SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of Commission
Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BARR 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:
[X] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
--------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
--------------------------------------------------------------------
(1) Amount Previously Paid:
--------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------------
BARR LABORATORIES, INC.
2 QUAKER ROAD
POMONA, NEW YORK 10970
(845) 362-1100
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholders:
The Annual Meeting of Shareholders of Barr Laboratories, Inc. (the
"Company") will be held on October 23, 2003, at 10:00 a.m. local time at The
Plaza Hotel, Fifth Avenue at Central Park, New York, New York, for the following
purposes:
1. to elect nine directors;
2. to consider a proposal to approve the reincorporation of the
Company in the state of Delaware;
3. to consider a proposal to approve an increase in the number of
authorized shares of the common stock of the new Delaware company if
Proposal No. 2 is approved by the shareholders at the Annual Meeting, or,
if Proposal No. 2 is not approved by the shareholders at the Annual
Meeting, of the Company from 100,000,000 shares to 200,000,000 shares; and
4. to transact such other business as may properly come before the
meeting.
Owners of record of the Company's Common Stock at the close of business on
September 2, 2003 will be entitled to vote at the Annual Meeting or at any
adjournments or postponements thereof.
Whether or not you plan to attend the Annual Meeting, each shareholder is
requested to promptly mark, sign and date the enclosed proxy card and to return
it without delay in the enclosed postage-paid envelope. You may also vote your
shares on the Internet or by telephone. Voting instructions are printed on your
proxy card.
By Order of the Board of Directors
FREDERICK J. KILLION
Secretary
September 26, 2003
BARR LABORATORIES, INC.
2 QUAKER ROAD
POMONA, NEW YORK 10970
(845) 362-1100
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 2003
DATE, TIME AND PLACE OF MEETING
We are providing these proxy materials in connection with the solicitation
by the board of directors of Barr Laboratories, Inc. ("Barr," the "Company,"
"we," or "us"), a New York corporation, for use at our 2003 Annual Meeting of
Shareholders to be held at 10:00 a.m. local time on October 23, 2003 at The
Plaza Hotel, Fifth Avenue at Central Park, New York, New York, and at any
adjournment or postponement thereof. It is anticipated that we will begin
mailing this proxy statement, together with the form of proxy, to our
shareholders on or about September 26, 2003.
WEBCAST OF ANNUAL MEETING
Our Annual Meeting will be webcast on October 23, 2003 at 10:00 a.m. New
York time. Please visit our homepage at www.barrlabs.com, and click on the
Investor Relations/Calendar of Events section to view the webcast live or to
access an archived replay.
REVOCABILITY AND VOTING OF PROXIES
A form of proxy for use at the Annual Meeting and a return envelope for the
proxy are enclosed. You have the power to revoke your proxy at any time before
it is exercised by (1) attending the Annual Meeting and voting in person, (2)
duly executing and delivering a proxy for the Annual Meeting bearing a later
date or (3) delivering written notice of revocation to the Secretary of the
Company prior to the Annual Meeting. Please note that if your shares are held of
record by a broker, bank or other nominee and you wish to revoke a previously
given proxy, you must contact that entity. If your shares are held of record by
a broker, bank or other nominee and you wish to vote in person at the annual
meeting, prior to the Annual Meeting you must obtain from that entity a proxy
covering the shares you beneficially own.
VOTING SECURITIES AND SHAREHOLDERS ENTITLED TO VOTE
Holders of our common stock, par value $.01 per share (the "Common Stock"),
at the close of business on September 2, 2003 are entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof. As of
that date, there were 66,992,993 shares of our Common Stock outstanding, each
entitled to one vote.
REQUIREMENTS FOR A QUORUM
The presence of holders of a majority of the outstanding shares of the
Common Stock entitled to vote at the Annual Meeting, in person or represented by
proxy, is necessary to constitute a quorum. Abstentions and broker "non-votes"
are counted as present and entitled to vote for purposes of determining a
quorum. A broker "non-vote" occurs when a broker holding shares for a beneficial
owner does not vote on a particular proposal because the broker does not have
discretionary voting power for that particular item and has not received
instructions from the beneficial owner.
SOLICITATION OF PROXIES; SOLICITATION COSTS
The proxy included with this proxy statement is solicited by the board of
directors of the Company for use at the annual meeting. We will pay the costs of
preparing, printing and mailing the Notice of Annual Meeting
1
of Shareholders and proxy statement, the enclosed proxy card and our Annual
Report for the fiscal year ended June 30, 2003. We will also reimburse brokerage
firms and others for reasonable expenses incurred by them in connection with
their forwarding of proxy solicitation materials to beneficial owners. The
solicitation of proxies will be conducted primarily by mail, but may also
include telephone, facsimile or oral communications by our directors, officers
or regular employees acting without special compensation. We have hired Mellon
Investor Services LLC ("Mellon") to distribute and solicit proxies. We will pay
Mellon a fee of $10,500 for this service.
HOW TO VOTE
VOTE BY TELEPHONE
Using any touch-tone telephone, you can vote by calling the toll-free
number on your proxy card. Have your proxy in hand when you call, and when
prompted, enter your control number as shown on your proxy card. Follow the
voice prompts to vote your shares.
VOTE ON THE INTERNET
You can also choose to vote on the Internet. The web site for Internet
voting is http://www.eproxy.com/brl. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, shown on
your proxy card, to create and submit an electronic ballot.
VOTE BY MAIL
You can submit your proxy by mailing it in the postage-paid envelope
provided.
VOTING AT THE ANNUAL MEETING
The method by which you vote will not limit your right to vote at the
Annual Meeting if you decide to attend in person. If your shares are held in the
name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
Annual Meeting.
REQUIRED VOTES
Directors are elected by a plurality of votes cast by the shares of Common
Stock present at the Annual Meeting (either in person or by proxy), which means
that the nine nominees with the most votes will be elected. Abstentions, broker
non-votes and withheld votes will not be considered as cast votes for the
election of directors.
The affirmative vote of the holders of at least two-thirds of the shares of
Common Stock outstanding on September 2, 2003 is required for the approval of
the proposed reincorporation of the Company in Delaware. Abstentions, broker
non-votes and withheld votes will not be considered as cast votes.
The affirmative vote of holders of at least a majority of the shares of
Common Stock present at the Annual Meeting (either in person or by proxy) is
required for the authorization of additional shares of common stock of the new
Delaware company or the Company, as the case may be. Abstentions, broker non-
votes and withheld votes will not be considered as cast votes.
If your proxy is properly completed and timely received, and it is not
revoked before the Annual Meeting, your shares will be voted at the Annual
Meeting according to the instructions indicated on your proxy. If you sign and
return your proxy card but do not give voting instructions for any or all of the
matters presented, the persons acting under the proxy will vote the shares
represented thereby for the election of each of the director nominees listed in
Proposal No. 1 below and for approval of Proposal No. 2 and Proposal No. 3, each
of which is discussed below. As far as we know, no other matters will be
presented at the Annual Meeting. However, if any other matters of business are
properly presented, the proxy holders named on the proxy card are authorized to
vote the shares represented by proxies according to their best judgment.
2
PROPOSAL NO. 1.
ELECTION OF DIRECTORS
Our board of directors currently has nine members. At the annual meeting,
we will nominate all of our current directors for re-election to the board of
directors. Each of the nominees has consented to serve if elected and we are not
aware of any nominee who is unable or unwilling to serve. However, if any
nominee is unable or unwilling to serve, the proxy holders may decide to vote
the shares for any substitute nominee or the board of directors may determine
not to nominate a substitute and may reduce the size of the board.
INFORMATION ON DIRECTOR NOMINEES
The nominees for election to the board of directors and biographical
information about the nominees is set forth below. Each of the nominees
currently serves as a director. Each nominee, if elected, will serve until the
next annual meeting of shareholders or until a successor is named and qualified.
<Table>
<Caption>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- ---- --- -------------------- --------
Bruce L. Downey................... 55 Chairman of the Board and Chief 1993
Executive Officer
Paul M. Bisaro.................... 42 President and Chief Operating 1998
Officer, Barr Laboratories, Inc.
Carole S. Ben-Maimon.............. 44 President and Chief Operating 2001
Officer, Barr Research
George P. Stephan................. 70 Business consultant and former 1988
Chairman of the Board of
Kollmorgen Corporation
Jack M. Kay....................... 63 President of Apotex, Inc. 1994
Harold N. Chefitz................. 68 Chairman of Notch Hill Advisors 2001
and President of Chefitz
HealthCare Investments
Richard R. Frankovic.............. 61 Pharmaceutical industry consultant 2001
Peter R. Seaver................... 61 Healthcare industry consultant 2001
James S. Gilmore, III............. 53 Partner at the law firm of Kelley, 2002
Drye & Warren and former Governor
of the Commonwealth of Virginia
</Table>
Bruce L. Downey became a member of the board of directors in January 1993
and was elected Chairman of the Board and Chief Executive Officer in February of
1994. From January 1993 to December 1999, he also served as our President. Prior
to assuming these positions, from 1981 to 1993, Mr. Downey was a partner in the
law firm Winston & Strawn and a predecessor firm, Bishop, Cook, Purcell and
Reynolds.
Paul M. Bisaro was elected a director in June 1998 and in December 1999 was
appointed to the position of President and Chief Operating Officer of Barr
Laboratories, Inc. Previously, he served as Senior Vice President -- Strategic
Business Development and General Counsel. Prior to joining us in 1992 as General
Counsel, Mr. Bisaro was associated with the law firm Winston & Strawn and a
predecessor firm, Bishop, Cook, Purcell and Reynolds.
Carole S. Ben-Maimon joined us in January 2001 as President and Chief
Operating Officer of Barr Research, and was elected a director in February 2001.
Prior to January 2001, Dr. Ben-Maimon was with Teva Pharmaceuticals USA, where
she most recently was Senior Vice President, Science and Public Policy, North
America. From 1996 until 2000, Dr. Ben-Maimon served as Senior Vice President,
Research and Development at Teva. She is Board Certified in Internal Medicine
and previously served as Chairman of the Board of the Generic Pharmaceutical
Association.
3
George P. Stephan was elected a director in February 1988. In April 1990,
Mr. Stephan retired as Vice Chairman of Kollmorgen Corporation, a diversified,
international technology company he had served in several executive capacities
for over 20 years. Mr. Stephan was also a director of Kollmorgen from 1982 until
June 2000, when it was acquired by Danaher Corporation, and served as Chairman
of the Board from 1991 to 1996. From 1994 to April 1999, Mr. Stephan also was a
Managing Director of Stonington Group LLC, financial intermediaries and
consultants. He is currently a business consultant and a director of Sartorius
Sports Limited, a privately held specialty sports retailer.
Jack M. Kay was elected a director in December 1994. Mr. Kay is President
of Apotex, Inc., and formerly served as Chair of the Canadian Drug Manufacturers
Association. He is also a Director of Humber River Regional Hospital (Toronto),
Chair of the Canadian Schizophrenia Foundation, and a Director of Cangene
Corporation.
Harold N. Chefitz was elected a director in February 2001. Mr. Chefitz is
Chairman of Notch Hill Advisors, which advises CK Capital Fund, and President of
Chefitz HealthCare Investments, a private investment company. Prior to forming
Notch Hill in 1999, Mr. Chefitz was a partner in Boles Knop & Co. Mr. Chefitz
has also served as Managing Director and head of the Healthcare Group at
Prudential Securities, and Senior Managing Director of Furman Selz. Mr. Chefitz
is the Chairman of the Board of Directors of GliaMed, Inc. as well as a member
of the boards of Kensey Nash and Elan Motor Technology. From 1990 to 1994, Mr.
Chefitz served as Chairman of the Board of Trustees at Columbia University
School of Pharmaceutical Sciences.
Richard R. Frankovic, a pharmaceutical industry consultant, was elected a
director in October 2001. He was employed by Rugby Laboratories from 1980 to
1998 where he served as President from 1984 until 1998. Prior to joining Rugby
Laboratories, he was employed by Lederle Laboratories, where he held a variety
of management positions. Mr. Frankovic served as a director of Duramed
Pharmaceuticals, Inc. from 1999 until its merger with Barr in October 2001.
Peter R. Seaver, a healthcare industry consultant, was elected a director
in October 2001. He retired from a 31-year career with The Upjohn Company, a
pharmaceutical manufacturer, in 1998. He held various executive positions with
Upjohn including Vice President -- Domestic Marketing, Corporate Vice
President -- Worldwide Pharmaceutical Marketing, and Corporate Vice President
for Health Care Administration. Mr. Seaver served as a director of Duramed
Pharmaceuticals, Inc. from 1998 until its merger with Barr in October 2001.
James S. Gilmore, III was elected a director in May 2002. Mr. Gilmore is a
partner at the law firm of Kelley, Drye & Warren, and also consults with the
federal government on homeland security issues. He served as the 68th Governor
of the Commonwealth of Virginia from 1997-2002. Mr. Gilmore also served as
Chairman of the Republican National Committee. From 1993 to 1997, he served as
Virginia's Attorney General, and from 1987 to 1993 served as the Commonwealth's
Attorney for Henrico County. He is Chairman of the Congressional Advisory
Commission on Terrorism and Weapons of Mass Destruction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINATED DIRECTORS.
