DEF 14A 1 formdef14a.htm FOREST LABORATORIES, INC. DEF 14 A 8-15-2013

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
 
Filed by the Registrant x
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))
x
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to § 240.14a-12
 
FOREST LABORATORIES, 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):
 
x
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
                                        

(2)
Aggregate number of securities to which transaction applies:
                                        

(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
                                        

(4)
Proposed maximum aggregate value of transaction:
                                        

(5)
Total fee paid:
                                        

o
Fee paid previously with preliminary materials.
o
Checkbox if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 

(2)
Form, Schedule or Registration Statement No.:
 

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(4)
Date Filed:
 



FOREST LABORATORIES, INC.
 
NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS
 
The 2013Annual Meeting of the Stockholders of Forest Laboratories, Inc. (the Annual Meeting) will be held on August 15, 2013 at 10:00 a.m. EDT, at JW Marriott Essex House, 160 Central Park South, New York, NY 10019. We are holding this meeting to:
 
1. Elect the eleven directors named in this proxy statement to the Company’s Board of Directors (Proposal 1);
 
2. Approve, on an advisory basis, the compensation of the Company’s Named Executive Officers (Proposal 2);
 
3. Approve certain amendments to the Company’s 2007 Equity Incentive Plan described in this Proxy Statement (Proposal 3 or the Equity Plan Proposal);
 
4. Ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2014 (Proposal 4); and
 
5. Consider and act upon such other matters as may properly be brought before the meeting or any postponements or adjournments thereof by or at the direction of the Board.
 
Only Forest stockholders of record at the close of business on June 24, 2013 may vote at the Annual Meeting or any postponements or adjournments of the Annual Meeting.  A copy of the 2013 Annual Report to Stockholders has previously been mailed to Forest stockholders.
 
You are invited to attend the Annual Meeting.  Whether or not you plan to attend the meeting in person, please vote by mail, by telephone or via the Internet in order to be certain your shares are represented at the Annual Meeting.

 
By Order of the Board of Directors,
 
 
 
 
HERSCHEL S. WEINSTEIN,
 
Corporate Secretary
July 8, 2013
 
New York, New York
 

FOREST LABORATORIES, INC.
PROXY STATEMENT
 
TABLE OF CONTENTS
 
 
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FOREST LABORATORIES, INC.
909 THIRD AVENUE
NEW YORK, NEW YORK 10022

PROXY STATEMENT FOR 2013 ANNUAL MEETING OF STOCKHOLDERS
 
DATED JULY 8, 2013
 
This Proxy Statement contains information related to our 2013 Annual Meeting of Stockholders (the Annual Meeting) to be held on August 15, 2013 beginning at 10:00 A.M. EDT, at JW Marriott Essex House, 160 Central Park South, New York, NY 10019, and at any postponements or adjournments thereof. This Proxy Statement is being sent to stockholders on or about July 8, 2013. You should review this information together with our 2013 Annual Report to Stockholders, which was previously sent to you.
 
INFORMATION ABOUT THE MEETING
 
Q: Why did you send me this Proxy Statement?
 
A: We sent you this Proxy Statement and the enclosed proxy card because the Board of Directors (the Board) of Forest Laboratories, Inc. (we or Forest or the Company) is soliciting your proxy to vote at the Annual Meeting to be held on August 15, 2013, and at any postponements or adjournments of the Annual Meeting. This Proxy Statement summarizes information that is intended to assist you in making an informed vote on the proposals described in this Proxy Statement.
 
Q: Who can vote at the Annual Meeting?
 
A: Only stockholders of record as of the close of business on June 24, 2013 (the Record Date) are entitled to vote at the Annual Meeting.  On that date, there were 267,982,915 shares of our common stock (individually referred to in this Proxy Statement as a share) outstanding and entitled to vote.
 
Q: How many shares must be present to conduct the Annual Meeting?
 
A: We must have a “quorum” present in person or by proxy to hold the Annual Meeting.  A quorum is a majority of the outstanding shares entitled to vote.  Abstentions and broker non-votes (defined below) will be counted for the purpose of determining the existence of a quorum.
 
Q: What matters are to be voted upon at the Annual Meeting?
 
A: Four proposals are scheduled for a vote:
 
· Election of the eleven directors named in this Proxy Statement to the Company’s Board of Directors (Proposal 1);
 
· Approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers (Proposal 2);
 
· Approval of certain amendments to the Company’s 2007 Equity Incentive Plan described in this Proxy Statement (Proposal 3 or the Equity Plan Proposal); and
 
· Ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2014 (Proposal 4).
 
As of the date of this Proxy Statement, our Board does not know of any other business to be presented at the Annual Meeting.  If other business is properly brought before the Annual Meeting, the persons named on the enclosed proxy card will vote on these other matters in their discretion.
Q: How does the Board recommend that I vote?
 
A: The Board recommends that you vote:
 
1. FOR the election of each of the director nominees named in this Proxy Statement;
 
2. FOR the proposal to approve (on an advisory basis) the compensation of the Company’s Named Executive Officers;
 
3. FOR the Equity Plan Proposal; and
 
4. FOR the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2014.
 
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
 
A: If your shares are registered in your name on the Company’s books and records or with our transfer agent, Computershare, you are the “stockholder of record” of those shares and this Notice of Annual Meeting and Proxy Statement and any accompanying documents have been provided directly to you by Forest.  In contrast, if you purchased your shares through a brokerage or other financial intermediary, the brokerage or other financial intermediary will be the “stockholder of record” of those shares.  Generally, when this occurs, the brokerage or other financial intermediary will automatically put your shares into “street name,” which means that the brokerage or other financial intermediary will hold your shares in its name or another nominee’s name and not in your name, but will keep records showing you as the real or “beneficial owner.”  If you hold shares beneficially in street name, this Notice of Annual Meeting and Proxy Statement and any accompanying documents have been forwarded to you by your broker, bank or other holder of record.
 
Q: How do I vote if my bank or broker holds my shares in “street name”?
 
A: If you hold shares beneficially in street name, you may vote by submitting the enclosed voting instruction form. Telephone and Internet voting may also be available – please refer to the voting instruction card provided by your broker.
 
Q: How do I vote before the Annual Meeting?
 
A: You may vote your shares by mail by filling in, signing and returning the enclosed proxy card or voting instruction form you receive from your broker. For your convenience, you may also vote your shares by telephone or via the Internet by following the instructions on the enclosed proxy card or your voting instruction form. If you vote by telephone or via the Internet, you do not need to return your proxy card or voting instruction form. With respect to the election of each Director nominee and each proposal to be submitted for a vote at the Annual Meeting, you may vote “FOR” or “AGAINST” or abstain from voting.
 
Q: May I vote at the Annual Meeting?
 
A: Yes, shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may also be voted by you in person at the Annual Meeting if you obtain a legal proxy from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.
Q: How many votes do I have?
 
A: Each share of common stock that you own as of the close of business on the Record Date (June 24, 2013) entitles you to one vote on each matter voted upon at the Annual Meeting.  As of the close of business on the Record Date, there were 267,982,915 shares of our common stock outstanding.
 
Q: May I change my vote?
 
A: Yes, you may change your vote or revoke your proxy at any time before the vote at the Annual Meeting.  You may change your vote prior to the Annual Meeting by executing a valid proxy card bearing a later date and delivering it to us prior to the Annual Meeting at Forest Laboratories, Inc., Attention:  Corporate Secretary, 909 Third Avenue, New York, New York 10022. You may withdraw your vote at the Annual Meeting and vote in person by giving written notice to our Corporate Secretary.  You may also revoke your vote without voting by sending written notice of revocation to our Corporate Secretary at the above address.  Attendance at the meeting will not by itself revoke a previously granted proxy.
 
Q: How are my shares voted if I submit a proxy card but do not specify how I want to vote?
 
A: If you submit a properly executed proxy card but do not specify how you want to vote, your shares will be voted “FOR” the election of each of the Company’s nominees for director; “FOR” advisory approval of the compensation of the Company’s Named Executive Officers; “FOR” the Equity Plan Proposal; and “FOR” the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2014.
 
Q: Will my shares be voted if I don’t provide instructions to my broker?
 
A: If you are the beneficial owner of shares held in “street name” by a broker, you must instruct your broker how to vote your shares.  If you do not provide voting instructions at least ten days prior to the Annual Meeting date, your broker will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary” items (we refer to the latter case as a broker non-vote).  In the case of a broker non-vote, your broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (NYSE).
 
The proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the Fiscal Year ending March 31, 2014 is considered a “discretionary” item over which your broker or other nominee has discretion to vote your shares if your broker or other nominee does not receive voting instructions from you. However, your broker or other nominee may not vote your shares with respect to the election of directors, the advisory vote relating to executive compensation, or the Equity Plan Proposal without your voting instructions on those proposals because such proposals are considered “non-discretionary” under NYSE rules.  Accordingly, without your voting instructions with respect to such proposals, a broker non-vote will occur.
 
Your vote is important and we strongly encourage you to vote your shares by following the instructions provided on the enclosed voting instruction form.  Please vote promptly.
Q:
What vote is required to elect directors?
 
A: As described in the Company’s Corporate Governance Guidelines, in an uncontested election, a director will be elected by a vote of a majority of the votes cast.  A majority of votes cast means that the number of shares cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” such director’s election.  In a contested election the directors will be elected by the vote of a plurality of the votes cast.  A contested election will occur if a stockholder has timely and properly nominated a person for election to the Board and has not timely withdrawn such nomination.  In either case, abstentions and broker non-votes will have no effect on the outcome of the election.
 
Q: What happens in an uncontested election if an incumbent director does not receive enough votes to be elected?
 
A: Pursuant to our Corporate Governance Guidelines, each director tenders an irrevocable resignation prior to the Annual Meeting, which resignation only becomes effective if he or she fails to receive the required number of votes cast for his or her re-election and the Board accepts such resignation.  In order to ensure that the Company always has a fully functioning Board, if an incumbent director fails to receive the required number of votes cast, he or she continues as a director. The Nominating and Governance Committee will act on an expedited basis to determine whether to accept or reject the director’s resignation and will submit such recommendation to the Board for prompt consideration. The Nominating and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a director’s resignation.  The Board will make its decision public as soon as practicable following the Annual Meeting.
 
Q: What vote is required to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers?
 
A: This matter is being submitted to enable stockholders to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers.  In order to be approved on an advisory basis, this proposal must receive the “FOR” vote of a majority of the shares present in person or by proxy and entitled to vote on the matter.  Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the proposal as brokers are not entitled to vote on such proposals in the absence of instructions from the beneficial owner.
 
Q: What vote is required to ratify the amendments to the Company’s 2007 Equity Incentive Compensation Plan?
 
A:
For approval of this proposal, the proposal must receive the “FOR” vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no effect on the proposal as brokers are not entitled to vote on this proposal in the absence of voting instructions from the beneficial owner.
 
Q: What vote is required to ratify the selection of BDO USA, LLP as Forest’s independent registered public accounting firm for the fiscal year ending March 31, 2014?
 
A: For approval of this proposal, the proposal must receive the “FOR” vote of a majority of the shares present in person or by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote against the proposal.  Brokers generally have discretionary authority to vote on the ratification of the selection of our independent registered public accounting firm, thus we do not expect any broker non-votes on this proposal.
 
Q: Who will count the votes?
 
A: Votes will be counted by an independent inspector of election appointed for the Annual Meeting by the Chairman of the Annual Meeting.
Q: Do stockholders have any appraisal or dissenters’ rights on the matters to be voted on at the Annual Meeting?
 
A: No, stockholders of Forest will not have rights of appraisal or similar dissenters’ rights with respect to any of the matters identified in this Proxy Statement to be acted upon at the Annual Meeting.
 
Q: What do I need for admission to the Annual Meeting?
 
A: Attendance at the Annual Meeting or any adjournment or postponement thereof will be limited to record and beneficial stockholders as of the Record Date, individuals holding a valid proxy from a record holder, and other persons authorized by the Company.  If you are a stockholder of record, your name will be verified against the list of stockholders of record prior to your admittance to the Annual Meeting or any adjournment or postponement thereof.  You should be prepared to present photo identification for admission.  If you hold your shares in street name, you will need to provide proof of beneficial ownership on the Record Date, such as a brokerage account statement showing that you owned our stock as of the Record Date, a copy of a voting instruction form provided by your broker, bank or other nominee, or other similar evidence of ownership as of the Record Date, as well as your photo identification, for admission.  If you do not provide photo identification or comply with the other procedures described above upon request, you will not be admitted to the Annual Meeting or any adjournment or postponement thereof.  For security reasons, you and your bags will be subject to search prior to your admittance to the Annual Meeting.
 
Q:
Who pays for the solicitation of proxies?
 
A: We will pay for the entire cost of soliciting proxies.  We will also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.  In addition, our directors and employees may solicit proxies in person, by telephone, via the Internet, or by other means of communication.  Directors and employees will not be paid any additional compensation for soliciting proxies.
 
Q:
How can I find out the results of the voting at the Annual Meeting?
 
A: We will announce results promptly once they are available and will report final results in a filing with the Securities and Exchange Commission (the SEC) on Form 8-K.
 
Q: May I propose actions for consideration at next year’s Annual Meeting of Stockholders or nominate individuals to serve as directors?
 
A: Yes. The following requirements apply to stockholder proposals, including director nominations, for the 2014 Annual Meeting of Stockholders.
 
Requirements for Stockholder Proposals to be Considered for Inclusion in Proxy Materials:
 
Stockholders interested in submitting a proposal for inclusion in the proxy materials distributed by us for the 2014 Annual Meeting of Stockholders may do so by following the procedures prescribed in Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the Exchange Act). To be eligible for inclusion, stockholder proposals must be received by us no later than March 10, 2014 and must comply with the Company’s Bylaws and regulations of the SEC under Rule 14a-8 of the Exchange Act regarding the inclusion of stockholder proposals in company-sponsored proxy materials.  If we hold our 2014 Annual Meeting of Stockholders more than 30 days before or after August 15, 2014 (the one-year anniversary date of the 2013 Annual Meeting), we will disclose the new deadline by which stockholders proposals must be received under Item 5 of Part II of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders. Proposals should be addressed to our principal executive offices: Forest Laboratories, Inc., Attention: Corporate Secretary, 909 Third Avenue, New York, New York 10022.
Requirements for Stockholder Proposals Not Intended for Inclusion in Proxy Materials and for Nomination of Director Candidates:
 
Stockholders who wish to nominate persons for election to the Board at the 2014 Annual Meeting of Stockholders or who wish to present a proposal at the 2014 Annual Meeting of Stockholders, but who do not intend for such proposal to be included in the proxy materials distributed by us for such meeting, must deliver written notice of the nomination or proposal to the Corporate Secretary at the above address no earlier than May 17, 2014 and no later than June 16, 2014 (provided, however, that if the 2014 Annual Meeting of Stockholders is held earlier than July 16, 2014 or later than October 14, 2014, nominations and proposals must be received no later than the close of business on the tenth day following the day on which the notice or public announcement of the date of the 2014 Annual Meeting of Stockholders is first mailed or made, as applicable, whichever occurs first). The stockholder’s written notice must include certain information concerning the stockholder and each nominee and proposal, as specified in the Company’s Bylaws, and must comply with the other requirements specified in the Company’s Bylaws. For further information on how a stockholder may nominate a candidate to serve as a director, please see the disclosure appearing under the heading, “Selection of Nominees for Election to the Board” on Page 22 of this Proxy Statement.
 
If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
 
Q: What is “householding” and how does it work?
 
A: The SEC’s “householding” rules permit us to deliver only one set of proxy materials to stockholders who share an address unless otherwise requested.  This procedure reduces printing and mailing costs.  If you share an address with another stockholder and have received only one set of proxy materials, you may request a separate copy of these materials at no cost to you by writing to Forest Laboratories, Inc., Attention:  Corporate Secretary, 909 Third Avenue, New York, New York 10022, or by calling us at (212) 421-7850.  Alternatively, if you are currently receiving multiple copies of the proxy materials at the same address and wish to receive a single copy in the future, you may contact us by calling or writing to us at the telephone number or address given above.
 
If you are a beneficial owner (i.e., your shares are held in the name of a bank, broker or other holder of record), the bank, broker or other holder of record may deliver only one copy of the Notice of Annual Meeting and Proxy Statement to stockholders who have the same address unless the bank, broker or other holder of record has received contrary instructions from one or more of the stockholders.  If you wish to receive a separate copy of the Notice of Annual Meeting and Proxy Statement, now or in the future, you may contact us at the address or telephone number above and we will promptly deliver a separate copy.  Beneficial owners sharing an address, who are currently receiving multiple copies of the Notice of Annual Meeting and Proxy Statement and wish to receive a single copy in the future, should contact their bank, broker or other holder of record to request that only a single copy be delivered to all stockholders at the shared address in the future.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
 
The following table sets forth, as of June 24, 2013, the number of shares of common stock owned beneficially by any persons we know to be beneficial owners of more than five percent of our outstanding shares, each of our directors and each of our executive officers named in the Summary Compensation Table below and all of our directors and executive officers as a group:  The percentage of ownership is calculated based upon the 267,982,915 shares of common stock issued and outstanding as of June 24, 2013.
 
Name and Address of Beneficial Owner
 
Amount and Nature of
Beneficial Ownership
   
Percent
of Class (1)
 
 
 
   
 
5% Stockholders
 
   
 
Wellington Management Company, LLP (2)
280 Congress Street
Boston, MA  02210
   
36,777,637
     
13.72
%
Icahn Capital LP (3)
c/o Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY  10153
   
30,662,005
     
11.44
%
Vanguard Specialized Funds –
Vanguard Health Care Fund (4)
100 Vanguard Boulevard
Malvern, PA  19355
   
25,903,000
     
9.67
%
ClearBridge Investments, LLC (5)
620 8th Avenue
New York, NY  10018
   
17,555,701
     
6.55
%
Capital Research Global Investors (6)
333 South Hope Street
Los Angeles, CA  90071
   
16,890,200
     
6.30
%
 
               
Named Executive Officers and Directors
               
Howard Solomon
   
2,424,521
(7)
   
*
 
Elaine Hochberg
   
649,029
(8)
   
*
 
Francis I. Perier, Jr.
   
