-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CaoC2EFyrZ5/+fPrlWBeOKZhkP9aTu15i6yP+GDdsIpsMMK0JT0EY0jaW5NnDdQJ 47abT4n8wwwMtMn2vm6vDg== 0000926372-97-000007.txt : 19970131 0000926372-97-000007.hdr.sgml : 19970131 ACCESSION NUMBER: 0000926372-97-000007 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19970130 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAULDING INC CENTRAL INDEX KEY: 0000729069 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 042769995 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13588 FILM NUMBER: 97514498 BUSINESS ADDRESS: STREET 1: 200 ELMORA AVE CITY: ELIZABETH STATE: NJ ZIP: 07207 BUSINESS PHONE: 9085279100 MAIL ADDRESS: STREET 1: 200 ELMORA AVENUE STREET 2: 200 ELMORA AVENUE CITY: ELIZABETH STATE: NJ ZIP: 07207 FORMER COMPANY: FORMER CONFORMED NAME: PUREPAC INC/ DATE OF NAME CHANGE: 19940908 FORMER COMPANY: FORMER CONFORMED NAME: MOLECULON INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MOLECULON BIOTECH INC DATE OF NAME CHANGE: 19860417 10-K/A 1 FORM 10-K/A-1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------------- FORM 10-K/A-1 ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Fiscal Year Ended June 30, 1996 Commission File Number: 0-13588 FAULDING INC. (FORMERLY, PUREPAC, INC.) (Exact name of registrant as specified in its charter) DELAWARE 04-2769995 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 200 Elmora Avenue, Elizabeth, New Jersey 07207 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908) 527-9100 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None - ------------------- ----------------------------------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share -------------------------------------- (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / 15,064,560 Number of shares outstanding of the Registrant's Common Stock as of September 16, 1996 $ 36,161,675 Aggregate market value of the voting stock held by nonaffiliates of the Registrant as of September 16, 1996 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Stock Options 1994 Stock Option Plan On October 18, 1994, the shareholders approved the 1994 Stock Option Plan (the 1994 Plan ) which provides for issuance of up to 1,000,000 options to acquire shares of the Company s authorized common stock. The options are intended to qualify as Incentive Stock Options (statutory options) as defined by the Internal Revenue Code or as Nonstatutory Stock Options. Under the 1994 Plan, the Incentive Stock Options may be granted to key employees of the Company or a subsidiary of the Company and the Nonstatutory Stock Options may be granted to any key employee, officer, non-employee director or consultant to the Company or a subsidiary of the Company, with the exception that Nonstatutory Stock Options may not be granted to a holder of more than 10% of the total voting power of the Company. The exercise price of all Incentive Stock Options must be at least equal to the fair market value of such shares on the date of grant. The exercise price of all Nonstatutory Stock Options granted under the 1994 Plan shall be determined by the Board of Directors of the Company at the time of grant. No option granted shall be exercisable after the expiration of ten (10) years from the date of grant. During the year ended June 30, 1995, the Company awarded two employees 33,000 Incentive Stock Options exercisable at $9.25 per share. During the year ended June 30, 1996, the Company awarded 27 employees options to purchase 675,000 shares, of which 496,789 were Incentive Stock Options and 178,211 were Nonstatutory Stock Options. During the year ended June 30, 1996, due to two resignations and one cancelation, awards totaling 108,000 shares were terminated. Information on the 1994 stock option plan activity is as follows: Number of Options Awarded ---------------------------------- Incentive Number of Exercisable Stock Nonstatutory Employees Price Range Total Options Stock Options --------- ----------- ------ --------- ------------- Outstanding at June 30, 1995 2 $ 9.25 33,000 33,000 - ------------------------------------------------------------------------------ Options Awarded 27 $ 4.625- 675,000 496,789 178,211 $ 10.125 Terminated/ Canceled (3) $ 6.125- (108,000) (98,304) (9,696) $ 9.25 - ------------------------------------------------------------------------------ Outstanding at June 30, 1996 26 $ 4.625- 600,000 431,485 168,515 $ 10.125 - ------------------------------------------------------------------------------ PART III (All dollar references are in thousands, unless otherwise indicated.) ITEM 10. DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES DIRECTORS - --------- The directors of the Company are as follows: Common Stock Beneficially Company Owned as of Name Office(s) Since Age Sept. 20 1996 - ------------------ ----------------- ----- --- ------------- Edward D. Tweddell Director/Chairman 1990 55 -0-(2) Alan G. McGregor Director 1988 60 -0-(2) David Beretta (1) Director 1989 68 -0- Bruce C. Tully Director 1989 47 -0- Richard F. Moldin President, Chief 1995 48 10,000(3) Executive Officer, Chief