BOARD OF DIRECTORS MEETINGS, COMMITTEES AND COMPENSATION
During the fiscal year ended June 30, 2003, the board of directors met nine
times. All directors attended at least 75% of the aggregate number of meetings
of the board and of the committees on which they served in fiscal 2003.
4
At present, the board has three committees -- an Audit Committee, a
Compensation Committee and a Business Development Committee. The table below
provides membership information for each of the board committees.
<Table>
<Caption>
BUSINESS
NAME AUDIT COMPENSATION DEVELOPMENT
- ---- ----- ------------ -----------
Dr. Ben-Maimon....................................... X
Mr. Bisaro........................................... X
Mr. Downey........................................... X*
Mr. Chefitz.......................................... X X*
Mr. Frankovic........................................ X
Mr. Gilmore.......................................... X
Mr. Kay.............................................. X
Mr. Seaver........................................... X
Mr. Stephan.......................................... X* X
</Table>
- ---------------
* Chairman
Audit Committee. The Audit Committee, among other things: selects and
retains our independent public accountants; monitors and reviews the activities
of our independent accountants; and reviews the adequacy of our accounting and
financial controls as reported by management and the independent accountants.
The Audit Committee met fourteen times during the fiscal year ended June 30,
2003.
Compensation Committee. The Compensation Committee, among other things:
reviews salaries, benefits and other compensation, including stock-based
compensation, of our directors, officers and other key employees; makes
recommendations to the board of directors regarding compensation issues; and
administers our stock option and stock incentive plans. The Compensation
Committee met four times during the fiscal year ended June 30, 2003.
Business Development Committee. The Business Development Committee is
responsible for working with the Board of Directors to evaluate business
opportunities that are presented to the Company from time to time. While there
were no formal meetings during the fiscal year ended June 30, 2003, the Business
Development Committee regularly met with the full Board of Directors during
regularly scheduled and special board meetings.
Compensation Committee Interlocks and Insider Participation. Mr. Chefitz,
a member of our Audit Committee and Chairman of our Compensation Committee,
serves as the Chairman of GliaMed, Inc., a privately held company. GliaMed has
created a platform of compounds designed for the treatment of neurodegeneration
diseases and primary brain cancers. We have made a $500,000 investment in
GliaMed, which represents approximately six percent of the outstanding voting
shares. In connection with this investment, we obtained options to elect to
market, distribute and manufacture products developed by GliaMed. We do not have
the ability to exercise significant influence on GliaMed's operations.
Director Compensation. During fiscal 2003, non-employee directors received
quarterly retainers of $7,500 covering their attendance at board meetings and
participation in committee meetings, with committee chairmen receiving an
additional $1,250. During fiscal 2004, non-employee directors will receive
quarterly retainers of $12,500 covering their attendance at board meetings and
participation in committee meetings, with committee chairmen receiving an
additional $2,500. In addition, under our 2002 Stock Option Plan for
Non-Employee Directors, as amended (the "2002 Non-Employee Director Plan"), each
continuing non-employee director receives an annual option grant to purchase
7,500 shares at an option price equal to 100% of the fair market value of the
common stock on the date of grant. Options granted to continuing non-employee
directors have ten-year terms and become exercisable in full on the date of the
first annual shareholders' meeting immediately following the date of the grant.
5
PROPOSAL NO. 2.
APPROVAL OF REINCORPORATION FROM NEW YORK TO DELAWARE
GENERAL
The board of directors has approved and declared advisable a proposal to
change the Company's state of incorporation from New York to Delaware (the
"Reincorporation"). To effect the Reincorporation, the Company will form a
Delaware corporation, Barr Laboratories, Inc. ("Barr-DE"), of which the Company
will own all of the capital stock. The Reincorporation will be effected by
merging the Company with and into Barr-DE, with Barr-DE being the surviving
corporation and the Company's current shareholders receiving shares of common
stock of Barr-DE as consideration (the "Merger"), all in accordance with the
terms of an Agreement and Plan of Merger (the "Merger Agreement"). A copy of the
form of Merger Agreement is attached to this Proxy Statement as Annex A, and
statements herein regarding the Merger Agreement are qualified by reference to
the complete Merger Agreement.
Upon consummation of the Merger, pursuant to the Merger Agreement, each
outstanding share of the Company's currently outstanding Common Stock (the "New
York Common Stock") automatically will be converted into a share of common
stock, par value $.01 per share, of Barr-DE (the "Delaware Common Stock"), and
each holder of New York Common Stock will be deemed to hold a number of shares
of Delaware Common Stock equal to the number of shares of New York Common Stock
held by such holder immediately prior to the Reincorporation. It will not be
necessary for the Company's shareholders to exchange their existing share
certificates following the Reincorporation.
In addition, as soon as the Reincorporation becomes effective, each
outstanding option, right or warrant to acquire shares of New York Common Stock
will be converted into an option, right or warrant to acquire an equal number of
shares of Delaware Common Stock, under the same terms and conditions as the
original option, right or warrant. All of the Company's employee benefit plans,
including the 1993 Stock Incentive Plan and the 2002 Stock and Incentive Award
Plan (the "Plans"), will be continued by Barr-DE following the Reincorporation.
As a result of the Merger, you and the other stockholders of the Company
will be stockholders of Barr-DE. Your rights as a stockholder will be governed
by the Certificate of Incorporation of Barr-DE, a copy of which is attached to
this Proxy Statement as Annex B (the "Delaware Charter"), the By-laws of
Barr-DE, a copy of which is attached to this Proxy Statement as Annex C (the
"Delaware By-laws"), and the Delaware General Corporation Law ("Delaware Law" or
"DGCL").
Following the Merger, Barr-DE intends to transfer substantially all of its
assets (other than stock in subsidiary companies) and, to the extent possible,
liabilities to a newly-formed Delaware corporation that will be a wholly-owned
subsidiary of Barr-DE. Following this transfer, Barr-DE will be a holding
company. This structure will allow Barr-DE to consummate future mergers and
acquisitions in a more efficient manner. This transfer will not require
stockholder approval.
EFFECTIVE TIME
The Reincorporation is expected to become effective (the "Effective Time")
on December 31, 2003, assuming shareholder approval has been obtained and all
other conditions to the Merger have been satisfied or waived. Notwithstanding
shareholder approval, the Merger Agreement and applicable law allow the board of
directors to abandon the Reincorporation prior to the Effective Time.
REASONS FOR REINCORPORATION IN DELAWARE
Historically, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has adopted comprehensive,
modern and flexible corporate laws which are updated and revised regularly in
response to the legal and business needs of corporations organized under its
laws. As a result of these efforts, many corporations initially choose Delaware
for their domicile or subsequently reincorporate there in a manner similar to
that proposed by the Company. Over the past century a well-established body of
6
case law construing the DGCL has developed, providing businesses with a greater
measure of predictability than exists in any other jurisdiction. The certainty
afforded by the well-established principles of corporate governance under the
DGCL will be of benefit to the Company and its shareholders and should assist
the Company in its ability to continue to attract and retain outstanding
directors and officers. Furthermore, the DGCL is generally acknowledged to be
the most advanced and flexible corporate statute in the country. The Delaware
Court of Chancery, the trial court that first hears most issues arising under
the DGCL, brings to its handling of complex corporate issues a level of
experience, a speed of decision and a degree of sophistication and understanding
beyond most other trial courts in the country. The Delaware Supreme Court, the
only appeals court in the state, is highly regarded and currently consists
primarily of former Vice Chancellors of the Court of Chancery and corporate
practitioners. The Delaware General Assembly considers and adopts statutory
amendments that have been proposed by the Corporation Law Section of the
Delaware bar that it finds appropriate to meet changing business needs on a
yearly basis. These factors often provide the directors and management of
Delaware corporations greater certainty and predictability in managing the
affairs of the corporation.
REQUIRED VOTE
Under New York law, the affirmative vote of the holders of at least
two-thirds of the shares of the Company's Common Stock outstanding on September
2, 2003 is required for approval of the Reincorporation of the Company in
Delaware. As a result, abstentions and broker non-votes will have the same
effect as negative votes. If approved by the shareholders, it is anticipated
that the Reincorporation would be completed on December 31, 2003. The
Reincorporation may be abandoned or the Merger Agreement may be amended (with
certain exceptions), either before or after shareholder approval has been
obtained, if, in the opinion of the board of directors, circumstances arise that
make such action desirable.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are presently governed by the
corporate law of New York, the Company's state of incorporation, and by the
Company's current Certificate of Incorporation (the "New York Charter") and the
Company's By-laws (the "New York By-laws"), both of which have been adopted
pursuant to New York law. The New York Charter and New York By-laws were filed
with the SEC as exhibits to the Company's Annual Reports on Form 10-K and are
available for inspection during business hours at the principal executive
offices of the Company. In addition, copies may be obtained by writing to the
Company at Barr Laboratories, Inc., Attention: Carol A. Cox, Vice President,
Investor Relations and Corporate Communications, 400 Chestnut Ridge Road,
Woodcliff Lake, New Jersey 07677.
If the Reincorporation proposal is approved by the shareholders and the
Merger occurs, the Company will merge with and into Barr-DE and the Company's
shareholders will become shareholders of Barr-DE. Therefore, following the
Merger, issues of corporate governance and control will be controlled by the
DGCL, rather than by the Business Corporation Law of New York ("New York Law" or
"NYBCL"). The New York Charter and the New York By-laws will be replaced by the
Delaware Charter and the Delaware By-laws. Accordingly, the differences among
these documents and between Delaware Law and New York Law are relevant to your
decision whether to approve the Reincorporation proposal.
It might be possible to achieve or approximate some of the results to be
achieved under Delaware Law, the Delaware Charter and the Delaware By-laws by
amending the New York Charter or New York By-laws to the extent permitted by New
York Law. However, the board of directors concluded that this approach would not
be as advantageous to the Company and would not enable the Company to take
advantage of the responsiveness and predictability of Delaware Law. The board of
directors accordingly chose the Reincorporation approach.
A number of differences between Delaware Law and New York Law are
summarized in the chart beginning on page 9. Differences between the Delaware
Charter and the New York Charter are summarized in the chart beginning on page
14. The board of directors urges shareholders to read the charts, the discussion
following the charts, the Merger Agreement, the Delaware Charter, and the
Delaware By-laws attached to this
7
Proxy Statement. For each item summarized in the charts, there is a reference to
a page of this Proxy Statement on which a more detailed discussion appears.
In considering the following charts and the discussions that follow them,
it is important to be aware that a number of changes were made to New York Law,
effective February 1998, in order to conform New York Law more closely with the
more flexible rules afforded under the corporate laws of other states, such as
Delaware. In many cases, these changes, although applying automatically to
corporations formed after that effective date, did not also apply automatically
to pre-existing corporations (like the Company). Rather, New York Law provided
that pre-existing corporations would continue to be governed by the superseded
(and, generally, less flexible) rules unless the particular corporation elected
to take advantage of the new rules by amending its charter to expressly
implement the particular changes. Although the Company amended its charter to
implement some of these changes, the Company did not take advantage of all of
these changes. Accordingly, discussions in this Proxy Statement of New York Law
are limited to that law as it currently applies to the Company, even though it
currently applies differently to some other New York corporations and would
apply differently to the Company if the Company were to implement the applicable
changes to the New York Charter.
Shareholders are also advised that many provisions of Delaware Law and New
York Law may be subject to differing interpretations, and that those offered
herein may be incomplete in certain respects. The following discussion is not a
substitute for direct reference to the statutes themselves or for professional
interpretation of them. In addition, this discussion is qualified in its
entirety by reference to Delaware Law (with any amendments effective July 1,
2003) and New York Law, case law applicable in Delaware or New York, the
Delaware Charter, the Delaware By-laws, the New York Charter and the New York
By-laws.
8
DIFFERENCES BETWEEN DELAWARE LAW AND NEW YORK LAW
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Amendment of Charter (see Requires approval of board of Requires approval of board of
page 15) directors and a majority of directors and a majority of
the voting stock. A the voting stock. A
corporation may require a corporation may require a
vote larger than majority on vote larger than majority on
particular issues. particular issues.
- ---------------------------------------------------------------------------------------------
Amendment of By-laws (see By a majority of the voting By a majority of the voting
page 15) stock or, if permitted under stock or, if permitted under
the charter, by the board of the charter or a
directors. shareholder-adopted by-law,
by the board of directors.
- ---------------------------------------------------------------------------------------------
Who May Call Special Meetings Generally, special meetings Generally, special meetings
of Shareholders (see page 16) may be called by the board of may be called by the board of
directors or by any person directors or by any person
authorized in the charter or authorized in the charter or
the by-laws. the by-laws.
- ---------------------------------------------------------------------------------------------
Action by Written Consent of Actions by written consent Actions by written consent
Shareholders in Lieu of a are permitted. Must be signed are permitted, but must be
Shareholder Meeting (see page by holders collectively unanimous.
16) owning at least the minimum
number of votes (generally, a
majority) that would be
needed at a meeting if all
shareholders entitled to vote
were present.