545,669
(9)
   
*
 
Marco Taglietti, M.D.
   
242,176
(10)
   
*
 
David F. Solomon
   
280,612
(11)
   
*
 
Nesli Basgoz, M.D.
   
42,356
(12)
   
*
 
Christopher J. Coughlin
   
24,987
(13)
   
*
 
Kenneth E. Goodman
   
69,691
(14)
   
*
 
Vincent J. Intrieri
   
0
     
*
 
Pierre Legault
   
10,000
(15)
   
*
 
Gerald M. Lieberman
   
24,987
(16)
   
*
 
Lawrence S. Olanoff, M.D., Ph.D.
   
339,058
(17)
   
*
 
Lester B. Salans, M.D.
   
68,666
(18)
   
*
 
Brenton L. Saunders
   
24,987
(19)
   
*
 
Peter J. Zimetbaum, M.D.
   
40,435
(20)
   
*
 
All directors and executive officers as a group
   
6,196,313
(21)
   
2.31
%
 

* Less than 1%
(1) For purposes of computing the percentage of outstanding shares of common stock held by each person named in the table on a given date, any security which such person has the right to acquire within 60 days after such date is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
 
(2) Based on the information provided pursuant to Amendment No. 9 to a statement on a Schedule 13G/A filed with the SEC on February 14, 2013 by Wellington Management Company, LLP (Wellington Management).  Wellington Management reported that it has shared voting power with respect to 7,814,357 shares of common stock and shared dispositive power with respect to 36,777,637 shares of common stock.  Wellington Management acts as investment advisor to various clients who have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares of common stock deemed to be beneficially owned by Wellington Management.  Other than Vanguard Specialized Funds – Vanguard Health Care Fund, no such client of Wellington Management was known to have such right or power with respect to more than five percent of the shares of our common stock.
 
(3) Based on the information provided pursuant to Amendment No. 19 to a statement on a Schedule 13D filed with the SEC on June 11, 2013 (the Icahn Schedule 13D) by Carl C. Icahn and Icahn Associates Corp. with respect to itself, the other members of the Icahn Group, and certain other affiliated entities of Carl C. Icahn (collectively, the Reporting Persons).  The Reporting Persons reported that (i) High River Limited Partnership, a Delaware limited partnership (High River), has sole voting power and sole dispositive power with regard to 6,132,398 shares of common stock, and that each of Hopper Investments LLC (Hopper), Barberry Corp. (Barberry) and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares; (ii) Icahn Partners LP, a Delaware limited partnership (Icahn Partners), has sole voting power and sole dispositive power with regard to 9,071,470 shares of common stock, and each of Icahn Onshore LP (Icahn Onshore), Icahn Capital LP (Icahn Capital), IPH GP LLC (IPH), Icahn Enterprises Holdings L.P. (Icahn Enterprises Holdings), Icahn Enterprises G.P. Inc. (Icahn Enterprises GP), Beckton Corp. (Beckton) and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares; (iii) Icahn Partners Master Fund LP, a Cayman Islands exempted limited partnership (Icahn Master), has sole voting power and sole dispositive power with regard to 9,905,159 shares of common stock, and that each of Icahn Offshore LP (Icahn Offshore), Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares; (iv) Icahn Partners Master Fund II LP, a Cayman Islands exempted limited partnership (Icahn Master II), has sole voting power and sole dispositive power with regard to 3,852,960 shares of common stock, and each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares; and (v) Icahn Partners Master Fund III LP, a Cayman Islands exempted limited partnership (Icahn Master III), has sole voting power and sole dispositive power with regard to 1,700,018 shares of common stock, and each of Icahn Offshore, Icahn Capital, IPH, Icahn Enterprises Holdings, Icahn Enterprises GP, Beckton and Mr. Icahn has shared voting power and shared dispositive power with regard to such shares.
 
(4) Based on the information provided pursuant to Amendment No. 11 to a statement on a Schedule 13G/A filed with the SEC on February 14, 2014 by Vanguard Specialized Funds – Vanguard Health Care Fund (Vanguard).  Vanguard reported that it has sole voting power with respect to 25,903,000 shares of common stock.
 
(5) Based on the information provided pursuant to Amendment No. 8 to a statement on a Schedule 13G/A filed with the SEC on February 14, 2013 by ClearBridge Investments, LLC (ClearBridge).  ClearBridge reported that it has sole voting power with respect to 17,465,420 shares of common stock and sole dispositive power with respect to 17,555,701 shares of common stock.
 
(6) Based on the information provided pursuant to Amendment No. 1 to a statement on a Schedule 13G/A filed with the SEC on February 13, 2013 by Capital Research Global Investors (Capital Research), a division of Capital Research and Management Company (CRMC).  Capital Research reported that it has sole voting and dispositive power with respect to 16,890,200 shares of common stock, and is deemed to be the beneficial owner of 16,890,200 shares of common stock as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.
 
(7) Includes 122,643 shares of stock that are subject to a risk of forfeiture, 1,397,168 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013 and 53,171 shares held by a 501(c)(3) charitable foundation, as to which Mr. Solomon disclaims beneficial ownership. Does not include target grants of 95,800 and 43,212 performance stock units granted on December 5, 2011 and May 7, 2012, respectively, which vest, if at all, following the conclusion of fiscal year 2015, based on the achievement of certain performance metrics.
 
(8) Includes 43,410 shares of stock that are subject to a risk of forfeiture, 489,373 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013 and 92,322 shares which are pledged as security. Does not include target grants of 23,850, 11,000 and 20,070 performance stock units granted on December 5, 2011, May 7, 2012, and May 21, 2013, respectively, which vest, if at all, following the conclusion of fiscal year 2015, fiscal year 2015 and fiscal year 2016, respectively, based on the achievement of certain performance metrics.
(9) Includes 51,750 shares of stock that are subject to a risk of forfeiture and includes 434,230 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.  Does not include target grants of 22,400, 10,236 and 18,632 performance stock units granted on December 5, 2011, May 7, 2012, and May 21, 2013, respectively, which vest, if at all, following the conclusion of fiscal year 2015, fiscal year 2015 and fiscal year 2016, respectively, based on the achievement of certain performance metrics.
 
(10) Includes 66,979 shares of stock that are subject to a risk of forfeiture and includes 133,639 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.  Does not include target grants of 19,100, 8,600 and 15,930 performance stock units granted on December 5, 2011, May 7, 2012, and May 21, 2013, respectively, which vest, if at all, following the conclusion of fiscal year 2015, fiscal year 2015 and fiscal year 2016, respectively, based on the achievement of certain performance metrics.
 
(11) Includes 67,103 shares of stock that are subject to a risk of forfeiture and includes 101,139 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.  Does not include target grants of 19,100, 8,800, and 15,910 performance stock units granted on December 5, 2011, May 7, 2012, and May 21, 2013, respectively, which vest, if at all, following the conclusion of fiscal year 2015, fiscal year 2015 and fiscal year 2016, respectively, based on the achievement of certain performance metrics.
 
(12) Includes 3,417 shares of stock that are subject to a risk of forfeiture and includes 35,861 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(13) Includes 1,629 shares of stock that are subject to a risk of forfeiture and includes 22,815 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(14) Includes 3,417 shares of stock that are subject to a risk of forfeiture and includes 30,982 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(15) Includes 10,000 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(16) Includes 1,629 shares of stock that are subject to a risk of forfeiture and includes 22,815 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(17) Includes 2,751 shares of stock that are subject to a risk of forfeiture and includes 248,361 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013. Does not include 10,000 shares beneficially owned by a charitable remainder trust as to which Dr. Olanoff disclaims beneficial ownership.
 
(18) Includes 3,417 shares of stock that are subject to a risk of forfeiture and includes 44,982 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(19) Includes 1,629 shares of stock that are subject to a risk of forfeiture and includes 22,815 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(20) Includes 3,417 shares of stock that are subject to a risk of forfeiture and includes 33,361 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013.
 
(21) Includes 675,055 shares of stock that are subject to a risk of forfeiture and includes 3,792,034 shares issuable pursuant to options that were exercisable on June 24, 2013 or which become exercisable within 60 days of June 24, 2013. Does not include target grants of 180,250, 81,848 and 70,542 performance stock units granted on December 5, 2011, May 7, 2012, and May 21, 2013, respectively, which vest, if at all, following the conclusion of fiscal year 2015, fiscal year 2015 and fiscal year 2016, respectively, based on the achievement of certain performance metrics.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Federal securities laws require our executive officers and directors and persons owning more than 10% of our common stock to file certain reports on ownership and changes in ownership with the SEC. Based on a review of our records and other information, we believe that during fiscal year 2013, our executive officers and directors and all persons holding more than 10% of our common stock timely filed all Section 16 reports, except for the following reports on Form 4 which were filed late: (i) a report covering a sale of shares of our common stock by Jerome Lynch on August 3, 2012, and (ii) a report covering the delivery of shares of our common stock to the Company by Frank Murdolo on September 15, 2012 in satisfaction of his tax withholding obligations upon the vesting of restricted stock awards.
PROPOSAL 1
ELECTION OF DIRECTORS
 
Overview of Election of Directors
 
Our entire Board is elected each year at the Annual Meeting of Stockholders, and we are recommending a highly qualified, experienced and diverse slate of eleven nominees for election at the 2013 Annual Meeting, each of whom has been recommended by our Nominating and Governance Committee and approved by our Board.  The eleven nominees listed below include nine independent directors as defined in the NYSE rules and regulations.   We are confident that our Board of Directors consists of the right group to best serve the interests of all of our stockholders.
 
Each nominee elected as a director will continue in office until the next Annual Meeting of Stockholders or until his or her successor has been elected or appointed.  Each person nominated below has consented to be named in this Proxy Statement and has agreed to serve if elected.
 
The names of our Board nominees and certain other information about them is set forth further below.
 
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE BOARD’S ELEVEN NOMINEES FOR DIRECTOR ON THE ENCLOSED PROXY CARD.
 
The persons named as proxies intend to vote the proxies “FOR” the election of each of the nominees unless you indicate on the proxy card a vote “AGAINST” or an abstention with respect to any of the nominees.  If for some reason any director nominee is unable to serve, or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board, and unless you indicate otherwise on your proxy card, the proxies will be voted in favor of the remaining nominees.  If any substitute nominees are designated, we will file an amended proxy statement that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected, and includes certain biographical and other information about such nominees required by SEC rules.
 
Biographical Information for Nominees
 
Howard Solomon (Director since 1964)
 
Mr. Solomon, 85, is Chairman, Chief Executive Officer and President of Forest. He began his career as an attorney at leading law firms in New York and joined Forest in 1964 as a director and secretary of the Board while serving as outside counsel for the Company. He became CEO of Forest in 1977 and Chairman in 1998. Mr. Solomon is a Trustee of the New York Presbyterian Hospital and previously served on the Board of Cold Spring Harbor Laboratories. He is currently a member of the Executive Committee of the Board of Directors of the Metropolitan Opera and Chairman of its Finance Committee. He also serves on the Board of the New York City Ballet. Mr. Solomon graduated from the City College of New York and holds a J.D. from Yale University.
 
We believe that Mr. Solomon’s experience as a senior executive and leader in our industry, his in-depth knowledge of our Company and its day-to-day operations and his strong record and strategic vision for the Company qualify him to serve on our Board.
 
Nesli Basgoz, M.D. (Director since 2006)
 
Dr. Basgoz, 55, is the Associate Chief for Clinical Affairs, Division of Infectious Diseases at Massachusetts General Hospital (MGH) and serves on the hospital's Board of Trustees. In addition, Dr. Basgoz is an Associate Professor of Medicine at Harvard Medical School. Previously, she served as Clinical Director in the Infectious Diseases Division of MGH for six years. Dr. Basgoz earned her M.D. Degree and completed her residency in internal medicine at Northwestern University Medical School. She also completed a fellowship in the Infectious Diseases Division at the University of California at San Francisco. She is board certified in both infectious diseases and internal medicine.
Dr. Basgoz’s broad medical expertise and nationally recognized leadership in the medical field, as well as her extensive clinical trial experience has equipped her to effectively advise the Board and management with respect to many strategic matters, including navigating regulatory approvals and the clinical trial process.  Moreover, her particular expertise in infectious diseases has enabled Dr. Basgoz to advise the Board and management with respect to the Company’s current and potential portfolio of drugs within the relevant indications, including our Teflaro® product and other antibiotics under development or being considered for development at the Company.
 
Christopher J. Coughlin (Director since 2011)
 
Mr. Coughlin, 60, served as an advisor to Tyco International from 2010 until September 30, 2012. He was Executive Vice President and Chief Financial Officer of Tyco International from 2005 to 2010. During his tenure, he played a central role in the separation of Tyco into five independent, public companies and provided financial leadership surrounding major transactions, including the $2 billion acquisition of Broadview Security, among many other responsibilities and accomplishments. Prior to joining Tyco, he worked as the Chief Operating Officer of the Interpublic Group of Companies from June 2003 to December 2004, as Chief Financial Officer from August 2003 to June 2004 and as a director from July 2003 to July 2004. Previously, Mr. Coughlin was Executive Vice President and Chief Financial Officer of Pharmacia Corporation from 1998 until its acquisition by Pfizer in 2003. Prior to that, he was Executive Vice President of Nabisco Holdings and President of Nabisco International. From 1981 to 1996 he held various positions, including Chief Financial Officer, at Sterling Drug. Mr. Coughlin is currently serving as the lead independent director on the board of Dun & Bradstreet, where he is a former member of the Audit Committee, chairs the Board Affairs Committee, and is a member of the Compensation and Benefits Committee. He also serves on the board of Covidien plc, where he is Chair of the Compliance Committee and a member of its Transaction Committee. In addition, Mr. Coughlin previously served on the boards of the Interpublic Group of Companies, Monsanto Company and Perrigo Company. Mr. Coughlin has a B.S. in accounting from Boston College.
 
A veteran of service and leadership on public company boards, Mr. Coughlin’s wide array of senior management positions in global companies, pharmaceutical background, finance experience and compliance and governance expertise enhances the Board’s ability to make strategic decisions for the long-term growth of the Company.

Kenneth E. Goodman (Director since 1998)
 
Mr. Goodman, 65, is the former President and Chief Operating Officer of Forest, a position that he held from 1998 to 2006. For eighteen years prior thereto, Mr. Goodman served as Forest's Vice President, Finance and Chief Financial Officer and was named Executive Vice President, Operations in February 1998. From 1975 to 1980, he served as a senior financial officer at Wyeth, and before that, as a C.P.A. at Main Hurdman, which is now part of KPMG LLP. Mr. Goodman currently serves Syracuse University as Vice Chairman of the Board of Trustees, a member of the Executive Committee and Chairman of the Audit Committee; he previously served as Chairman of the Budget Committee. He is also Chairman of the International Board of Directors of the Israel Cancer Research Fund and Co-Chairman of its New York Board. Mr. Goodman is a C.P.A. and holds a B.S. degree from The Whitman School of Management at Syracuse University.
 
Mr. Goodman’s intimate knowledge of the Company’s operations, having served as President and Chief Operating Officer of Forest with broad responsibility for sales, commercial operations, compliance, manufacturing operations, information technology and other areas, his substantial expertise in financial matters, and his service as an important interface between management and the Board as its presiding independent director, make him a valuable member of the Board.
 
Vincent J. Intrieri (Director since 2013)
 
Mr. Intrieri, 56, has, since October 1998, been employed in various investment-related capacities by several entities controlled by Carl C. Icahn. Since January 2008, Mr. Intrieri has served as Senior Managing Director of Icahn Capital LP. In addition, since November 2004, Mr. Intrieri has been a Senior Managing Director of Icahn Onshore LP and Icahn Offshore LP. Mr. Intrieri has been a director of CVR Refining GP, LLC since January 2013; Navistar International Corporation since October 2012; Chesapeake Energy Corporation since June 2012; and CVR Energy, Inc. since May 2012.
Mr. Intrieri was previously a director of Federal−Mogul Corporation from December 2007 to June 2013; a director of Icahn Enterprises G.P. Inc., from July 2006 to September 2012; Senior Vice President of Icahn Enterprises G.P. Inc. from October 2011 to September 2012; a director of Dynegy Inc. from March 2011 to September 2012; chairman of the board and a director of PSC Metals Inc. from December 2007 to April 2012; a director of Motorola Solutions, Inc. from January 2011 to March 2012; a director of XO Holdings from February 2006 to August 2011; a director of National Energy Group, Inc. from December 2006 to June 2011; a director of American Railcar Industries, Inc. from August 2005 until March 2011; a director of WestPoint Home LLC from November 2005 to March 2011; chairman of the board and a director of Viskase Companies, Inc. from April 2003 to March 2011; a director of WCI Communities, Inc. from August 2008 to September 2009; a director of Lear Corporation from November 2006 to November 2008; and President and Chief Executive Officer of Philip Services Corporation from April 2005 to September 2008. Mr. Intrieri graduated with distinction from The Pennsylvania State University (Erie Campus) in 1984 with a B.S. in Accounting, and was previously a certified public accountant.

Mr. Intrieri was selected as a director nominee pursuant to the terms of a Nomination and Standstill Agreement as discussed below.

