It is provided
in recognition of the need to have executive officers visit
customers, business partners and other stakeholders in order to
fulfill their job responsibilities. The mandatory annual
physical exams are required to monitor the physical health of
our executives and to discover potential health issues that
could interfere with their duties at the company. The financial
planning assistance covers expenses resulting from financial,
estate and tax planning. We believe that it is in its best
interest for the executives to have professional assistance in
managing their total compensation so that they can focus their
full attention on growing and managing the business. We also
reimbursed Mr. Bisaro for $7,500 of legal fees that he
incurred in the review of his employment agreement with us,
which facilitated our recruitment of him to work with us.
Attributed costs of the personal benefits described above for
the Named Executive Officers for the fiscal year ended
December 31, 2008, are included in column (i) of the
Summary Compensation Table on page 22.
Other
Benefits
Generally
Available Benefits
We provide the following benefits to our Named Executive
Officers generally on the same basis as the benefits provided to
all employees:
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|
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|
|
Health, dental and vision insurance;
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|
|
|
Life insurance;
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|
|
|
Short- and long-term disability;
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|
Educational assistance; and
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|
|
|
401(k) plan.
|
19
Executive
Compensation Deferral Program
Our Named Executive Officers, in addition to certain other
U.S.-based
eligible management level employees, are entitled to participate
in our Executive Deferred Compensation Plan. Pursuant to our
Executive Deferred Compensation Plan, eligible employees may
defer from 1% to 80% of their salary and from 1% to 80% of their
annual cash incentive award, if any.
We match 50% of the first 2% an employee defers in accordance
with this Plan. Vesting of the matched amount is based on an
employees years of service with us. If an employee has
been with us for less than one year, none of the matched amount
is vested. Vesting thereafter occurs 33% per year, such that
employees who have been with us for more than 3 years are
100% vested in the matched amount.
All contributions to our Executive Deferred Compensation Plan
have a guaranteed fixed interest rate of return. This guaranteed
rate is adjusted annually based on the Prime interest rate
published in the Wall Street Journal on the first business day
of December 2007 for the 2008 plan year and November 2008 for
the 2009 plan year. In 2008 the guaranteed interest rate was
7.5%. In 2009 the guaranteed interest rate is 4.0%.
Our Executive Deferred Compensation Plan is discussed in further
detail under the heading Nonqualified Deferred
Compensation on page 29.
Severance
Benefits
Termination of each of our Named Executive Officers
employment can occur at any time with or without cause, or by
reason of death or disability. Additionally, each Named
Executive Officer may voluntarily resign at any time with or
without good reason. Pursuant to each of our Named Executive
Officers respective employment agreements, in the event of
termination of employment without cause, or if the Named
Executive Officer resigns for good reason, we will provide the
Named Executive Officer with severance compensation and
benefits, including a lump sum severance payment (based on a
multiple of the executive officers salary and bonus),
continued group health insurance benefits for two years and
outplacement services for certain periods subsequent to the
executive officers termination. The severance benefits are
designed to retain our executive officers by providing them with
security in the event of a termination of employment without
cause or resignation for good reason.
In addition to the severance benefits discussed above, if we
experience a
change-in-control,
and if a Named Executive Officer is terminated without cause or
resigns for good reason within ninety (90) days prior to or
up to twenty-four (24) months following such
change-in-control,
our employment agreements with our Named Executive Officers
provide for the immediate vesting of any unvested options and
restricted stock held by such Named Executive Officer. The
benefits are only payable upon a double trigger
there must be a
change-in-control
and a termination or resignation for good reason. We believe
this approach to be in our best interests in that it
(1) provides a retention incentive to our Named Executive
Officers who may be faced with the potential of job loss
following a
change-in-control
and (2) affords any successor entity the opportunity to
retain any or all Named Executive Officers following such a
change-in-control.
Each Named Executive Officer is also entitled to receive a
gross-up
payment to compensate for any excise tax imposed on the Named
Executive Officer under the IRC. Additional information
regarding applicable payments and benefits provided under our
agreements to our Named Executive Officers is provided under the
heading Potential Payments Upon Termination or
Change-in-Control
on page 30.
In January 2008, in consideration for Dr. Hsias services
during the transition to a new Chief Executive Officer, and in
recognition of his contributions as the co-founder of the
company, the Committee approved an amendment to
Dr. Hsias employment agreement to include his
retirement as a trigger event for severance benefit eligibility
and providing enhanced health insurance benefits upon his
retirement. Dr. Hsia retired on September 30, 2008.
20
Tax
and Accounting Considerations
Policy on
Deductibility of Executive Compensation
Section 162(m) of the IRC provides a $1,000,000 deduction
limit on compensation paid to the reporting executives of
publicly held corporations, unless the compensation qualifies as
performance based compensation based on certain
performance, disclosure, stockholder approval and other
requirements being met. The options granted under the Incentive
Award Plan generally comply with these performance-based
compensation requirements. We have not historically designed our
long-term equity incentives and our annual cash incentive award
programs to comply with the performance-based compensation
requirements.
We periodically review the potential consequences of
Section 162(m) and may structure the performance-based
portion of our executive compensation to comply with certain
exemptions of Section 162(m). However, we reserve the right
to use our judgment to authorize compensation payments that do
not comply with the exemptions of Section 162(m) when we
believe that such payments are appropriate and in the best
interests of our stockholders.
Nonqualified
Deferred Compensation
Section 409A of the IRC requires that nonqualified
deferred compensation be deferred and paid under plans or
arrangements that satisfy the requirements of the statute with
respect to the timing of deferral elections, timing of payments
and certain other matters. Failure to satisfy these requirements
can expose employees and other service providers to accelerated
income tax liabilities and penalty taxes and interest on their
vested compensation under such plans. Accordingly, as a general
matter, it is our intention to design and administer our
compensation and benefits plans and arrangements for all of our
employees and other service providers, including the Named
Executive Officers, so that they are either exempt from, or
satisfy the requirements of, Section 409A. With respect to
our compensation and benefit plans that are subject to
Section 409A, in accordance Section 409A and
regulatory guidance issued by the Internal Revenue Service
(IRS), we are currently operating such plans in
compliance with Section 409A based upon our good faith,
reasonable interpretation of the statute and the IRSs
regulatory guidance.
Change-in-Control
Tax
Gross-Ups
Sections 280G and 4999 of the IRC impose certain adverse
tax consequences on compensation treated as excess parachute
payments. An executive is treated as having received excess
parachute payments if he receives compensatory payments or
benefits that are contingent on a change in control, and the
aggregate amount of such payments and benefits equal or exceeds
three times the executives base amount. The portion of the
payments and benefits in excess of one times base amount are
treated as excess parachute payments and are subject to a 20%
excise tax, in addition to any applicable federal income and
employment taxes. Also, our compensation deduction in respect of
the executives excess parachute payments is disallowed. If
we were to be subject to a
change-in-control,
certain amounts received by our executives (for example, amounts
attributable to the accelerated vesting of stock options) could
be excess parachute payments under Sections 280G and 4999
of the IRC. As discussed above under Potential Payments
Upon Termination or
Change-in-Control,
we provide certain of our executive officers with tax gross up
payments in the event of a
change-in-control,
but did not enter into any such agreements in 2008.
21
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of Watson has reviewed and discussed
the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement and our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
THE COMPENSATION COMMITTEE
Ronald R. Taylor, Chairman
Catherine M. Klema
Fred G. Weiss
SUMMARY
COMPENSATION TABLE
The following table sets forth certain information regarding the
annual and long-term compensation for services rendered to the
Company in all capacities for the fiscal year ended
December 31, 2008 of our Named Executive Officers. For
purposes of determining the three most highly compensated
executive officers, the amounts shown in column (h) below
were excluded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Compensation
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)(5)
|
|
($)(6)
|
|
($)(7)
|
|
($)
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
Paul M. Bisaro (8)
|
|
|
2008
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
553,508
|
|
|
|
1,181,519
|
|
|
|
997,200
|
|
|
|
1,159
|
|
|
|
38,969
|
|
|
|
3,772,355
|
|
President and Chief Executive Officer
|
|
|
2007
|
|
|
|
303,846
|
|
|
|
|
|
|
|
158,164
|
|
|
|
610,759
|
|
|
|
330,000
|
|
|
|
|
|
|
|
4,219
|
|
|
|
1,406,988
|
|
Mark W. Durand (9)
|
|
|
2008
|
|
|
|
457,500
|
|
|
|
100,000
|
|
|
|
119,948
|
|
|
|
|
|
|
|
255,136
|
|
|
|
287
|
|
|
|
22,271
|
|
|
|
955,142
|
|
Senior Vice President and
|
|
|
2007
|
|
|
|
34,615
|
|
|
|
50,000
|
|
|
|
9,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
672
|
|
|
|
95,046
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Russillo
|
|
|
2008
|
|
|
|
790,608
|
|
|
|
|
|
|
|
385,469
|
|
|
|
123,519
|
|
|
|
430,486
|
|
|
|
|
|
|
|
32,564
|
|
|
|
1,762,646
|
|
Executive Vice President
|
|
|
2007
|
|
|
|
744,719
|
|
|
|
60,000
|
|
|
|
270,026
|
|
|
|
236,653
|
|
|
|
500,116
|
|
|
|
|
|
|
|
22,869
|
|
|
|
1,834,383
|
|
and President, Watson U.S. Generic Division
|
|
|
2006
|
|
|
|
212,692
|
|
|
|
75,000
|
|
|
|
52,549
|
|
|
|
87,960
|
|
|
|
|
|
|
|
|
|
|
|
4,820
|
|
|
|
433,021
|
|
David A. Buchen
|
|
|
2008
|
|
|
|
503,346
|
|
|
|
|
|
|
|
181,011
|
|
|
|
33,181
|
|
|
|
250,000
|
|
|
|
10,569
|
|
|
|
24,713
|
|
|
|
1,002,820
|
|
Senior Vice President,
|
|
|
2007
|
|
|
|
463,523
|
|
|
|
|
|
|
|
85,342
|
|
|
|
69,581
|
|
|
|
245,916
|
|
|
|
9,075
|
|
|
|
21,135
|
|
|
|
894,572
|
|
General Counsel and Secretary
|
|
|
2006
|
|
|
|
377,237
|
|
|
|
|
|
|
|
27,245
|
|
|
|
104,975
|
|
|
|
232,122
|
|
|
|
3,283
|
|
|
|
20,342
|
|
|
|
765,204
|
|
Edward F. Heimers
|
|
|
2008
|
|
|
|
430,040
|
|
|
|
29,771
|
|
|
|
137,573
|
|
|
|
64,410
|
|
|
|
220,528
|
|
|
|
2,775
|
|
|
|
33,937
|
|
|
|
919,034
|
|
Executive Vice President,
|
|
|
2007
|
|
|
|
380,112
|
|
|
|
|
|
|
|
71,196
|
|
|
|
107,779
|
|
|
|
226,843
|
|
|
|
2,122
|
|
|
|
27,078
|
|
|
|
815,130
|
|
and President, Brand Division
|
|
|
2006
|
|
|
|
332,573
|
|
|
|
|
|
|
|
27,245
|
|
|
|
147,460
|
|
|
|
122,835
|
|
|
|
412
|
|
|
|
25,516
|
|
|
|
656,041
|
|
David C. Hsia (10)
|
|
|
2008
|
|
|
|
346,884
|
|
|
|
|
|
|
|
28,856
|
|
|
|
101,364
|
|
|
|
|
|
|
|
8,584
|
|
|
|
1,342,272
|
|
|
|
1,827,960
|
|
former Senior Vice
|
|
|
2007
|
|
|
|
327,524
|
|
|
|
|
|
|
|
54,116
|
|
|
|
48,586
|
|
|
|
120,092
|
|
|
|
4,443
|
|
|
|
23,146
|
|
|
|
577,907
|
|
President, Scientific Affairs
|
|
|
2006
|
|
|
|
305,212
|
|
|
|
|
|
|
|
21,785
|
|
|
|
64,746
|
|
|
|
128,826
|
|
|
|
1,238
|
|
|
|
22,191
|
|
|
|
543,998
|
|
|
|
|
(1) |
|
Salary includes annual salary and cash paid in lieu of vacation,
and in the case of Dr. Hsia, $11,900 of consulting fees
paid to him after his retirement from us. Amounts include cash
compensation earned but deferred, as applicable, under the
Companys deferred compensation plans. Participants in
these plans may defer receipt of portions of salary and/or
annual non-equity incentive plan compensation earned for the
year into Watsons Executive Deferred Compensation Plan.