- ---------------------------------------------------------------------------------------------
Right of Shareholders to Permitted for any purpose Permitted for most purposes
Inspect Stockholder List (see reasonably related to such not contrary to the business
page 16) shareholder's interest as of the corporation upon the
shareholder. shareholder's written demand
at least five days prior to
inspection. Certain
shareholders are
disqualified.
- ---------------------------------------------------------------------------------------------
Vote Required for Certain Subject to any provisions Unless the charter provides
Transactions (see page 16) which may be contained in the that approval by holders of a
charter, certain mergers, majority of the outstanding
consolidations or sales of stock is required, approval
all or substantially all of by holders of two-thirds of
the corporation's assets only the outstanding stock is
require approval by a required in connection with
majority of the shares certain mergers,
entitled to vote. consolidations and sales of
all or substantially all of
the corporation's assets,
with certain exceptions.
- ---------------------------------------------------------------------------------------------
Number of Directors (see page Must have one or more Must have one or more
17) directors. The exact number directors. The exact number
may be fixed in the charter, is fixed (i) in charter, (ii)
and if not so fixed instead in by-laws, (iii) by
shall be fixed by (or in the shareholders or (iv) if
manner provided in) the by- authorized in a
laws. shareholder-adopted by-law,
by the board of directors.
- ---------------------------------------------------------------------------------------------
</Table>
9
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Classified Board of Directors Permitted if charter or a Permitted if charter or
(see page 17) shareholder-adopted by-law so shareholder-adopted by-law so
provides. provides.
- ---------------------------------------------------------------------------------------------
Removal of Directors by Generally, directors may be Generally, directors may be
Shareholders (see page 17) removed with or without cause removed for cause by
by a majority vote of the shareholders or, if charter
shareholders. The board of or shareholder-adopted by-law
directors may not remove any so provide, by directors.
director, whether or not for Directors also may be removed
cause. by shareholders without
cause, but only if charter or
by-laws so provide.
- ---------------------------------------------------------------------------------------------
Limitation of Directors' The personal liability of a The personal liability of a
Liability (see page 17) director for breach of his director for breach of duty
fiduciary duty may be limited may be limited or eliminated,
or eliminated except for (i) except where a judgment
breaches of the duty of establishes that (i) his acts
loyalty; (ii) acts or or omissions were in bad
omissions not in good faith faith or involved intentional
or involving intentional misconduct or a knowing
misconduct or knowing violation of law, (ii) he
violations of law; (iii) the personally gained a financial
payment of unlawful dividends profit to which he was not
or unlawful stock repurchases legally entitled or (iii) his
or redemptions; or (iv) acts were in violation of
transactions in which a certain NYBCL provisions
director received an improper regarding dividends,
personal benefit. Must be set distributions and loans to
forth in charter and will not directors. Must be set forth
relieve director for in charter and will not
liability predating the relieve director from any
charter provision. liability predating charter
provision.
- ---------------------------------------------------------------------------------------------
Indemnification of Directors Delaware Law permits broad New York Law permits broad
and Officers; Insurance (see indemnification and the indemnification and the
page 18) purchase of directors' and purchase of directors' and
officers' insurance. In officers' insurance. In
general, the person to be general, the person to be
indemnified must have acted indemnified must have acted
in good faith and in a manner in good faith and in a manner
consistent with the best consistent with (or not
interests of the corporation. opposed to) the best
interests of the corporation.
New York Law restricts some
claims that may be made under
insurance purchased by the
corporation.
- ---------------------------------------------------------------------------------------------
</Table>
10
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Loans to, and Guarantees of Board of directors may Shareholders must approve
Obligations of, Directors authorize loans by a loans by a corporation to,
(see page 18) corporation to, or guarantees and guarantees by the
by the corporation of the corporation of the
obligations of, any director obligations of, a director.
of the corporation who is an
officer or other employee of
the corporation whenever, in
the judgment of the board of
directors, such loan or
guarantee may reasonably be
expected to benefit the
corporation. Notwithstanding
Delaware Law, the Company has
not made and does not intend
to make any personal loans to
any of its directors or
officers in violation of
Section 13(k) of the
Securities Act of 1934.
- ---------------------------------------------------------------------------------------------
Issuance of Rights and Board of directors may Must be approved by
Options to Directors, authorize. shareholders.
Officers and Employees (see
page 19)
- ---------------------------------------------------------------------------------------------
Transactions with Interested Delaware Law provides that no New York Law provides several
Directors (see page 19) transaction between a methods for establishing the
corporation and an interested validity of transactions
director is void or voidable between a corporation and
solely because that interested directors,
director's votes are counted including a vote by
if the material facts of that uninterested directors.
director's interest are known
to the board of directors and
the board of directors in
good faith authorizes the
transaction by vote of a
majority of the disinterested
directors, or if that
director's interest is
disclosed to stockholders and
stockholders in good faith
approve the transaction.
- ---------------------------------------------------------------------------------------------
Consideration for Shares (see May consist of cash, services May consist of money or other
page 19) rendered, personal or real property, tangible or
property, leases of real intangible, labor or services
property or any combination actually received by or
of these. However, the performed for the
portion of the purchase price corporation, a binding
above the amount allocable to obligation to pay the
stated capital also can be purchase price or provide
issued (in whole or in part) services, or any combination
upon receipt of the of these.
purchaser's binding
obligation to pay such
portion.
- ---------------------------------------------------------------------------------------------
</Table>
11
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Dividends; Redemption of Dividends may be paid from Dividends may be paid from
Stock (see page 19) surplus, which is the excess surplus, which is the excess
of net assets over stated of net assets over stated
capital. If there is no capital. New York Law
surplus, Delaware allows the generally permits redemption
corporation to apply net of stock, if the charter so
profits from the current or provides, but only from
preceding fiscal year, with surplus.
certain exceptions. Delaware
Law generally permits
redemption of stock, if the
charter so provides, but only
if the stated capital of the
corporation is not impaired.
- ---------------------------------------------------------------------------------------------
Appraisal Rights (see page Generally available if Generally available in a
20) shareholders receive cash in merger or consolidation or
exchange for the shares and certain other transactions
in certain other except when shares are listed
circumstances except when on a national exchange or on
shares are listed on a Nasdaq's National Market.
national exchange or Nasdaq's
National Market.
- ---------------------------------------------------------------------------------------------
Preemptive Rights (see page Not available unless provided Available unless charter
20) in charter. provides otherwise.
- ---------------------------------------------------------------------------------------------
Statutory Liability of 10 Not applicable. The ten largest shareholders
Largest Shareholders for of every corporation whose
Wages Due to Employees shares are not listed on a
national securities exchange
or regularly quoted in an
over the counter market are
jointly and severally
personally liable for all
debts, wages or salaries due
and owing to its employees
(other than contractors) for
services performed by them.
- ---------------------------------------------------------------------------------------------
</Table>
12
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Business Combinations with Delaware Law generally New York Law generally
Interested Stockholders (see prohibits an interested prohibits an interested
page 21) stockholder from entering stockholder from entering
into certain transaction for into certain transactions for
three years after becoming an five years after becoming an
interested stockholder unless interested stockholder unless
(i) before the stockholder the board of directors
became an interested approved either the
stockholder, the board of transaction at issue or the
directors approved the transaction in which the
transaction in which the stockholder became an
stockholder became an interested stockholder before
interested stockholder, (ii) the stockholder became an
the interested stockholder interested stockholder.
owned at least 85% of the Generally, an "interested
voting stock at the time the stockholder" is any person
transaction commenced, or (or an affiliate or associate
(iii) on or after the time of such person) who owns at
the stockholder became an least 20% of the outstanding
interested stockholder, the voting stock or owned such
board of directors approved amount within the preceding
the transaction and at least five years.
two-thirds of the outstanding
voting stock not owned by the
interested stockholder
approved the transaction.
Generally, an "interested
stockholder" is any person
(or an affiliate or associate
of such person) who owns at
least 15% of the outstanding
voting stock or owned such
amount within the preceding
three years.
- ---------------------------------------------------------------------------------------------
Other Responsive legislature and New York Law permits use of
larger body of corporate case electronic transmission for
law in Delaware provides more notice of shareholder
predictable corporate legal meetings, waiver of notice of
environment. Delaware Law such meetings and designation
permits use of electronic of proxy.
transmission as a means for
communicating notice, votes
and other corporate
governance functions.
- ---------------------------------------------------------------------------------------------
</Table>
13
DIFFERENCES BETWEEN DELAWARE CHARTER AND NEW YORK CHARTER
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Capitalization (see page 20) Under the Delaware Charter, Under the New York Charter,
authorized to issue authorized to issue
100,000,000 shares of common 100,000,000 shares of common
stock, par value $.01 par stock, par value $.01 per
value per share, and share, and 2,000,000 shares
2,000,000 shares of preferred of preferred stock, par value
stock, par value $1.00 per $1.00 per share.
share.
- ---------------------------------------------------------------------------------------------
Amendment of Charter (see Amendment of the Delaware Amendment of the New York
page 15) Charter requires approval by Charter requires approval by
the board of directors and, the board of directors and by
with respect to provisions a majority of the voting
relating to (i) the liability stock of the corporation.
and indemnification of
directors and officers, (ii)
the term of directorships and
the filling of directorship
vacancies, (iii) stockholder
action by written consent,
(iv) the election by the
Company to be governed by
Section 203 of the DGCL and
(v) the ability of the board
of directors to make, alter,
amend or repeal the Delaware
By-laws, approval by at least
66 2/3% of the voting stock
of the Company. Other
amendments require approval
by the board of directors and
by a majority of the voting
stock.
- ---------------------------------------------------------------------------------------------
Amendment of By-laws (see Under Delaware Charter, the The New York Charter is
page 15) board of directors is silent as to the authority of
authorized to make, alter, the board of directors to
amend or repeal the Delaware make, alter, amend or repeal
By-laws. the New York By-laws, but the
New York By-laws confer such
authority except with respect
to certain provisions of the
New York By-laws.
- ---------------------------------------------------------------------------------------------
Who May Call Special Meetings Special meetings may only be Special meetings may be
of Shareholders (see page 16) called by the board of called by the board of
directors, the Chairman of directors, the President and
the board of directors, the by the President or the
Chief Executive Officer or Secretary at the written
the President. request of not less than 25%
of the shares entitled to
vote.
- ---------------------------------------------------------------------------------------------
Preemptive Rights (see page Not provided in Delaware New York Charter eliminates
20) Charter. Therefore, preemptive rights.
shareholders have no
statutory preemptive rights.
- ---------------------------------------------------------------------------------------------
</Table>
14
<Table>
<Caption>
ISSUE DELAWARE NEW YORK
- ---------------------------------------------------------------------------------------------
Number of Directors; Filling The number of directors is The New York By-laws provide
of Vacancies (see page 17) fixed from time to time by a that the number of directors
majority of the total number may not be less than three
of directors. Vacancies must (unless there are less than
be filled by the board of three shareholders).
directors. Vacancies must be filled by
the board of directors.
- ---------------------------------------------------------------------------------------------
Classified Board of Directors The Delaware Charter does not The New York Charter does not
(see page 17) designate classes of designate classes of
directors. directors.
- ---------------------------------------------------------------------------------------------
Removal of Directors by Directors generally may be Directors generally may be
Shareholders (see page 17) removed, with or without removed, with or without
cause, by a majority of the cause, by a majority of the
stockholders. stockholders.
- ---------------------------------------------------------------------------------------------
Indemnification of Directors The Delaware Charter provides The New York Charter reserves
and Officers; Insurance (see that the Company shall the Company's right to
page 18) indemnify directors and indemnify directors and
officers. officers. The New York
By-laws provides that the
Company may indemnify
directors and officers.
- ---------------------------------------------------------------------------------------------
</Table>
AMENDMENT OF CHARTER
Under New York Law, except for certain ministerial changes to the charter
which may be implemented by a corporation's board of directors without
shareholder action, and except as otherwise required under a charter, a charter
may be amended only if authorized by the board of directors and by the vote of
the holders of a majority of the shares of stock entitled to vote on such
amendment. Delaware Law allows a board of directors to recommend an amendment
for approval by shareholders, and a majority of the shares entitled to vote at a
shareholders' meeting are normally enough to approve that amendment. Both New
York Law and Delaware Law also require that if a particular class or series of
stock is adversely affected by certain types of amendments then such class or
series also must authorize such amendment in order for it to become effective.
New York Law and Delaware Law both allow a corporation to require a higher
proportion of votes in order to authorize charter amendments, if so provided in
the charter. The Delaware Charter provides that any amendment to the Delaware
Charter relating to (i) the liability and indemnification of directors and
officers, (ii) the term of directorships and the filling of directorship
vacancies, (iii) stockholder action by written consent, (iv) the election by the
Company to be governed by Section 203 of the DGCL (see Article Thirteen of the
Delaware Charter) and (v) the ability of the board of directors to make, alter,
amend or repeal the Delaware By-laws can only be effected by the affirmative
vote of the holders of at least 66 2/3% of the voting power of the then
outstanding voting stock of Barr-DE. The New York Charter contains no comparable
provision.
In cases where the charter provides for so-called "blank check" preferred
stock (that is, preferred stock that is undesignated as to series and relative
rights), New York Law and Delaware Law also would allow the board of directors
to establish one or more series of preferred stock and their relative rights, by
amending the charter (called a certificate of designation in Delaware) without
further shareholder action. Both the Delaware Charter and the New York Charter
allow for "blank check" preferred stock.