Pierre Legault (Director since 2012)
 
Mr. Legault, 53, has served as Executive Chairman of Nephrogenex, a pharmaceutical company focused on the treatment of diabetic kidney disease, since November of 2012, and is the President and CEO of Stone Management LLC, a firm focused in the areas of business development and board assistance, since April 2012. From 2010 to 2012, he was the Chief Executive Officer of Prosidion Ltd., a UK mid-size biotechnology firm and fully integrated subsidiary of Astellas Pharmaceuticals. From 2009 to 2010, he served as Executive VP, Chief Financial Officer and Treasurer of OSI Pharmaceuticals, a mid-size biotechnology company. He was also Senior Executive VP and Chief Administrative Officer of Rite Aid Corporation, a Fortune 500 pharmaceutical retail company, from June 2007 to 2009. Previously, Mr. Legault held several senior positions over a period exceeding 15 years with Sanofi-Aventis and predecessor companies, last serving as Worldwide President of a large global Sanofi-Aventis business unit from 2003 to 2005. Prior positions included the Senior VP Deputy CEO and Chief Financial Officer of Aventis Pharmaceuticals Inc. (2000 to 2003), Global Senior VP Finance and Treasurer of Hoechst Marion Roussel, Inc. (1998 to 2000), VP and Chief Financial Officer, North America Finance, IT and Administration of Marion Merrell Dow, Inc. (1997 to 1998), and VP and Chief Financial Officer of Marion Merrell Dow Pharmaceutical Canada (1990 to 1996). In addition, Mr. Legault has served on several public, private and nonprofit company boards and audit committees, as well as on several advisory boards, including the following: OSI Investment Holdings GMBH (Chairman), a venture capital firm (2009-2012), Cyclacel Pharmaceutical Inc., a publicly traded biotech company (2006-2008), PJC Inc., a publicly traded pharmacy retail company (2005-2007), as well as other private boards. Mr. Legault studied at the Harvard Business School, McGill University and University of Montreal (HEC) and holds BAA, MBA, CA and CPA degrees.
 
Based upon Mr. Legault's impressive background as an executive officer and board member of various companies, including biotech companies, the Board believes that Mr. Legault has the requisite set of skills to serve as a Board member of the Company.
 
Gerald M. Lieberman (Director since 2011)
 
Mr. Lieberman, 66, most recently served as the President and Chief Operating Officer, as well as a member of the board of directors of AllianceBernstein from 2004 to 2009, where he oversaw several critical functions for AllianceBernstein, including finance, global risk management, technology, operations, human resources and investor and public relations. In addition, he was instrumental in developing AllianceBernstein's global integrated platform and enhancing its corporate governance and financial transparency. Prior to joining AllianceBernstein in 1998, Mr. Lieberman held a number of senior positions at Fidelity Investments from 1993 to 1998, including Chief Financial Officer and Chief of Administration and he was a member of Fidelity's operating committee, reporting directly to the Chairman. Before joining Fidelity, Mr. Lieberman spent 14 years with Citicorp, where he served as Senior Human Resources Officer and a member of the policy committee, reporting to the Company's Chairman and Chief Executive Officer. At Citicorp, he also held several other senior leadership positions, including Chief Executive Officer of Citibank Mexico and Division Head of Latin America. Mr. Lieberman served as a director at Computershare. He served 9 years as a trustee of the University of Connecticut Foundation and was a practicing C.P.A with Arthur Andersen. He received a B.S. from the University of Connecticut and attended New York University's Graduate School of Business Administration.
Mr. Lieberman’s senior roles at AllianceBernstein and Fidelity Investments, premier investment and asset management firms, and his breadth and depth of experiences, including his finance and accounting expertise and career-long focus on risk management, and his extensive global experience enable him to provide important and valuable perspectives to the Board.
 
Lawrence S. Olanoff, M.D., Ph.D. (Director since 2006)
 
Dr. Olanoff, 61, served as Forest's Chief Operating Officer from 2006 to 2010 and currently serves as Senior Scientific Advisor to the Company. From July 2005 to October 2006, Dr. Olanoff was President and Chief Executive Officer at Celsion Corporation, an oncology drug development company. He also served as Executive Vice President and Chief Scientific Officer of Forest from 1995 to 2005. Prior to joining Forest in 1995, Dr. Olanoff served as Senior Vice President of Clinical Research and Development at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group) and at the Upjohn Company in a number of positions including Corporate Vice President of Clinical Development and Medical Affairs. Over his entire career, he was involved in 30 product approvals. In addition, he is currently an adjunct Assistant Professor and Special Advisor to the President for Corporate Affairs at the Medical University of South Carolina (MUSC), an ex-officio Director of the MUSC Foundation for Research Development, which is a non-profit foundation created to benefit the university, as well as the Chairman of the Board of Caelus Biosciences, Inc. (formerly Ariel Pharmaceuticals, Inc.), a private, development-stage pharmaceutical company. He holds a Ph.D. in biomedical engineering and an M.D. degree from Case Western Reserve University.
 
Dr. Olanoff’s detailed knowledge of the pharmaceutical industry, his broad operational experience and research and development leadership over the course of his career at Forest, Sandoz and Upjohn, including with respect to thirty product approvals, and his service as a senior executive and intimate knowledge of Forest’s operations combine to make him an important asset to the Board.
 
Lester B. Salans, M.D. (Director since 1998)
 
Dr. Salans, 77, is a Clinical Professor and member of the Clinical Attending Staff of Internal Medicine at the Mount Sinai Medical School. Prior thereto, Dr. Salans was a senior executive at Sandoz Pharmaceutical Corporation (now a division of the Novartis Group). Dr. Salans is a former Director of the National Institutes of Arthritis, Diabetes, Digestive and Kidney Diseases of the National Institutes of Health. He was a Professor of Medicine and Dean of the Faculty of the Mt. Sinai Medical School and Senior Vice President of the Mt. Sinai Medical Center in New York. He served as Professor of Medicine and Director of the Division of Endocrinology at the Dartmouth Hitchcock Medical Center, Hanover, from 1968-1975. He also founded and is president of LBS Advisors, Inc., a consultancy serving several pharmaceutical and biotechnology companies, academic institutions, the National Institutes of Health and many investment firms. He serves on the board of directors of PharmaIN Corporation, a biopharmaceutical company. Dr. Salans earned a B.A. from University of Michigan and M.D. from University of Illinois.
 
Dr. Salans’ recognized leadership in the medical field, his varied positions in the pharmaceutical sector, and particular medical expertise in the fields of diabetes mellitus, obesity and endocrinology and clinical research experience bring valuable perspectives to the Board on research and development matters generally and with respect to the Company’s current and potential portfolio drugs within such indications.  As a practicing physician in addition to his other roles, Dr. Salans bridges the gap between basic science and clinical medicine, enabling him to offer valuable insights to the Board.
Brenton L. Saunders (Director since 2011)
 
Mr. Saunders, 43, has been the Chief Executive Officer of Bausch + Lomb and a board director since March 2010. Previously, Mr. Saunders served as a senior executive with Schering-Plough from 2003 to 2010, most recently as President of Global Consumer Health Care. He also served as Head of Integration for both Schering-Plough's merger with Merck & Co. and for its $16 billion acquisition of Organon BioSciences. Before joining Schering-Plough, Mr. Saunders was a Partner and Head of the Compliance Business Advisory Group at PricewaterhouseCoopers LLP from 2000 to 2003. Prior to that, he was Chief Risk Officer at Coventry Health Care between 1998 and 1999 and a co-founder of the Health Care Compliance Association in 1995. Mr. Saunders began his career as Chief Compliance Officer for the Thomas Jefferson University Health System. In addition to the Bausch + Lomb board, he serves on the boards of ElectroCore LLC and the Overlook Hospital Foundation. He is also the former Chairman of the New York chapter of the American Heart Association. Mr. Saunders is a member of the Federal Reserve Bank of New York's Upstate New York Regional Advisory Board, PhRMA and The Business Council. He is also a member of the Board of Trustees of the University of Pittsburgh. He received a B.A. from the University of Pittsburgh, an M.B.A. from Temple University School of Business, and a J.D. from Temple University School of Law.
 
Mr. Saunders’ leadership experience as CEO of a global, branded healthcare company and deep pharmaceutical experience make him an asset to the Board.  In addition to his other attributes, his 15 years of senior compliance experience and broad regulatory expertise at a number of different companies, including Bausch + Lomb and Schering-Plough, are particularly valuable.
 
Peter J. Zimetbaum, M.D. (Director since 2009)
 
Dr. Zimetbaum, 49, has served as Director of Clinical Cardiology at Beth Israel Deaconess Medical Center in Boston (BIDMC) since 2005 and is the Director of ECG and Arrhythmia Core Laboratory at the Harvard Clinical Research Institute. Additionally, since 2006, Dr. Zimetbaum has been an Associate Professor of Medicine at the Harvard Medical School (HMS), and he currently serves on the HMS Standing Committee on Conflicts of Interest. Dr. Zimetbaum received his M.D. degree from the Albert Einstein College of Medicine in 1990 and is board certified in both cardiovascular medicine and cardiovascular electrophysiology.
 
Dr. Zimetbaum’s extensive experience in the practice of medicine and clinical trials provides the Board and management with the perspectives of physicians and other healthcare providers who use the Company’s products and with insight into the clinical trial process.  His expertise in cardiology, including the cardiovascular safety profile of products, is a valuable resource to the Board and management in analyzing and developing current and potential portfolio drugs.  In addition, his service on Harvard Medical School’s conflict of interest committee provides the Company with important insights on the ethics of healthcare.
 
Nomination and Standstill Agreement and Appointment of Vincent J. Intrieri to the Board
 
On June 10, 2013, the Company entered into a Nomination and Standstill Agreement (the Agreement) with Carl C. Icahn, Vincent J. Intrieri, Icahn Capital LP and certain affiliated entities (collectively, the Icahn Group) pursuant to which, among other things, the Icahn Group agreed not to conduct a proxy contest for the election of directors with respect to the Annual Meeting or acquire more than 15% of the Company’s common stock for at least one year after the effective date of the Agreement, subject to certain exceptions. Pursuant to the Agreement, the Company increased the size of the Board from ten to eleven members, appointed Mr. Intrieri, Senior Managing Director of Icahn Capital LP, to the Board, and included Mr. Intrieri in its slate of nominees for election to the Board at the Annual Meeting The Company further agreed to use its reasonable best efforts to cause the election of the Mr. Intrieri to the Board at the Annual Meeting. including recommending that the Company’s stockholders vote in favor of Mr. Intrieri along with the Company’s slate of nominees.
 
For so long as Mr. Intrieri is on the Board, the Icahn Group has agreed to vote all of its shares of common stock of the Company in favor of the election of all of the Company’s director nominees at each annual meeting of the Company.  Also pursuant to the Agreement, effective June 10, 2013 and until the date when Mr. Intrieri ceases to be a member of the Board, subject to limited exceptions, the Icahn Group has also agreed to adhere to certain standstill obligations, including the obligation to not solicit proxies or consents or influence others with respect to the same.  The Icahn Group has further agreed, effective June 10, 2013 and until the later of the date when Mr. Intrieri ceases to be a member of the Board and the one-year anniversary of the Agreement, and subject to certain exceptions, that the Icahn Group will not acquire or otherwise beneficially own more than 15% of the Company’s outstanding voting securities.
Pursuant to the Agreement, the Company appointed Mr. Intrieri to the Board’s Succession Planning Committee.  In addition, from the effective date of the Agreement until the Company’s 2014 Annual Meeting of Stockholders (the 2014 Annual Meeting), for so long as Mr. Intrieri is a member of the Board, the Board will include him as a member of an Executive Committee formed by the Board and will generally consider the appointment and employment of executive officers and M&A transactions at the full Board level or in committees of which Mr. Intrieri is a member.  The size of the Board will not be increased beyond eleven persons prior to the 2014 Annual Meeting.
 
In the event Mr. Intrieri resigns from the Board or is rendered unable to, or refuses to, be appointed to, or for any other reason fails to serve or is not serving on the Board (other than as a result of not being nominated by the Company for election to the Board at any annual meeting subsequent to the Annual Meeting), the Icahn Group will be entitled to designate a replacement director that is approved by the Company, such approval not to be unreasonably withheld.  For any annual meeting subsequent to the Annual Meeting, the Company is required to notify the Icahn Group in writing no less than 45 calendar days in advance of the Company’s advance notice deadline whether Mr. Intrieri will be nominated for election by the Company at such annual meeting. If Mr. Intrieri is so nominated, the Company will use commercially reasonable efforts to cause his election to the Board.
 
If at any time the Icahn Group ceases to hold a net long position, as defined in the Agreement, of more than 15,331,002 shares of the Company’s common stock, the Company’s obligations under the Agreement terminate and Mr. Intrieri must resign from the Board.
 
The foregoing is not a complete description of the terms of the Agreement. For a further description of the terms of the Agreement, including a copy of the Agreement, please see our Current Report on Form 8-K that we filed with the SEC on June 11, 2013.
CORPORATE GOVERNANCE
 
We seek to follow best practices in corporate governance in a manner that is in the best interests of our business and our stockholders.  We are in compliance with the corporate governance requirements imposed by the Sarbanes-Oxley Act, the SEC and the NYSE and will continue to review our policies and practices to meet ongoing developments in this area. To this end, the Board consulted with leading authorities in corporate governance, Dean Robert C. Clark of the Harvard Law School and John C. Wilcox, Chairman of Sodali Ltd., regarding our governance practices.  We have also committed to meeting with an independent corporate governance expert to review our policies and practices on an annual basis.
 
Code of Business Conduct and Ethics
 
All of our directors and employees, including our CEO, Chief Financial Officer (CFO), all other senior financial officers and all other executive officers, are required to comply with our Code of Business Conduct and Ethics.  You can access our Code of Business Conduct and Ethics by clicking on the “Corporate Governance” link in the “Investor Center” section of our website at www.frx.com.  The Code of Business Conduct and Ethics is also available in print to any requesting stockholder.  We post amendments to, and waivers of, our Code of Business Conduct and Ethics, as applicable, on our website.
 
Corporate Governance Guidelines
 
Our Corporate Governance Guidelines (the Guidelines) reflect the principles by which we operate.  From time to time, the Nominating and Governance Committee and the Board review and revise the Guidelines in response to regulatory requirements and evolving best practices.  In addition to setting forth the standards for Director Qualifications and Responsibilities, our Guidelines provide for:
 
· Majority voting in uncontested elections of Directors;
· Annual Say-on-Pay votes to provide our stockholders with a voice on executive compensation;
· Annual evaluation of and succession planning for key managers, including our CEO and other senior executives;
· Stock ownership guidelines for our executive officers and non-employee directors;
· A holding period requirement for certain shares of common stock acquired by our executive officers; and
· An anti-hedging policy for our executive officers and non-employee directors.

Under our stock ownership guidelines, our executive officers are required to hold shares of Company common stock in amounts ranging from one times to six times their annual base salary, depending upon their seniority, on or before December 31st of the year which includes the fifth anniversary of the date they became subject to the stock ownership guidelines, and our non-employee directors are required to hold shares of Company common stock in amounts equal to three times their annual retainer fee on or before December 31st of the year which includes the seventh anniversary of the date they became subject to the stock ownership guidelines.  Under the holding period requirement adopted in 2012, our executive officers who are subject to the stock ownership guidelines are also required to hold all shares obtained upon the exercise of Company stock options and shares acquired through restricted stock awards and performance stock units until they have satisfied the stock ownership guidelines, with exceptions provided for shares required to be sold in order to exercise the option or pay the taxes accruing as a result of the exercise of the option or the vesting of the restricted stock award or performance stock unit and in connection with corporate transactions that are generally available to stockholders.  Finally, our anti-hedging policy prohibits our executive officers and directors from hedging their ownership in Company common stock, including trading in options, puts, calls or other derivative instruments designed to limit or eliminate the risk from owning the Company’s common stock.
 
You can access our Corporate Governance Guidelines by clicking on the “Corporate Governance” link in the “Investor Center” section of our website at www.frx.com.  The Corporate Governance Guidelines are also available in print to any requesting stockholder.
Disclosure, Legal Compliance and Risk Management Committee
 
The Disclosure, Legal Compliance and Risk Management Committee (the Disclosure Committee) is made up of the following members of senior management:  CFO, Chief Commercial Officer, Senior Vice President – General Counsel, Senior Vice President – Research and Development, and Senior Vice President – Corporate Development and Strategic Planning.  The primary purpose of the Disclosure Committee is to review and evaluate our disclosure documents, to develop and monitor a program of risk assessment and management and to evaluate legal compliance and compliance with our Code of Business Conduct and Ethics.  The Disclosure Committee met four times during the fiscal year ended March 31, 2013.  The Disclosure Committee does not have oversight responsibility for financial matters, including financial statements and systems of internal control over financial reporting, which are monitored by the Company’s Audit Committee.
 
Compliance Committee
 
We have established a Compliance Committee chaired by our Vice President – Compliance and Chief Compliance Officer.  Our Compliance Committee is responsible for overseeing our program for compliance with applicable laws and regulations specific to the pharmaceutical industry.  The Compliance Committee includes senior management and senior departmental personnel from various corporate divisions (marketing, contract-customer operations, medical and scientific affairs, sample policy compliance, operations, corporate quality management, internal audit and legal counsel).  Other personnel are invited to participate from time to time as specific issues warrant.  The Compliance Committee meets approximately every six weeks to review issues related to our Comprehensive Compliance Program, establish and approve compliance policies and provide support, guidance and advice to our Chief Compliance Officer regarding the compliance program.
 
Certain Relationships and Related Persons Transactions
 
Related Person Transactions.
 
As more fully described in the subsection entitled “Letter Agreement with Howard Solomon” of the “Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards” appearing on Page 44 of this Proxy Statement, on May 22, 2013, Howard Solomon entered into a letter agreement with the Company in connection with his retirement as the Company’s CEO pursuant to which he will continue to serve as Senior Advisor to and Director of the Company for an annual salary and other compensation.
 
David F. Solomon, our Senior Vice President – Corporate Development and Strategic Planning, is the son of Howard Solomon, Chairman of the Board, CEO, President and a director of the Company.
 
In connection with his retirement as the Company’s Chief Operating Officer, the Company and Dr. Olanoff entered into a Consultant Services Letter Agreement dated January 1, 2011, which was amended and restated on April 22, 2013. Pursuant to his Consultant Services Letter Agreement, Dr. Olanoff may provide consulting services to Forest on a project-by-project basis relating to the evaluation of products and potential product opportunities and is compensated at the rate of $500 per hour. In addition, in the event the Company requires Dr. Olanoff to travel in connection with the performance of such services, the Company will reimburse Dr. Olanoff for out-of-pocket expenses in accordance with the Company’s expense reimbursement policies, including the reasonable cost of transportation, meals and lodging, where applicable.
 