Operating Officer (1) Mr. Beretta died on September 16, 1996. (2) Mr. McGregor and Dr. Tweddell are directors of Faulding, the parent of Holdings, the principal stockholder of the Company. See "Principal Stockholders" of the Company and "Compensation Committee Interlocks and Insider Participation." (3) Excludes 200,000 shares issuable upon the exercise of stock option awards, not presently exercisable, that have been made to Mr. Moldin under the Company's 1994 Stock Option Plan. See "Compensation of Executive Officers." Edward D. Tweddell, M.D., was elected a director in November 1990 and was subsequently elected Chairman of the Board. He joined Faulding as Managing Director of its Faulding Pharmaceuticals Division in September 1988. He was elected to the Board of Directors of Faulding in March 1989 and served as Executive Director of the Faulding Pharma Group from 1990 to November 1993 when he was appointed Group Managing Director and Chief Executive Officer of Faulding. From July 1987, until joining Faulding, he held the position of Chairman and Chief Executive Officer of Pharmol Pacific Ltd., an Australian biotechnology company. Prior thereto and from April 1986, he was President and Chief Executive Officer of Homecare Japan, LTD. Dr. Tweddell, who holds a Bachelor of Science degree in addition to an honors degree in Medicine, spent his early career in medical practice and, in 1976, joined the multinational pharmaceutical company, Pfizer International Inc. ("Pfizer"), where he held a number of senior management positions. Alan G. McGregor, a director of the Company since June 1988, is Chairman of Faulding. Mr. McGregor is also a director of James Hardie Industries Ltd., Burns, Philp & Co. Ltd. and other companies. He has served as a partner in two major Adelaide, South Australia law firms and was a Crown Prosecutor with the South Australian Crown Solicitor's Office. David Beretta, a director of the Company since April 1989, was President of Executive Consulting Inc., a business consulting firm in Jamestown, Rhode Island until his death on September 16, 1996. From April 1991, Mr. Beretta was Vice Chairman and President of Amtrol Inc., a concern engaged in the manufacture of products used in flow control, storage, heating and other treatment of fluids in the water systems market and selected sectors of the heating, ventilating and air conditioning market in West Warwick, Rhode Island. Until 1982, he was Chairman of the Board of Uniroyal, Inc. and remained a director until 1987. He was also a director of Chartel Power Systems Inc. Bruce Tully, a director of the Company since April 1989, has been a Managing Director of BT Securities Corporation, a subsidiary of Bankers Trust New York Corporation in New York, New York, since September 1989. Prior thereto and from October 1986, he was Managing Director of Bankers Trust Company and for four years prior thereto, was a Vice President thereof. Richard F. Moldin, was appointed President and Chief Executive Officer of the Company and President of Purepac on July 17, 1995 and was appointed to serve as a director and Chief Operating Officer of the Company on July 24, 1995. Prior to joining the Company and from October 1994 he served as Managing Director, Australia & New Zealand for Wellcome Australia Limited. From May 1993 until his appointment as Managing Director, he was Divisional Manager, Primary Manufacturing, for Wellcome Foundation Limited, U.K. Prior thereto and from September 1979, he served in various executive positions at Burroughs Wellcome Co., U.S.A., including from October 1991 to February 1993 as Vice President, Logistics & Primary Manufacturing. EXECUTIVE OFFICERS - ------------------ Set forth below is certain information with respect to the Company's executive officers who are not serving as a director. Lee Craker, age 41, was appointed Chief Financial Officer of the Company on May 26, 1995 and was appointed Treasurer on October 11, 1995. Mr. Craker has held various positions with Faulding, or certain of its affiliates, dating from his initial employment by Faulding in 1973. From May 1985 to May 1990 he served as Finance and Administration Manager of David Bull Laboratories Pty. Ltd., a wholly-owned subsidiary of Faulding. From May 1990 to June 1994, he was Finance and Administration Manager of the Faulding Pharma Group and from July 1994 until joining the Company in May 1995 he was Finance and Administration Manager of Faulding Services Inc. William R. Griffith, age 48, was elected Secretary of the Company in October 1993. Mr. Griffith is a member of Parker Duryee Rosoff & Haft, counsel to the Company. Mr. Griffith has been a practicing attorney for more than ten years. ITEM 11. EXECUTIVE COMPENSATION (Dollars in thousands) Summary Compensation Set forth below is the aggregate compensation for services rendered in all capacities to the Company during its fiscal years ended June 30, 1996, 1995 and 1994 by each of its executive officers who served as an executive officer on June 30, 1996 and whose compensation exceeded $100 during its fiscal year ended June 30, 1996: Summary