AMENDMENT OF BY-LAWS
Under New York Law, a corporation's by-laws may be amended by the vote of
the holders of a majority of the votes cast with respect to such amendment
(rather than a majority of the shares outstanding) or, if permitted under the
corporation's charter or a by-law adopted by the shareholders, by the board of
directors.
15
The New York Charter is silent as to the authority of the board of directors to
make, alter, amend or repeal the New York By-laws, but the New York By-laws
confer such authority except that the board of directors has no power to change
the quorum for meetings of the shareholders or of the board of directors or to
change any provisions of the New York By-laws with respect to the removal of
directors or the filling of vacancies in the board of directors resulting from
the removal of the directors by the shareholders.
Under Delaware Law, the by-laws can be amended by the vote of the holders
of a majority of the votes cast with respect to such amendment (rather than a
majority of the shares outstanding) or, if permitted under the corporation's
charter, by the board of directors. The Delaware Charter provides the board of
directors with the authority to amend the Delaware By-laws and also provides
that this authority can only be withdrawn by vote of at least 66 2/3% of the
voting power of the then outstanding voting stock of Barr-DE.
WHO MAY CALL SPECIAL MEETINGS OF SHAREHOLDERS
Under both New York Law and Delaware Law, the board of directors or anyone
authorized in the charter or by-laws may call a special meeting of shareholders.
Currently, the New York By-laws provide that special meetings may be called by
the board of directors or the President and require that the President or the
Secretary call a special meeting at the written request of shareholders
collectively owning at least 25% of the shares entitled to vote. The Delaware
Charter provides that special meetings may be called only by the board of
directors, the Chairman of the board of directors, the Chief Executive Officer
or the President.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS IN LIEU OF A SHAREHOLDER MEETING
New York Law permits shareholder action in lieu of a meeting only by
unanimous written consent of those who would have been entitled to vote on a
given action at a meeting. Delaware Law, on the other hand, generally permits
shareholders to take action by the written consent of holders collectively
owning at least the minimum number of votes (generally, a majority) that would
be required for action at a shareholders' meeting assuming the presence of all
shareholders entitled to vote thereon.
The Delaware Charter eliminates actions by written consent of shareholders.
Elimination of such shareholders' written consents may lengthen the amount of
time required to take shareholder actions because certain actions by written
consent are not subject to the minimum notice requirement of a shareholders'
meeting. The elimination of shareholders' written consents will deter hostile
takeover attempts because of the lengthened shareholder approval process. The
board of directors believes this provision, like the other provisions to be
included in the Delaware Charter and Delaware By-laws, will enhance the board of
director's opportunity to fully consider and effectively negotiate in the
context of a takeover attempt.
RIGHT OF SHAREHOLDERS TO INSPECT SHAREHOLDER LIST
Under New York Law, a shareholder of record may inspect the list of record
shareholders upon giving at least five days' written demand to do so. The
inspection may be denied if the shareholder refuses to give an affidavit that
such inspection is not desired for a purpose which is in the interest of a
business other than the business of the corporation and that the shareholder has
not been involved in selling or offering to sell any list of shareholders of any
corporation within the preceding five years. Under Delaware Law, any shareholder
may inspect the shareholders' list for any purpose reasonably related to the
person's interest as a shareholder. In addition, for at least ten days prior to
each shareholders' meeting, a Delaware corporation must make available for
examination a list of shareholders entitled to vote at the meeting.
VOTE REQUIRED FOR CERTAIN TRANSACTIONS
New York Law generally prohibits New York corporations from engaging in
mergers, consolidations and sales of all or substantially all of their assets
without the approval of holders of at least two-thirds of the corporation's
voting stock.
Under Delaware Law, on the other hand, holders of a majority of the
outstanding stock entitled to vote on such transactions have the power to
approve a merger, consolidation or sale of all or substantially all the assets,
16
unless the charter provides otherwise. Furthermore, in the case of a merger
under Delaware Law, shareholders of the surviving corporation do not have to
approve the merger at all, unless the charter provides otherwise, if these three
conditions are met:
- No amendment of the surviving corporation's charter is made by the merger
agreement; and
- Each share of the surviving corporation's stock outstanding or in the
treasury immediately prior to the effective date of the merger is to be
an identical outstanding or treasury share of the surviving corporation
after the effective date; and
- The merger results in no more than a 20% increase in its outstanding
common stock.
NUMBER OF DIRECTORS; FILLING OF VACANCIES
Under both New York Law and Delaware Law, corporations must have at least
one director. Under New York Law, the exact number of directors is fixed either
in the charter, the by-laws, by the shareholders, or, if authorized in a
shareholder-adopted by-law, by the board of directors. Under Delaware Law, the
exact number of directors is fixed in the charter or in (or in the manner
provided by) the by-laws.
The New York By-laws provide that the number of directors may not be less
than three (unless there are less than three shareholders). The Delaware Charter
states the number of directors shall be determined by the Delaware By-laws. The
Delaware By-laws provide that the number of directors shall be determined by a
majority of the directors then in office. Under both the New York By-laws and
the Delaware By-laws, in most instances vacancies are filled by the board of
directors. However, the New York By-laws provide that if a vacancy is created by
the removal of a director by the shareholders, the shareholders shall fill that
vacancy at the meeting at which the director was removed. The Delaware By-laws
do not contain a similar provision.
CLASSIFIED BOARD OF DIRECTORS
Both New York Law and Delaware Law permit "classified" boards of directors,
which means the directors have staggered terms that do not all expire at once.
New York Law and Delaware Law require that classified boards of directors be
authorized in the corporation's charter or in a shareholder-adopted by-law. New
York Law allows for as many as four different classes of directors, all as
nearly equal in number as possible, and Delaware Law allows for only up to three
different classes of directors. None of the New York Charter, New York By-laws,
Delaware Charter nor Delaware By-laws authorizes a classified board of directors
for the Company.
REMOVAL OF DIRECTORS BY SHAREHOLDERS
Under New York Law, directors may be removed by a majority of shareholders
for cause, and may be removed for cause by the directors if the charter or a
shareholder-adopted by-law so provides. Furthermore, if the charter or a
shareholder-adopted by-law so provides, directors may be removed by the
shareholders without cause. Under Delaware Law, directors generally may be
removed, with or without cause, by a majority of the shareholders.
LIMITATION OF DIRECTORS' LIABILITY
Both states permit the limitation of a director's personal liability while
acting in his or her official capacity, but only if the limitation is contained
in the corporation's charter. Under New York Law, the charter may contain a
provision eliminating or limiting the personal liability of directors to the
corporation or its shareholders for any breach of duty. However, no provision
can eliminate or limit:
- the liability of any director if a judgment or other final adjudication
adverse to the director establishes that the director acted in bad faith
or engaged in intentional misconduct or a knowing violation of law,
personally gained a financial profit to which the director was not
legally entitled, or violated certain provisions of New York Law; or
- the liability of any director for any act or omission prior to the
adoption of such provision in the charter.
17
The New York Charter does not contain a provision eliminating or limiting the
personal liability of directors.
Delaware Law also requires a charter provision in order to limit or
eliminate a director's liability. However, Delaware Law precludes any limitation
or elimination of liability if the director breaches his or her duty of loyalty
to the corporation or its shareholders, or if his or her acts are not in good
faith or involve a knowing violation of law or if he or she receives an improper
personal benefit from the corporation, or authorized a dividend or stock
repurchase that was forbidden by Delaware Law. The Delaware Charter limits
director liability to the fullest extent permitted by Delaware Law.
Due to the variations in New York Law and Delaware Law, there may be
circumstances where, despite the inclusion of charter provisions seeking the
maximum director exculpation permitted by applicable law, a director could
remain liable under New York Law for conduct that would not expose him or her to
liability under Delaware Law, or vice versa.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE
With some variations, both New York Law and Delaware Law allow a
corporation to "indemnify" (that is, to make whole) any person who is or was a
director or officer of the corporation if that person is held liable for
something he or she did or failed to do in an official capacity. Besides
covering court judgments, out-of-court settlements, fines and penalties, both
New York Law and Delaware Law also allow the corporation to advance certain
reasonable expenses the person will incur or to reimburse those person's
expenses after they are incurred, even if liability is not actually proven. The
right to indemnification under both New York Law and Delaware Law does not
normally exclude other rights of recovery the indemnified person may have.
Additionally, each of the two laws permits a corporation to purchase
insurance for its directors and officers against some or all of the costs of
such indemnification or against liabilities arising from actions and omissions
of the insured person, even though the corporation may not have power to
indemnify the person against such liabilities.
The New York Charter contains a provision reserving the right of the
Company to indemnify the Company's directors and officers. The New York By-laws
provide that the Company may indemnify the Company's directors and officers if
such director or officer is not adjudged to have breached his or her duty to the
Company as defined in Section 717 of the NYBCL and if such director or officer
acted in good faith for a purpose which he or she reasonably believed to be in
the best interests of the Company and, in criminal actions or proceedings, had
no reasonable cause to believe that his conduct was unlawful.
However, neither New York Law nor Delaware Law permits indemnification of a
director or officer if a court finds the person liable to the corporation
itself, unless the court determines otherwise. Furthermore, both laws generally
require that the person to be indemnified must have acted in good faith and in a
manner he or she reasonably believed was consistent with (or, in Delaware only,
not opposed to) the best interests of the corporation.
If the Reincorporation is approved by the Company's shareholders, the
Delaware Charter and the Delaware By-laws will permit the Company to indemnify
directors and officers as fully as Delaware Law allows.
LOANS TO, AND GUARANTEES OF OBLIGATIONS OF, DIRECTORS
Under New York Law, a corporation may not lend money to, or guarantee the
obligation of, a director unless the disinterested shareholders of such
corporation approve the transaction. For purposes of the shareholder approval,
the holders of a majority of the votes of the shares entitled to vote constitute
a quorum, but shares held by directors who are benefited by the loan or
guarantee are not included in the quorum. Moreover, under New York law, a
guarantee may not be given by a New York corporation, if not in furtherance of
its corporate purposes, unless it is authorized by two-thirds of the votes of
all outstanding shares entitled to vote.
18
Under Delaware Law, a board of directors may authorize loans by the
corporation to, and guarantees by the corporation of any obligations of, any
director of the corporation who is also an officer or other employee of the
corporation whenever, in the judgment of the board of directors, such loan or
guarantee may reasonably be expected to benefit the corporation.
Notwithstanding Delaware Law, the Company has not made and does not intend
to make any personal loans to, or guarantees for the benefit of, any of its
directors or officers in violation of Section 13(k) of the Securities Act of
1934.
ISSUANCE OF RIGHTS AND OPTIONS TO DIRECTORS, OFFICERS AND EMPLOYEES
Under New York Law, the issuance of any stock rights or stock options, as
well as plans to issue rights or options, to directors, officers or employees,
must be approved by a majority vote of the corporation's shareholders. Delaware
Law does not require stockholder approval of such transactions.
TRANSACTIONS WITH INTERESTED DIRECTORS
Under New York Law, a corporation may establish the validity of
transactions between it and its interested directors through one of several
methods, including the approval of a majority of the uninterested directors.
Delaware Law provides that no transaction between a corporation and an
interested director is void or voidable solely because that director's votes are
counted if the material facts of that director's interest are known to the board
of directors and the board of directors in good faith authorizes the transaction
by a vote of a majority of the disinterested directors, or if that director's
interest is disclosed to the stockholders and the stockholders in good faith
approve the transaction.
CONSIDERATION FOR SHARES
Under New York Law, consideration for the issue of shares may consist of
money or other property, tangible or intangible, labor or services actually
received by or performed for the corporation, a binding obligation to pay the
purchase price or a binding obligation to perform services, or some combination
of the above. Stock certificates may not be issued until the amount of the
consideration determined to be stated capital has been paid in cash (or certain
other approved forms), and the consideration for the balance above stated
capital, if any, which may include the above-referenced binding obligation, is
provided for. Under Delaware Law, consideration may consist of cash, services
rendered, personal or real property, leases of real property or any combination
of these as payment in full or in part for the shares. However, the portion of
the purchase price above the amount allocable to stated capital also can be
issued (in whole or in part) upon receipt of the purchaser's binding obligation
to pay such portion.
DIVIDENDS; REDEMPTION OF STOCK
Subject to its charter provisions, under both New York Law and Delaware Law
a corporation may generally pay dividends, redeem shares of its stock or make
other distributions to shareholders if the corporation is solvent and would not
become insolvent because of the dividend, redemption or distribution. The assets
applied to such a distribution may not be greater than the corporation's
"surplus."
Under New York Law, dividends may be paid or distributions made out of
surplus only, so that the net assets of the corporation remaining after such
payment or distribution shall be at least equal to the amount of its stated
capital. New York Law defines surplus as the excess of net assets over stated
capital and permits the board of directors to adjust stated capital. Delaware
Law defines surplus as the excess of net assets over stated capital and lets the
board of directors adjust capital. If there is no surplus, Delaware Law allows a
corporation to apply net profits from the current or preceding fiscal year, or
both, with certain exceptions. In general, with certain restrictions, New York
Law permits a corporation to provide in its charter for redemption (at the
option of the corporation of the shareholder or in certain other circumstances)
of one or more classes or series of its shares. One such restriction provides
that common stock may be issued or redeemed, with certain exceptions, only when
the corporation has an outstanding class of common shares that is not subject to
19
redemption. Delaware Law permits redemptions only when the corporation has
outstanding one or more shares of one or more classes or series of stock, which
share or shares have full voting powers.