The compensation paid to Mr. Solomon during fiscal year 2013 is reported in the Summary Compensation Table on Page 41 of this Proxy Statement; and the compensation paid to Dr. Olanoff in connection with his Consultant Services Letter Agreement is reported in the Director Compensation Table on Page 52 of this Proxy Statement.
Related Persons Transaction Procedures.  The Board has adopted written policies and procedures for the review and approval of transactions involving the Company and related parties, such as directors, executive officers and their immediate family members, and has allocated the responsibility for carrying out these policies among the Audit, Nominating and Governance and Compensation Committees of the Board as set forth in the table below:

Transaction Type
 
Committee Responsible for Reviewing and Approving or Ratifying Transaction
Any transaction between the Company and any director
 
Nominating and Governance Committee
 
With respect to matters other than executive officer compensation, any transaction or series of transactions (i) in which the Company or a subsidiary is a participant, (ii) the amount involved exceeds $120,000 and (iii) a Related Person (as defined in Item 404 of Regulation S-K) has a direct or indirect material interest
 
Audit Committee
 
Compensation arrangements with executive officers of the Company whose annual compensation exceeds $120,000
 
Compensation Committee
 
In addition, under the Company’s written Code of Business Conduct and Ethics, all conflicts of interest, including transactions with Related Persons, are prohibited unless approved by the Company’s Board or a Committee of the Board.
BOARD MATTERS; COMMITTEES
 
Board of Directors Meetings and Attendance of Directors
 
The Board held fifteen meetings during the fiscal year ended March 31, 2013.  During fiscal year 2013, each of the directors attended 75% or more of the combined total meetings of the Board and the respective committees on which he or she served.  Directors are required to make every reasonable effort to attend the Annual Meeting of Stockholders.  All members of the Board who were then in office attended our 2012 Annual Meeting of Stockholders.
 
Board Leadership Structure
 
Mr. Solomon serves as Chairman and CEO of the Company. On May 22, 2013, Mr. Solomon entered into an agreement with the Company in connection with his retirement as the Company’s CEO pursuant to which he agreed to continue serving as the Company’s CEO and President until December 31, 2013, or such later date as his successor as CEO is appointed. In order to retain Mr. Solomon’s extensive wisdom and experience for the benefit of the Board, the roles of CEO and Chairman will be separated upon Mr. Solomon’s retirement to permit Mr. Solomon to retain the Chairman position through the 2014 Annual Meeting of Stockholders, subject to his re-election to the Board at the 2013 Annual Meeting. For more information, please see the subsection entitled “Letter Agreement with Howard Solomon” of the “Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards” appearing on Page 44 of this Proxy Statement
 
The Company’s Corporate Governance Guidelines provide for the position of a presiding director, a position currently held by Mr. Goodman.  As presiding director, Mr. Goodman is responsible for, among other things, presiding at all meetings at which the Chairman is not present, including the executive sessions of the independent directors that are held after each Board meeting, and apprising the Chairman of the issues considered and decisions made at such meetings; being available for consultation and direct communication with the Company’s stockholders; calling meetings of the independent directors when necessary and appropriate; and, in consultation with the other independent directors, advising the Chairman as to an appropriate schedule of Board meetings and reviewing and providing the Chairman with input regarding the agenda for Board meetings.
 
In addition, the Board believes that its governance practices support its independent oversight, including having open and direct communication with management, encouraging independent director input on meeting agendas, performing annual evaluations of director performance and holding regular executive sessions after each Board meeting. In addition, each independent director has access to the Chief Executive Officer and other Company executives upon request, and may call meetings of the independent directors and may request agenda topics to be added or dealt with in more detail at meetings of the full Board or an appropriate Board committee.
 
The Board’s Role in Risk Oversight
 
In order to assist the Board in overseeing risk management, we use enterprise risk management (ERM), a company-wide initiative overseen by the Disclosure Committee, which in turn reports to the Audit Committee, that involves management and other personnel, in an integrated effort to identify, assess, prioritize and manage a broad range of risks (e.g., financial, operational, business, reputational, governance and managerial) that may affect our ability to execute on our corporate strategy and fulfill our business objectives. The ERM approach is designed to enable the Board to establish a mutual understanding with management of the effectiveness of the Company’s risk management practices and capabilities, to review the Company’s risk exposure and to elevate certain key risks for discussion at the Board or Audit Committee level.
 
While the Board has the ultimate oversight responsibility for the risk management process, various committees of our Board and the Disclosure Committee also have responsibility for risk management.  Our Board is advised by the committees of significant risks and management’s response via periodic updates.  The Board Compliance Committee oversees areas of legal and compliance risks relevant to the pharmaceutical industry. The Audit Committee oversees our financial risk exposures, including monitoring the integrity of our financial statements, financial reporting process and systems of internal controls, accounting and legal compliance and the independence and qualifications of our independent registered public accounting firm, and receives an annual internal controls assessment report from our independent registered public accounting firm.  Additionally, as discussed below in “Executive Compensation – Compensation Discussion and Analysis”, the Compensation Committee attempts to design compensation standards for the Company’s personnel in a way that discourages behavior that may lead to excessive risk-taking.  Finally, as discussed above, the Disclosure Committee is responsible for developing and monitoring a program of risk assessment and management and overseeing our ERM program.
Director Independence
 
The Board has affirmatively determined that the following directors have no material relationship with us and are independent within the meaning of the NYSE definition of “independence”:  Nesli Basgoz, M.D., Christopher J. Coughlin, Kenneth E. Goodman, Vincent Intrieri, Pierre Legault, Gerald M. Lieberman, Lester B. Salans, M.D., Brenton L. Saunders and Peter J. Zimetbaum, M.D.  To assist in making the independence determination, the Board has adopted Director Qualification Standards as part of our Corporate Governance Guidelines.  The Director Qualification Standards satisfy the NYSE independence requirements, and a copy of these standards is attached to this Proxy Statement as Appendix A. In determining that Dr. Basgoz was independent within the meaning of the NYSE definition of “independence”, the Board considered the compensation provided to Dr. Basgoz for consulting services that she rendered to Forest on a project-by-project basis relating to the evaluation of products and potential product opportunities. The aggregate fees of $11,152 paid to Dr. Basgoz as compensation for her consulting services during fiscal year 2013 is also reported in the Director Compensation Table on Page 52 of this Proxy Statement. Independent directors receive no compensation from us for service on the Board or the Committees other than directors’ fees and non-discretionary grants under our 2007 Equity Incentive Plan.
 
Executive Sessions
 
As required by the NYSE listing standards, our non-management directors meet in executive session at which only non-management directors are present on a regularly scheduled basis.  As discussed above, Mr. Goodman, as Presiding Director, presides over each meeting of the independent directors in executive session (see “Board Leadership Structure” above at Page 19 of this Proxy statement).
 
Communications with Directors
 
You may contact the entire Board, any Committee, the non-management directors as a group or any individual director by calling our Audit Committee Hotline at 1-800-461-0825.  An outside vendor collects all reports or complaints and delivers them to the Audit Committee.  The Audit Committee will forward all correspondence to the appropriate director or group of directors.  You are also welcome to communicate directly with the Board at the Annual Meeting of Stockholders.
 
Board Committees
 
The Board has five standing committees:  the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, the Board Compliance Committee and the Science Committee (formed in 2013).  All of the members of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Board Compliance Committee are independent directors within the meaning of the NYSE Listing Standards and Securities Exchange Act of 1934, as amended (the Exchange Act), Rule 10A-3 and Rule 10C-1.  Each of the committees has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by the Company.
 
The Board-approved charters of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Board Compliance Committee are available on our website by clicking on the “Corporate Governance” link under the “Investor Center” section at www.frx.com.  The charters are also available in print to any requesting stockholder.
 
Audit Committee. For the fiscal year ended March 31, 2013, the Audit Committee consisted of Christopher J. Coughlin (the Chairman), Pierre Legault, and Lester B. Salans, M.D.  The Board has determined that each of Messrs. Coughlin and Legault qualify as an “audit committee financial expert” for purposes of the federal securities laws.
The Audit Committee’s primary responsibilities are to:  (i) oversee our financial reporting principles and policies and internal control systems, including review of our quarterly and annual financial statements; (ii) review and monitor the performance and independence of our independent registered public accounting firm and the performance of the internal audit department; (iii) oversee our compliance with legal and regulatory requirements and monitor the effectiveness of our internal systems for ensuring compliance; (iv) provide an open avenue of communication among the independent registered public accounting firm, financial and senior management, the internal audit department and the Board; (v) appoint (subject to stockholder ratification), evaluate, compensate and, where appropriate, terminate and replace our independent registered public accounting firm; and (vi) review and approve any transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a “Related Person” (as that term is defined in Item 404 of Regulation S-K) has any direct or indirect material interest (other than matters relating to compensation arrangements with executive officers, which are approved by the Compensation Committee). The Audit Committee held ten meetings during fiscal year 2013.
 
Compensation Committee.  The Compensation Committee is composed of Brenton L. Saunders (the Chairman), Christopher J. Coughlin, and Gerald M. Lieberman.  Pursuant to the Compensation Committee Charter, the Committee is responsible for (i) discharging the Board’s responsibilities relating to compensation of our executive officers; and (ii)  producing an annual report on executive compensation for inclusion in our Proxy Statement in accordance with applicable rules and regulations. During the fiscal year ended March 31, 2013, the Compensation Committee held four meetings at which the Committee made recommendations concerning compensation for our executive officers for the 2013 fiscal year, and granted stock options, stock awards and performance stock units under the 2007 Equity Incentive Plan.  The Committee approved all equity awards granted during the year at regularly scheduled Board meetings.
 
Nominating and Governance Committee.  The Nominating and Governance Committee is composed of Gerald M. Lieberman (the Chairman), Nesli Basgoz, M.D., and Peter J. Zimetbaum, M.D.  The Committee’s responsibilities include (i) identifying individuals qualified to become Board members consistent with criteria approved by the Board and recommending that the Board select the director nominees for the next Annual Meeting of Stockholders; (ii) developing and recommending to the Board the Corporate Governance Guidelines; and (iii) overseeing evaluation of the Board and management. The Nominating and Governance Committee held four meetings during fiscal year 2013.
 
Board Compliance Committee.  The Board Compliance Committee is composed of Lester B. Salans, M.D. (the Chairman), Nesli Basgoz, M.D., Pierre Legault, Brenton L. Saunders, and Peter J. Zimetbaum, M.D..  The Committee’s responsibilities include (i) reviewing and overseeing matters relating to our compliance with Federal health care program requirements, FDA requirements and the obligations imposed by the Corporate Integrity Agreement dated September 15, 2010 that we entered into with the Office of Inspector General of the U.S. Department of Health and Human Services; (ii) appointing, compensating, retaining (or terminating) and overseeing the work of an independent Compliance Expert; and (iii) providing an additional avenue of communication among Compliance Department personnel, including the Chief Compliance Officer, the Compliance Committee described at Page 17 of this Proxy Statement, our management and the Board. The Board Compliance Committee was formed in December 2010 and held seven meetings during fiscal year 2013.
 
Science Committee. The Science Committee is composed of Nesli Basgoz, M.D., Lawrence S. Olanoff, M.D., Ph.D., Lester B. Salans, M.D., and Peter J. Zimetbaum, M.D. The Committee’s responsibilities include (i) advising the Board regarding emerging trends in pharmaceutical research and development, and (2) consulting with Company management as requested and advising the Board with respect to scientific matters related to proposed or on-going discovery and development programs or the Company’s business development opportunities and marketed products. The Science Committee was established in May 2013.
Selection of Nominees for Election to the Board
 
The Nominating and Governance Committee has established a process for identifying and evaluating nominees for director.  The Nominating and Governance Committee believes that its process for identifying and evaluating nominees is designed to produce nominees that possess the educational, professional, business and personal attributes that are best suited to further Forest’s operational and strategic goals.  The Nominating and Governance Committee will consider nominees recommended by stockholders in accordance with our Bylaws as well as those recommended by management or consultants retained by the Nominating and Governance Committee.  Under our Bylaws and as described in this Proxy Statement under the heading, “May I propose actions for consideration at next year’s Annual Meeting of Stockholders or nominate individuals to serve as directors?”, any interested person may recommend a nominee by submitting the nomination within the timeframe specified by our Bylaws, together with the information and materials required by our Bylaws, to the Company’s Secretary at Forest Laboratories, Inc., Attention:  Corporate Secretary, 909 Third Avenue, New York, New York 10022.  All recommended candidates submitted in accordance with our Bylaws will be considered using the criteria set forth in our Corporate Governance Guidelines.
 
The Nominating and Governance Committee will consider, among other factors, the following to evaluate recommended nominees:
 
· The Board’s current composition, including expertise, diversity, balance of management and non-management directors;
 
· Independence and other qualifications required or recommended by applicable laws, rules and regulations (including NYSE requirements) and Forest’s policies and procedures; and
 
 
 
· The general qualifications of potential nominees, including, but not limited to:  personal integrity, loyalty to Forest and concern for its success and welfare; experience at strategy and policy setting, high-level leadership experience in business; breadth of knowledge about issues affecting Forest; an ability to work effectively with others; sufficient time to devote to Forest; and freedom from conflicts of interest.
 
The Nominating and Governance Committee annually reviews the individual expertise and skills of the directors as well as the composition of the Board as a whole. The Corporate Governance Guidelines expressly provide for the Board to consider the configuration of the Board in evaluating qualifications of potential Board members.  In this regard, the Nominating and Governance Committee strives to nominate directors with diverse business and professional experience and skills relevant to the Company’s current and anticipated needs.  The Nominating and Governance Committee does not follow any fixed ratio or formula to determine the appropriate mix, but rather uses its judgment to seek directors whose attributes and experience taken as a whole will contribute to the high standards of Board service at the Company.
Named Executive Officers of Forest
 
Name
Age
Position with Forest
Howard Solomon
85
Chairman of the Board, CEO and President
Elaine Hochberg
56
Executive Vice President and Chief Commercial Officer
Francis I. Perier, Jr.
53
Executive Vice President – Finance and Administration and CFO
Marco Taglietti, M.D.
53
Senior Vice President – Research and Development and President, Forest Research Institute, Inc.
David F. Solomon
46
Senior Vice President – Corporate Development and Strategic Planning
 
Set forth below is certain biographical information concerning our executive officers who are not also directors:
 
Elaine Hochberg has served as the Executive Vice President and Chief Commercial Officer of the Company since December 31, 2010.  Prior thereto, Ms. Hochberg served as our Senior Vice President – Marketing from December 1999 through December 2010 and has also served as our Chief Commercial Officer since December 2007.  Ms. Hochberg joined us in June 1997 as Vice President – Marketing of our wholly-owned subsidiary Forest Pharmaceuticals, Inc.  In February 1998, she was promoted to Vice President – Marketing of the Company.  Prior to joining us in 1997, Ms. Hochberg was Assistant Vice President – Marketing at Wyeth-Lederle Laboratories.
 
Francis I. Perier, Jr. has served as the Executive Vice President – Finance and Administration and CFO of the Company since December 31, 2010.  Prior thereto, Mr. Perier served as our Senior Vice President – Finance from September 2004 through December 2010 and has also served as our CFO since September 2004.  From March 2004 until joining us in September 2004, Mr. Perier was Vice President – Finance – Operations Planning – Americas Medicines at Bristol-Myers Squibb.  For eight years prior to March 2004, Mr. Perier served in senior financial positions at Bristol-Myers Squibb including four years as Vice President – Finance, Planning, Business Development and Information Technology at its ConvaTec Division.  Prior to that, Mr. Perier had been a partner at Deloitte & Touche, LLP.
 
Marco Taglietti, M.D. has served as the Senior Vice President – Research and Development of the Company and President, Forest Research Institute, Inc. since December 31, 2010.  Prior thereto, Dr. Taglietti served as our Vice President – Research and Development since December 2008.  Dr. Taglietti joined Forest in August 2007 as Executive Vice President – Research and Development and Chief Medical Officer of our wholly-owned subsidiary Forest Research Institute, Inc. Prior to joining us, Dr. Taglietti was Senior Vice President and Head of Global Research and Development at Stiefel Laboratories for three years.  Prior to that, Dr. Taglietti was at Schering-Plough for twelve years in positions of increasing responsibilities including Vice President – Worldwide Clinical Research for Anti-Infectives, Oncology, CNS, Endocrinology and Dermatology.
 
David F. Solomon has served as the Senior Vice President – Corporate Development and Strategic Planning since December 31, 2010.  Prior thereto, Mr. Solomon served as our Vice President – Business Development and Strategic Planning from December 2007 through December 2010.  From June 2006 through December 2007, Mr. Solomon served as our Vice President – Business Development.  Mr. Solomon joined the Company in 2001.
EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
Introduction
 
Our executive compensation programs are designed to attract, retain and reward our executive officers. This Compensation Discussion and Analysis provides a detailed description of the Company’s executive compensation philosophy and programs, the compensation decisions made by the Compensation Committee of the Board (the Compensation Committee) and the issues considered in making such decisions. This Compensation Discussion and Analysis focuses on the compensation of our CEO, CFO, and the next three most highly compensated executive officers (referred to herein as the Named Executive Officers or NEOs) for the fiscal year ended March 31, 2013 (fiscal year 2013), who were:
 
Name
Title
Howard Solomon
Chairman of the Board, Chief Executive Officer and President
Elaine Hochberg
Executive Vice President and Chief Commercial Officer
Francis I. Perier, Jr.
Executive Vice President – Finance and Administration and Chief Financial Officer
Marco Taglietti, M.D.
Senior Vice President – Research and Development and President, Forest Research Institute, Inc.
David F. Solomon
Senior Vice President – Corporate Development and Strategic Planning
 
How Pay Ties to Company Performance
 
Our executive compensation program is designed to align executive compensation with the interests of our stockholders by tying a large portion of executive compensation to the achievement of the Company’s business objectives and individual executive contributions towards those objectives. The majority of compensation for our Named Executive Officers is variable compensation and is not guaranteed.
 