Watsons Executive Deferred Compensation Plan is discussed
in further detail above under the heading Executive
Compensation Deferral Program on page 20 and below
under the heading Nonqualified Deferred Compensation
on page 29. |
22
|
|
|
(2) |
|
Mr. Durand received a signing bonus upon appointment as
Chief Financial Officer in November 2007, $50,000 of which was
payable in 2007 and $100,000 of which was payable in March 2008.
Mr. Russillo received a signing bonus upon his appointment
as Executive Vice President and President Generic Division in
September 2006 in the amount of $75,000 paid in 2006 and a
negotiated guaranteed bonus of $60,000 paid in March 2007.
Mr. Heimers bonus represents the portion of his
annual cash incentive award which was increased by the Committee
at its discretion, as allowed under 2008 Senior Executive
Compensation Program. |
|
(3) |
|
Stock awards represent the compensation expense recognized for
financial statement reporting purposes for the fiscal years
ended December 31, 2008, 2007 and 2006, respectively, in
accordance with SFAS 123(R), for restricted stock issued
pursuant to Time Awards and Performance Awards, regardless of
when the awards were granted, and include amounts from stock
issued in and prior to 2008. The Company recognizes the expense
associated with the fair value of restricted stock issued in and
prior to 2008 over the period restrictions are eliminated for
those awards. Fair value is based on the fair market value on
the date of issuance. No compensation expense is recognized for
the Performance Awards until shares of restricted stock are
issued in settlement of such Performance Awards. For additional
discussion on the assumptions used in determining fair value and
the accounting for restricted stock awards, see Share-Based
Compensation in Note 2 and Note 3 to the audited
consolidated financial statements in the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2008. |
|
(4) |
|
Option awards represent the expense recognized for financial
statement reporting purposes for the fiscal years ended
December 31, 2008, 2007 and 2006, respectively, in
accordance with SFAS 123(R) for stock options, regardless
of when the awards were granted, and include amounts from stock
options granted in and prior to 2008. We recognize the expense
associated with the fair value of stock options granted in and
prior to 2008 over the vesting term of those awards. Fair value
is based on the Black-Scholes option pricing model on the date
of grant. For additional discussion on the assumptions used in
determining fair value and the accounting for stock options, see
Share-Based Compensation in Note 2 and Note 3
to the audited consolidated financial statements in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008. |
|
(5) |
|
Non-equity incentive plan compensation represents payment under
our annual cash incentives awards program for the fiscal year
stated but paid in March of the following year.
Mr. Bisaros 2007 non-equity incentive plan
compensation was prorated for the portion of the year he was
employed as our chief executive officer. Mr. Durand was
hired in November 2007 and was not eligible to participate in
our annual cash incentives awards program for 2007 performance.
For additional discussion on our annual cash incentive award
programs, see Annual Cash Incentive Awards above under
the heading Compensation Discussion and Analysis on
page 14 and below under the heading Grants of
Plan-Based Awards on page 25. |
|
(6) |
|
Amounts reflect interest on deferred compensation balances that
is considered to be earned at above-market interest rates.
Interest on deferred compensation is deemed to be above-market
if it exceeds 120% of the applicable federal long-term rate. All
contributions to our Executive Deferred Compensation Plan have a
guaranteed fixed interest rate of return. This guaranteed rate
is adjusted annually based on the Prime interest rate published
in the Wall Street Journal on the first business day of December
2007 for the 2008 plan year and November 2008 for the 2009 plan
year. In 2008 the guaranteed interest rate was 7.5%. The
Executive Deferred Compensation Plan is discussed in further
detail above under the heading Executive Compensation
Deferral Program on page 20 and below under the
heading Nonqualified Deferred Compensation on
page 29. |
23
|
|
|
(7) |
|
Total other compensation for 2008 includes severance benefits
for Dr. Hsia upon his retirement from us, a car allowance,
registrant contributions under our 401(k) plan and deferred
compensation plan, group life insurance coverage and other
perquisites as follows: |
2008
Other Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
Group Term
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Car
|
|
|
401(k)
|
|
|
Compensation
|
|
|
Life
|
|
|
Other
|
|
|
Total Other
|
|
Name
|
|
Benefits
|
|
|
Allowance
|
|
|
Match
|
|
|
Match
|
|
|
Insurance
|
|
|
Perquisites
|
|
|
Compensation
|
|
|
Paul M. Bisaro
|
|
|
|
|
|
|
12,000
|
|
|
|
6,712
|
|
|
|
10,000
|
|
|
|
1,710
|
|
|
|
8,547
|
|
|
|
38,969
|
|
Mark W. Durand
|
|
|
|
|
|
|
7,200
|
|
|
|
7,892
|
|
|
|
4,575
|
|
|
|
1,557
|
|
|
|
1,047
|
|
|
|
22,271
|
|
Thomas R. Russillo
|
|
|
|
|
|
|
7,200
|
|
|
|
10,382
|
|
|
|
|
|
|
|
14,757
|
|
|
|
225
|
|
|
|
32,564
|
|
David A. Buchen
|
|
|
|
|
|
|
7,200
|
|
|
|
10,989
|
|
|
|
5,033
|
|
|
|
1,146
|
|
|
|
345
|
|
|
|
24,713
|
|
Edward F. Heimers
|
|
|
|
|
|
|
7,200
|
|
|
|
10,549
|
|
|
|
6,569
|
|
|
|
6,416
|
|
|
|
3,203
|
|
|
|
33,937
|
|
David C. Hsia
|
|
|
1,321,684
|
|
|
|
5,871
|
|
|
|
5,574
|
|
|
|
4,399
|
|
|
|
4,744
|
|
|
|
|
|
|
|
1,342,272
|
|
Included in Mr. Bisaros 2008 other perquisites was a
$7,500 payment to reimburse Mr. Bisaro for legal fees
relating to his employment agreement.
See further discussion of Dr. Hsias severance
benefits below under the heading Potential Payments Upon
Termination or Change-in-Control on page 30.
|
|
|
(8) |
|
Mr. Bisaro was appointed to the position of President and
Chief Executive Officer effective September 4, 2007.