APPRAISAL RIGHTS
The NYBCL generally provides that a dissenting shareholder has the right to
receive the fair value of his shares if he complies with certain procedures and
objects to (i) certain mergers and consolidations, (ii) certain dispositions of
assets requiring shareholder approval, (iii) certain share exchanges, or (iv)
certain amendments to the charter which adversely affect the rights of such
shareholder. The DGCL provides such appraisal rights only in the case of
shareholders objecting to certain mergers or consolidations (which class of
mergers or consolidations is somewhat narrower than the class giving rise to
appraisal rights under the NYBCL), unless additional appraisal rights are
provided in the charter. The Delaware Charter does not provide any such
additional appraisal rights.
The NYBCL provides that dissenting shareholders have no appraisal rights if
their shares are listed on a national securities exchange or designated as a
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. Appraisal rights may also be unavailable
under the NYBCL in a merger between a parent corporation and its subsidiary
where only one of them is a New York corporation, or in a merger between a
parent and subsidiary where both are New York corporations, and the parent owns
at least 90% of the subsidiary. Also, appraisal rights are available to
shareholders who are not allowed to vote on a merger or consolidation and whose
shares will be canceled or exchanged for cash or something else of value other
than shares of the surviving corporation or another corporation. When appraisal
rights are available, the shareholder may have to request the appraisal and
follow other required procedures.
Similarly, under the DGCL, appraisal rights are not available to a
shareholder if the corporation's shares are listed on a national securities
exchange or held by more than 2,000 shareholders of record, or if the
corporation will be the surviving corporation in a merger which does not require
the approval of the surviving corporation's shareholders. But, regardless of
listing on an exchange, a dissenting shareholder in a merger or consolidation
has appraisal rights under the DGCL if the transaction requires him or her to
exchange shares for anything of value other than one or more of (a) shares of
stock of the surviving corporation or of a new corporation which results from
the merger or consolidation, (b) shares of another corporation which will be
listed on a national securities exchange or held by more than 2,000 shareholders
of record after the merger or consolidation occurs, or (c) cash instead of
fractional shares of the surviving corporation or another corporation.
PREEMPTIVE RIGHTS
In New York, shareholders are generally entitled to preemptive rights in
connection with certain types of stock issuances by the corporation, unless the
charter expressly limits or eliminates preemptive rights. The New York Charter
eliminates preemptive rights.
In Delaware, the issuance of shares does not result in preemptive rights of
shareholders unless the charter expressly provides them. The Delaware Charter
does not expressly provide shareholders with preemptive rights.
CAPITALIZATION
The Company's capital stock currently consists of 100,000,000 authorized
shares of Common Stock, par value $.01 per share, of which 66,785,798 shares
were issued and outstanding as of June 30, 2003, and 2,000,000 authorized shares
of preferred stock, par value $1.00 per share, of which none are currently
outstanding. In addition, as of June 30, 2003, the Company had granted options
to purchase a total of 5,743,402 shares of the Company's Common Stock and held
such number of shares in reserve for issuance upon the exercise of such options.
The board of directors has determined that it is necessary to increase the
number of authorized shares of the Delaware Common Stock or New York Common
Stock, as the case may be, and Barr-DE proposes to increase the number of
authorized shares of Delaware Common Stock if Proposal No. 2 is approved by the
shareholders at the Annual Meeting, and the Company proposes to increase
20
the number of authorized shares of New York Common Stock if Proposal No. 2 is
not approved by the shareholders at the Annual Meeting, from 100,000,000 shares
to 200,000,000 shares upon shareholder approval of Proposal No. 3 described on
page 26.
The capital stock of Barr-DE will consist of 100,000,000 authorized shares
of common stock, par value $.01 per share, and 2,000,000 authorized shares of
preferred stock, par value $1.00 per share, at the time of the Merger, unless
Proposal No. 3 is approved by the shareholders at the Annual Meeting, in which
case the capital stock of Barr-DE will consist of 200,000,000 authorized shares
of common stock, par value $.01 per share, and 2,000,000 authorized shares of
preferred stock, par value $1.00 per share.
Under the Delaware Charter, the board of directors has the authority to
determine or alter the rights, preferences, privileges and restrictions to be
granted to or imposed upon any wholly unissued series of preferred stock and to
fix the number of shares constituting any such series and to determine the
designation thereof. The board of directors may also authorize the issuance of
preferred stock in connection with various corporate transactions.
After the Reincorporation, Barr-DE will retain the rights currently
available to the Company under New York Law to issue shares of its authorized
but unissued capital stock. As the Company could currently do under New York
Law, following the effectiveness of the proposed Reincorporation, shares of
authorized and unissued common stock and preferred stock of Barr-DE could
(within the limits imposed by applicable law) be issued in one or more
transactions, or preferred stock could be issued with terms, provisions and
rights which would make more difficult and, therefore, less likely, a takeover
of Barr-DE. Any such issuance of additional stock could have the effect of
diluting the earnings per share and book value per share of existing shares of
common stock and preferred stock, and such additional shares could be used to
dilute the stock ownership of persons seeking to obtain control of Barr-DE.
It should be noted that, as with the voting rights to be accorded to any
unissued series of preferred stock of the Company ("New York Preferred Stock")
by the board of directors of the Company, the voting rights to be accorded to
any unissued series of preferred stock of Barr-DE ("Delaware Preferred Stock")
remain to be fixed by the board of directors of Barr-DE. Accordingly, if the
board of directors of Barr-DE so authorizes, the holders of Delaware Preferred
Stock may be entitled to vote separately as a class in connection with approval
of certain extraordinary corporate transactions in circumstances where Delaware
law does not ordinarily require such a class vote, or might be given a
disproportionately large number of votes. Such Delaware Preferred Stock could
also be convertible into a large number of shares of Delaware Common Stock under
certain circumstances or have other terms which might make acquisition of a
controlling interest in Barr-DE more difficult or more costly, including the
right to elect additional directors to the board of directors of Barr-DE. As is
presently the case with the New York Preferred Stock with respect to the
Company, the Delaware Preferred Stock could potentially be used to create voting
impediments or to frustrate persons seeking to effect a merger or otherwise to
gain control of Barr-DE.
If the Reincorporation is approved, it is not the present intention of the
board of directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Provisions in both New York Law and Delaware Law may help to prevent or
delay changes of corporate control. In particular, both New York Law and
Delaware Law restrict or prohibit an interested stockholder from entering into
certain types of business combinations unless the board of directors approves
the transaction in advance.
Under New York Law, an interested shareholder is generally prohibited from
entering into certain types of business combinations with a New York corporation
for a period of five years after becoming an interested shareholder, unless the
board of directors approves either the business combination or the acquisition
of stock by the interested shareholder before the interested shareholder
acquires his or her shares. An "interested shareholder" under New York Law is
generally a beneficial owner of at least 20% of the corporation's
21
outstanding voting stock. "Business combinations" under New York Law include
mergers and consolidations between corporations or with an interested
shareholder; sales, leases, mortgages or other dispositions to an interested
shareholder of assets with an aggregate market value which either equals 10% or
more of the corporation's consolidated assets or outstanding stock, or
represents 10% or more of the consolidated earning power or net income of the
corporation; issues and transfers to an interested shareholder of stock with an
aggregate market value of at least 5% of the aggregate market value of the
outstanding stock of the corporation; liquidation or dissolution of the
corporation proposed by or in connection with an interested shareholder;
reclassification or recapitalization of stock that would increase the
proportionate stock ownership of an interested shareholder; and the receipt by
an interested shareholder of any benefit from loans, guarantees, pledges or
other financial assistance or tax benefits provided by the corporation.
After a five-year period, New York Law allows such business combination if
it is approved by a majority of the voting stock not owned by the interested
shareholder or by an affiliate or associate of the interested shareholder.
Business combinations are also permitted when certain statutory "fair price"
requirements are met.
One section of Delaware Law, Section 203, generally prohibits an interested
stockholder from entering into certain types of business combinations with a
Delaware corporation for three years after becoming an interested stockholder.
An "interested stockholder" under Delaware Law is any person other than the
corporation and its majority-owned subsidiaries who owns at least 15% of the
outstanding voting stock, or who owned at least 15% within the preceding three
years, and this definition includes affiliates of the corporation. Briefly
described, the prohibited combinations include:
(i) Mergers or consolidations.
(ii) Sales, leases, exchanges or other dispositions of 10% or more of
(1) the aggregate market value of all assets of the corporation or (2) the
aggregate market value of all the outstanding stock of the corporation.
(iii) Issuances or transfers by the corporation of its stock that
would increase the proportionate share of stock owned by the interested
stockholder.
(iv) Receipt by the interested stockholder of the benefit of loans,
advances, guarantees, pledges or other financial benefits provided by the
corporation.
(v) Any other transaction, with certain exceptions, that increases the
proportionate share of the stock owned by the interested stockholder.
A Delaware corporation may choose not to have Section 203 of the Delaware
Law apply. The Company has chosen, however, to accept the protections of Section
203, and therefore the Delaware Charter will not waive those protections.
Nevertheless, Section 203 does not apply in the following cases:
(i) If, before the stockholder became an interested stockholder, the
board of directors approved the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder.
(ii) If, after the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, subject to technical calculation rules.
(iii) If, on or after the time the interested stockholder became an
interested stockholder, the board of directors approved the business
combination, and at least two-thirds of the outstanding voting stock that
is not owned by the interested stockholder also ratified the business
combination at a stockholders' meeting.
ANTI-TAKEOVER PROVISIONS IN BARR-DE'S CHARTER
Through the Delaware Charter, the Company proposes to adopt certain
measures designed to make hostile takeovers of Barr-DE more difficult. These
measures include specific requirements described above
22
relating to amendments to the Delaware Charter, calling special meetings of
shareholders, the vote required for certain transactions as prescribed by
Section 203 of the DGCL and the ability of the board of directors to make,
alter, amend or repeal the Delaware By-laws. The Company's board of directors
believes that adoption of these measures will enable the board of directors to
consider fully any proposed takeover attempt and to negotiate terms that
maximize the benefit to Barr-DE and its shareholders.
A hostile takeover attempt may have a positive or a negative effect on
Barr-DE and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms that may be less than favorable to all of the
shareholders than would be available in a board-approved transaction. Board of
director-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Company's board of directors recognizes that hostile takeover attempts
do not always have the unfavorable consequences or effects described above and
may frequently be beneficial to the shareholders, providing all of the
shareholders with considerable value for their shares. However, the board of
directors believes that the potential disadvantages of takeover attempts which
are not approved by the board of directors are sufficiently great so that
prudent steps to reduce the likelihood of such takeover attempts are in the best
interests of Barr-DE and its shareholders. Accordingly, the Reincorporation
proposal includes certain elements that may have the effect of discouraging or
deterring hostile takeover attempts.
Notwithstanding the belief of the board of directors as to the benefits to
shareholders of the changes, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire control
of Barr-DE which is not presented to and approved by the board of directors, but
which a substantial number and perhaps even a majority of shareholders might
believe to be in their best interests or in which shareholders might receive a
substantial premium for their shares over the current market price. As a result,
shareholders who might desire to participate in such a transaction may not have
an opportunity to do so.
In considering the Reincorporation proposal, shareholders should be aware
that the overall effect of certain of the proposed changes is to make it more
difficult for holders of a majority of the outstanding shares of common stock to
change the composition of the board of directors and to remove existing
management in circumstances where a majority of the shareholders may be
dissatisfied with the performance of the incumbent directors or otherwise desire
to make changes.
The provisions in Barr-DE's charter documents could make a proxy contest a
less effective means of removing or replacing existing directors or could make
it more difficult to effect a change in control of Barr-DE which is opposed by
the board of directors. This strengthened tenure and authority of the board of
directors could enable the board of directors to resist change. Because this
provision may have the effect of continuing the tenure of the current board of
directors, the board of directors has recognized that the individual directors
have a personal interest in this provision that may differ from those of the
shareholders. However, the board of directors believes that these provisions'
primary purpose is to ensure that the board of directors will have sufficient
time to consider fully any proposed takeover attempt in light of the short- and
long-term benefits and other opportunities available to Barr-DE and, to the
extent the board of directors determines to proceed with the takeover, to
effectively negotiate terms that would maximize the benefits to Barr-DE and its
shareholders.
The Company's board of directors has considered the potential disadvantages
and believes that the potential benefits of the provisions included in the
Delaware Charter outweigh the possible disadvantages. In particular, the board
of directors believes that the benefits associated with enabling the board of
directors to fully consider and negotiate proposed takeover attempts, as well as
the greater sophistication, breadth and certainty of Delaware law, make the
proposed Reincorporation beneficial to the Company, its management and its
shareholders.