Executive Compensation Program Highlights
 
Our executive compensation program is designed to drive performance while promoting good corporate governance.  The Compensation Committee annually assesses and, if appropriate, updates the Company’s compensation practices to ensure alignment with these goals.  Commencing with the fiscal year ended March 31, 2012 (fiscal year 2012), the Compensation Committee, in consultation with its independent compensation consultant, restructured our executive pay practices to further align pay with performance and provide greater transparency with respect to how we implement our pay for performance philosophy.  We have highlighted below important aspects of our executive compensation practices as well as certain practices in which the Company intentionally does not engage because we do not believe that such practices would serve our stockholders’ long-term interests.
 
What We Do
 
ü    Majority of Pay is Performance Based. The majority of the total compensation opportunity for our Named Executive Officers is not guaranteed.  The value of equity compensation granted to our NEOs directly correlates to the value generated by the Company’s stock for our stockholders.  In addition, certain elements of cash and equity compensation are conditioned upon the achievement of corporate and individual performance objectives designed to enhance stockholder value or to promote continued service with the Company.  We believe allocating compensation in this manner is in the best long-term interests of our stockholders.
 
ü    Pay for Performance Awards.  Commencing with fiscal year 2013, cash bonuses are determined pursuant to an annual incentive bonus plan implemented at the beginning of the fiscal year which established performance goals, fifty percent of which related to corporate performance, thirty percent of which related to individual performance, and twenty percent of which are related to individual development goals.  In addition, our executives receive one-third to one-half of their equity compensation in the form of performance based stock equivalent units (also referred to as performance stock units or PSUs) which are settled in shares that vest at the end of a three year period based on the satisfaction of pre-established corporate performance goals.
ü    Stock Ownership Guidelines. We have stock ownership guidelines for our Directors and certain key executives, including each Named Executive Officer. Our Chairman, Chief Executive Officer and President has a guideline requirement equal to six times his base salary.
 
ü    Holding Period for Stock Options, Restricted Stock and Performance Stock Units. With certain limited exceptions, our stock ownership guidelines require our key executives to hold all shares obtained upon the exercise of Company stock options or through Company restricted stock grants and performance stock units until such executive achieves the applicable ownership threshold under the stock ownership guidelines.
 
ü    Minimum Vesting Periods. All stock options, stock appreciation rights, and restricted stock awards granted to all executive officers are required to have a vesting schedule which exceeds 24 months.
 
ü    Annual Risk Assessment. Our executive compensation programs are designed with features that mitigate risk without diminishing the incentive nature of the compensation.  To assess the degree to which our executive compensation programs accomplish this goal in practice, the Compensation Committee conducts an annual risk assessment. In fiscal year 2013, as in previous years, the Compensation Committee concluded that our executive compensation programs do not encourage behaviors that would create risks reasonably likely to have a material adverse effect on the Company.
 
ü    Clawback Policy. The Company has an executive incentive compensation recoupment (claw-back) policy to promote accountability.  Pursuant to the policy, the Company may recoup certain incentive- or commission-based payments which were based upon any financial results or operating metrics that were impacted by such executive officer’s knowing or intentional fraudulent or illegal conduct.
 
ü    Reasonable Change of Control Severance Provisions. We believe we have reasonable post-employment and change of control cash severance provisions that do not exceed three times base salary plus bonus.
 
ü    Minimal Perquisites. We provide our Named Executive Officers with minimal perquisites.
 
ü    Independent Compensation Consultant. The Compensation Committee utilizes the services of an independent compensation consulting firm that provides no other services to the Company.
 
What We Don’t Do
 
û    No-Hedging Policy. Our Directors and executive officers, including our Named Executive Officers, are prohibited from hedging their ownership of the Company’s stock, including trading in options, puts, calls or other derivative instruments related to Company stock or debt.
 
û    No Tax Gross-Ups. We do not provide tax gross-ups on perquisites or any severance or change-in-control payments to any of our executive officers.
 
û    No Repricing of Awards. The Company does not have a history of repricing equity incentive awards, and in May 2012, the Board amended the Company’s 2007 Equity Incentive Plan to expressly prohibit such practices, as well as repurchases of “underwater” stock options or stock appreciation rights.
 
û    No Above Market Returns. We do not offer preferential or above market returns on deferred compensation.
 
û    No Underpriced Stock Options. We do not grant stock options with exercise prices that are below the fair market value of the Company’s common stock on the date of grant.
 
Compensation Restructuring  
 
As noted above, the Compensation Committee implemented new executive pay practices for fiscal year 2012 to further align pay with performance and provide greater transparency with respect to how we implement our pay for performance philosophy (the Compensation Restructuring).  As part of the Compensation Restructuring, the Company’s compensation cycle was changed from a 12-month cycle that ended on September 30 of each year to a 12-month cycle that ended with the Company’s fiscal year end of March 31 to provide greater transparency with respect to how we align pay with performance.  As a result of the Compensation Restructuring, compensation decisions for each fiscal year ended March 31 are made in the following May.
To accomplish the Compensation Restructuring, the Compensation Committee established a six-month transition period commencing on October 1, 2011 and ending on March 31, 2012 (the Transition Period).  Following the conclusion of the Transition Period, at the May 2012 Compensation Committee meeting (the 2012 Compensation Committee Meeting), the Compensation Committee reviewed the performance of the Company and its executive officers over the Transition Period and, based on that review, (x) awarded annual cash incentive bonuses with respect to performance during such six-month period, (y) awarded merit-based increases in base salaries applicable for fiscal year 2013, and (z) granted long-term equity awards, including performance stock units.  At the 2012 Compensation Committee Meeting, the Compensation Committee also established performance metrics for the annual cash incentive plan awards to be granted with respect to fiscal 2013 performance and the performance stock units that were granted at the meeting. The performance metrics established for the annual incentive plan were based on individual performance goals and corporate performance over fiscal year 2013, while performance metrics for the PSUs were based on corporate performance over a three year period.  The annual and multi-year corporate performance metrics were established by the Compensation Committee based on the corporate performance goals approved by the Board in connection with its fiscal planning which was completed at the start of fiscal year 2013.
 
Fiscal Year 2013 Business Highlights
 
Fiscal year 2013 was the first year in which the Forest Laboratories, Inc. Annual Incentive Compensation Plan (the Incentive Plan) was applied to the Company’s NEOs.  The Compensation Committee established Company and individual performance metrics for each NEO at the beginning of the fiscal year, and following the end of fiscal year 2013, at its May meeting, the Compensation Committee determined the extent to which cash incentive bonuses were earned pursuant to the Incentive Plan based on corporate and NEO performance during the 2013 fiscal year.  As described in greater detail below under the heading “Annual Incentives,” among the factors considered by the Compensation Committee in making its determinations were the following:
 
· Significant pipeline and operational developments that occurred during fiscal year 2013 including the successful launches of TudorzaTM PressairTM and LinzessTM in the United States and Bystolic® in Canada.
 
· The filing of New Drug Applications with the FDA for cariprazine and levomilnacipran and with Health Canada for linaclotide and aclidinium.
 
· The execution of agreements with Adamas Pharmaceuticals, Inc. for the development and commercialization of a fixed dosed combination of Namenda XR and donepezil HCL, and Almirall for a partnership to commercialize aclidinium in Canada and for an out-license of Mexican rights to linaclotide.
 
· The expansion of our operations into Canada, and the establishment of a Latin America strategic partnership through the Company’s agreements with moksha8.
 
Our Compensation Philosophy and Objectives
 
Philosophy
 
Our executive compensation philosophy seeks to align executive compensation with the achievement of the Company’s business objectives and with individual performance directed towards obtaining those objectives. Consequently, the Company’s compensation program is designed to reward our executives’ respective contributions to the Company’s achievements and is intended to facilitate long-term strategic management and the enhancement of stockholder value. In considering the elements of the compensation program, the Compensation Committee emphasizes pay for performance on both an annual and long-term basis and consideration of marketplace best practices.
Objectives
 
Our compensation program is designed to achieve the following objectives:
 
· Attract and retain highly qualified executives;
· Motivate individual performance;
· Align incentives with business objectives;
· Create incentives that focus executives on, and reward them for, increasing stockholder value;
· Maintain equitable levels of overall compensation both among executives and as compared to executives with similar positions at companies in the Comparator Group (as defined on Page 36 of this Proxy Statement);
· Create an ownership culture which instills long-term perspective; and
· Improve overall Company performance.
 
Elements of Executive Compensation
 
The elements we use to achieve our compensation objectives, and to enable the Company to retain, motivate, engage and reward our Named Executive Officers and other executives include base salary, annual incentive compensation and long-term equity compensation.
 
Element / Type of Plan
 
Link to Compensation Objectives
 
Key Features
Base Salary
 
(Cash)
 
¨      Fixed amount of compensation for performing day-to-day responsibilities.
 
¨      Provides financial stability and security.
 
¨      Competitive pay that takes into consideration the salary paid to persons in similar positions by companies in the Comparator Group (as defined below), the executive’s performance, criticality of the executive’s position, and the executive’s knowledge, skills and experience.
 
¨      Executives may be eligible for an annual increase depending on individual performance, their level of pay compared to the salaries paid to persons in similar positions by companies in the Comparator Group, and upon a change in role and responsibilities.
Annual Incentive
 
(Cash)
 
¨      Motivates and rewards achievement of key operational and individual goals measured over the current fiscal year.
 
¨      Utilization of multiple performance metrics and a range of payouts based on the achievement of such metrics (as opposed to an “all or nothing” payout scheme) functions to mitigate risk.
 
¨      Target bonuses for NEOs ranged between 60% and 75% of base salary for fiscal year 2013 based on the executive’s level of responsibility and upon an examination of compensation paid to persons in similar positions by companies in the Comparator Group.
 
¨      Total potential payouts range from 0% - 200% of target payout.
 
¨      Goals and weighting are set annually, and the financial metrics are tied to the Company’s annual budget.
Long-Term Incentive
 
(Equity)
 
¨      Motivates and rewards for sustaining long-term financial and operational performance that increases stockholder value.
 
¨      Encourages continued employment through vesting periods in order to obtain shares.
 
¨      Stock ownership and holding period requirements align the financial interests of our executives with the financial interests of our stockholders and function to mitigate risk.
 
¨      Long-term incentive target award opportunities are granted to have a dollar value based on a multiple of an executive’s base salary.
 
    o  CEO:                                                                   6 times base salary
    o  Senior & Executive VPs:                 3 – 3.5 times base salary
    o  Vice Presidents:                                      1 – 2 times base salary
 
¨      PSUs:
 
    o   Vest at the conclusion of a multi-year performance period based on the achievement of two equally weighted performance metrics
 
¨      Stock Options:
 
        o   Generally vest in four equal annual installments on each anniversary of the grant date
 
¨      Time-based Restricted Stock Awards:
 
    o   Generally vest in three annual installments with 33%, 33% and 34% vesting on May 15 of each year
 

The charts below depict the actual compensation paid to our Named Executive Officers during fiscal year 2013 by compensation element.  As a result of the Compensation Restructuring, equity compensation awarded during fiscal year 2013 was based on performance during the 6-month Transition Period rather than a full fiscal year.  Accordingly, the charts below deviate from the historical allocation of compensation between the various compensation elements.
 
Base Salary
 
General
 
As described above, base salary provides a fixed element of executive compensation, which is intended to attract and retain key executives and provide an element of security to the executive officers on an ongoing basis. Executive salaries are reviewed on an annual basis by the Compensation Committee in May following the conclusion of the preceding fiscal year as well as at the time of a promotion or other material change in responsibilities, and are based on:
 
· Assessment of the Named Executive Officer’s performance;
 
· Level of pay compared to the salaries paid to persons in similar positions by companies in the Comparator Group (defined below);
 
· Tenure and experience; and
 
· Current compensation.
 
Merit Increases
 
An increase in base salary is not automatic or guaranteed. In May 2012, merit increases for the Named Executive Officers were approved for some executives.  These increases, which took effect July 1, 2012, were awarded based on performance reviews during the Transition Period and with a view to maintaining base salary compensation around the median of the Comparator Group as determined during the prior performance reviews that were conducted in December 2011.  When considering whether to increase base salaries during its May 2012 meeting, the Compensation Committee took note of the sales and marketing efforts that resulted in the continued growth in sales of the Company’s promoted products from $4.2 billion to $4.4 billion, the buyout of Bystolic® royalties from Janssen Pharmaceutica NV, and the completion of the acquisition of Clinical Data, Inc. Reviewing management’s further development of the Company’s product pipeline, the Compensation Committee noted the successful launches of Daliresp® and Viibryd®, the filing of New Drug Applications (NDAs) for aclidinium (TudorzaTM PressairTM) and linaclotide (LinzessTM), and the successful completion of studies required to file NDAs for cariprazine and levomilnacipran. As a result, the merit increases awarded in May 2012 for the Named Executive Officers were as follows: Mr. H. Solomon’s base salary was not increased at Mr. Solomon’s request; Ms. Hochberg, Mr. Perier, Dr. Taglietti and Mr. D. Solomon each received a 1.75% increase.  These increases were generally in line with merit increases for all employees.
Promotions or Change of Role
 
Base salary may be adjusted to recognize a promotion or change in the individual’s role; however, increases are not guaranteed upon such events. No increases were awarded to any Named Executive Officer in fiscal year 2013 due to promotion or changes in role.
 
Annual Incentives
 
General
 
Annual incentives are intended to motivate executives to achieve key operational and individual performance goals and to reward executives for their advancement toward such goals. In connection with the Compensation Restructuring, in May 2012, the Board adopted the Incentive Plan to more closely align variable cash compensation awarded to the Company’s executives with corporate performance and the development of managerial and leadership skills. In accordance with the terms of the Incentive Plan, starting in fiscal year 2013, target performance and payouts were established for each Named Executive Officer and the actual payouts under the Incentive Plan were based upon the Compensation Committee’s assessment of (i) multiple pre-determined financial and corporate growth objectives and (ii) individual performance objectives, which included individual contributions to corporate objectives and performance measures.  In determining awards under the Incentive Plan, the Compensation Committee may take into account not only the level at which the performance objectives were met but may also take into consideration such equitable factors as may be determined by the Compensation Committee in its discretion.  The Incentive Plan for fiscal year 2013 was implemented as follows:
 
 
 
· At the beginning of the fiscal year, the Compensation Committee established (i) the performance measures and goals being assessed, (ii) the performance targets for each metric, including threshold annual performance requirements to earn an award, target performance requirements and maximum performance scores, and (iii) the relative weighting of each performance metric.
 
 
 
· Also at the beginning of the fiscal year, the Compensation Committee set individual target awards for each Named Executive Officer that ranged between 60% and 75% of base salary, based on the executive’s level of responsibility and taking into account the total compensation allocated to such position as compared to total compensation paid to persons in similar positions by companies in the Comparator Group.  Pursuant to the Incentive Plan, actual awards may increase or decrease within a payout range of 0% to 200% of the target award depending upon the Company’s and the executive’s achievement of the specific performance objectives.
 
· After the close of the fiscal year, the Compensation Committee received a report from management regarding the Company’s and each Named Executive Officer’s performance against the pre-established performance goals. Annual cash incentive compensation earned under the Incentive Plan (Annual Cash Incentive Compensation) was based on each Named Executive Officer’s individual target award percentage and the overall Company and Named Executive Officer’s performance relative to the specific performance goals, as certified by the Compensation Committee.
 
Setting Annual Performance Metrics
 
The Compensation Committee sets the performance metrics as well as the performance targets for each metric. For fiscal year 2013, the Compensation Committee considered performance against four separate performance measures, which were weighted as follows:
 
· 25% ‒ Growth in Non-GAAP Diluted EPS;1
 
· 25% ‒ Growth in revenues determined in accordance with GAAP;

1 Non-GAAP Diluted EPS is defined as earnings per share calculated in accordance with GAAP as adjusted to exclude (i) amortization arising from business combinations and acquisitions of product rights, (ii) up-front license payments and (iii) such one-time items as approved by the Board.
· 30% ‒ Individual performance objectives related to each Named Executive Officer’s area of responsibility; and
 
· 20% ‒ Individual development goals.
 
The Compensation Committee allocated 50% weighting to Non-GAAP diluted EPS and revenue performance in order to align cash incentive compensation with corporate performance as measured by the achievement of the performance goals approved by the Board at the beginning of the fiscal year.  The 30% weight allocated to the individual performance goals that were developed for each Named Executive Officer is tied to our objective of encouraging the accomplishment of specific business objectives that we believed would improve the operational effectiveness of the Company.  The 20% weight allocated to individual development metrics is tied to our objective of incentivizing the development and refinement of leadership and managerial skills.
 
Individual performance goals were designed for each Named Executive Officer to reflect their specific functional responsibilities, including effectiveness of oversight and implementation of the Company’s business operations, strategies and management, achievement of sales launch and marketing objectives, effective implementation of corporate programs, including corporate governance and compliance initiatives, achievement of research and development objectives, including submission of New Drug Applications and receipt of product approvals, achievements with respect to acquisitions of product rights, and effective management of the supply chain and patent litigation strategies.  Named Executive Officers were also evaluated on how well they accomplished the same four objectives for the individual development metric: (1) ability to deliver business results; (2) ability to enhance organizational performance; (3) personal leadership; and (4) ability to develop human capital.
 
We believe this approach for determining Incentive Plan award payments balances the need to consider overall Company financial performance, results specific to a Named Executive Officer’s functional area of responsibility, and the Named Executive Officer’s ability to achieve results vs. objectives on an individual level while also demonstrating desirable managerial and leadership traits.
 