Mr. Bisaro was also appointed as a member of the Board. |
|
(9) |
|
Mr. Durand was appointed to the position of Senior Vice
President and Chief Financial Officer effective
November 26, 2007. |
|
(10) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008. |
24
GRANTS OF
PLAN-BASED AWARDS
The following table provides information about equity and
non-equity awards granted to Named Executive Officers for 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Fair
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
Estimated Future Payouts
|
|
|
Number
|
|
|
Value of
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Under Equity Incentive
|
|
|
of Shares
|
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards(1)
|
|
|
Plan Awards(4)
|
|
|
of Stock
|
|
|
Option
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
Paul M. Bisaro
|
|
|
2/25/2008(1
|
)
|
|
|
350,000
|
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,850
|
|
|
|
1,014,481
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,425
|
|
|
|
36,850
|
|
|
|
36,850
|
|
|
|
|
|
|
|
1,014,481
|
|
Mark W. Durand
|
|
|
2/25/2008(1
|
)
|
|
|
76,725
|
|
|
|
255,750
|
|
|
|
383,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
|
|
|
234,005
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,250
|
|
|
|
8,500
|
|
|
|
12,750
|
|
|
|
|
|
|
|
351,007
|
|
Thomas R. Russillo
|
|
|
2/25/2008(1
|
)
|
|
|
221,370
|
|
|
|
553,425
|
|
|
|
830,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
412,950
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
206,475
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
7,500
|
|
|
|
11,250
|
|
|
|
|
|
|
|
309,712
|
|
David A. Buchen
|
|
|
2/25/2008(1
|
)
|
|
|
74,131
|
|
|
|
247,104
|
|
|
|
370,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
206,475
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
|
206,475
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
7,500
|
|
|
|
11,250
|
|
|
|
|
|
|
|
309,712
|
|
Edward F. Heimers
|
|
|
2/25/2008(1
|
)
|
|
|
88,000
|
|
|
|
220,000
|
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,500
|
|
|
|
151,415
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,500
|
|
|
|
151,415
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,750
|
|
|
|
5,500
|
|
|
|
8,250
|
|
|
|
|
|
|
|
227,122
|
|
David Hsia(5)
|
|
|
2/25/2008(1
|
)
|
|
|
41,175
|
|
|
|
137,248
|
|
|
|
205,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/12/2008(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
110,120
|
|
|
|
|
3/12/2008(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
110,120
|
|
|
|
|
3/12/2008(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
4,000
|
|
|
|
6,000
|
|
|
|
|
|
|
|
165,180
|
|
|
|
|
(1) |
|
Annual Cash Incentive Awards: The Company provides
performance-based annual cash incentive awards to our chief
executive officer under a compensation program administered by
the Compensation Committee and for our executive officers under
the 2008 Senior Executive Compensation Program. These columns
indicate the ranges of possible payouts targeted for 2008
performance under the applicable annual cash incentive award
program for each Named Executive Officer listed above. Actual
cash incentive awards paid in 2009 for 2008 performance are set
forth in column (f) in the Summary Compensation
Table. Target payouts are based on the targeted percentage
of base salary earned during the year. Maximum payouts represent
150% of target payouts, or 100% of target payouts in the case of
our chief executive officer. Threshold payouts are based on the
minimum level of performance for which payouts are authorized
under the program and is equal to 50% of the portion of the
Named Executive Officers annual incentive award
attributable to (i) Corporate Financial Performance as
measured by Adjusted EBITDA and (ii) in the case of
Messrs. Russillo and Heimers, Segment Contribution as
measured by Adjusted Contribution. Payout amounts do not take
into account any discretionary authority of the Committee to
increase or decrease a Named Executive Officers (other
than our chief executive officers) award by +/- 25%. For
additional discussion of our annual cash incentive award
programs, see Annual Cash Incentive Awards under the
heading Compensation Discussion and Analysis on
page 14. |
|
(2) |
|
Issuance of restricted stock pursuant to 2007 Performance
Awards: The restricted stock issued on March 12, 2008
pursuant to 2007 Performance Awards were authorized in
connection with the annual long term equity incentive grant
under the Incentive Award Plan. Restrictions lapse equally on
the restricted stock grants on the second and fourth
anniversaries of the grant date, subject to continued
employment. |
25
|
|
|
|
|
The fair value of Performance Award restricted stock grants is
based on the fair market value of our common stock of $27.53 on
the issuance date of March 12, 2008. |
|
(3) |
|
2008 Time Awards: The restricted stock issued on
March 12, 2008 pursuant to 2008 Time Awards were authorized
in connection with the annual long term equity incentive grant
under the Incentive Award Plan. Restrictions lapse equally on
the restricted stock grants on the second and fourth
anniversaries of the grant date (except in the case of
Mr. Russillo, which vests on December 31, 2010),
subject to continued employment. The fair value of Time Award
restricted stock grants is based on the fair market value of our
common stock of $27.53 on the issuance date of March 12,
2008. |
|
(4) |
|
2008 Performance Awards: The Company provides
performance-based annual equity incentive awards to our chief
executive officer under a compensation program administered by
the Compensation Committee and for our executive officers under
the 2008 Senior Executive Equity Compensation Program. Under
these programs, our 16 senior executive officers, including our
Named Executive Officers, are eligible to receive an award of
shares of restricted stock based on the Companys
performance during the fiscal year as measured by Adjusted
EBITDA. The target issuance of restricted shares to a Named
Executive Officers under a Performance Award is equal to
his or her actual Time Share award granted in the fiscal year
for which performance is being measured. Maximum issuance
represents 150% of target payouts, or 100% for our chief
executive officer. Threshold issuance represents the minimum
level of performance for which issuances are authorized under
the program and is equal to 50% of the target issuances. The
grant date fair value of the Performance Awards is based on the
maximum potential issuance and the fair market value of our
common stock of $27.53 on the grant date of March 12, 2008.
However, no compensation expense is recognized for the
Performance Awards until shares of restricted stock are issued
in settlement of such Performance Awards. Issuances of
restricted stock pursuant to Performance Awards granted in 2008
for 2008 Adjusted EBITDA were determined and made on
March 5, 2009 as follows: Mr. Bisaro received 36,703
restricted shares with a fair value of $968,592, Mr. Durand
received 8,466 restricted shares with a fair value of $223,418,
Mr. Russillo received 7,470 restricted shares with a fair
value of $197,133, Mr. Buchen received 7,470 restricted
shares with a fair value of $197,133, and Mr. Heimers
received 5,478 restricted shares with a fair value of $144,564.
Dr. Hsia was not eligible to receive restricted shares
under his Performance Award since his employment was terminated
in 2008. |
|
(5) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008. |
|
(6) |
|
For additional discussion on our annual equity incentive award
programs, including our Time Awards and Performance Awards, see
Long-Term Equity Incentives above under the heading
Compensation Discussion and Analysis on
page 17. For additional discussion on the accounting for
restricted stock awards, see Share-Based Compensation in
Note 2 and Note 3 to the audited consolidated
financial statements in the Companys Annual Report on Form
10-K for the
year ended December 31, 2008. |
26
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth the outstanding equity awards for
the Companys Named Executive Officers at December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares or
|
|
|
|
Number of Securities
|
|
|
Number of Securities
|
|
|
Option
|
|
|
|
|
|
Number of Shares or
|
|
|
Units of
|
|
|
|
Underlying Unexercised
|
|
|
Underlying Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Units of Stock That
|
|
|
Stock That Have
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Price
|
|
|
Expiration
|
|
|
Have Not Vested
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
(#)(1)
|
|
|
($)(2)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
Paul M. Bisaro
|
|
|
31,800
|
|
|
|
95,400
|
(3)
|
|
|
30.6600
|
|
|
|
9/4/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
(4)
|
|
|
30.6600
|
|
|
|
9/4/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,450
|
|
|
|
2,110,987
|
|
Mark W. Durand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,500
|
|
|
|
491,545
|
|
Thomas R. Russillo
|
|
|
30,000
|
|
|
|
30,000
|
(5)
|
|
|
25.8600
|
|
|
|
9/5/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,500
|
|
|
|
1,262,075
|
|
David A. Buchen
|
|
|
1,000
|
|
|
|
|
|
|
|
38.0625
|
|
|
|
3/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
33.3750
|
|
|
|
7/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
16,500
|
|
|
|
|
|
|
|
36.8750
|
|
|
|
3/3/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
2,250
|
|
|
|
|
|
|
|
44.7500
|
|
|
|
4/17/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
51.8125
|
|
|
|
7/13/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
48.9000
|
|
|
|
3/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
|
|
|
|
|
|
|
54.4800
|
|
|
|
8/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
|
|
|
|
28.1500
|
|
|
|
11/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
|
|
26.4000
|
|
|
|
5/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
29.4300
|
|
|
|
11/20/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
38.9200
|
|
|
|
8/4/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
13,600
|
|
|
|
3,400
|
(6)
|
|
|
26.1400
|
|
|
|
8/9/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
1,250
|
(7)
|
|
|
35.1100
|
|
|
|
8/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
2,500
|
(8)
|
|
|
25.6400
|
|
|
|
9/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,168
|
|
|
|
642,144
|
|
Edward F. Heimers
|
|
|
27,000
|
|
|
|
18,000
|
(9)
|
|
|
29.3900
|
|
|
|
5/11/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750
|
|
|
|
1,250
|
(7)
|
|
|
35.1100
|
|
|
|
8/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
2,500
|
(8)
|
|
|
25.6400
|
|
|
|
9/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,168
|
|
|
|
482,724
|
|
David C. Hsia
|
|
|
3,000
|
(10)
|
|
|
|
|
|
|
35.1100
|
|
|
|
9/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
(10)
|
|
|
|
|
|
|
25.6400
|
|
|
|
9/30/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Except in the case of Mr. Russillo, restrictions on the
restricted stock grants generally lapse equally on the second
and fourth anniversaries of the grant date. Information
presented in column (f) aggregates all unvested restricted
stock awards outstanding. Individual restrictions on restricted
stock lapse as follows: |
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Restricted Shares
|
|
Date Restrictions Lapse
|
|
Mr. Bisaro
|
|
|
21,300
|
|
|
|
September 4, 2009
|
|
|
|
|
18,425
|
|
|
|
March 12, 2010
|
|
|
|
|
21,300
|
|
|
|
September 4, 2011
|
|
|
|
|
18,425
|
|
|
|
March 12, 2012
|
|
Mr. Durand
|
|
|
5,000
|
|
|
|
November 26, 2009
|
|
|
|
|
4,250
|
|
|
|
March 12, 2010
|
|
|
|
|
5,000
|
|
|
|
November 26, 2011
|
|
|
|
|
4,250
|
|
|
|
March 12, 2012
|
|
27
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Restricted Shares
|
|
Date Restrictions Lapse
|
|
Mr. Russillo
|
|
|
7,500
|
|
|
|
June 29, 2009
|
|
|
|
|
10,000
|
|
|
|
December 31, 2009
|
|
|
|
|
11,250
|
|
|
|
March 12, 2010
|
|
|
|
|
7,500
|
|
|
|
June 29, 2011
|
|
|
|
|
11,250
|
|
|
|
March 12, 2012
|
|
Mr. Buchen
|
|
|
3,750
|
|
|
|
June 29, 2009
|
|
|
|
|
834
|
|
|
|
August 12, 2009
|
|
|
|
|
7,500
|
|
|
|
March 12, 2010
|
|
|
|
|
834
|
|
|
|
September 1, 2010
|
|
|
|
|
3,750
|
|
|
|
June 29, 2011
|
|
|
|
|
7,500
|
|
|
|
March 12, 2012
|
|
Mr. Heimers
|
|
|
2,750
|
|
|
|
June 29, 2009
|
|
|
|
|
834
|
|
|
|
August 12, 2009
|
|
|
|
|
5,500
|
|
|
|
March 12, 2010
|
|
|
|
|
834
|
|
|
|
September 1, 2010
|
|
|
|
|
2,750
|
|
|
|
June 29, 2011
|
|
|
|
|
5,500
|
|
|
|
March 12, 2012
|
|
|
|
|
(2) |
|
Market value is determined by multiplying the number of shares
by the closing price of $26.57 of the Companys common
stock on the New York Stock Exchange on December 31, 2008. |
|
(3) |
|
Unexercised options vest at a rate of 20% per year with
remaining vesting dates of 9/4/2009, 9/4/2010 and
9/4/2011. |
|
(4) |
|
Unexercised options vest at a rate of 33% per year with
remaining vesting dates of 9/4/2010, 9/4/2011 and
9/4/2012. |
|
(5) |
|
Remaining unexercised options vest on 12/31/2009. |
|
(6) |
|
Unexercised options vest at a rate of 20% per year with a
remaining vesting date of 8/9/2009. |
|
(7) |
|
Unexercised options vest at a rate of 25% per year with a
remaining vesting date of 8/12/2009. |
|
(8) |
|
Unexercised options vest at a rate of 25% per year with
remaining vesting dates of 9/1/2009 and 9/1/2010. |
|
(9) |
|
Unexercised options vest at a rate of 20% per year with
remaining vesting dates of 5/11/2009 and 5/11/2010. |
|
(10) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008.