Compensation Table Annual Compensation Name and Fiscal Other Annual Principal Position Year Salary Bonus Compensation - ----------------- ------ ------ ----- ------------ Richard F. Moldin 1996 $ 285 $ 105 (1) Chief Executive Officer, 1995 --- --- --- President and Chief 1994 --- --- --- Operating Officer Lee Craker 1996 $ 158 $ 38 (1) Chief Financial Officer 1995 78(2) --- --- and Treasurer 1994 --- --- --- - ------------------ (1) Such amounts for each of the named executive officers listed in the Summary Compensation Table are less than 10% of the total annual salary and bonus reported for each such executive officer. (2) Mr. Craker became an employee of the Company on January 1, 1996. Stock Options and Bonus Plans The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by the Board of Directors on August 16, 1994 and by a majority in interest of the stockholders of the Company on October 18, 1994. The 1994 Plan provides for the granting of up to 1,000,000 options which are intended to qualify either as incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986 or as options which are not intended to meet the requirements of such section ("Nonstatutory Stock Options"). The total number of shares of Common Stock reserved for issuance under the 1994 Plan is 1,000,000. Options to purchase shares may be granted under the 1994 Plan to persons who, in the case of Incentive Stock Options, are employees (including officers) of the Company, or, in the case of Nonstatutory Stock Options, are employees (including officers) or non-employee directors of the Company. The 1994 Plan is administered by a committee appointed by the Board of Directors, which has discretionary authority, subject to certain restrictions, to determine the number of shares issued pursuant to Incentive Stock Options and Nonstatutory Stock Options and the individuals to whom, the time at which, and the exercise price for which options will be granted. The exercise price of all Incentive Stock Options granted under the 1994 Plan must be at least equal to the fair market value of such shares on the date of the grant or, in the case of Incentive Stock Options granted to the holder of more than ten percent of the Company's Common Stock, at least 110% of the fair market value of such shares on the date of the grant. The maximum exercise period for which Incentive Stock Options may be granted is ten years from the date of grant (five years in the case of an individual owning more than 10% of the Company's Common Stock). The aggregated fair market value (determined at the date of the option grant) of shares with respect to which Incentive Stock Options are exercisable for the first time by the holder of the options during any calendar year shall not exceed $100. The following table sets forth certain information concerning grants of stock options to the executive officers of the Company under the 1994 Plan during the fiscal year ended June 30, 1996. Option Grants in Last Fiscal Year
Potential Realizable Value at Assumed Annual Rates of Stock Price Individual Appreciation Grants for Option Term - ----------------------------------------------------------------------------------------------- % of Total Options Granted to Employees Number of in Fiscal Options Year Ended Exercise Expiration Name Granted June 30, 1996 Price Date 5%($) 10%($) - -------------------- --------- ------------- -------- --------- ----- ------ Richard F. Moldin Chief Executive 150,000 25% $ 10.125 7/16/2005 6.555 17.285 Officer, President and Chief Operating 50,000 8.3% $ 6.25 4/21/2006 4.04 10.67 Officer
The following table sets forth certain information with respect to options granted to officers, directors and employees of the Company and its subsidiaries under the 1994 Plan during the fiscal year ended June 30, 1996. The dollar value set forth below reflects the difference between the aggregate exercise price of the options and the estimated value of the Company's Common Stock at June 30, 1996. Fiscal Year End Option Values Number of Unexercised Options at June 30, 1996 Value of ----------------------------- Unexercised Options Name Exercisable Unexercisable at June 30, 1996 - ------------------- ----------- ------------- ------------------- Richard F. Moldin -0- 200,000 $ -0- Chief Executive Officer, President and Chief Operating Officer All Non-Executive Employees as a -0- 400,000 $ -0- Group 1991 Restricted Stock Incentive Plan The Company's 1991 Restricted Stock Incentive Plan (the "1991 Plan") was adopted by the Board of Directors on November 25, 1991 and ratified by a majority in interest of the stockholders of the Company on October 21, 1992. The stated intent of the 1991 Plan is to induce persons of outstanding ability and potential to join and remain with the Company and to enable key employees, who make substantial contribution to the Company, to acquire proprietary equity interests in the Company. The Board of Directors chooses the Committee, whose members are ineligible to receive stock awards under the 1991 Plan, to administer the Plan. The Committee determines the employees to whom awards of