23
The proposal to include these anti-takeover provisions in the proposed
Reincorporation is not in response to any presently proposed takeover or other
attempt to acquire control of the Company. From time-to-time, the Company
receives proposals regarding transactions that could result in a takeover or
change of control of the Company; however, no such transactions are currently
anticipated.
MODIFICATION OR ABANDONMENT
Additional considerations may become evident to the Company in the course
of completing the planning and implementation of the Reincorporation.
Accordingly, the board of directors has determined that it is advisable in the
best interests of the Company and its shareholders for the board to reserve the
power to modify or abandon the plan regarding the Reincorporation in whole or in
part after it has been approved by the shareholders of the Company, provided
that any such modification or abandonment does not have any material adverse
effect on individual shareholders or on the Company's financial condition or
operations. Management of the Company does not presently anticipate that the
abandonment or material modification of the Reincorporation plan will prove to
be necessary or desirable.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a general summary of the material federal
income tax consequences of the Merger to holders of New York Common Stock and to
the Company and Barr-DE. This discussion is limited to holders of New York
Common Stock who are individual citizens or residents of the United States or
that are United States corporations and that in each case hold their New York
Common Stock as a capital asset for United States federal income tax purposes
(generally, assets held for investment). This discussion does not address all of
the tax consequences of the Merger that may be relevant to a particular holder
of New York Common Stock or to a holder of New York Common Stock that is subject
to special treatment under United States federal income tax laws. Also, this
discussion does not address the tax consequences to holders who acquired their
New York Common Stock through stock option or stock purchase programs or in
other compensatory transactions. In addition, the following discussion does not
address the tax consequences of transactions effected prior to or after the
Merger (whether or not such transactions are in connection with the Merger).
Finally, no foreign, state or local tax or non-income tax considerations are
addressed herein. Accordingly, the Company's shareholders are urged to consult
their own tax advisors as to the specific tax consequences to them of the
Merger, including the applicable federal, state, local and foreign tax
consequences to them of the Merger.
The following discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. No assurance can
be given that the Internal Revenue Service (the "IRS") will not assert, or that
a court will not sustain, a position contrary to any of the tax consequences set
forth below. In addition, there can be no assurance that future legislative,
judicial or administrative changes or interpretations will not adversely affect
the accuracy of the statements and conclusions set forth herein. Any such
changes or interpretations could be applied retroactively and could affect the
tax consequences of the Merger to the Company, Barr-DE and the Company's
shareholders.
At the time of the Merger, the Company will receive an opinion from
Kirkland & Ellis LLP to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. If the Merger
qualifies as a reorganization, then, subject to the limitations and
qualifications referred to herein, the material federal income tax consequences
of the Merger will be as follows:
- No gain or loss will be recognized by holders of New York Common Stock on
the exchange of New York Common Stock for Delaware Common Stock;
- The aggregate tax basis of the Delaware Common Stock received by each
holder of New York Common Stock in the Merger will be equal to the
aggregate tax basis of the New York Common Stock surrendered in exchange
therefor;
24
- The holding period of the Delaware Common Stock received by each holder
of New York Common Stock will include the holding period that such holder
had in the New York Common Stock surrendered in exchange therefor; and
- No gain or loss will be recognized by the Company or Barr-DE as a result
of the Merger.
The Company has not requested a ruling from the IRS with respect to the
federal income tax consequences of the Merger. The opinion of Kirkland & Ellis
LLP referred to above will rely upon assumptions and representations of the
Company and Barr-DE and will be subject to the limitations and qualifications
set forth therein. This opinion will neither bind the IRS or the courts, nor
preclude the IRS from adopting a contrary position. A successful IRS challenge
to the status of the Merger as a reorganization could result in a shareholder
recognizing gain or loss with respect to each share of New York Common Stock
exchanged in the Merger in an amount equal to the difference between the fair
market value, as of the time of the Merger, of the Delaware Common Stock
received in the exchange and the shareholder's basis in the New York Common
Stock surrendered.
The holders of New York Common Stock will be required to attach a statement
to their tax returns for the year of the Merger that contains the information
listed in Treasury Regulation Section 1.368-3(b). This statement must include
the holder's tax basis in the holder's New York Common Stock and a description
of the Delaware Common Stock received.
ACCOUNTING TREATMENT OF THE MERGER
In accordance with generally accepted accounting principles, the Company
expects that the Merger will be accounted for as a reorganization of entities
under common control at historical cost.
FINANCIAL ACCOUNTING IMPLICATIONS
For financial accounting and reporting purposes, Barr-DE's subsidiaries
will be fully consolidated with Barr-DE and the Reincorporation and transfer of
assets to a wholly-owned subsidiary are not expected to otherwise have any
material financial reporting implications for Barr-DE or the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE REINCORPORATION PROPOSAL.
25
PROPOSAL NO. 3.
AMENDMENT TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK OF
THE COMPANY OR BARR-DE, AS THE CASE MAY BE,
FROM 100,000,000 SHARES TO 200,000,000 SHARES
The board of directors has approved, subject to shareholder approval, an
Amendment to Barr-DE's Certificate of Incorporation if Proposal No. 2 is
approved by the shareholders at the Annual Meeting, or to the Company's
Certificate of Incorporation if Proposal No. 2 is not approved by the
shareholders at the Annual Meeting, to increase the number of authorized shares
of common stock of Barr-DE or Barr-NY, as the case may be, from 100,000,000
shares to 200,000,000 shares. If Proposal No. 2 is approved by the shareholders
at the Annual Meeting, Barr-DE proposes to amend Section 1 of Article Four of
its Certificate of Incorporation to read as follows:
"SECTION 1. Authorized Shares. The total number of shares of capital
stock which the Corporation has authority to issue is 202,000,000 shares,
consisting of:
(a) 2,000,000 shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"); and
(b) 200,000,000 shares of Common Stock, par value $.01 per share
("Common Stock").
The Preferred Stock and the Common Stock shall have the rights,
preferences and limitations set forth below."
If Proposal No. 2 is not approved by the shareholders at the Annual
Meeting, the Company proposes to amend the first sentence of Article Fourth of
its Certificate of Incorporation to read as follows:
"FOURTH: The number of shares of all classes of stock which the
corporation shall have authority to issue is 200,000,000 shares of common
stock of the par value of $.01 per share, entitled to one vote per share,
and 2,000,000 shares of preferred stock of the par value of $1.00 per
share."
The Board of Directors believes that it is advisable and in the best
interests of Barr-DE or the Company, as the case may be, to have available
additional authorized but unissued shares of common stock to provide for future
needs. The Company has authorized 100,000,000 shares of Common Stock with
66,992,993 shares of Common Stock issued and outstanding as of September 2, 2003
and 6,741,436 shares of Common Stock reserved for issuance upon the exercise of
stock options previously granted by the Company. Barr-DE or the Company, as the
case may be, will need additional authorized shares of Common Stock. The
additional but unissued shares of Common Stock will be available for issuance
from time to time by Barr-DE or the Company, as the case may be, at the
discretion of the Board of Directors, normally without further stockholder
action (except as may be required for a particular transaction by applicable
law, requirements of regulatory agencies or by stock exchange rules), for any
proper corporate purpose including, among other things, future acquisitions of
property or securities of other corporations, stock dividends, stock splits,
stock options, convertible debt and equity financing. Except to the extent that
Barr-DE or the Company, as the case may be, may issue shares of Common Stock
reserved therefor pursuant to its stock option plans, neither Barr-DE nor the
Company has entered into any agreements or understandings, and neither has any
present plans, for the issuance of additional shares of Common Stock, but
Barr-DE and the Company, as the case may be, wish to have such shares available
for future issuances as the need may arise. The Company's Board of Directors
believes that the additional but unissued common stock may be necessary for
future financing and to attract potential new equity capital to carry out the
Company's business objectives.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
OF BARR-DE OR THE COMPANY, AS THE CASE MAY BE,
FROM 100,000,000 SHARES TO 200,000,000 SHARES
26
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information regarding the beneficial
ownership of our common stock as of June 30, 2003 by (i) each person known to us
who beneficially owns more than 5% of our common stock; (ii) each director;
(iii) each executive officer of the Company identified in the Summary
Compensation Table below (the "Named Officers"); and (iv) all directors and
executive officers of the Company as a group. Except as otherwise indicated, and
subject to applicable community property laws, we believe that the beneficial
owners of the common stock listed below, based on information furnished by such
owners, have sole voting and investment power with respect to such shares.
<Table>
<Caption>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ------------------------ ----------------- --------
Bernard C. Sherman(2)...................................... 10,359,264 15.5
150 Signet Drive, Weston, Ontario, M9L1T9 Canada
FMR, Edward C. Johnson, 3d and Abigail P. Johnson(3)....... 4,083,380 6.1
82 Devonshire Street, Boston, MA 02109
Bruce L. Downey(4)......................................... 1,338,986 2.0
Paul M. Bisaro(5).......................................... 427,039 *
George P. Stephan(6)....................................... 232,246 *
William T. McKee(7)........................................ 211,800 *
Carole S. Ben-Maimon(8).................................... 134,997
Jack M. Kay(9)............................................. 101,249 *
Harold N. Chefitz(10)...................................... 28,750 *
Richard R. Frankovic(11)................................... 27,736 *
Peter R. Seaver(12)........................................ 26,152
James S. Gilmore, III(13).................................. 22,500 *
Frederick J. Killion(14)................................... 18,393 *
All executive officers and directors (17 persons)(15)...... 3,590,900 5.1
</Table>
- ---------------
* Less than 1%
(1) We have included in shares owned by each shareholder all options held by
the shareholder that are currently exercisable or exercisable within 60
days of June 30, 2003. Percentages are based on 66,785,798 shares of common
stock issued and outstanding as of June 30, 2003, net of shares held in
treasury.
(2) All of these shares are held of record by Sherman Delaware, Inc., of which
Mr. Sherman is the sole shareholder. Of these shares, 10,359,264 have been
pledged to banks to secure a guaranty by Sherman Delaware of the obligation
of a third party.
(3) As of June 30, 2003, FMR Corp., on behalf of certain of its direct and
indirect subsidiaries, and Fidelity International Limited, on behalf of
certain of its direct and indirect subsidiaries (collectively "Fidelity"),
indirectly held 4,083,380 shares of our common stock. Fidelity Management &
Research Company and FMR Co., Inc., wholly-owned subsidiaries of FMR Corp.
and investment advisors registered under Section 203 of the Investment
Advisors Act of 1940, were the beneficial owners of 4,049,468 shares.
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.,
was the beneficial owner of 32,962 shares. Fidelity International Limited
was the beneficial owner of 950 shares.
(4) Beneficial ownership for Mr. Downey includes 1,079,993 shares issuable upon
the exercise of options held by Mr. Downey that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(5) Beneficial ownership for Mr. Bisaro includes 379,391 shares issuable upon
the exercise of options held by Mr. Bisaro that are currently exercisable
or exercisable within 60 days of June 30, 2003.
27
(6) Beneficial ownership for Mr. Stephan includes 134,873 shares issuable upon
the exercise of options held by Mr. Stephen that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(7) Beneficial ownership for Mr. McKee includes 206,790 shares issuable upon
the exercise of options held by Mr. McKee that are currently exercisable or
exercisable within 60 days of June 30, 2003.
(8) Beneficial ownership for Dr. Ben-Maimon includes 134,997 shares issuable
upon the exercise of options held by Dr. Ben-Maimon that are currently
exercisable or exercisable within 60 days of June 30, 2003.
(9) Beneficial ownership for Mr. Kay includes 101,249 shares issuable upon the
exercise of options held by Mr. Kay that are currently exercisable or
exercisable within 60 days of June 30, 2003.
(10) Beneficial ownership for Mr. Chefitz includes 28,750 shares issuable upon
the exercise of options held by Mr. Chefitz that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(11) Beneficial ownership for Mr. Frankovic includes 26,343 shares issuable upon
the exercise of options held by Mr. Frankovic that are currently
exercisable or exercisable within 60 days of June 30, 2003.
(12) Beneficial ownership for Mr. Seaver includes 22,500 shares issuable upon
the exercise of options held by Mr. Seaver that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(13) Beneficial ownership for Mr. Gilmore includes 22,500 shares issuable upon
the exercise of options held by Mr. Gilmore that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(14) Beneficial ownership for Mr. Killion includes 18,000 shares issuable upon
the exercise of options held by Mr. Killion that are currently exercisable
or exercisable within 60 days of June 30, 2003.
(15) Beneficial ownership for all executive officers and directors includes
shares issuable upon the exercise of options that are currently exercisable
or exercisable within 60 days of June 30, 2003.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes annual and long-term compensation for the
three fiscal years ended June 30, 2003 awarded to, earned by or paid to our
Chief Executive Officer and the four other most highly paid executive officers
during the last fiscal year for services rendered to the Company in all
capacities.