Calculating Performance Scores
 
For each performance metric, a payout percentage is calculated based upon how the Company or individual Named Executive Officer, as applicable, performed relative to the targeted performance level established by the Compensation Committee. The required performance levels and corresponding payout percentages applied for fiscal year 2013 are summarized in the table below:
 
Performance Level
 as a percentage of the Target
Payout Percentage*
<75%
None
75% (“Threshold”)
50%
80%
60%
90%
75%
100% (“Target”)
100%
110%
135%
125% (“Maximum”)
200%
 
* Payout percentage is interpolated for performance falling between two Performance Levels.
 
The payout percentage for each performance metric is multiplied by the weighting percentage to obtain the adjusted payout percentage applicable to that metric. The adjusted payout percentages for each metric are then added together and the total is multiplied by the individual Named Executive Officer’s target award amount to determine the actual award amount.
The table below shows the weights, performance and resulting adjusted payout percentage for each of the financial performance metrics earned for fiscal year 2013 under the Incentive Plan:

Fiscal Year 2013 Financial Performance Metrics
 
Performance Metric
 
Weight
   
Performance
Target
   
Actual
Performance
Results
   
Performance Level as a Percentage of the Performance Target
   
Payout
Percentage
   
Adjusted
Payout
Percentage
 
Non-GAAP Diluted EPS
   
25
%
 
$
1.33
   
$
0.45
(1) 
   
33.83
%
   
0.00
%
   
0.00
%
Revenues
   
25
%
 
$
3,447,900,000
   
$
3,126,125,000
     
90.67
%
   
76.68
%
   
19.17
%
Total
                                           
19.17
%

(1) As disclosed at Pages 43 and 55 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2013, Non-GAAP diluted earnings per share from continuing operations was $0.45 and GAAP diluted losses per share from continuing operations was $(0.12). Non-GAAP Diluted EPS excludes (i) amortization arising from business combinations and acquisitions of product rights, (ii) up-front license payments and (iii) such one-time items as approved by the Board.  Please see Appendix B on Page B-1 of this Proxy Statement for a reconciliation of Non-GAAP Diluted EPS to GAAP diluted EPS.

As indicated in the table above, the resulting adjusted payout percentage for each Named Executive Officer attributed to the Non-GAAP Diluted EPS and Revenue performance metrics was 19.17%.
 
As disclosed above under the heading “Setting Annual Performance Metrics”, the remaining 50% of each Named Executive Officer’s fiscal year 2013 Incentive Award bonus was based on the achievement of individual performance and development goals.  Based on the factors described above, the Compensation Committee determined the degree to which each Named Executive Officer’s individual performance and individual development goals had been achieved.  The Compensation Committee then assessed each Named Executive Officer’s individual performance against the Company’s performance with respect to the financial performance metrics.  Based on that assessment, the Company exercised discretion granted to it under the Incentive Plan to discount each Named Executive Officer’s award, which resulted in Annual Cash Incentive Compensation ranging between 40.00% and 78.77% of each Named Executive Officer’s target bonus.  The actual Annual Cash Incentive Compensation paid to our Named Executive Officers is shown in the table below and also reported in the Summary Compensation Table in the Non-Equity Incentive Plan Compensation column:

Fiscal Year 2013 Annual Incentive Awards
 
Name
 
Target Percentage
   
Target Bonus ($)
   
Actual % of Target
Bonus Awarded
   
Actual Payout ($)
 
Howard Solomon
   
75
%
   
1,012,500
     
40.00
%
   
405,000
 
Elaine Hochberg
   
60
%
   
427,350
     
61.08
%
   
261,025
 
Francis I. Perier, Jr.
   
60
%
   
396,825
     
61.08
%
   
242,394
 
Marco Taglietti, M.D.
   
60
%
   
361,710
     
78.77
%
   
284,919
 
David F. Solomon
   
60
%
   
293,040
     
62.12
%
   
182,036
 

Long-Term Incentives
 
General; The Equity Plan
 
Given the long-term nature of the pharmaceutical business, we believe that incentivizing executives to focus on long-term performance is of particular importance to us. We believe that one of the most effective ways to accomplish this objective is to allocate the majority of the Named Executive Officer’s compensation to long-term incentive components that are tied to an increase in the Company’s market value or other pre-determined performance measures. These awards are intended to reward performance over a multi-year period, align the interests of executives with those of stockholders, instill an ownership culture, enhance the personal stake of executive officers in the growth and success of the Company and provide an incentive for continued service at the Company. Long-term incentive awards are made under our stockholder-approved 2007 Equity Incentive Plan, as amended to date (the Equity Plan).   Equity awards are granted annually following the conclusion of each fiscal year at the Board’s regularly scheduled May meeting.
Pursuant to the Equity Plan, employees, including the Named Executive Officers, may be granted stock options to purchase shares of common stock, restricted stock awards, stock appreciation rights and stock equivalent units (together, the Awards). The exercise price of all options, including incentive stock options as defined by Section 422 of the Internal Revenue Code of 1986, as amended (the Code), is the fair market value of the shares on the grant date. All of our employees, our subsidiaries’ employees and our non-employee directors are eligible to receive Awards as defined under the Equity Plan.
 
Long-Term Incentive Vehicles Awarded in Fiscal Year 2013
 
Mix of Long-Term Awards
 
We grant our executives, including our Named Executive Officers, a package of long-term incentive awards that is designed to incentivize them and to reward them based on the Company’s performance. The Compensation Committee, with the advice of its independent compensation consultant, established each executive’s long-term incentive target award opportunity as a multiple of such executive’s base salary, with that multiple generally being approximately six times base salary for the CEO, three to three and one-half times base salary for the Company’s Senior Vice Presidents and Executive Vice Presidents, and one to two times base salary for the Company’s Vice Presidents. As discussed above under the heading “Compensation Restructuring”, during its May 2012 meeting, the Compensation Committee reviewed the performance of the Company and its executive officers over the six-month Transition Period ended March 31, 2012.  Based on that review and taking into account the reduced performance period underlying the awards, the Compensation Committee granted each Named Executive Officer a mix of long-term awards equivalent to one-half of the awards which would have been granted for a full year of service and which, in the case of each Named Executive Officer other than the CEO, were allocated in approximately equal amounts (based on value) to PSUs, Stock Options and Time-based Restricted Stock Awards, each of which is described in greater detail below. In light of his more direct responsibility for the Company’s performance, the Compensation Committee allocated a larger portion, 50% (based on value), of the CEO’s equity award to PSUs, with the remaining 50% of the CEO’s equity award allocated approximately equally to each category of Stock Options and Time-based Restricted Stock Awards.  Commencing with the grants issued in May 2012 and consistent with the Compensation Restructuring, equity awards are issued to the Named Executive Officers annually in May.
 
· Performance Stock Units. PSUs granted in May 2012 will vest, if at all, at the end of the performance period based upon the level of achievement of two equally weighted performance metrics, one related to total shareholder return (TSR) and one related to revenues of certain pipeline products (Revenues).  The performance for both the Revenue measure and the TSR measure is the 36 month period commencing April 1, 2012 and ending March 31, 2015.  The PSUs are paid out in shares of the Company’s common stock at a one-to-one ratio in accordance with the terms of the individual award agreement.  The terms of the PSUs, including the metrics underlying the PSU are further described below.
 
· Stock Options. Incentive stock options granted in May 2012 vest in four equal annual installments beginning on the first anniversary of the date of grant.  These stock options have an exercise price of $34.035 (the average of the high and low prices of the Company’s common stock on May 7, 2012).
 
· Time-based Restricted Stock Awards. Time-based Restricted Stock Awards granted in May 2012 vest in three annual installments with 33%, 33% and 34% vesting on May 15, 2013, May 15, 2014 and May 15, 2015, respectively.
 
The Company’s long-term equity awards are subject to a grantee’s continued employment, but contain exceptions in certain cases in the event of the grantee’s death, disability, or retirement or the occurrence of a change of control.  The value of the PSUs, Stock Options and Restricted Stock Awards granted to each Named Executive Officer during fiscal year 2013 is reported in the Summary Compensation Table on Page 41 of this Proxy Statement and the specific number of shares awarded with respect to each type of equity award is set forth in the Grants of Plan-Based Awards Table on Page 43 of this Proxy Statement.
Performance Metrics for Performance Stock Units
 
The PSUs granted in May 2012 vest, if at all, based upon the level of achievement of two performance metrics:
 
· The Revenues metric is based on the comparison of the Company’s total revenues from its cumulative sales of Bystolic, Daliresp®, Savella®, Teflaro® and Viibryd® for the period between April 1, 2012 and March 31, 2015 to the total projected Revenues for the same period as included in the budget prepared by the Company and approved by the Board at its May 2012 meeting; and
 
 
 
· The TSR metric is based on the change in TSR of the Company during the period between April 1, 2012 and March 31, 2015 relative to the change in the TSR of the other companies in the NYSE Arca Pharmaceutical Index.  To minimize the effect of a single day’s stock price volatility on the TSR calculations, stock prices are calculated using the 20-day volume weighted average closing stock prices prior to and including the beginning and end of the performance period.
 
The Compensation Committee believes that both Revenues and TSR are appropriate performance metrics that properly incentivize the Company’s executive officers to achieve the Company’s long-term financial and strategic goals while simultaneously aligning their interests with the long-term interests of the Company’s stockholders.  In particular, the Compensation Committee selected Revenues as a performance metric because they tie a portion of the compensation opportunity for the Company’s executives to a factor that is largely within their control – i.e., the ability to execute the Company’s strategic plan in order to generate projected Revenues – and TSR because it focuses the Company’s executives on improving the Company’s stock price.  In addition, the products chosen by Compensation Committee as the basis for the Revenue performance metric were selected because they represented the five most recent products that the Company commercially launched in the United States when the PSUs were granted.
 
While the Compensation Committee determines an executive’s total compensation opportunity by assuming that he or she will earn 100% of the PSUs initially awarded in the compensation cycle (the Target Award), the number of PSUs that will actually be earned could be between 0% and 150% of the Target Award depending on the level of achievement of both performance metrics.   The percentage of the Target Award that is earned is determined by calculating the percentage of achievement for each metric and averaging the two percentages.  The following table shows the percentage of achievement that is earned with respect to each metric based on the performance level achieved:
 
Revenues Metric
 
TSR Metric
 
 
Performance Level
 
Percentage of Achievement
 
 
 
Performance Level
 
Percentage of Achievement
 
 
 
 
 
 
 
 
 
 
 
1
 
<70%
 
0%
 
 
 
< 25%
 
0%
2  (“Threshold”)
 
70%
 
50%*
 
(“Threshold”)
 
25%
 
50%*
3
 
80%
 
60%*
 
 
 
 
 
 
4
 
90%
 
80%*
 
 
 
 
 
 
5  (“Target”)
 
100%
 
100%*
 
(“Target”)
 
50%
 
100%*
6
 
110%
 
120%*
 
 
 
 
 
 
7  (“Maximum”)
 
≥120%
 
150%*
 
(“Maximum”)
 
≥75%
 
150%*
 
* For performance falling between two performance levels, the Percentage of Achievement will be interpolated to reflect the actual performance level
With respect to the Revenues metric, we are not disclosing total projected Revenues over the performance period because we believe such disclosure would cause us competitive harm in that it would reveal confidential future business plans and objectives. In particular, we set our Revenue targets based on our confidential 5-year business plan and budget that is developed in the ordinary course of our fiscal planning process and approved by the Board on an annual basis.  Because our revenue projections are based on our internal forecasts and confidential information about our business and developed primarily as a tool to facilitate strategic planning, disclosure of this target would cause us significant competitive harm. For example, in a highly-competitive industry such as pharmaceuticals, a competitor’s knowledge of our strategic business plans could provide information about our plans for investment in the specified products that could be used to implement competitive research and marketing strategies that may force us to invest significantly higher levels of research and marketing resources. Moreover, such disclosure could adversely affect the Company’s negotiating leverage with its distributors and suppliers since such agreements frequently involve negotiation of minimum volumes and tiered pricing schemes which are based on projected volumes.  Based on our historical experience in achieving projected product line revenues, we believe that it will be difficult but achievable to meet or exceed the Revenues Target.
 
Additional Compensation Elements
 
Benefits
 
The Named Executive Officers are also eligible to participate in the same retirement plans and health and welfare benefit plans made available to the other benefits-eligible employees of the Company, including, for example, the Company’s defined contribution plan, medical, dental, vision, life insurance and disability coverage.
 
Perquisites
 
The Company provides certain executive officers, including the Named Executive Officers, with certain perquisites that the Compensation Committee believes are reasonable and consistent with the Company’s overall compensation program. We believe that the indirect benefit that the Company receives from providing these perquisites outweighs the cost of providing them. The specific cost of perquisites paid by the Company for each Named Executive Officer in fiscal year 2013 is set forth in the “Summary Compensation Table” on Page 41 of this Proxy Statement under the heading “All Other Compensation” and is described further in footnote 4 to the table. The Committee does not believe that the perquisites provided to executive officers form a material part of their compensation. The Company does not provide loans to executive officers.
 
Retiree Medical Benefits
 
On December 1, 1989, the Board authorized the grant of certain lifetime medical benefits to certain senior executive officers and their spouses upon the completion of ten years of service by such officers. The benefit was subsequently discontinued and the only Named Executive Officer currently employed by the Company eligible for such benefit is Mr. Howard Solomon. This benefit is further described under the heading “Post-Termination Benefits and Change in Control Payments” on Page 49 of this Proxy Statement.
 
Deferred Compensation Plans
 
The Company maintains a nonqualified Deferred Compensation Plan for the benefit of certain highly compensated employees, including its Named Executive Officers. Such plans are common within the Company’s competitive peer group. Under this plan, full-time salaried employees who have an annual base salary of at least $150,000 may defer up to 50% of their annual base salary and up to 100% of their annual bonus. Deferred amounts may be invested among several investment programs at the participant’s option. Deferred amounts are not subject to federal or state income tax until a participant withdraws amounts from the plan. The Company does not match any of these funds. Further information on the deferred compensation payable to its Named Executive Officers can be found under the heading “Nonqualified Deferred Compensation” on Page 48 of this Proxy Statement.
Contracts and Agreements
 
Letter Agreement with Howard Solomon 
 
On May 22, 2013, Howard Solomon entered into a letter agreement with the Company in connection with his retirement as the Company’s Chief Executive Officer (CEO) pursuant to which he will continue to serve as Senior Advisor to and Director of the Company for an annual salary and other compensation. Mr. Solomon’s letter agreement is more fully described in the subsection entitled “Letter Agreement with Howard Solomon” of the “Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards” appearing on Page 44 of this Proxy Statement.
 
Retention Letter Agreements
 
The Company entered into letter agreements with Mr. Perier and Dr. Taglietti in connection with their employment with the Company. Pursuant to these letter agreements, Mr. Perier and Dr. Taglietti are entitled to guaranteed severance payments for a one year period following a termination of employment, a bonus for the year in which the termination of employment occurs equal to the greater of the last bonus received from the Company or 40% of salary target in the case of Mr. Perier and 30% of salary target in the case of Dr. Taglietti, and continued medical and dental health care coverage for such officer and any eligible family members until the earlier of the expiration of the one year period or the date such officer obtains alternate coverage. The guaranty is triggered if the executive is terminated by the Company without Cause or resigns for Good Reason (each as defined in the relevant letter agreement). A more detailed description of such severance arrangements (including the amounts payable thereunder) can be found under the heading “Post-Termination Benefits and Change in Control Payments” on Page 49 of this Proxy Statement.
 
Change of Control Employment Agreements
 
The Company is party to change-in-control employment agreements with certain key executives, including each of the Named Executive Officers, which provide for severance (i) upon a termination due to death or disability or a termination without Cause or for Good Reason or Adequate Reason, in each case during the three year period following a Change of Control (as such terms is defined in the applicable agreement) or (ii) in connection with a termination of the agreement within 90 days following a Change of Control. Each individual covered by such an agreement has made a significant contribution to the Company and has knowledge and understanding of the Company and its operations and these arrangements are provided to maintain continuity of such expertise and leadership during potentially disruptive negotiations relating to potential mergers, acquisitions or other business combinations. They also serve to protect the stockholders’ interest in maintaining executive leadership so that goals and objectives in the best interest of stockholders are pursued. A more detailed description of such severance arrangements (including the amounts payable thereunder) can be found under the heading “Post-Termination Benefits and Change in Control Payments” on Page 49 of this Proxy Statement.
 
How We Make Compensation Decisions
 
The Role of Our Compensation Committee
 
The Compensation Committee is responsible for establishing the Company’s compensation strategy and overall program of executive compensation and for administering and monitoring compliance with the compensation program. The Compensation Committee seeks to ensure that the total compensation paid to our Named Executive Officers is fair, reasonable and competitive. For fiscal year 2013, the Compensation Committee also engaged an independent compensation consultant as described below under the heading “The Role of the Compensation Committee’s Independent Compensation Consultant”.
 
The Compensation Committee reviews the performance of and establishes compensation for the CEO and CFO.  The Compensation Committee is also responsible for granting all equity awards under the Company’s 2007 Equity Incentive Plan.  With respect to non-equity compensation awarded to senior executives of the Company other than the CEO and CFO, including the other Named Executive Officers, the Compensation Committee reviews and assesses management’s evaluation of such executives’ performance and makes recommendations to the Board regarding their non-equity compensation.
The Role of Our Management
 
As part of the annual compensation approval process and this year in connection with the Transition Period, the Compensation Committee considers the advice of the CEO and CFO with respect to the compensation of all Named Executive Officers other than the CEO and CFO. In addition, management of the Company provided to the Compensation Committee management’s recommendations on the proposed compensation, including annual cash incentive compensation, for the executive officers other than the CEO and CFO. The CEO and CFO assisted the Compensation Committee and its independent compensation consultant in determining the Company’s Comparator Group (as described on Page 36 of this Proxy Statement). Other members of management provided support to the Compensation Committee as needed. Based upon a review of performance and historical compensation, recommendations and information from members of management, and discussions with its independent compensation consultant, the Compensation Committee determined and recommended for Board approval compensation for the Named Executive Officers other than the CEO and CFO.
 