Common Stock will be granted and the amount, size and terms of each such award. A total of 465,000 shares of Common Stock of the Company were reserved for issuance under the 1991 Plan, of which aggregate grants of 275,000 and 50,000 were awarded in November 1991 and March 1993, respectively, at the respective values of $8.125 and $13.8125, being the respective market value thereof on the date of the grant. During the year ended June 30, 1994, due to two resignations, grants totaling 27,500 shares were terminated and 82,250 shares were issued. During the year ended June 30, 1995, due to two resignations, 10,500 shares were terminated and 71,125 shares were issued. During the year ended June 30, 1996, due to eight terminations, grants totaling 47,000 shares were terminated and 44,625 shares were issued. Pension Plan The Company maintains a defined benefit pension plan, fully paid for by the Company, for the benefit of eligible employees. All non-union employees become eligible for participation in the pension plan on January 1 or July 1, as applicable, following completion of one year of service. 161 persons were participants in the pension plan as of June 30, 1996. A participant in the Company's pension plan will receive retirement income based on .91% of his final average annual compensation, defined in the pension plan as including salary, bonuses, overtime and commissions, plus .52% of his final average annual compensation in excess of Social Security covered compensation, multiplied by years of credited service up to 35 years. Years of service for benefit accrual purposes are only after January 1, 1976. Final average compensation is defined in the pension plan as the average of a participant's total compensation received during the highest paid five consecutive plan years during the last 10 consecutive plan years immediately prior to retirement. A participant is 100% vested in his accrued pension benefit after five years of service as defined in the plan. The vested benefit of many participants employed prior to October 31, 1989, are provided through both the Purepac pension plan and the Solvay Group Pension Plan, the predecessor Company's plan. The following table indicates the estimated annual plan benefits payable upon retirement as of June 30, 1996 at age sixty-five after fifteen, twenty, twenty-five, thirty and thirty-five years of credited service to the Company: PENSION PLAN TABLE (Dollars in thousands) Average Compensation Annual Benefit Based on Years of Service - ------------------ ---------------------------------------- 15 20 25 30 35 -- -- -- -- -- $ 125,000 ........ $25 $33 $41 $50 $ 58 150,000 ........ 30 40 50 60 70 175,000 ........ 30 40 50 60 70 200,000 ........ 30 40 50 60 70 225,000 ........ 30 40 50 60 70 250,000 ........ 30 40 50 60 70 300,000 ........ 30 40 50 60 70 350,000 ........ 30 40 50 60 70 400,000 ........ 30 40 50 60 70 450,000 ........ 30 40 50 60 70 500,000 ........ 30 40 50 60 70 At June 30, 1996, the credited years of service under the pension plan for Mr. Moldin was one. Mr. Craker is not a participant in the pension plan. Savings Plan The Company has a savings plan, implemented as of January 1, 1990, covering all non-union employees of the Company and its subsidiaries. Under the savings plan, employees may defer up to 15% of their salary, to a maximum of $9 per annum. The Company makes an annual matching contribution equal to 50% of an employee's contribution, not exceeding 6% of the employee's salary. Matching contributions are vested at the rate of 20% per annum commencing upon one year's participation in the savings plan. All vested amounts in a participant's account, including earnings, may be distributed only following hardship, retirement, death, permanent or total disability or termination of employment. For the three year period ended June 30, 1996, the Company had contributed an aggregate of $650 to the savings plan (net of forfeitures of non-vested amounts), for the respective accounts of 193 participants. None of such $650 has been credited to the accounts of current executive officers. President/CEO and Executive Officers Compensation The Company's executive compensation program consists of three key components: base salary, a cash incentive scheme and long term incentives through the awards of restricted stock grants and stock options. The incentive payments have two performance components, each with a 50% weighting: (a) a financial budget achievement target based on net profit before taxes and (b) achievement of specific job-related objectives. The underlying principle for the design and implementation of the Company's incentive scheme is based on the concept that the Company commit in advance to predetermined annual levels of performance. Actual results achieved are measured against that commitment. The Company's long term incentives to date have been in the form of restricted stock and stock option grants. The object of this program has been to advance the longer term interest of the Company and its stockholders. Equity compensation is an important element of the perfor- mance-based