Amounts represent the balance of Dr. Hsias vested
options on the date of his termination which are exercisable for
two years thereafter, or by September 30, 2010. In
conjunction with his termination, Dr. Hsia forfeited
13,334 shares of restricted stock and unvested options to
acquire 103,500 shares of stock. |
28
OPTION
EXERCISES AND STOCK VESTED
The following table sets forth certain information with respect
to each Named Executive Officer concerning the vesting of stock
awards during the fiscal year ended December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
|
Acquired on Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)(1)
|
|
|
($)(2)
|
|
|
Paul M. Bisaro
|
|
|
|
|
|
|
|
|
Mark W. Durand
|
|
|
|
|
|
|
|
|
Thomas R. Russillo
|
|
|
10,000
|
|
|
|
299,500
|
|
David A. Buchen
|
|
|
833
|
|
|
|
25,248
|
|
Edward F. Heimers
|
|
|
833
|
|
|
|
25,248
|
|
David C. Hsia(3)
|
|
|
666
|
|
|
|
20,186
|
|
|
|
|
(1) |
|
Shares acquired on vesting are represented on a pre-tax basis.
The Incentive Award Plan permits withholding a number of shares
upon vesting to satisfy tax withholding requirements. |
|
(2) |
|
Represents the closing market price of a share of our common
stock the date of vesting multiplied by the number of shares
that have vested. |
|
(3) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008. |
|
(4) |
|
No option awards were exercised by any of our Named Executive
Officers in 2008. |
NONQUALIFIED
DEFERRED COMPENSATION
The following table sets forth the executive contributions,
employer matches, earnings, withdrawals/distributions and
account balances, where applicable, for the Named Executive
Officers in the Executive Deferred Compensation Plan (the
Deferred Plan), an unfunded, unsecured deferred
compensation plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
Last FY
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
Paul M. Bisaro
|
|
|
100,000
|
|
|
|
10,000
|
|
|
|
4,110
|
|
|
|
|
|
|
|
114,110
|
|
Mark W. Durand
|
|
|
22,875
|
|
|
|
4,575
|
|
|
|
1,017
|
|
|
|
|
|
|
|
28,467
|
|
Thomas R. Russillo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David A. Buchen
|
|
|
125,837
|
|
|
|
5,033
|
|
|
|
37,108
|
|
|
|
|
|
|
|
598,134
|
|
Edward F. Heimers
|
|
|
32,844
|
|
|
|
6,569
|
|
|
|
9,735
|
|
|
|
|
|
|
|
155,577
|
|
David C. Hsia
|
|
|
96,006
|
|
|
|
4,399
|
|
|
|
19,585
|
|
|
|
(75,296
|
)
|
|
|
257,020
|
|
|
|
|
(1) |
|
Executive contributions reported in column (b) above
include salary contributions for 2008 and amounts related to
non-equity incentive plan compensation earned in 2007 but paid
in 2008. All amounts in column (b) are also reported in the
Salary column for 2008 or the Non-Equity
Incentive Plan Compensation column for 2007 in the Summary
Compensation Table on page 22. Included in the amounts
above representing non-equity plan contribution earned in 2007
but paid in 2008 was $11,342 for Mr. Heimers, and $48,037
for Dr. Hsia. |
|
(2) |
|
Registrant contributions reflects company matching contributions
to the Deferred Plan in 2008. All Registrant contributions are
reported in the All Other Compensation column of the
Summary Compensation Table on page 22. |
|
(3) |
|
Aggregate earnings represent 2008 deemed investment earnings at
the guaranteed fixed interest rate for 2008 of 7.5%. No other
investment alternatives for amounts deferred or credited are
offered under the Deferred Plan. Included in column (d) are
amounts considered to be earned at above-market interest rates |
29
|
|
|
|
|
which are included in the Change in Pension Value and
Nonqualified Deferred Compensation Earnings column of the
Summary Compensation Table on page 22. |
|
(4) |
|
Assets in the Deferred Plan are distributed either (i) at
separation of service as a result of retirement, disability,
termination or death; or (ii) on a designated date elected
by the participant. The Deferred Plan requires participants to
make an annual distribution election with respect to the money
to be deferred in the next calendar year. If a participant so
elects, deferrals made in one year may be distributed as soon as
the next year following the deferral election. Participants may
elect to receive a distribution as a lump-sum cash payment or in
installment payments paid over 2 to 15 years, as the
participant elects. Bonus deferrals are credited to a
participants account the year following the year in which
the bonus is earned. As a result, bonus deferrals may not be
distributed until the year following the year in which the bonus
is paid to a participant and credited to his or her account. Per
regulatory requirements, participants may not accelerate
distributions from the Deferred Plan. |
|
(5) |
|
Aggregate balance reflects vested and unvested balances within
the Deferred Plan as of December 31, 2008. All amounts are
fully vested for each Named Executive Officer except for
Mr. Bisaro and Mr. Durand, whose vested balance as of
December 31, 2008 amounts to $107,160 and $25,288,
respectively. Of the aggregate balances in column (f), the
following amounts are reported as compensation in the Summary
Compensation Table on page 22 for 2008, 2007 and 2006:
$111,159 for Mr. Bisaro, $27,737 for Mr. Durand, $0
for Mr. Russillo, $324,912 for Mr. Buchen, $131,481
for Mr. Heimers, and $228,262 for Dr. Hsia. |
|
(6) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008. |
POTENTIAL
PAYMENTS UPON TERMINATION OR
CHANGE-IN-CONTROL
Executive
Severance and Change in Control Agreements
Each of our Named Executive Officers is party to an employment
agreement pursuant to which he is entitled to certain payments
and benefits in the event of (i) an involuntary termination
without cause, (ii) the resignation of the executive for
good reason or (iii) a qualifying termination in connection
with a
change-in-control.
With certain exceptions footnoted in the table that follows,
these agreements generally provide that under these
circumstances our Named Executive Officers are entitled to
receive:
(1) lump sum cash payments equal to the sum of
(a) between 12 and 36 months of the executives
then base salary, (b) the greater of one to three times the
executives target bonus to be earned in the year in which
the termination occurs or two times the amount of the bonus paid
to the executive in the prior year, and (c) the
executives prorated bonus for the year in which the
termination occurs;
(2) continued group health benefits (medical, dental and
vision) for the executive and the executives dependents
for a period of between 18 and 36 months; and
(3) outplacement services for one year with a nationally
recognized service selected by us.
Unless we determine that any severance payments should be
delayed in consideration of Section 409A of the Internal
Revise Code of 1986, cash payments are to be paid within
30 days of termination.
Change-in-Control
In the event of a qualifying termination in
connection with a
change-in-control,
a Named Executive Officer is entitled to accelerated vesting
with respect to all of his options and restricted stock awards.
Such executive is entitled to exercise any vested options and is
entitled to continue to hold their shares of unrestricted stock
after termination. The value of vested equity awards are not
included in the tables below because all employees who hold
vested stock options and unrestricted stock under our stock
plans are entitled to exercise such options and continue to hold
such stock upon termination of their employment. However, in the
event of a qualifying termination in connection with a
change-in-control,
each Named Executive Officer is entitled to accelerated vesting
with respect to all of his options and restricted stock awards.
30
Change-in-Control
Gross Up Payment.
Pursuant to their respective employment agreements, each of our
Named Executive Officers is also entitled to receive a
gross-up
payment to compensate him for any excise taxes payable with
respect to the payments and benefits made under his employment
agreement in the event of a qualifying termination in connection
with a
change-in-control.
Forfeiture
of Severance Benefits.
If the Named Executive Officer breaches the non-solicitation
provision of his employment agreement, as applicable, or
violates certain other confidentiality agreements entered into
with us, and fails to cure such violation within 10 business
days written notice from us, then any severance payments or
other benefits being provided to such Named Executive Officer
will immediately cease.
Estimated
Termination Payments
In accordance with the requirements of the rules of the SEC, the
table below indicates the amount of compensation payable by us
to each Named Executive Officer upon (i) resignation for
good reason, or involuntary not-for-cause
termination and (ii) a qualifying termination following a
change-in-control.
The amounts assume that such termination was effective as of
December 31, 2008 and thus includes amounts earned through
such date and are only estimates of the amounts that would
actually be paid to such executives upon their termination. The
definitions of
change-in-control,
cause and good reason and descriptions
of the payments and benefits appear after the table.
The table does not include certain amounts that the Named
Executive Officer is entitled to receive under certain plans or
arrangements that do not discriminate in scope, terms or
operation, in favor of our Named Executive Officers and that are
generally available to all salaried employees, such as payment
of accrued vacation. The table also does not include the accrued
and vested accounts of the executive under our Deferred Plan.
These amounts are generally distributed to our executives upon a
termination of employment, regardless of the reason, in
accordance with his or her election under the applicable plan.