<Table>
<Caption>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------
----------------------------- STOCK ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY(1) BONUS OPTIONS(2) COMPENSATION
- ------------------------- ---- --------- -------- ---------- ------------
Bruce L. Downey........................ 2003 $846,154 $500,000 134,999 $158,445(5)
Chairman and CEO 2002 746,154 500,000 112,500 78,587
2001 646,154 400,000 90,000 95,986
Paul M. Bisaro......................... 2003 $448,077 $250,000 71,999 $ 90,305(6)
President and COO 2002 397,115 250,000 75,000 50,770
Barr Laboratories, Inc. 2001 323,077 200,000 60,000 52,239
Carole S. Ben-Maimon................... 2003 $398,077 $200,000 67,499 $ 78,905(7)
President and COO 2002 334,615 470,000 37,500 79,319
Barr Research 2001(3) 116,538 216,397 75,000 25,794
Frederick J. Killion................... 2003 $339,423 $290,000 9,000 $ 61,383(8)
Senior Vice President 2002(4) 95,000 175,000 75,000 20,187
General Counsel and Secretary
William T. McKee....................... 2003 $298,846 $150,000 53,999 $ 55,793(9)
Senior Vice President 2002 269,039 175,000 52,500 45,540
CFO and Treasurer 2001 243,654 120,000 45,000 39,791
</Table>
- ---------------
(1) Includes amounts deferred by the employee for all years under our Savings
and Retirement Plan and our Excess Savings and Retirement Plan.
(2) Stock options adjusted for 3-for-2 stock split effected in the form of a 50%
stock divided distributed on March 17, 2003 to shareholders of record on
February 28, 2003.
28
(3) Dr. Ben-Maimon was hired and elected as an officer in January 2001.
(4) Mr. Killion was hired and elected as an officer in March 2002.
(5) Includes the Company's contributions to the Savings and Retirement Plan and
the Excess Savings and Retirement Plan aggregating $134,615, $2,591 in life
and medical insurance premiums paid by the Company and $21,239 in personal
use of the Company's corporate jet.
(6) Includes the Company's contributions to the Savings and Retirement Plan and
the Excess Savings and Retirement Plan aggregating $67,308, $6,157 in life
and medical insurance premiums paid by the Company, $9,840 as an automotive
allowance and $7,000 in personal use of the Company's corporate jet.
(7) Includes the Company's contributions to the Savings and Retirement Plan and
the Excess Savings and Retirement Plan aggregating $59,808, $6,769 in life
and medical insurance premiums paid by the Company and $12,328 as an
automotive allowance.
(8) Includes the Company's contributions to the Savings and Retirement Plan and
the Excess Savings and Retirement Plan aggregating $51,708, $2,229 in life
and medical insurance premiums paid by the Company and $7,446 as an
automotive allowance.
(9) Includes the Company's contributions to the Savings and Retirement Plan and
the Excess Savings and Retirement Plan aggregating $47,385, $1,653 in life
and medical insurance premiums paid by the Company and $6,755 as an
automotive allowance.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning all grants of
stock options to the Named Officers during the fiscal year ended June 30, 2003.
These options are included in the Summary Compensation Table above. All options
were granted at fair market value under the 1993 Stock Incentive Plan and have
ten-year terms. The rules of the Securities and Exchange Commission require us
to show hypothetical gains that the Named Officers would have for these options
at the end of their ten-year terms. These gains are calculated assuming annual
compound stock price appreciation of 5% and 10% from the date the option was
originally granted to the end of the option term. The 5% and 10% assumed annual
compound rates of stock price appreciation are required by SEC rules. They are
not our estimate or projection of future stock prices.
<Table>
<Caption>
INDIVIDUAL GRANTS(1)
------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SHARES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR BASE PRICE DATE 5% 10%
- ---- ---------- ------------ ----------- ---------- ------------- -------------
Bruce L. Downey.......... 134,999 9.60% $39.87 8/7/12 $3,384,969 $8,578,176
Paul M. Bisaro........... 71,999 5.12 39.87 8/7/12 1,805,305 4,574,997
Carole S. Ben-Maimon..... 67,499 4.80 39.87 8/7/12 1,692,472 4,289,056
Frederick J. Killion..... 9,000 0.64 39.87 8/7/12 225,666 571,883
William T. McKee......... 53,999 3.84 39.87 8/7/12 1,353,972 3,431,232
</Table>
- ---------------
(1) Consists of options granted under our 1993 Stock Incentive Plan, as amended.
All options listed were granted on August 7, 2002 and were scheduled to vest
ratably over three years.
29
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information about the value realized on option
exercises for each of the Named Officers during the fiscal year ended June 30,
2003, and the value of their unexercised options at June 30, 2003.
<Table>
<Caption>
NUMBER OF SHARES VALUE OF UNEXERCISED
SUBJECT TO UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END(1)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
Bruce L. Downey......... -- $ -- 1,034,993 134,999 $50,864,926 $3,499,174
Paul M. Bisaro.......... 50,000 2,569,274 355,391 71,999 14,560,830 1,866,214
Carole S. Ben-Maimon.... -- -- 112,497 67,499 2,560,606 1,749,574
Frederick J. Killion.... -- -- 15,000 69,000 307,650 1,463,880
William T. McKee........ 26,867 1,051,817 188,790 53,999 6,383,400 1,399,654
</Table>
- ---------------
(1) The dollar value is calculated by determining the difference between the
fair market value of the securities underlying the options and the exercise
price of the options at exercise or year-end.
(2) "In-the-money" means the market price of the common stock is greater than
the exercise price of the option on the date specified.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of June 30, 2003 with respect
to compensation plans approved by Barr shareholders under which our equity
securities are authorized for issuance. In our merger with Duramed, we assumed
stock option plans that were approved by Duramed's shareholders but not
subsequently approved by our shareholders. Other than those assumed Duramed
plans, we do not have any equity compensation plans that have not been approved
by our shareholders. While we will honor our obligations with respect to
outstanding option grants under the Duramed plans, we do not plan to make any
future option grants under those plans (as reflected in column (c) below, no
options remain available for grant under those Duramed plans).
<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
NUMBER OF UNDER EQUITY
SECURITIES TO BE WEIGHTED-AVERAGE COMPENSATION PLANS
ISSUED UPON EXERCISE EXERCISE PRICE (EXCLUDING
OF OUTSTANDING OF OUTSTANDING SECURITIES REFLECTED
PLAN CATEGORY OPTION(A) OPTIONS(B) IN COLUMN(A))(C)
- ------------- -------------------- ---------------- --------------------
Equity compensation plans approved by
security holders........................ 5,191,188 $30.44 5,657,161
Equity compensation plans not approved by
security holders........................ 552,214 16.86 --
--------- ------ ---------
Total................................ 5,743,402 $29.13 5,657,161
========= ====== =========
</Table>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to its charter, the Compensation Committee's responsibilities
include developing and administering a compensation policy for senior management
that contains appropriate performance incentives and equity-linked components,
and reviewing annually the performance of the executive officers of the Company.
The Compensation Committee also administers the stock option and stock incentive
plans and approves grants of stock options and other incentives under those
plans.
Compensation programs for executive officers are designed to attract,
retain and motivate employees who will contribute to the achievement of
corporate goals and objectives. Elements of executive compensation include
salaries, bonuses and awards of stock options, with the last two being variable.
In making its decisions
30
or recommendations, the Committee takes into account factors it deems relevant
to the specific compensation component being considered, including: compensation
paid by other business organizations of comparable size in the same industry and
related industries; profitability; the attainment of annual individual and
business objectives; an assessment of individual contributions relative to
others; and historic compensation awards.
The Committee considered the factors described above in determining Mr.
Downey's total compensation. Specifically, the Committee and the board
recognized that during fiscal 2003, under Mr. Downey's leadership, the Company
met strategic objectives approved by the board of directors, which included
strong sales in its generic products including a 196% year over year increase in
sales from the Company's oral contraceptive franchise, generic product
development as measured by product filings and approvals and proprietary product
development, including the filing of a New Drug Application (NDA) for
SEASONALE(R). During fiscal 2003, the Company filed 14 new product applications
with the FDA, including an application for generic Premarin(R) (Conjugated
Estrogens), received 16 new product approvals, and launched 10 new products,
including five generic oral contraceptive products and an alternative brand of
ciprofloxacin.
Also during fiscal 2003, the Company had nine proprietary products in
development, including seven clinical trials, expanded its female healthcare
sales force to 250 representatives and completed construction of its Adenovirus
facility on its Virginia campus. Finally, in June 2003 the Company completed
agreements with Wyeth to acquire the U.S. rights to four products marketed by
Wyeth and a license to complete the development of and market a new oral
contraceptive.
The Compensation Committee set the total compensation packages for Mr.
Downey and the other executive officers based on Barr's achievements in fiscal
2003.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally limits the income tax
deduction that a publicly-traded corporation may take for compensation paid in
any tax year to any executive officer named in the Summary Compensation Table to
$1,000,000. Generally speaking, neither compensation that qualifies as
"performance-based compensation" under the Code, nor compensation that is
deferred until termination of employment, is subject to this deduction limit.
This limit has not had a material effect on the Company to date.
The Company has the right under its employment agreement with Mr. Downey to
defer the payment of his bonus awards to the extent that they would otherwise be
non-deductible by the Company as a result of Code Section 162(m), and the
Company has exercised this right with respect to a portion of Mr. Downey's bonus
award for the Company's 2003 fiscal year. The Company is also implementing
elective salary and bonus deferral arrangements that may likewise help to
mitigate the potential impact of Section 162(m) in the future.
At last year's Annual Meeting, the shareholders of the Company approved the
2002 Stock and Incentive Award Plan, which authorizes the Committee, in its
discretion, to make stock-based awards and cash awards that qualify as
"performance-based compensation" under the Code, as well as awards that do not
so qualify. The Committee believes that the vast majority of awards that have
been made to the named executive officers to date under the Plan and its
predecessor, the 1993 Stock Incentive Plan, qualify as "performance-based
compensation" that is not subject to the deduction limit of Section 162(m).
The Committee's primary objective is to pay compensation on terms that will
best achieve the Company's business goals. If the Committee determines that it
can readily accomplish this objective without loss of deductibility pursuant to
Section 162(m), then it will generally endeavor to do so. Otherwise, it may pay
compensation that is not deductible under Section 162(m).
THE COMPENSATION COMMITTEE
Harold N. Chefitz, Chairman
James S. Gilmore III
Peter R. Seaver
George P. Stephan
31
EXECUTIVE AGREEMENTS
Bruce L. Downey. We entered into an employment agreement with Mr. Downey
in 1993 that we amended and restated in its entirety on August 8, 2002 and
further amended and restated in its entirety on October 24, 2002. Under the
agreement, Mr. Downey will continue to serve as our Chief Executive Officer. Mr.
Downey's employment agreement is set to terminate on August 8, 2005, but will
automatically extend for successive one-year periods unless one party gives
notice to the other party at least 12 months prior to the scheduled termination
date of its desire to terminate the agreement. Under the agreement, Mr. Downey
is paid a base salary, presently $1,000,000 for fiscal 2004, subject to increase
in future years by the Compensation Committee, and is eligible for an annual
bonus of up to 50% of his base salary in effect for a particular year at the
discretion of the Compensation Committee (at their discretion, the Compensation
Committee may increase the bonus above 50% of his base salary). In addition to
being eligible to participate in our incentive, health and benefit plans, Mr.
Downey is also entitled to the business and personal use of an automobile at our
expense. If the agreement is terminated by us without Good Cause, as defined in
the agreement, or by Mr. Downey for Good Reason, as defined in the agreement, he
will be entitled to a severance payment equal to up to three times the sum of
(1) his highest base salary and (2) an average bonus amount (such amount,
"Annual Cash Compensation"). If the termination occurs after Mr. Downey attains
the age of 65 but before 70, the payment shall be equal to two times his Annual
Cash Compensation, and if after 70 the payment shall be equal to his Annual Cash
Compensation. Unless termination occurs after Mr. Downey has attained the age of
70, the payment of a portion of any severance payment will be conditioned on Mr.
Downey not competing with us and complying with the confidentiality, non-solicit
and non-disparagement obligations that survive termination of the agreement. In
addition, if we elect not to renew the agreement at any time, unless we have
Good Cause for not renewing the agreement, Mr. Downey will be entitled to a
non-renewal payment equal to two times his Annual Cash Compensation (unless Mr.
Downey has attained the age of 70 prior to the scheduled terminate date, in
which case the payment shall be equal to his Annual Cash Compensation). If any
compensation to Mr. Downey under the agreement would be subject to the excise
tax imposed under Section 4999 of the Internal Revenue Code, we are obligated to
make a gross-up payment to Mr. Downey in an amount sufficient to cover any such
taxes. Mr. Downey has agreed to keep confidential certain information during the
term of the agreement and thereafter, and has agreed to certain non-solicitation
and non-disparagement restrictions that apply for a year after termination.