Our management was also involved in developing proposals regarding program design and administration for the Compensation Committee’s review and approval. Management was responsible for responding to any Compensation Committee requests for information, analysis, or perspective as it related to topics that arose during the course of the year. Lastly, management carries out certain responsibilities relating to administration of the compensation program.
 
The Role of the Compensation Committee’s Independent Compensation Consultant
 
The Compensation Committee engaged an independent compensation consultant, Steven Hall & Partners, LLP (SH&P) to provide advice in connection with the Compensation Restructuring and fiscal year 2013 compensation.  At the Compensation Committee’s request, SH&P conducted a thorough review of the Company’s executive compensation plans, policies and practices, as well as market trends and current and pending legislation and evolving policies and procedures adopted by proxy advisory services firms. As part of the review, SH&P reviewed current and historical practices of the Company and conducted interviews with members of the Board and management. The SH&P report to the Compensation Committee recommended the adoption of a comparator group to be used for benchmarking of compensation and practices and specific recommendations based on the Company’s long-term objectives to create a stronger alignment with the interests of stockholders and in line with current “best practices”.
 
Non-Binding Advisory Say on Pay Proposal and Recent Changes in Compensation Practices
 
In August 2012, our stockholders approved a non-binding advisory say-on-pay proposal at our 2012 Annual Meeting with approximately 81.2% of the votes cast voting in favor of that proposal, exceeding the approximately 73.5% favorable vote in 2011. The Compensation Committee interpreted these results as a validation of the efforts that we undertook in connection with the Compensation Restructuring to improve our pay-for-performance compensation program. As a result, we have retained our general approach to executive compensation. Nonetheless, the Compensation Committee continues to work with its independent compensation consultant to consider alternatives and intends to make changes to the program, both large and small, where it determines it appropriate. Accordingly, the Compensation Committee will continue to monitor and consider future advisory say-on-pay votes to ensure that there is continued support for our pay-for-performance compensation programs among our stockholders.  The Board has historically held this vote annually and continues to do so, consistent with the recommendation of our stockholders at the 2011 annual meeting.
 
Competitive Marketplace Assessment
 
As part of our executive compensation program, we periodically review executive compensation data from similar companies in order to ensure that our practices are fair and reasonable.  In connection with the compensation determinations made by the Compensation Committee in May 2012 at the end of the Transition Period, the Compensation Committee utilized the independent compensation consultant’s analysis that was provided to the Compensation Committee in December 2011.  At that time, the Compensation Committee had requested that the Compensation Consultant review data from a broad range of publicly traded pharmaceutical companies.  From this group, the Compensation Consultant recommended, and based on such recommendation the Compensation Committee established, a peer group consisting of eleven publicly traded pharmaceutical health companies (the Comparator Group).  The Comparator Group was selected based on industry focus, revenue size and includes companies with which we compete for talent. In addition, we considered an analysis of market capitalization and similarity of broad-based product and service offerings. The Comparator Group consisted of:
Allergan, Inc.
 
Hospira, Inc.
Biogen Idec Inc.
 
Mylan Inc.
Celgene Corporation
 
Perrigo Company
Cephalon Inc.2
 
Warner Chilcott PLC
Endo Pharmaceuticals Holdings Inc.
 
Watson Pharmaceuticals, Inc.3
Gilead Sciences, Inc.
 
 
 
Compensation decisions by the Compensation Committee at the 2012 Compensation Committee Meeting also took into account a market study prepared by the independent consultant for the December 2011 meeting which benchmarked elements of compensation including base salaries, total cash compensation and total compensation for officers in comparable positions. The study included data derived from a number of sources, including the proxy statements of companies within the Comparator Group and two surveys published by Towers Watson. In developing compensation levels for the Company’s officers, the Compensation Committee used such data as a point of reference, and made adjustments based on differences in the scope of responsibilities of the Company’s executive as compared to their counterparts within the Comparator Group. The Compensation Committee further adjusted compensation levels based on the executive’s tenure, performance during the compensation period and the relative strategic importance of such executive’s position within the Company.
 
Risk Considerations
 
The Compensation Committee has reviewed the Company’s compensation policies and practices and analyzed the potential business risks inherent in such policies and practices. The Compensation Committee believes that the Company’s executive compensation policies and practices do not encourage our management, including our Named Executive Officers, to take unnecessary business risks that are reasonably likely to have a material adverse effect on the Company.  Specifically, the Company’s historical practice of providing the majority of management compensation in the form of long-term equity awards, and its recent additions to its compensation programs, including the issuance of PSUs which use multiple performance metrics, have a range of payouts based on the achievement of such metrics (as opposed to an “all or nothing” payout scheme that could otherwise encourage the taking of unnecessary risks), and have a minimum three year performance period and the requirement that all awards granted to executive officers under the Equity Plan have a vesting schedule which exceeds 24 months, align the interests of our management with the long-term interests of the Company’s stockholders and protect against inappropriate risk taking.  In addition to the foregoing, during fiscal year 2012, the Company amended its Corporate Governance Guidelines to implement stock ownership guidelines, a holding period requirement with respect to shares acquired by executive officers from option exercises and restricted stock grants, and an anti-hedging policy with a view to further aligning the interests of management with those of our stockholders thereby mitigating the taking of unnecessary risks.  Finally, as described in greater detail in the following section, the Company also maintains a “clawback” policy to discourage knowing or intentional fraudulent or illegal conduct.
 
Clawback Policy
 
The Company maintains a “clawback” policy, which is set forth in our Corporate Governance Guidelines. The policy provides that, in addition to any other remedies that may be available to the Company, the Company may recover (in whole or in part) any bonus, incentive payment, commission, equity award or other compensation received by an executive officer of the Company that is or was based on any financial results or operating metrics that were impacted by such executive officer’s knowing or intentional fraudulent or illegal conduct.

2 Cephalon, Inc. was acquired subsequently by Teva Pharmaceutical Industries Ltd. on October 14, 2011.
3  Following its acquisition of Activis Group in October 2012, Watson Pharmaceuticals, Inc. changed its name to Activis, Inc.
Stock Ownership Guidelines
 
Our Corporate Governance Guidelines include stock ownership guidelines applicable to our non-employee Directors and our executive officers, including the Named Executive Officers. These guidelines are intended to align the long-term interests of our non-employee Directors and executives with the interests of stockholders and promote an ownership culture and long-term perspective.
 
Role
Value of Common Stock to be Owned
Chairman of the Board, Chief Executive Officer and President
Six times base salary
Direct Reports to the Chief Executive Officer
Three times base salary
Other senior executives
One times base salary
Non-employee directors
Three times annual retainer fee
 
Each executive and non-employee Director is required to meet his or her target stock ownership threshold on or before December 31 of the year which includes the fifth anniversary or seventh anniversary, respectively, of the date he or she became subject to the guidelines.
 
Holding Period for Stock Options, Restricted Stock and Performance Stock Units
 
To further promote a culture of ownership and long-term investment, the Board has adopted a policy requiring that shares obtained by executives, including the Named Executive Officers, upon the exercise of Company stock options or through Company restricted stock grants and performance stock units be held until such executive achieves the applicable ownership threshold under the stock ownership guidelines, subject to exceptions for shares required to be sold in order to exercise the option or pay the taxes accruing as a result of the exercise of the option or the vesting of the restricted stock award or performance stock unit and in connection with corporate transactions that are generally available to stockholders.
 
No Hedging Policy
 
To further align our Directors’ and executive officers’ interests with the interests of the Company’s stockholders, the Board has adopted a policy applicable to all Directors and executive officers, including the Named Executive Officers, which prohibits transactions designed to limit or eliminate economic risks to our Directors or executive officers from owning the Company’s stock, such as transactions involving any form of margin arrangement, short sales or dealing in puts and calls or other derivative instruments related to Company stock or debt.
 
Tax and Accounting Implication of Compensation
 
Section 162(m) of the Code generally limits the deductibility of compensation (other than qualified performance-based compensation) in excess of $1,000,000 paid in a taxable year to a company’s chief executive officer and the four other most highly compensated executive officers. The Company considers the impact of this deductibility limitation on its compensation program, but recognizes that there may be cases in which authorized compensation exceeds the limits contemplated in Section 162(m) of the Code.
 
Current accounting rules, including Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC 718), “Compensation-Stock Compensation”, require the Company to record as an expense the estimated fair market value of stock option grants and stock awards, which reduces the Company’s reported profits. The Committee considers this expense when determining the types and values of equity awards to be granted to employees, including the Named Executive Officers.
Report Of The Compensation Committee(1)
 
With respect to the fiscal year ended March 31, 2013, the Compensation Committee hereby reports as follows:
 
1.    The Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis, set forth in this proxy statement, as required by Item 402(b) of Regulation S-K; and
 
2.    Based on the review and discussions referred to in paragraph 1 above, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A filed with the SEC.
 
FOREST LABORATORIES, INC.
COMPENSATION COMMITTEE
 
Brenton L. Saunders (Chairman)
Christopher J. Coughlin, and
Gerald M. Lieberman
 
(1) Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the Report of the Compensation Committee shall not be deemed incorporated by reference in any such filings.
Tabular Compensation Disclosure
 
The following tables summarize our Named Executive Officer and non-employee director compensation as follows:
 
1. Summary Compensation Table.  The Summary Compensation Table on Page 41 and related discussion summarize the compensation earned by or paid to our Named Executive Officers for the fiscal years ended March 31, 2013, 2012 and 2011, including salary earned, the aggregate grant date fair value of performance stock units, stock awards and option awards granted to our Named Executive Officers, and all other compensation paid to our Named Executive Officers, including perquisites.
 
2. Grants of Plan-Based Awards Table.  The Grants of Plan-Based Awards Table on Page 43 and related discussion summarize all grants of plan-based awards made to our Named Executive Officers for the fiscal year ended March 31, 2013.
 
 
 
3. Outstanding Equity Awards at Fiscal Year-End Table.  The Outstanding Equity Awards at Fiscal Year-End Table on Page 46 and related discussion summarize the unvested performance stock units, stock awards and all stock options held by our Named Executive Officers as of March 31, 2013.  Please note that our Named Executive Officers’ ownership of vested shares of stock is set forth under “Security Ownership of Principal Stockholders and Management” on Page 7 of this Proxy Statement.
 
4. Option Exercises and Stock Vested Table.  The Option Exercises and Stock Vested Table on Page 48 and related discussion summarize our Named Executive Officers’ option exercises and stock award vesting during the fiscal year ended March 31, 2013.
 
5. Non-qualified Deferred Compensation Table.  The Nonqualified Deferred Compensation Table on Page 48 and related discussion summarize the contributions to and account balances under our Deferred Compensation Plan during the fiscal year ended March 31, 2013.
 
6. Potential Payments Upon Termination Table.  The Potential Payments Upon Termination Table on Page 49 and related discussion summarize payments and benefits that would be made to certain of our Named Executive Officers in the event of certain employment terminations.
 
7. Potential Payments Upon a Change in Control Table.  The Potential Payments Upon a Change in Control Table on Page 51 and related discussion summarize payments and benefits that would be made to our Named Executive Officers in the event of a change in control.
 
 
 
8. Director Compensation Table.  The Director Compensation Table on Page 52 and related discussion summarize the compensation paid to our non-employee directors during the fiscal year ended March 31, 2013, including cash compensation and the aggregate grant date fair value of stock awards and option awards granted to our non-employee directors.
Summary Compensation Table
 
The following table sets forth compensation for each of our Named Executive Officers (NEOs) for each of the fiscal years ended March 31, 2013, 2012 and 2011 during which such person qualified as a NEO.
 
Name and Principal Position
Year
 
Salary
($)
   
Bonus
($)(1)
   
Stock Awards
($)(2)
   
Option Awards
($)(2)
   
Non-Equity Incentive Plan Compensation ($)(1)
   
All Other
Compensation
($)
   
Total
($) (3)
 
Howard Solomon,
2013
   
1,349,999
     
0
     
2,199,275
     
726,196
     
405,000
     
143,332
(4)
   
4,823,802
 
Chairman, CEO and President
2012
   
1,350,000
     
1,013,885
     
4,523,246
     
1,515,050
     
0
     
131,486
     
8,533,667
 
 
2011
   
1,312,500
     
1,037,500
     
4,020,625
     
2,112,000
     
0
     
358,688
     
8,841,313
 
 
 
                                                       
Elaine Hochberg,
2013
   
709,187
     
0
     
747,230
     
367,779
     
261,025
     
47,181
(4)
   
2,132,402
 
Executive Vice President and
2012
   
682,587
     
402,000
     
1,430,762
     
783,580
     
0
     
45,449
     
3,344,378
 
Chief Commercial Officer
2011
   
650,321
     
385,000
     
1,769,075
     
1,056,000
     
0
     
46,432
     
3,906,828
 
 
 
                                                       
Francis I. Perier, Jr.,
2013
   
658,531
     
0
     
695,331
     
344,030
     
242,394
     
48,028
(4)
   
1,988,314
 
Executive Vice President – Finance
2012
   
632,243
     
366,810
     
1,343,776
     
723,750
     
0
     
48,252
     
3,114,831
 
and Administration and CFO
2011
   
603,956
     
344,000
     
1,608,250
     
1,056,000
     
0
     
48,885
     
3,661,091
 
 
 
                                                       
Marco Taglietti, M.D.,
2013
   
600,263
     
0
     
584,198
     
288,752
     
284,919
     
33,575
(4)
   
1,791,707
 
Senior Vice President – Research
2012
   
578,091
     
325,500
     
1,145,809
     
599,265
     
0
     
33,643
     
2,682,308
 
and Development
and President
2011
   
550,872
     
310,000
     
1,447,425
     
637,800
     
0
     
34,123
     
2,980,220
 
of Forest
Research
Institute
 
                                                       
 
 
                                                       
David F. Solomon,
2013
   
486,300
     
0
     
597,784
     
296,857
     
182,036
     
27,567
(4)
   
1,590,544
 
Senior Vice President – Corporate
2012
   
450,000
     
261,500
     
1,145,809
     
552,945
     
0
     
25,255
     
2,435,509
 
Development and
Strategic
Planning
2011
   
396,875
     
230,000
     
1,447,425
     
584,650
     
0
     
22,359
     
2,681,309
 
 

(1) In December 2011, the Compensation Committee decided to align the Company’s compensation cycle, which historically covered the twelve month period ending September 30, with the Company’s fiscal year end of March 31.  The amounts set forth in the “Bonus” column for fiscal year 2012 represent the cash incentives issued as a bonus for the fiscal year ended March 31, 2012. To facilitate comparisons among fiscal years 2011 and 2012, the cash incentive awards set forth in the “Bonus” column for fiscal year 2011 has been restated to reflect the cash incentives earned as bonuses with respect to such fiscal year as opposed to the amount earned with respect to the twelve-month period ended September 30.  Commencing with fiscal year 2013, the Compensation Committee discontinued granting discretionary cash bonus awards and instituted a policy of granting formula based cash incentive awards under the Company’s Annual Incentive Compensation Plan (the Incentive Plan) instead.  All awards granted pursuant to the Incentive Plan were determined in accordance with the terms of the Incentive Plan as described under the heading “Annual Incentives” of the “Executive Compensation Discussion and Analysis” on Page 29 of this Proxy Statement.
 
(2) Represents the aggregate grant date fair values of awards granted during the fiscal years ended March 31, 2013, 2012 and 2011 computed in accordance with FASB ASC 718.  For a discussion of valuation assumptions used in calculating the amounts for fiscal years 2013, 2012 and 2011, see Note 1 to our Consolidated Financial Statements included in our Annual Reports on Form 10-K for the fiscal years ended March 31, 2013, 2012 and 2011, respectively.  For fiscal years 2012 and 2013, the “Stock Awards” column reflects the grant date fair value for both grants of Restricted Stock and performance stock units (PSUs) granted to the NEOs during that period.  For fiscal years 2012 and 2013, the value of PSUs has been determined based on an assumed vesting of 100% of the target PSUs awarded, which is the performance threshold the Company believed as of the grant date was most likely to be achieved under the grants.  The following is the maximum grant date fair value for the PSU awards granted in fiscal years 2012 and 2013 for each of the following NEOs if, due to the Company’s performance during the applicable performance cycle, the PSUs vested at their maximum level: Howard Solomon: $4,310,282 and $2,194,737; Elaine Hochberg: $1,073,071 and $558,690; Francis I. Perier: $1,007,832 and $519,886; Marco Taglietti: $859,357 and $436,794; and David F. Solomon: $859,357 and $446,952.  Please see the “Grants of Plan-Based Awards” table on Page 43 of this Proxy Statement for more information regarding equity awards granted in fiscal year 2013.
(3) There are no above-market or preferential earnings on deferred compensation.  Consequently, the Summary Compensation Table does not include earnings on deferred amounts.  In addition, none of the NEOs is eligible for pension benefits because Forest does not have a defined benefit retirement program.
 