The accrued and vested amounts under the Deferred Plan are set
forth in the table under Nonqualified Deferred
Compensation on page 29.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Vesting
|
|
Other Benefits
|
|
|
|
|
|
|
Cash
|
|
Restricted
|
|
Unexercisable
|
|
Health &
|
|
|
|
Tax
|
|
|
Name of Executive
|
|
Trigger
|
|
Severance(1)
|
|
Stock(2)
|
|
Options(3)
|
|
Welfare(4)
|
|
Outplacement(5)
|
|
Gross-Ups(6)
|
|
Total
|
|
Paul M. Bisaro
|
|
Good Reason or
Without Cause
|
|
$
|
4,000,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
23,168
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,023,168
|
|
|
|
Change in Control
|
|
$
|
6,000,000
|
|
|
$
|
2,110,987
|
|
|
$
|
0
|
|
|
$
|
46,335
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,157,322
|
|
David A. Buchen
|
|
Good Reason or
Without Cause
|
|
$
|
1,482,624
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,890
|
|
|
$
|
9,000
|
|
|
$
|
0
|
|
|
$
|
1,522,514
|
|
|
|
Change in Control
|
|
$
|
1,482,624
|
|
|
$
|
642,117
|
|
|
$
|
3,787
|
|
|
$
|
30,890
|
|
|
$
|
9,000
|
|
|
$
|
747,138
|
|
|
$
|
2,915,556
|
|
Mark W. Durand
|
|
Good Reason or
Without Cause
|
|
$
|
930,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
23,168
|
|
|
$
|
9,000
|
|
|
$
|
0
|
|
|
$
|
962,168
|
|
|
|
Change in Control
|
|
$
|
1,441,500
|
|
|
$
|
491,545
|
|
|
$
|
0
|
|
|
$
|
23,168
|
|
|
$
|
9,000
|
|
|
$
|
0
|
|
|
$
|
1,965,213
|
|
Edward F. Heimers
|
|
Good Reason or
Without Cause
|
|
$
|
1,333,686
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,890
|
|
|
$
|
9,000
|
|
|
$
|
0
|
|
|
$
|
1,373,576
|
|
|
|
Change in Control
|
|
$
|
1,333,686
|
|
|
$
|
482,697
|
|
|
$
|
2,325
|
|
|
$
|
30,890
|
|
|
$
|
9,000
|
|
|
$
|
603,600
|
|
|
$
|
2,462,198
|
|
Thomas R. Russillo
|
|
Good Reason or
Without Cause
|
|
$
|
1,344,034
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,344,034
|
|
|
|
Change in Control
|
|
$
|
1,344,034
|
|
|
$
|
1,262,075
|
|
|
$
|
21,300
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,627,409
|
|
David C. Hsia(7)
|
|
Actual Payment
|
|
$
|
1,142,013
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
170,671
|
|
|
$
|
9,000
|
|
|
$
|
0
|
|
|
$
|
1,321,684
|
|
|
|
|
(1) |
|
For Mr. Bisaro, represents (A) in the event of a
termination by us without cause or by Mr. Bisaro for good
reason, the sum of (i) two times Mr. Bisaros
then base salary and (ii) two times Mr. Bisaros
target annual bonus opportunity for the year of termination or
resignation or two times the amount of the bonus paid to
Mr. Bisaro in the previous year, whichever is greater and
(B) in the event of a
change-in-control |
31
|
|
|
|
|
termination, the sum of (i) three times
Mr. Bisaros base salary and (ii) three times
Mr. Bisaros target bonus under our Senior Executive
Compensation Program. |
|
|
|
For Mr. Russillo, represents in the event of a termination
by us without cause or by Mr. Russillo for good reason or
in the event of a
change-in-control
termination before 2009 the sum of (i) twelve months of
Mr. Russillos base salary,
(ii) Mr. Russillos target bonus to be earned for
the year in which the termination occurs, and
(iii) Mr. Russillos pro-rated bonus for the year
in which the termination occurs. Mr. Russillos
prorated bonus (calculated through the date of termination) is
excluded from the table as the triggering event occurs on the
last day of the performance period and thus the pay out will be
the same as if the termination had not occurred. |
|
|
|
For Mr. Durand represents (A) in the event of a
termination by us without cause or by Mr. Durand for good
reason, two times Mr. Durands then base salary and
(B) in the event of a
change-in-control
termination the sum of (i) two times Mr. Durands
then base salary and (ii) two times Mr. Durands
target bonus to be earned for the year in which the termination
occurs or the bonus paid to Mr. Durand in the prior year,
whichever is greater. |
|
|
|
For the remainder of our Named Executive Officers, other than
Dr. Hsia, represents in the event of a termination by us
without cause or by the executive for good reason or in the
event of a
change-in-control
termination the sum of (i) two times the executives
then base salary, (ii) two times the executives
target bonus to be earned in the year of termination or
resignation or two times the amount of the bonus paid to the
executive in the previous year, whichever is greater and
(iii) the executives pro-rated bonus for the year in
which the termination occurs. |
|
(2) |
|
Represents the aggregate of the acceleration of vesting of the
unvested restricted stock valued based on the closing price of
our common stock on December 31, 2008 of $26.57. |
|
(3) |
|
Represents the aggregate value of the acceleration of vesting of
the unvested stock options based on the spread between the
closing price of our common stock of $26.57 on December 31,
2008 and the exercise price of the stock options. |
|
(4) |
|
For Mr. Bisaro, represents continued group health benefits
(medical, dental and vision) for Mr. Bisaro and his
dependents for a period of (i) up to 18 months in the
event of a termination by us without cause or by Mr. Bisaro
for good reason and (ii) up to 36 months in the event
of a
change-in-control
termination. |
|
|
|
For Mr. Durand, represents continued group health benefits
(medical, dental and vision) for Mr. Durand and his
dependents for a period of up to 18 months. |
|
|
|
For the remainder of the Named Executive Officers, represents
continued group health benefits (medical, dental and vision) for
the executive and their dependents for a period of up to
24 months. |
|
(5) |
|
Represents one year of outplacement services. |
|
(6) |
|
Represents payment of an amount sufficient to offset the impact
of any excess parachute payment excise tax payable
by the executive pursuant to the provisions of the IRC or any
comparable provision of state law. An executive is treated as
having received excess parachute payments if he receives
compensatory payments or benefits that are contingent on a
change in control, and the aggregate amount of such payments and
benefits equal or exceeds three times the executives base
amount. |
|
(7) |
|
Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008.
Upon his termination, he was entitled to receive
(i) $1,106,320, which equals two times his then base salary
and two times his target bonus for 2008 or the bonus paid to him
in 2007, whichever was greater, (ii) $35,693 in interest on
the amount in (i) above which was paid on a delayed basis
to comply with Section 409A of the IRC,
(iii) continued group health benefits for him and his
spouse for life with a value of $165,761, (iv) COBRA
payments made on his behalf of $4,910, and (v) one year of
outplacement services with a value of $9,000. |
32
Certain
Definitions
Change in
Control
For Mr. Bisaro, Mr. Durand and Mr. Russillo a
change-in-control
generally means (i) a sale of assets representing more than
50% of our net book value or fair market value; (ii) our
liquidation or dissolution; (iii) a merger, consolidation
or other transaction involving us after the completion of which
our stockholders before the transaction represent less than 50%
of the voting power of our stockholders following the
transaction; (iv) the acquisition by a person or group of
more than 50% of the combined voting power of Watson; or
(v) the replacement of the majority of our incumbent
directors by individuals not approved by a majority of our
incumbent Board.
For Mr. Buchen and Mr. Heimers a
change-in-control
generally means (i) a sale of assets representing more than
50% of our net book value or fair market value; (ii) our
liquidation or dissolution; (iii) a merger, consolidation
or other transaction involving us after the completion of which
our stockholders before the transaction represent less than 60%
of the voting power of our stockholders following the
transaction; (iv) the acquisition by a person or group of
more than 30% of the combined voting of Watson; or (v) the
replacement of the majority of our incumbent directors by
individuals not approved by a majority of our incumbent Board.
For Mr. Bisaro, a qualifying termination
means, within 90 days before or within 12 months
following a
change-in-control,
(i) we terminate Mr. Bisaro other than for
cause or (ii) Mr. Bisaro terminates his
employment with us for good reason.
For the remainder of our Named Executive Officers, a
qualifying termination means, within
90 days before or within 24 months following a
change-in-control,
(i) we terminate the executive other than for
cause or (ii) the executive terminates his
employment with us for good reason.
Good
Reason
For Mr. Bisaro a termination for good
reason means that Mr. Bisaro has terminated his
her employment with us because (i) we failed to re-elect
him to, or removed him from, the position of President and Chief
Executive Officer; (ii) of a material diminution of his
duties, and responsibilities, taken as a whole; (iii) we
failed to appoint or renominate him as a member of our Board of
Directors; (iv) the assignment of his duties are materially
inconsistent with, or materially impair his ability to perform,
the duties customarily assigned to a President and Chief
Executive Officer; (v) we changed our reporting structures
such that he reports to someone other than the Board of
Directors; (vi) we materially breached our obligations
under his employment agreement; (vii) we failed to obtain
an assumption of his employment agreement by any successor or
assignee; or (viii) we cause him to commit fraud or expose him
to criminal liability.
For Mr. Buchen, a termination for good
reason generally means that he has terminated his
employment with us because of (i) a material reduction in
his then existing annual base salary, (ii) a material
reduction in the package of benefits and incentives, taken as a
whole, provided to him or (iii) a material diminution of
his duties, responsibilities, authority, or reporting structure;
(iv) a request that he materially relocate such that the
distance of his one-way commute is increased by more than
thirty-five (35) miles; (v) we materially breached our
obligations under his employment agreement; or (vi) we
failed to obtain the assumption of his employment agreement by
any successor or assign.
For each of Messrs Heimers and Durand a termination for
good reason means that he has terminated his
employment with us because (i) after a
Change-in-Control,
(a) of a material reduction of his then existing annual
base salary, (b) of a material reduction in his package of
benefits and incentives, taken as a whole, (c) of a
material diminution of his duties and responsibilities, taken as
a whole; or (d) a requirement that he materially relocate
such that the distance of his one-way commute is increased by
more than thirty-five (35) miles; (ii) we materially
breached our obligations under his employment agreement; or
(iii) we failed to obtain the assumption of his employment
agreement by any successor or assign.
For Mr. Russillo a termination for good
reason means that Mr. Russillo has terminated his
employment with us because (i) after a
Change-in-Control,
(a) of a material reduction of his then existing annual
base
33
salary, (b) of a material reduction in his package of
benefits and incentives, taken as a whole, (c) of a
material diminution of executives duties and
responsibilities, taken as a whole or (d) a requirement
that he materially relocate such that the distance of his
one-way commute is increased by more than thirty-five
(35) miles; (ii) we materially breached our
obligations under his employment agreement; or (iii) we
failed to obtain the assumption of his employment agreement by
any successor or assign.