compensation of the executive officers and helps to ensure that management's interests remain closely aligned with those of the Company's stockholders. The Committee is of the view that Restricted stock awards and stock option grants provide the Company's key employees an opportunity for increased equity ownership and help to create an incentive to remain with the Company for the long term, since the grants vest over a four to six year period. During the approximate five month period from January to July 17, 1995 Michael R.D. Ashton held the position of President and Chief Executive Officer of the Company. His yearly salary as President of Faulding Services Inc. had already been established, was not altered upon his acceptance of additional responsibilities as President and CEO of the Company and was paid by Faulding Services Inc. On July 17, 1995, the Company appointed Richard F. Moldin as its President and Chief Executive Officer. Mr. Moldin's initial compensation package reflected the Company's determination to recruit experienced executive officers who had considerable experience in the pharmaceutical industry by offering them compensation cometitive with that of health care companies of comparable size and performance. He received an initial base salary of $285 and a grant of 150,000 stock options under the 1994 Stock Option Plan. Mr. Moldin received an additional grant of 50,000 stock options in April, 1996 and a cash incentive award of $105 in September, 1996. His additional compensation reflected the Committee's assessment of Mr. Moldin's leadership in strengthening the position of the Company, his efforts in broadening the Company's base of operations to include the generic injectable business and his leadership contribution in implementing the Company's programs during the fiscal year ended June 30, 1996. $1,000 Limit On Tax Deductible Compensation As part of the Omnibus Budget Reconciliation Act passed by Congress in 1993, a new limit has been created for the deductibility of compensation paid to certain officers. These officers are the Chief Executive Officer and the next four most highly compensated officers in office at the end of the year. Compensation paid to these officers in excess of $1,000, that is not performance-based, cannot be claimed by the Company as a tax deduction. It is the Committee's intention to continue to utilize performance-based compensation. Accordingly, these regulations should not impact the compensation paid by the Company to its officers. Edward D. Tweddell ) Members of the Alan G. McGregor ) Compensation Committee September 23, 1996 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Dr. Tweddell is Group Managing Director and Chief Executive Officer and a Director of Faulding. He is also a Director of Holdings, which owns approximately 61.6% of the Company's Common Stock, plus preferred stock convertible into additional shares of the Company's Common Stock. Alan McGregor is Chairman of the Board and a Director of Faulding. See "Principal Stockholders" and "Certain Relationships and Related Transactions." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT PRINCIPAL STOCKHOLDERS OF PUREPAC The following table sets forth certain information regarding shares of the Company's outstanding Common Stock beneficially owned on September 19, 1995, (i) by each person who is known by the Company to beneficially own or exercise voting or dispositive control over more than 5% of the Company's Common Stock, (ii) by each of the Company's Directors, and (iii) by all executive officers and Directors of the Company as a group: Name of Number of Shares Percentage Beneficial Owner Beneficially Owned of Class - --------------------------------------------------------------------- Faulding Holdings Inc. 15,848,770(1) 73.3%(1) 529 Fifth Avenue 8th Floor New York, New York 10017 All executive officers 40,000(2) * and directors as a Group (9 persons) - -------------- (1) Includes 5,005,128 shares issuable upon conversion of 834,188 shares of the Company's Class A Preferred Stock and 1,564,950 shares issuable under conversion of 150,000 share of the Company's Class B Preferred Stock. 2) Mr. McGregor is Chairman and a director, and Dr. Tweddell is Group Managing Director, Chief Executive Officer and a director, respectively, of Faulding, the sole stockholder of Holdings. Dr. Tweddell is also a director of Holdings. Each of Dr. Tweddell and Mr. McGregor, however, disclaims any beneficial interest in or voting or dispositive control over the shares of the Company's Common Stock owned by Holdings. Excludes 170,000 shares issuable to, but not presently exercisable by, Mr. Moldin under the 1994 Plan. Includes 30,000 shares exercisable by Mr. Moldin as of July 17, 1996 under the 1994 Plan. * Equals a percentage less than 1% of the outstanding shares of the Company's stock. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to the Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: January 30, 1997 FAULDING INC. By: /s/Richard F. Moldin Richard F. Moldin President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----