(4) This amount includes the cost of group term life insurance and compensation credited to the NEOs pursuant to our Savings and Profit Sharing Plan, each of which benefit is available on the same terms to all non-bargaining unit employees of the Company and its domestic subsidiaries.  These employees become participants in the plan if they are employed for at least six months prior to the plan year-end.  The Company makes contributions to the plan at the Board’s discretion.  However, for fiscal year 2013, the contribution base may not exceed 25% of the individual plan participant’s gross salary (up to a maximum salary of $255,000), including allocated forfeitures for the plan year.  Plan participants vest over a period of one to five years of credited service.  The amount disclosed also includes the costs of all perquisites provided to the NEOs, including with respect to Mr. David F. Solomon and Dr. Taglietti amounts that did not exceed $10,000.  The amount of such perquisites represent the cost associated with company cars (including insurance), company provided lunches and membership dues.  With respect to Mr. Howard Solomon this amount also includes $101,946 of medical expenses paid on behalf of Mr. Solomon under a supplemental medical plan.
Grants Of Plan-Based Awards
 
The following table sets forth certain additional information regarding grants of plan-based awards to our NEOs during the fiscal year ended March 31, 2013:
 
        
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards(1)
   
Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
   
 All Other
Stock
Awards:
    All Other Option     Exercise        
Name
Grant
 
Threshold
($)
   
Target
($)
   
Maximum
($)
   
Threshold
(#)
   
Target
(#)
   
Maximum
(#)
   
Number of
Shares of
Stock or
Units
(#)(3)
   
 Awards:
Number of
Securities
Underlying
Options (#)(4)
   
 or Base
Price of
Option
Awards
($)
   
Grant Date
Fair Value
of Stock
and Option
Awards ($)(5)
 
Howard Solomon
05/07/12
 
$
506,250
   
$
1,012,500
   
$
2,025,000
   
   
   
   
   
   
   
 
 
05/07/12
                           
21,606
     
43,212
     
64,818
   
   
   
     
1,463,158
 
 
05/07/12
                                                   
21,606
   
   
     
736,116
 
 
05/07/12
                                                           
71,676
   
$
34.035
     
726,196
 
Elaine Hochberg
05/07/12
 
$
213,675
   
$
427,350
   
$
854,700
                                                         
 
05/07/12
                           
5,500
     
11,000
     
16,500
                             
372,460
 
 
05/07/12
                                                   
11,000
                     
374,770
 
 
05/07/12
                                                           
36,300
   
$
34.035
     
367,779
 
Francis I. Perier, Jr.
05/07/12
 
$
198,413
   
$
396,825
   
$
793,650
                                                         
 
05/07/12
                           
5,118
     
10,236
     
15,354
                             
346,591
 
 
05/07/12
                                                   
10,236
                     
348,741
 
 
05/07/12
                                                           
33,956
   
$
34.035
     
344,030
 
Marco Taglietti, M.D.
05/07/12
 
$
180,855
   
$
361,710
   
$
723,420
                                                       
 
05/07/12
                           
4,300
     
8,600
     
12,900
                             
291,196
 
 
05/07/12
                                                   
8,600
                     
293,002
 
 
05/07/12
                                                           
28,500
   
$
34.035
     
288,752
 
David F. Solomon
05/07/12
 
$
146,520
   
$
293,040
   
$
586,080
                                                         
 
05/07/12
                           
4,400
     
8,800
     
13,200
                             
297,968
 
 
05/07/12
                                                   
8,800
                     
299,816
 
 
05/07/12
                                                           
29,300
   
$
34.035
     
296,857
 

(1) The amounts actually paid to each NEO under the Annual Incentive Plan are set forth in the Summary Compensation Table at Page 41. At the beginning of the 2013 fiscal year, target payouts under these awards were based on a targeted percentage of base salary to be earned during the year. The amount set forth as the “Maximum” represents the maximum individual bonus that could have been earned by each NEO with respect to such NEO’s grant for the 2013 fiscal year under our Incentive Plan. The amount set forth as the “Threshold” represents the bonus that would have been payable if each of the four metrics under the award was achieved at the minimum level of performance, although no bonus, or a smaller bonus, could have been payable if none, or only some, respectively, of the four performance metrics were achieved at the threshold level.  Additional information regarding the awards issued to NEOs for the 2013 fiscal year under the Incentive Plan can be found in this Proxy Statement under the heading “Compensation Discussion and Analysis – Elements of Executive Compensation – Annual Incentives.”
 
(2) Performance-based restricted stock units (PSUs) are earned after a three year period based on achievement of financial objectives established by the Compensation Committee at the time of grant.  At the end of the third year, the Compensation Committee assesses performance versus the targets to determine how many shares are earned, and payouts are then made. The amount set forth as the “Maximum” represents the maximum number of shares that could be issued under the PSUs with respect to the award granted during the 2013 fiscal year.  The amount set forth as the “Threshold” represents the number of shares that would be issued if each metric under the award is achieved at the minimum level of performance, although 0% of the award could be earned if none of the performance metrics are achieved.  Additional information regarding the PSUs issued to NEOs during the 2013 fiscal year can be found in this Proxy Statement under the heading “Compensation Discussion and Analysis – Elements of Executive Compensation – Long Term Incentives.”
(3) The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the award on May 15, 2013, 33% of the shares on May 15, 2014 and 34% of the shares on May 15, 2015.
 
(4) The stock option has a term of ten years and becomes exercisable as to 25% of the shares covered by the option on each of the first four anniversaries of the grant date.
 
(5) Represents the aggregate grant date fair value of awards computed in accordance with FASB ASC 718 and does not reflect whether the recipient has actually realized a financial benefit from the awards.  For additional information regarding the valuation methodology used by the Company, see Note 1 to our 2013 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended March 31, 2013.  The value of PSUs has been determined based on the vesting of 100% of the target PSUs awarded, which is the performance threshold the Company believed as of the grant date was most likely to be achieved under the grants.
 
Narrative Addendum to the Summary Compensation Table and Grants of Plan-Based Awards
 
Letter Agreement with Howard Solomon.
 
 On May 22, 2013, Howard Solomon advised the Board of his decision to retire as President and Chief Executive Officer of the Company effective December 31, 2013, and entered into a letter agreement with the Company (the Letter Agreement) pursuant to which he agreed to continue serving as the Company’s Chief Executive Officer and President until the later of December 31, 2013, or the date his successor as Chief Executive Officer is appointed (the Transition Date). Under the terms of the Letter Agreement, Mr. Solomon will continue to receive his current compensation and benefits through the Transition Date. In light of Mr. Solomon’s key relationships, including with the Company’s licensing partners, and in order to retain the benefit of his experience, from and following the Transition Date, Mr. Solomon will commence employment as a Senior Advisor to the Company, and in that capacity he will provide services reasonably requested by the Board or the Chief Executive Officer of the Company. Mr. Solomon’s term as Senior Advisor to the Company will last until the earlier of December 31, 2016 or the date his employment is terminated in accordance with the terms of the Letter Agreement.
 
In consideration for serving as a Senior Advisor to the Company, Mr. Solomon will receive an annual salary of $250,000, will continue to receive health insurance and other welfare benefits at least at the current level, service credit for all purposes under the Company’s compensation and benefit plans, policies and arrangements in which he participates, an office and secretarial support, and use of a Company car and driver. Following the Transition Date, Mr. Solomon will no longer be eligible for severance compensation or benefits under either his change-in-control employment agreement with the Company, or any other severance pay arrangement of the Company or its affiliates. Mr. Solomon and the Company will also execute and deliver mutual releases of claims to each other no later than 21 days following the Transition Date.
 
The Letter Agreement also provides that, subject to the Board’s standard nominating procedures, the Company anticipates that it will nominate Mr. Solomon as a director of the Company at the 2013 annual meeting of stockholders and, if Mr. Solomon is elected at such meeting, he will retain his position as Chairman of the Board until the 2014 annual meeting of stockholders. Subject to the Board’s standard nominating procedures and the exercise of its fiduciary duties, the Board will also consider Mr. Solomon for election as a director at the 2014 and 2015 annual meetings of stockholders, and if nominated and elected, Mr. Solomon will be given the honorary title “Chairman Emeritus”. Following the Transition Date and while serving as a director, Mr. Solomon will receive (i) the same compensation as non-employee members of the Board, and (ii) while serving as the non-executive Chairman of the Board, an additional retainer, payable at an annual rate of $150,000. In the event that his employment as Senior Advisor terminates while he is serving as a director, Mr. Solomon will resign from the Board if he is requested to do so by the Board.
Equity Plans
 
The only long-term incentive compensation plan pursuant to which we presently grant equity awards is our 2007 Equity Incentive Plan (the Equity Plan).  Pursuant to the Equity Plan, employees, including the Named Executive Officers, may be granted options to purchase shares of common stock, stock awards, stock appreciation rights and stock equivalent units (the Awards).  The exercise price of all options, including Incentive Stock Options (ISOs) as defined by Section 422 of the Internal Revenue Code of 1986 (the Code), is the fair market value of the shares on the grant date.  In fiscal 2012, we granted only performance based stock equivalent units (referred to as performance stock units or PSUs), restricted stock awards and stock options.  All of our employees, our subsidiaries’ employees and our non-employee directors are eligible to receive Awards under the Equity Plan.  The Equity Plan provides that a Committee composed of no fewer than three (3) members of the Board, each of whom meets the definition of “outside director” under the provisions of Section 162(m) of the Code and the definition of “non-employee director” under the provisions of the Exchange Act or rules and regulations promulgated thereunder, shall administer the Equity Plan and determine which employees are granted Awards and the number of shares subject to each Award.  A full description of the terms of the equity awards granted to our Named Executive Officers is described in the “Compensation Discussion and Analysis – Elements of Executive Compensation - Long-Term Incentives”.  Under the Equity Plan, the non-employee directors are eligible for automatic grants of stock awards and stock options as further described in the narrative following the Director Compensation table on Page 52 of this Proxy Statement under the heading “Director Compensation.”
 
At the Annual Meeting we are proposing several amendments to the Equity Plan, including to increase the number of shares available for grant under the Equity Plan and adjustments to the share counting rules, including the addition of fungible share counting.  A full description of the terms of the Equity Plan and the proposed amendments is set forth on Page 57 of this Proxy Statement under “Proposal 3.
 
We have historically granted options to our employees and directors under our 1998 Stock Option Plan, our 2000 Stock Option Plan and our 2004 Stock Option Plan (the Prior Option Plans).  Following the adoption of the Equity Plan, we ceased issuing options under the Prior Option Plans, however all options previously issued under the Prior Option Plans which remain outstanding continue to be governed by the terms of such Prior Option Plans.
Outstanding Equity Awards At Fiscal Year-End
 
The following table sets forth information regarding each unexercised option and unvested stock award held by each of our Named Executive Officers as of March 31, 2013:
 
 
 
OPTION AWARDS
 
STOCK AWARDS
 
Name
 
Number of Securities Underlying Unexercised Options (#)
Exercisable
   
Number of Securities Underlying Unexercised Options (#)
Unexercisable
   
Option Exercise
Price ($)
 
Option Expiration
Date
 
Number of Shares or Units of Stock That Have Not
Vested (#)
   
Market Value of Shares or Units of Stock That Have Not
Vested ($)
   
Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)
   
Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)
 
Howard Solomon
   
- -
     
71,676
(1)
   
34.0350
 
5/6/2022
   
21,606
(2)
   
821,892
     
21,606
     
821,892
 
 
   
39,250
     
117,750
(3)
   
29.9950
 
12/04/2021
   
36,850
(4)
   
1,401,774
     
47,900
     
1,822,116
 
 
   
150,000
     
- -
     
32.1650
 
12/05/2020
   
- -
     
- -
     
- -
     
- -
 
 
   
140,000
     
- -
     
31.2650
 
12/06/2019
   
- -
     
- -
     
- -
     
- -
 
 
   
125,000
     
- -
     
24.1200
 
12/08/2018
   
- -
     
- -
     
- -
     
- -
 
 
   
125,000
     
- -
     
37.2550
 
12/05/2017
   
- -
     
- -
     
- -
     
- -
 
 
   
200,000
     
- -
     
51.5350
 
12/08/2016
   
- -
     
- -
     
- -
     
- -
 
 
   
200,000
     
- -
     
40.2900
 
12/09/2015
   
- -
     
- -
     
- -
     
- -
 
 
   
200,000
     
- -
     
42.5350
 
12/13/2014
   
- -
     
- -
     
- -
     
- -
 
 
   
200,000
     
- -
     
59.0500
 
12/12/2013
   
- -
     
- -
     
- -
     
- -
 
 
                       
 
                               
Elaine Hochberg
   
- -
     
36,300
(1)
   
34.0350
 
5/6/2022
   
11,000
(2)
   
418,440
     
5,500
     
209,220
 
 
   
20,299
     
60,901
(3)
   
29.9950
 
12/04/2021
   
15,980
(4)
   
607,879
     
11,925
     
453,627
 
 
   
75,000
     
- -
     
32.1650
 
12/05/2020
   
- -
     
- -
     
- -
     
- -
 
 
   
60,000
     
- -
     
31.2650
 
12/06/2019
   
- -
     
- -
     
- -
     
- -
 
 
   
50,000
     
- -
     
24.1200
 
12/08/2018
   
- -
     
- -
     
- -
     
- -
 
   
50,000
     
- -
     
37.2550
 
12/05/2017
   
- -
     
- -
     
- -
     
- -
 
   
75,000
     
- -
     
51.5350
 
12/08/2016
   
- -
     
- -
     
- -
     
- -
 
   
50,000
     
- -
     
40.2900
 
12/09/2015
   
- -
     
- -
     
- -
     
- -
 
   
50,000
     
- -
     
42.5350
 
12/13/2014
   
- -
     
- -
     
- -
     
- -
 
 
   
50,000
     
- -
     
59.0500
 
12/12/2013
   
- -
     
- -
     
- -
     
- -
 
 
                       
 
                               
Francis I. Perier, Jr.
   
- -
     
33,956
(1)
   
34.0350
 
5/6/2022
   
10,236
(2)
   
389,377
     
5,118
     
194,689
 
 
   
18,749
     
56,251
(3)
   
29.9950
 
12/04/2021
   
15,008
(4)
   
570,904
     
11,200
     
426,048
 
 
   
75,000
     
- -
     
32.1650
 
12/05/2020
   
- -
     
- -
     
- -
     
- -
 
 
   
26,997
     
33,003
(5)
   
31.2650
 
12/06/2019
   
11,250
(6)
   
427,950
     
- -
     
- -
 
 
   
29,996
     
20,004
(7)
   
24.1200
 
12/08/2018
   
- -
     
- -
     
- -
     
- -
 
 
   
50,000
     
- -
     
37.2550
 
12/05/2017
   
- -
     
- -
     
- -
     
- -
 
 
   
75,000
     
- -
     
51.5350
 
12/08/2016
   
- -
     
- -
     
- -
     
- -
 
 
   
50,000
     
- -
     
40.2900
 
12/09/2015
   
- -
     
- -
     
- -
     
- -
 
 
   
100,000
     
- -
     
44.7400
 
09/30/2014
   
- -
     
- -
     
- -
     
- -
 
 
                       
 
                               
Marco Taglietti, M.D.
   
- -
     
28,500
(1)
   
34.0350
 
5/6/2022
   
8,600
(2)
   
327,144
     
4,300
     
163,572
 
 
   
15,524
     
46,576
(3)
   
29.9950
 
12/04/2021
   
12,797
(4)
   
486,798
     
9,550
     
363,282
 
 
   
17,998
     
42,002
(8)
   
32.1650
 
12/05/2020
   
22,500
(9)
   
855,900
     
- -
     
- -
 
 
   
17,997
     
22,003
(5)
   
31.2650
 
12/06/2019
   
10,000
(6)
   
380,400
     
- -
     
- -
 
 
   
14,996
     
10,004
(7)
   
24.1200
 
12/08/2018
   
- -
     
- -
     
- -
     
- -
 
 
   
60,000
     
- -
     
39.8800
 
08/12/2017
   
- -
     
- -
     
- -
     
- -
 
 
                       
 
                               
David F. Solomon
   
- -
     
29,300
(1)
   
34.0350
 
5/6/2022
   
8,800
(2)
   
334,752
     
4,400
     
167,376
 
 
   
14,324
     
42,976
(3)
   
29.9950
 
12/04/2021
   
12,797
(4)
   
486,798
     
9,550
     
363,282
 
 
   
16,498
     
38,502
(8)
   
32.1650
 
12/05/2020
   
22,500
(9)
   
855,900
                 
   
17,997
     
22,003
(5)
   
31.2650
 
12/06/2019
   
10,000
(6)
   
380,400
     
- -
     
- -
 
   
14,996
     
10,004
(7)
   
24.1200
 
12/08/2018
   
- -
     
- -
     
- -
     
- -
 
 
   
25,000
     
- -
     
37.2550
 
12/05/2017
   
- -
     
- -
     
- -
     
- -
 
 
   
5,000
     
- -
     
51.5350
 
12/08/2016
   
- -
     
- -
     
- -
     
- -
 

(1) The option was granted on May 7, 2012 and has a term of ten years.  The option vests and is exercisable as to 25% of the shares underlying the option on each of the first four anniversaries of the grant date.
 
(2) The stock award was granted on May 7, 2012.  The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the award on the first two anniversaries of the grant date and 34% of the shares on the third anniversary of the grant date.
 
(3) The option was granted on December 5, 2011 and has a term of ten years.  The option vests and is exercisable as to 25% of the shares underlying the option on each of the first four anniversaries of the grant date.
 
(4) The stock award was granted on December 5, 2011.  The stock award is subject to a risk of forfeiture which lapses as to 33% of the shares covered by the award on the first two anniversaries of the grant date and 34% of the shares on the third anniversary of the grant date.
 
(5) The option was granted on December 7, 2009 and has a term of ten years.  The option vests and is exercisable as to 15% of the shares underlying the option on each of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
 
(6) The stock award was granted on December 7, 2009.  The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on each of the first four anniversaries of the grant date.
 
(7) The option was granted on December 8, 2008 and has a term of ten years.  The option vests and is exercisable as to 15% of the shares underlying the option on each of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
 
(8) The option was granted on December 6, 2010 and has a term of ten years.  The option vests and is exercisable as to 15% of the shares underlying the option on each of the first four anniversaries of the grant date and as to the remaining 40% on the fifth anniversary of the grant date.
 
(9) The stock award was granted on December 6, 2010.  The stock award is subject to a risk of forfeiture which lapses as to 25% of the shares covered by the award on each of the first four anniversaries of the grant date.
Option Exercises And Stock Vested
 
No options were exercised by any of the Named Executive Officers during the fiscal year ended March 31, 2013.  The following table sets forth information regarding vesting of restricted stock during fiscal year 2013:
 
 
 
STOCK AWARDS
 
Name
 
Number of Shares
Acquired on
Vesting (#)
   
Value Realized on
Vesting ($)
 
Howard Solomon
   
49,400
     
1,770,572
 
Elaine Hochberg
   
21,621
     
774,927
 
Francis I. Perier, Jr.
   
41,142
     
1,473,289
 
Marco Taglietti, M.D.