Cause
For Mr. Bisaro a termination for cause
means that we have terminated Mr. Bisaro because
(i) his fraud, misrepresentation embezzlement or other act
of material misconduct against us; (ii) his gross neglect,
willful malfeasance or gross misconduct in connection with this
employment; (iii) his conviction or plea of guilty or nolo
contendere to a felony or other crime involving moral turpitude;
(iv) his willful and knowing violations of any rules or
regulations of any governmental body material to our business;
(v) his failure to cooperate, if requested by the Board,
with any internal or external investigation or inquiry into our
business practices; or (vi) his substantial and willful
failure to render services in accordance with the terms of his
employment agreement.
For the remainder of the Named Executive Officers, a termination
for cause means that we have terminated the
executive because of (i) the executives conviction
for any felony; (ii) the executives gross misconduct,
material violation of our policies, or material breach of the
executives duties to us, which the executive fails to
correct within thirty (30) days after the executive is
given written notice by our chief executive officer or another
designated officer; or, solely in the case of Mr. Durand,
(iii) other events or matters relating to his job
performance that would ordinarily cause an employer to consider
the termination of an employees employment.
Equity
Compensation Plan Information as of December 31,
2008
The following table sets forth information regarding outstanding
options and shares reserved for future issuance under the
Watsons equity compensation plans as of December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Remaining Available for
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Future Issuance Under
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
7,250,497
|
|
|
|
36.1100
|
|
|
|
8,018,902
|
(2)
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,250,497
|
|
|
|
36.1100
|
|
|
|
8,018,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on outstanding options under our 1991 Stock Option plan,
1995 Non-Employee Directors Stock Option Plan and our
Incentive Award Plan. |
|
(2) |
|
Represents securities available for issuance under our Incentive
Award Plan. Includes shares available for issuance under our
Incentive Award Plan which were converted from shares of common
stock available for issuance under the Andrx Corporation 2000
Stock Option Plan in connection with our acquisition of Andrx
Corporation in November 2006. These converted shares may not be
used for grants to individuals who were providing services to
Watson or any of our subsidiaries immediately prior to the
effective time of our acquisition of Andrx Corporation. The 1995
Non-Employee Directors Stock Option Plan expired in
February 2005 and no securities are available for future awards
under this plan. |
34
DIRECTOR
COMPENSATION
All members of the Board of Directors who are not full-time
employees of the Company received a directors fee of
$40,000 for 2008. In addition, in 2008 directors were paid
$1,500 prior to May and $2,000 after May for each Board of
Directors meeting personally attended and $500 prior to
May and $1,000 after May for each meeting attended
telephonically. Directors were also paid $1,000 prior to May and
$1,500 after May for each Committee meeting personally attended
and $500 prior to May and $1,000 after May for each Committee
meeting attended telephonically. Andrew L. Turner received an
annual fee of $75,000 as our nonexecutive Chairman of the Board.
Additionally, the Chairman of each of the Compensation
Committee, the Regulatory Compliance Committee and the
Nominating and Corporate Governance Committee received an annual
fee of $5,000 prior to May and $7,000 after May. The Chairman of
the Audit Committee received an annual fee of $8,000 prior to
May and $10,000 after May. All directors were reimbursed for
expenses incurred in connection with attending Board of
Directors and Committee meetings. Michel J. Feldmans law
firm receives his directors fees. Our Chief Executive
Officer does not receive additional compensation for his service
as a director. The Committee approved the increases to director
compensation made in May 2008 after reviewing a study of board
compensation practices for our peer group companies performed by
Towers Perrin.
The following table sets forth the annual compensation to each
person who served as a non-employee director during 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)
|
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
Allen Chao, Ph.D.(1)
|
|
|
46,734
|
|
|
|
404,363
|
|
|
|
142,527
|
|
|
|
10,209
|
|
|
|
11,412
|
|
|
|
615,245
|
|
Michael J. Fedida
|
|
|
56,500
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183,452
|
|
Michel J. Feldman
|
|
|
58,000
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184,952
|
|
Albert F. Hummel
|
|
|
55,000
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,952
|
|
Catherine M. Klema
|
|
|
69,500
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,452
|
|
Jack Michelson
|
|
|
63,500
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190,452
|
|
Ronald R. Taylor
|
|
|
76,000
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202,952
|
|
Andrew L. Turner
|
|
|
132,000
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
258,952
|
|
Fred G. Weiss
|
|
|
74,500
|
|
|
|
126,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,452
|
|
|
|
|
(1) |
|
Dr. Chao retired as a director and Chairman of our Board of
Directors on May 12, 2008, in order to pursue other
business activities. |
|
(2) |
|
5,000 shares of restricted stock with a per share fair
value of $28.28 were granted on May 9, 2008 to each of
Mr. Fedida, Mr. Feldman, Mr. Hummel, Ms Klema, Mr.
Michelson, Mr. Taylor, Mr. Turner and Mr. Weiss representing an
overall fair value of $141,400, each. |
|
|
|
Stock awards reported in column (c) represent the
compensation expense we recognized for financial statement
reporting purposes for the fiscal year ended December 31,
2008 in accordance with SFAS 123(R) for restricted stock
awards we granted to our non-employee directors in 2008 and
prior fiscal years. We recognize the expense associated with the
grant date fair value of these restricted stock awards over the
period restrictions are eliminated for those awards. For our
non-employee directors, restricted stock awards vest after one
year. |
|
|
|
For additional discussion on the determination of share-based
compensation expense and the grant date fair value for
restricted stock, see Share-Based Compensation in
Note 2 and Note 3 to the audited consolidated
financial statements in the Companys Annual Report on Form
10-K for the
year ended December 31, 2008. |
|
(3) |
|
Option awards represent the compensation expense recognized for
financial statement reporting purposes for the fiscal year ended
December 31, 2008 in accordance with SFAS 123(R) for
stock options, regardless |
35
|
|
|
|
|
of when the awards were granted, and include amounts from stock
options granted in and prior to 2006. We recognize the expense
associated with the grant date fair value of stock options
granted in and prior to 2006 over the vesting term of those
awards. Fair value is based on the Black-Scholes option pricing
model on the date of grant. For additional discussion on the
valuation assumptions used in determining share-based
compensation expense and the grant date fair value for stock
options, see Share-Based Compensation in Note 2 and
Note 3 to the audited consolidated financial statements in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2008. |
|
(4) |
|
Amount reflects interest on deferred compensation balances that
is considered to be earned at above-market interest rates.
Interest on deferred compensation is deemed to be above-market
if it exceeds 120% of the applicable federal long-term rate. All
contributions to our Executive Deferred Compensation Plan have a
guaranteed fixed interest rate of return. This guaranteed rate
is adjusted annually based on the Prime interest rate published
in the Wall Street Journal on the first business day of December
2007 for the 2008 plan year and November 2008 for the 2009 plan
year. In 2008 the guaranteed interest rate was 7.5%. The
Executive Deferred Compensation Plan is discussed in further
detail above under the heading Executive Compensation
Deferral Program on page 20 and under the heading
Nonqualified Deferred Compensation on page 29. |
|
(5) |
|
Amount includes $1,415 in company contributions under our 401(k)
plan on behalf of Dr. Chao and $9,997 paid for group life
insurance coverage on behalf of Dr. Chao and his spouse. |
|
(6) |
|
The table below shows the aggregate number of outstanding
unvested stock awards and option awards held by each
non-employee director as of December 31, 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and
|
|
|
Unvested Stock
|
|
Unvested Option
|
|
|
Awards
|
|
Awards
|
Director
|
|
(#)
|
|
(#)
|
|
Michael J. Fedida
|
|
|
5,000
|
|
|
|
70,000
|
|
Michel J. Feldman
|
|
|
5,000
|
|
|
|
60,000
|
|
Albert F. Hummel
|
|
|
5,000
|
|
|
|
70,000
|
|
Catherine M. Klema
|
|
|
5,000
|
|
|
|
21,700
|
|
Jack Michelson
|
|
|
5,000
|
|
|
|
47,000
|
|
Ronald R. Taylor
|
|
|
5,000
|
|
|
|
65,000
|
|
Andrew L. Turner
|
|
|
5,000
|
|
|
|
65,000
|
|
Fred G. Weiss
|
|
|
5,000
|
|
|
|
70,000
|
|
36
BENEFICIAL
OWNERSHIP OF STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 20, 2009, the
name, address (where required) and beneficial ownership of each
person (including any group as defined in
Section 13(d)(3) of the Exchange Act) known by us to be the
beneficial owner of more than 5% of our common stock, and the
amount of common stock beneficially owned by each of the
directors (including nominees) and Named Executive Officers, and
by all of our directors and executive officers (including Named
Executive Officers) as a group:
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
|
|
Name of Beneficial Owner
|
|
Ownership(1)
|
|
|
Percent of Class
|
|
|
Franklin Resources, Inc.
One Franklin Parkway
San Mateo, California 94403
|
|
|
10,593,971
|
(2)
|
|
|
10.1
|
%
|
The TCW Group Inc., on behalf of the TCW Business Unit
865 South Figueroa Street
Los Angeles, California 90017
|
|
|
7,761,939
|
(3)
|
|
|
7.4
|
%
|
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
|
|
|
5,377,369
|
(4)
|
|
|
5.1
|
%
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
Michael J. Fedida
|
|
|
81,668
|
(5)
|
|
|
*
|
|
Michel J. Feldman
|
|
|
69,334
|
(6)
|
|
|
*
|
|
Albert F. Hummel
|
|
|
229,514
|
(7)
|
|
|
*
|
|
Catherine M. Klema
|
|
|
33,368
|
(8)
|
|
|
*
|
|
Jack Michelson
|
|
|
57,001
|
(9)
|
|
|
*
|
|
Ronald R. Taylor
|
|
|
75,001
|
(10)
|
|
|
*
|
|
Andrew L. Turner
|
|
|
75,001
|
(11)
|
|
|
*
|
|
Fred G. Weiss
|
|
|
79,334
|
(12)
|
|
|
*
|
|
Paul M. Bisaro
|
|
|
184,803
|
(13)
|
|
|
*
|
|
Mark W. Durand
|
|
|
33,966
|
(14)
|
|
|
*
|
|
Thomas R. Russillo
|
|
|
92,289
|
(15)
|
|
|
*
|
|
David A. Buchen
|
|
|
163,497
|
(16)
|
|
|
*
|
|
Edward F. Heimers, Jr
|
|
|
66,130
|
(17)
|
|
|
*
|
|
David C. Hsia
|
|
|
1,730,515
|
(18)
|
|
|
1.6
|
%
|
All current directors and executive officers of the Company (24
individuals)
|
|
|
2,654,018
|
(19)
|
|
|
2.5
|
%
|
|
|
|
* |
|
Represents less than 1% |
|
(1) |
|
Unless otherwise indicated in the footnotes to this table and
pursuant to applicable community property laws, we believe the
persons named in this table have sole voting and investment
power with respect to all shares of common stock reflected in
this table. As of March 20, 2009, 105,324,586 shares
of our common stock were issued and outstanding. No shares have
been pledged as security by any of our executive officers. |
|
(2) |
|
According to a Schedule 13G/A filed with the SEC on
February 9, 2009 by Franklin Resources, Inc., on behalf of
(i) itself, (ii) its principal shareholders, Charles
B. Johnson and Rupert H. Johnson, Jr. and (iii) certain of
its affiliates, including: |
|
|
|
a. |
|
Franklin Templeton Investment Management Limited (sole power to
vote or to direct the vote of 1,854,425 shares and sole
power to dispose or to direct the disposition of
4,688,740 shares), |
37
|
|
|
b. |
|
Franklin Advisory Services, LLC (sole power to vote or to direct
the vote of 1,719,400 shares and sole power to dispose or
to direct the disposition of 1,719,400 shares), |
|
c. |
|
Franklin Templeton Investments Corp. (sole power to vote or to
direct the vote of 1,239,893 shares and sole power to
dispose or to direct the disposition of 1,239,893 shares), |
|
d. |
|
Templeton Investment Counsel, LLC (sole power to vote or to
direct the vote of 1,265,703 shares, sole power to dispose
or to direct the disposition of 1,572,953 shares and shared
power to dispose or to direct the disposition of
107,040 shares), |
|
e. |
|
Templeton Global Advisors Limited (sole power to dispose or to
direct the disposition of 188,519 shares), |
|
f. |
|
Franklin Templeton Investments (Asia) Ltd. (sole power to vote
or to direct the vote of 323,564 shares and sole power to
dispose or to direct the disposition of 883,960 shares), |
|
g. |
|
Franklin Templeton Portfolio Advisors, Inc. (sole power to vote
or to direct the vote of 111,966 shares and sole power to
dispose or to direct the disposition of 111,966), |
|
h. |
|
Templeton Asset Management Ltd. (sole power to vote or to direct
the vote of 33,570 shares and sole power to dispose or to
direct the disposition of 33,570 shares), |
|
i. |
|
Franklin Templeton Investments Australia Limited (sole power to
vote or to direct the vote of 33,930 shares and sole power
to dispose or to direct the disposition of 33,930 shares), |
|
j. |
|
Franklin Advisors, Inc. (sole power to vote or to direct the
vote of 7,640 shares and sole power to dispose or to direct
the disposition of 7,640 shares), |
|
k. |
|
Fiduciary Trust Company International (sole power to vote
or to direct the vote of 100 shares and sole power to
dispose or to direct the disposition of
100 shares), and |
|
l. |
|
Franklin Templeton Investments Japan Limited (sole power to vote
or to direct the vote of 6,260 shares and sole power to
dispose or to direct the disposition of 6,260 shares). |
|
|
|
(3) |
|
According to a Schedule 13G/A filed with the SEC on
February 9, 2009 by The TCW Group, Inc., on behalf of The
TCW Business Unit. The TCW Business Unit is deemed to be the
beneficial owner of 7,761,939 shares, has shared power to
dispose of all shares held by it, has sole power to vote none of
such shares and has shared power to vote 6,276,606 of such
shares. The TCW Group, Inc. is a parent holding company with
subsidiaries including the Trust Company of the West, TCW
Asset Management Company and TCW Investment Management Company.
The TCW Business Unit is primarily engaged in the provision of
investment management services. |
|
(4) |
|
According to a Schedule 13G filed with the SEC on
February 17, 2009 by Wellington Management Company, LLP.
Wellington Management Company, LLP is deemed to be the
beneficial owner of 5,377,369 shares, has shared power to
dispose or direct the disposition of 5,377,369 shares held
by it and has shared power to vote or direct the vote of
2,350,449 shares held by it. |
|
(5) |
|
Includes 70,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
6,668 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Fedida. |
|
(6) |
|
Includes 60,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
3,334 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Feldman and
1,000 shares of common stock held by Ercelle Feldman, the
wife of Michel J. Feldman, for which Mr. Feldman disclaims
beneficial ownership. |
|
(7) |
|
Includes 70,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
154,514 shares of common stock, and 5,000 unvested shares
of restricted common stock held by Mr. Hummel. |
|
(8) |
|
Includes 21,700 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
6,668 shares of common stock and 5,000 unvested shares of
restricted common stock held by Ms. Klema. |
38
|
|
|
(9) |
|
Includes 47,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
5,001 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Michelson. |
|
(10) |
|
Includes 65,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
5,001 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Taylor. |
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(11) |
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Includes 65,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
5,001 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Turner. |
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Includes 70,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
4,334 shares of common stock and 5,000 unvested shares of
restricted common stock held by Mr. Weiss. |
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(13) |
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Includes 31,800 shares of common stock subject to options
exercisable within 60 days of March 20, 2009, and
153,003 unvested shares of restricted common stock held by
Mr. Bisaro. |
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(14) |
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Includes 33,966 unvested shares of restricted common stock held
by Mr. Durand. |
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(15) |
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Includes 30,000 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
14,819 shares of common stock and 47,470 unvested shares of
restricted common stock held by Mr. Russillo. |
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(16) |
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Includes 124,600 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
3,509 shares of common stock and 35,388 unvested shares of
restricted common stock held by Mr. Buchen. |
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(17) |
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Includes 42,250 shares of common stock subject to options
exercisable within 60 days of March 20, 2009,
2,984 shares of common stock and 20,896 unvested shares of
restricted common stock held by Mr. Heimers. |
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Dr. Hsia retired from his position as Senior Vice
President, Scientific Affairs effective September 30, 2008.
Information is based on his most recent Form 4 filed with
the SEC on September 3, 2008 and the records of the
company. Includes 5,000 shares of common stock subject to
options exercisable within 60 days of March 20, 2009,
89,212 shares of common stock held by Dr. Hsia,
642,085 shares of common stock held by the Hsia Family
Trust, of which Dr. Hsia is a beneficial owner,
954,218 shares of common stock held by Hsia Interests,
Ltd., of which Dr. Hsia is a general partner, and
40,000 shares of common stock held by another trust shown
on Dr. Hsias most recent Form 4. |
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(19) |
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Includes 1,187,347 shares of common stock subject to
options exercisable within 60 days of March 20, 2009
and 535,458 unvested shares of restricted common stock held by
for all executive officers and directors as a group. |
39
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP
The firm of PricewaterhouseCoopers LLP has audited our books and
records since our inception and the Board of Directors
recommends that the stockholders ratify the appointment of
PricewaterhouseCoopers LLP to audit our accounts for the fiscal
year ending December 31, 2009. Representatives of that firm
are expected to be present at the Meeting with the opportunity
to make a statement if they desire to do so and are expected to
be available to respond to appropriate questions from
stockholders.
We have been informed by PricewaterhouseCoopers LLP that neither
the firm nor any of its members or their associates has any
direct financial interest or material indirect financial
interest in us or our affiliates.
Stockholder ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm is not required by our Bylaws or otherwise.
However, the Board of Directors is submitting the appointment of
PricewaterhouseCoopers LLP to the stockholders entitled to vote
at the Meeting for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the appointment,
the Audit Committee will reconsider whether or not to retain
that firm. Even if the appointment is ratified, the Audit
Committee in its discretion may direct the appointment of a
different independent registered public accounting firm at any
time during the year if it determines that such a change would
be in our best interests and in the best interests of our
stockholders.
Required
Vote
In order to ratify the selection of PricewaterhouseCoopers LLP
as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2009, the
affirmative vote of a majority of the stock voting in person or
by proxy on this proposal is required. Abstentions, which do not
represent voting power, will have no effect on this proposal.
The ratification of PricewaterhouseCoopers LLP is a matter on
which a broker or other nominee has discretionary voting
authority, and thus, broker non-votes will not result from this
proposal.
The Board of Directors unanimously recommends a vote
FOR ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm for fiscal 2009.
AUDIT
FEES
The aggregate fees billed by PricewaterhouseCoopers LLP, our
independent registered public accounting firm, in fiscal years
2008 and 2007 were as follows:
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Services
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2008
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2007
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Audit Fees
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$
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2,246,700
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$
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2,461,800
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Audit-Related Fees
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6,000
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94,700
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Total Audit and Audit-Related Fees
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2,252,700
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2,556,500
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Tax Fees
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1,020,700
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720,300
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All Other Fees
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3,000
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3,000
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Total Fees
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$
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3,276,400
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$
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3,279,800
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Audit
Fees
Audit Fees include professional services rendered in connection
with the annual audits of our financial statements and internal
control over financial reporting, the review of the financial
statements included in our
Form 10-Qs
covering quarterly periods during the related year and for
Sarbanes-Oxley advisory time. Additionally, Audit Fees include
other services that only an independent registered public
accounting firm can reasonably provide, such as services
associated with SEC registration statements or other documents
filed with the SEC.
40
Audit-Related
Fees
Audit-Related Fees include accounting consultations and review
procedures related to accounting, financial reporting or
disclosure matters not classified as Audit Fees.
Tax
Fees
Tax Fees include tax compliance for our foreign subsidiaries,
tax advice in connection with certain acquisitions and other tax
advice and tax planning services. Tax Fees in 2008 include
$358,300 and in 2007 include $157,600 for services provided in
connection with IRS investigations.
All
Other Fees
All Other Fees in 2008 and 2007 include subscription fees for an
accounting and auditing research reference tool.
The Audit Committee believes that the provision of all non-audit
services rendered is compatible with maintaining
PricewaterhouseCoopers LLPs independence.
The Audit Committee approved all audit and non-audit services
provided by PricewaterhouseCoopers LLP in 2008. The Audit
Committee has adopted a policy to pre-approve all audit and
certain permissible non-audit services provided by
PricewaterhouseCoopers LLP. Pre-approval is generally provided
for up to one year, and any pre-approval is detailed as to type
of services to be provided by PricewaterhouseCoopers LLP and the
estimated fees related to these services. During the approval
process, the Audit Committee considers the impact of the types
of services and the related fees on the independence of
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP and
management are required to periodically report to the full Audit
Committee regarding the extent of services provided by
PricewaterhouseCoopers LLP, in accordance with the pre-approval
policy and the fees for the services performed. During the year,
circumstances may arise when it may become necessary to engage
PricewaterhouseCoopers LLP for additional services not
contemplated in the pre-approval. In those instances, the Audit
Committee requires specific pre-approval by the Audit Committee
before engaging PricewaterhouseCoopers LLP for such services.
REPORT OF
THE AUDIT COMMITTEE
The following Report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other Company filing under
the Securities Act or under the Exchange Act, except to the
extent we specifically incorporate this Report by reference
therein.
The primary function of the Audit Committee is to assist the
Board of Directors in fulfilling its oversight of:
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the integrity of Watsons financial statements;
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Watsons compliance with legal and regulatory requirements;
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the outside auditors qualifications and
independence; and
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the performance of Watsons internal audit function and of
its independent registered public accounting firm.
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Additionally, the Audit Committee serves as an independent and
objective party that:
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monitors Watsons financial reporting process and internal
control systems;
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retains, oversees and monitors the qualifications, independence
and performance of Watsons independent registered public
accounting firm; and
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provides an open avenue of communication among the independent
registered public accounting firm, financial and senior
management, the internal auditing department and the Board of
Directors.
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41
The Audit Committee Charter describes in greater detail the full
responsibilities of the Audit Committee, and is available under
the Investors section of our website at
http://www.watson.com.
The Audit Committee reviews the Audit Committee Charter
annually prior to Watsons Annual Stockholders
Meeting and at such other times as deemed appropriate by the
Audit Committee.
The Audit Committee schedules its meetings and implements
procedures designed to ensure that during the course of each
fiscal year it devotes appropriate attention to each of the
matters assigned to it under the Audit Committee Charter. To
this end, the Audit Committee met each quarter, and six times in
total, during 2008. In addition to the foregoing, the Audit
Committee makes itself available to Watson and its internal and
external auditors during the course of the year to discuss any
issues believed by such parties to warrant the attention of the
Audit Committee.
In carrying out its responsibilities, the Audit Committee acts
in an oversight capacity. Management has the primary
responsibility for the financial reporting process, including
the system of internal controls, and for preparation of
consolidated financial statements in accordance with generally
accepted accounting principles. Watsons independent
registered public accounting firm is responsible for auditing
those financial statements and expressing an opinion as to their
conformity with generally accepted accounting principles. In
performing its oversight responsibilities in connection with
Watsons 2008 audit, the Audit Committee has:
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reviewed and discussed Watsons audited consolidated
financial statements for fiscal 2008 with management and
Watsons independent registered public accounting firm,
PricewaterhouseCoopers LLP;
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discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended, as adopted by
the Public Company Accounting Oversight Board
(PCAOB) in Rule 3200T; and
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received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by PCAOB Ethics and
Independence Rule 3526, Communications with Audit
Committees Concerning Independence, and has discussed with
PricewaterhouseCoopers LLP its independence from Watson and its
management.
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Based on the review and discussions above, the Audit Committee
has recommended that the Board of Directors include the audited
consolidated financial statements in Watsons Annual Report
on
Form 10-K
for the year ended December 31, 2008.
Fred G. Weiss, Chairman
Michel J. Feldman
Catherine M. Klema
Ronald R. Taylor
42
SECTION 16(a)
BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), requires our
directors and officers, and persons who own more than 10% of a
registered class of our equity securities to file with the SEC
reports of ownership and changes in ownership of our common
stock and our other equity securities. Officers, directors and
greater-than-10% stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished
to us or written representations that no other reports were
required, we believe that during the 2008 fiscal year all filing
requirements applicable to our officers, directors and
greater-than-10% beneficial owners were complied with and all
filings were timely filed.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We review all relationships and transactions in which we and our
directors and executive officers or their immediate family
members are participants to determine whether such persons have
a direct or indirect material interest. Pursuant to our written
Related Person Transaction Policies and Procedures, our legal
department is primarily responsible for the implementation of
processes and controls to obtain information from the directors
and executive officers with respect to related person
transactions and for then determining, based on the facts and
circumstances, whether we or a related person has a direct or
indirect material interest in the transaction. In determining
whether a proposed transaction is a related person transaction,
our legal department assesses:
(i) the related persons relationship to us;
(ii) the related persons interest in the transaction;
(iii) the material facts of the proposed transaction,
including the proposed aggregate value of such transaction or,
in the case of indebtedness, the amount of principal that would
be involved;
(iv) the benefits to us of the proposed transaction;
(v) if applicable, the availability of other sources of
comparable products or services; and
(vi) whether the proposed transaction is on terms that are
comparable to the terms available to an unrelated third party or
to employees generally.
If our legal department determines that the proposed transaction
is a related person transaction, the proposed transaction is
submitted to our Nominating and Corporation Governance Committee
for consideration. The Nominating and Corporation Governance
Committee may only approve or ratify those transactions that are
in, or are not inconsistent with, our best interests and the
best interests of our stockholders, as the Nominating and
Corporation Governance Committee determines in good faith.
As required under SEC rules, we disclose in our proxy statement
any related person transactions determined to be directly or
indirectly material to us or a related person. No reportable
transactions occurred in 2008.
43
STOCKHOLDERS
PROPOSALS FOR THE 2010 ANNUAL MEETING
We expect to hold the 2010 Annual Meeting of Stockholders on
May 7, 2010. Under
Rule 14a-8
of the Exchange Act, stockholder proposals to be included in the
proxy statement for the 2010 Annual Meeting of Stockholders must
be received by our Secretary at its principal executive offices
no later than December 1, 2009 and must comply with the
requirements of
Rule 14a-8
of the Exchange Act.
In addition, our Bylaws provide that rather than including a
proposal in our proxy statement as discussed above, a
stockholder may commence his or her own proxy solicitation for
the 2010 Annual Meeting of Stockholders or may seek to nominate
a candidate for election as a director. Additionally, a
stockholder may propose business for consideration at such
meeting by delivering written notice to our Secretary at our
principal executive offices not less than seventy (70) days
nor more than ninety (90) days prior to the first
anniversary of the preceding years annual meeting.
Accordingly, the stockholder must provide written notice to our
Secretary no later than February 27, 2010 and no earlier
than February 7, 2010 in order to provide timely notice.
Such notice must contain information required in our Bylaws.
OTHER
BUSINESS
As of the date of this proxy statement, the Board of Directors
knows of no other business that will be presented for
consideration at the Meeting. If other proper matters are
presented at the Meeting, however, it is the intention of the
proxy holders named in the enclosed form of proxy to take such
actions as shall be in accordance with their best judgment.
By Order of the Board of Directors
David A. Buchen,
Secretary
Corona, California
March 31, 2009
44
ANNUAL
MEETING OF STOCKHOLDERS OF
WATSON PHARMACEUTICALS, INC.
May 8, 2009
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Annual Report/Form 10K Wrap and Glossy Brochure are available at
www.proxyvote.com.
WATSON PHARMACEUTICALS, INC.
311 BONNIE CIRCLE
CORONA, CALIFORNIA 92880
PROXY-SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS - MAY 8, 2009
The undersigned hereby appoints Paul M. Bisaro and David A. Buchen, or either of them,
as proxies with full power of substitution, and authorizes them to represent and to vote
on behalf of the undersigned all shares which the undersigned would be entitled to vote if
personally present at the 2009 Annual meeting of Stockholders of
WATSON PHARMACEUTICALS, INC. to be held on May 8, 2009, and any adjournments or postponements thereof, with respect to the following as designated on the reverse side.
A majority of the proxies or substitutes present at the meeting, or if only one person shall be present then that one, may exercise all powers granted hereby.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on reverse side)
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WATSON
PHARMACEUTICALS, INC. 311 BONNIE CIRCLE CORONA, CA 92880
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VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions
and for electronic delivery of information up until
11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand
when you access the web site and follow the
instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER
COMMUNICATIONS
If you would like to reduce the costs incurred by
Watson Pharmaceuticals, Inc. in mailing proxy
materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up
for electronic delivery, please follow the
instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or
access stockholder communications electronically in
future years.
VOTE
BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the
instructions.
VOTE BY
MAIL
Mark, sign and date your proxy card and return it in
the postage-paid envelope we have provided or return
it to Watson Pharmaceuticals, Inc., c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU
MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: |
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WATSN1 |
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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WATSON PHARMACEUTICALS, INC. |
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For All |
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Withhold All |
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For All Except |
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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.
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A VOTE FOR
RONALD R. TAYLOR, ANDREW L. TURNER, AND JACK MICHELSON IS RECOMMENDED BY
THE BOARD OF DIRECTORS.
Vote on Directors |
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1. |
Election of the following nominees as Directors: |
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01) Ronald R. Taylor
02) Andrew L. Turner 03)
Jack Michelson
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Vote on Proposal |
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A VOTE FOR PROPOSAL 2 IS RECOMMENDED BY THE BOARD OF DIRECTORS. |
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Abstain |
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2. |
Ratification of the Appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2009 fiscal year.
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THIS PROXY IF PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE STOCKHOLDER. THE
COMPANYS DIRECTORS RECOMMEND A VOTE FOR MESSRS. TAYLOR, TURNER, AND MICHELSON AND FOR PROPOSAL 2. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED (1) FOR MESSRS. TAYLOR, TURNER AND MICHELSON FOR DIRECTOR AND (2) FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
IN ADDITION, THE PROXIES MAY VOTE IN THEIR DISCRETION ON OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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For address changes and/or comments, please check this box
and write them on the back where indicated. |
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Please indicate if you plan to attend
this meeting. |
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(NOTE: Please sign exactly as your name(s) appear(s)
hereon. All holders must sign. When signing as
attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should
each sign personally. If a corporation, please sign in
full corporate name, by authorized officer. If a
partnership, please sign in partnership name by
authorized person.)
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners) |
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