Paul M. Bisaro. We entered into an employment agreement with Mr. Bisaro in
1999 that we amended and restated in its entirety on August 8, 2002 and further
amended and restated in its entirety on October 24, 2002. Under the agreement,
Mr. Bisaro will continue to serve as President and Chief Operating Officer of
Barr Laboratories, Inc. Mr. Bisaro's employment agreement is set to terminate on
August 8, 2005, but will automatically extend for successive one-year periods
unless one party gives notice to the other party at least six months prior to
the scheduled termination date of its desire to terminate the agreement. Under
the agreement, Mr. Bisaro is paid a base salary, presently $525,000 for fiscal
2004, subject to increase in future years by the Compensation Committee, and is
eligible for an annual bonus of up to 50% of his base salary in effect for a
particular year at the discretion of the Compensation Committee (at their
discretion, the Compensation Committee may increase the bonus above 50% of his
base salary). In addition to being eligible to participate in our incentive,
health and benefit plans, Mr. Bisaro is also entitled to the business and
personal use of an automobile at our expense. If the agreement is terminated by
us without Good Cause, as defined in the agreement, or by Mr. Bisaro for Good
Reason, as defined in the agreement, he will be entitled to a severance payment
equal to 2.5 times his Annual Cash Compensation. The payment of a portion of any
severance payment will be conditioned on Mr. Bisaro not competing with us and
complying with the confidentiality, non-solicit and non-disparagement
obligations that survive termination of the agreement. In addition, if we elect
not to renew the agreement at any time, unless we have Good Cause for not
renewing the agreement, and Mr. Bisaro performs the transition duties and
responsibilities set forth in the non-renewal notice for a period not to exceed
90 days and thereafter terminates the agreement for Good Reason prior to the
scheduled termination date (such non-renewal combined with the required
performance by Mr. Bisaro constitutes Good Reason), Mr. Bisaro will be entitled
to a payment equal to 1.25 times his Annual Cash Compensation. If we elect not
to renew the agreement at any time and Mr. Bisaro does not thereafter elect to
terminate the agreement for Good Reason, as specified above, Mr. Bisaro will be
entitled to a payment equal to his Annual
32
Cash Compensation, provided that he serves-out the balance of his term and
complies with the confidentiality, non-solicit and non-disparagement obligations
that survive termination of the agreement. If any compensation to Mr. Bisaro
under the agreement would be subject to the excise tax imposed under Section
4999 of the Internal Revenue Code, we are obligated to make a gross-up payment
to Mr. Bisaro in an amount sufficient to cover any such taxes. Mr. Bisaro has
agreed to keep confidential certain information during the term of the agreement
and thereafter, and has agreed to certain non-solicitation and non-disparagement
restrictions that apply for a year after termination.
Carole S. Ben-Maimon. We entered into an employment agreement with Dr.
Ben-Maimon in 2001 that we amended and restated in its entirety on August 8,
2002 and further amended and restated in its entirety on October 24, 2002. Under
the agreement, Dr. Ben-Maimon will continue to serve as the President of Barr
Research, responsible for directing, managing and overseeing all new proprietary
drug discovery and development studies and activities, including clinical trials
and medical and regulatory affairs related to such activities. Dr. Ben-Maimon's
employment agreement is set to terminate on August 19, 2005, but will
automatically extend for successive one-year periods unless one party gives
notice to the other party at least six months prior to the scheduled termination
date of its desire to terminate the agreement. Under the agreement, Dr.
Ben-Maimon is paid a base salary, presently $475,000 for fiscal 2004, subject to
increase in future years by the Compensation Committee, and is eligible for an
annual bonus of up to 50% of her base salary in effect for a particular year at
the discretion of the Compensation Committee (at their discretion, the
Compensation Committee may increase the bonus above 50% of her base salary). In
addition to being eligible to participate in our incentive, health and benefit
plans, Dr. Ben-Maimon is also entitled to the business and personal use of an
automobile at our expense, and we have agreed to pay the costs of her medical
malpractice insurance premiums, not to exceed $15,000 in any year. If the
agreement is terminated by us without Good Cause, as defined in the agreement,
or by Dr. Ben-Maimon for Good Reason, as defined in the agreement, she will be
entitled to a severance payment equal to 2.5 times her Annual Cash Compensation.
The payment of a portion of any severance payment will be conditioned on Dr.
Ben-Maimon not competing with us and complying with the confidentiality,
non-solicit and non-disparagement obligations that survive termination of the
agreement. In addition, if we elect not to renew the agreement at any time,
unless we have Good Cause for not renewing the agreement, and Dr. Ben-Maimon
performs the transition duties and responsibilities set forth in the non-
renewal notice for a period not to exceed 90 days and thereafter terminates the
agreement for Good Reason prior to the scheduled termination date (such
non-renewal combined with the required performance by Dr. Ben-Maimon constitutes
Good Reason), Dr. Ben-Maimon will be entitled to a payment equal to 1.25 times
her Annual Cash Compensation. If we elect not to renew the agreement at any time
and Dr. Ben-Maimon does not thereafter elect to terminate the agreement for Good
Reason, as specified above, Dr. Ben-Maimon will be entitled to a payment equal
to her Annual Cash Compensation, provided that she serves-out the balance of her
term and complies with the confidentiality, non-solicit and non-disparagement
obligations that survive termination of the agreement. If any compensation to
Dr. Ben-Maimon under the agreement would be subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code, we are obligated to make a
gross-up payment to Dr. Ben-Maimon in an amount sufficient to cover any such
taxes. Dr. Ben-Maimon has agreed to keep confidential certain information during
the term of the agreement and thereafter, and has agreed to certain
non-solicitation and non-disparagement restrictions that apply for a year after
termination.
Frederick J. Killion. On February 8, 2002, we entered into an employment
agreement with Mr. Killion that we amended and restated in its entirety on
February 19, 2003, under which he will continue to serve as our Senior Vice
President, General Counsel and Secretary, responsible for managing and
supervising the day-to-day legal affairs of the Company, including managing and
supervising internal and external counsel. Mr. Killion's employment agreement is
set to terminate on February 19, 2006, but will automatically extend for
successive one-year periods unless one party gives notice to the other party at
least six months prior to the scheduled termination date of its desire to
terminate the agreement. Under the agreement, Mr. Killion is paid a base salary,
presently $400,000 for fiscal 2004, subject to increase in future years by the
Compensation Committee, and is eligible for an annual bonus of up to 40% of his
base salary in effect for a particular year at the discretion of the
Compensation Committee (at their discretion, the Compensation Committee may
increase the bonus above 40% of his base salary). In addition to being eligible
to participate in our incentive,
33
health and benefit plans, Mr. Killion is also entitled to the business and
personal use of an automobile at our expense. If the agreement is terminated by
us without Good Cause, as defined in the agreement, or by Mr. Killion for Good
Reason, as defined in the agreement, he will be entitled to a severance payment
equal to 2 times his Annual Cash Compensation. In addition, if we elect not to
renew the agreement at any time, unless we have Good Cause for not renewing the
agreement, Mr. Killion will be entitled to a non-renewal payment equal to his
Annual Cash Compensation, provided that he serves-out the balance of his term
and complies with the confidentiality obligations that survive termination of
the agreement. Mr. Killion has agreed to keep confidential certain information
during the term of the agreement and thereafter.
William T. McKee. On February 7, 2001, we entered into an employment
agreement with Mr. McKee that we amended and restated in its entirety on
February 19, 2003, under which he will continue to serve as our Senior Vice
President, Chief Financial Officer and Treasurer. Mr. McKee's employment
agreement is set to terminate on February 19, 2006, but will automatically
extend for successive one-year periods unless one party gives notice to the
other party at least six months prior to the scheduled termination date of its
desire to terminate the agreement. Under the agreement, Mr. McKee is paid a base
salary, presently $400,000 for fiscal 2004, subject to increase in future years
by the Compensation Committee, and is eligible for an annual bonus of up to 40%
of his base salary in effect for a particular year at the discretion of the
Compensation Committee (at their discretion, the Compensation Committee may
increase the bonus above 40% of his base salary). In addition to being eligible
to participate in our incentive, health and benefit plans, Mr. McKee is also
entitled to the business and personal use of an automobile at our expense. If
the agreement is terminated by us without Good Cause, as defined in the
agreement, or by Mr. McKee for Good Reason, as defined in the agreement, he will
be entitled to a severance payment equal to 2 times his Annual Cash
Compensation. In addition, if we elect not to renew the agreement at any time,
unless we have Good Cause for not renewing the agreement, Mr. McKee will be
entitled to a non-renewal payment equal to his Annual Cash Compensation,
provided that he serves-out the balance of his term and complies with the
confidentiality obligations that survive termination of the agreement. Mr. McKee
has agreed to keep confidential certain information during the term of the
agreement and thereafter.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
MEMBERSHIP AND ROLE OF THE AUDIT COMMITTEE
The Audit Committee consists of the following members of the Company's
board of directors: George P. Stephan (Chairman), Harold N. Chefitz and Richard
R. Frankovic. The board of directors has determined that each member of the
Audit Committee is independent as defined in Section 303 of the listing
standards of the New York Stock Exchange. The Audit Committee operates under a
written charter that has been adopted by the board of directors, which was most
recently published in our proxy statement for our 2001 Annual Meeting of
Shareholders.
The primary function of the Audit Committee is to assist the board of
directors in fulfilling its oversight responsibilities with respect to the
Company's financial matters. The Audit Committee's primary responsibilities are
to: (1) monitor the integrity of Barr's financial reporting processes and
systems of internal controls; (2) select, retain and monitor the independence
and performance of Barr's independent public accountants; and (3) facilitate and
maintain an open avenue of communication among the board of directors, senior
management and the independent public accountants.
REVIEW OF THE COMPANY'S AUDITED FINANCIAL STATEMENTS
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended June 30, 2003 with the
Company's management. The Audit Committee has discussed with Deloitte & Touche
LLP, the Company's independent public accountants, the matters required to be
discussed by Statement on Auditing Standards ("SAS") No. 61 (Communication with
Audit Committees), as amended by SAS No. 89 (Audit Adjustments) and SAS No. 90
(Audit Committee Communications).
34
The Audit Committee has also received the written disclosures and the
letter from Deloitte & Touche LLP required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees) and the Audit
Committee has discussed the independence of Deloitte & Touche LLP with that
firm.
Based on the Audit Committee's review and discussions noted above, the
Audit Committee recommended to the board of directors that the Company's audited
financial statements be included in the Company's Annual Report to Shareholders
on Form 10-K.
DELOITTE & TOUCHE LLP INFORMATION
The Audit Committee has selected and retained Deloitte & Touche LLP to
serve as our independent auditors for the fiscal year ending June 30, 2004.
Deloitte & Touche LLP has served as our independent auditors since fiscal 1994.
The Company expects that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting and will be available to respond to appropriate
questions which may be raised at the Annual Meeting. Representatives of Deloitte
& Touche LLP will have the opportunity to make a statement if they so desire.
AUDIT AND NON-AUDIT FEES
Fees billed to Barr related to services performed by Deloitte & Touche LLP
during the last two fiscal years ended June 30, 2003 are as follows:
<Table>
<Caption>
2003 2002
---------- ----------
Audit Fees.................................................. $ 447,000 $ 225,000
Audit-Related Fees.......................................... 602,000 714,000
Tax Fees.................................................... 173,000 160,000
All Other Fees.............................................. -- --
---------- ----------
Total..................................................... $1,222,000 $1,099,000
---------- ----------
</Table>
Audit Fees. Represents fees for professional services provided for the
audit of Barr's annual financial statements and review of Barr's quarterly
financial statements, and audit services provided in connection with other
statutory or regulatory filings.
Audit-Related Fees. Represents fees for assurance services related to the
audit of Barr's financial statements. The amount shown for 2003 includes fees
related to the employee benefit plan audit, research and consultation on
accounting matters and due diligence services. The amount shown for 2002
includes fees related to the employee benefit plan audit and services performed
in connection with the merger with Duramed Pharmaceuticals, Inc. and Enhance
Pharmaceuticals, Inc.
Tax Fees. Represents fees for professional services provided primarily for
domestic compliance and tax advice. The amounts shown for 2002 and 2003 include
tax compliance and tax advisory services.
All Other Fees. Represents fees for products and services not otherwise
included in the categories above.
The Audit Committee has considered whether the independent auditors'
provision of other non-audit services to the Company is compatible with the
auditors' independence. The Audit Committee has concluded that the independent
auditors are independent from the Company and its management.
Submitted by
George P. Stephan, Chairman
Harold N. Chefitz
Richard R. Frankovic
35
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder returns on Barr
common stock for the last five fiscal years with the cumulative total return of
the Standard & Poor's Pharmaceutical Index and the Standard & Poor's 500
Composite Index over the same period, assuming an investment of $100 in the
common stock, the S&P Pharmaceutical Index and the S&P 500 Composite Index on
June 30, 1998, and reinvestment of dividends. The comparisons in the graph below
are based on historical data and are not intended to forecast the possible
future performance of our common stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(COMPARISON GRAPH)
<Table>
<Caption>
FISCAL YEAR ENDED JUNE 30
$100 INVESTED ON 06/30/98
---------------------------------------------------------
COMPANY/INDEX NAME 1998 1999 2000 2001 2002 2003
- ------------------ ------- ------- ------- ------- ------- -------
Barr Laboratories, Inc.............. $100.00 $100.31 $169.10 $261.12 $239.72 $370.72
S&P Pharmaceutical Index(1)......... $100.00 $122.76 $131.66 $112.13 $ 91.96 $ 92.19
S&P 500 Index....................... $100.00 $114.57 $128.72 $115.29 $ 96.05 $104.05
</Table>
- ---------------
(1) The S&P Pharmaceutical Index was formerly known as the S&P Health Care Drugs
Index. The components of the index remained the same after the name change.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 2003, we sold certain of our
pharmaceutical products and bulk pharmaceutical materials in the amount of
$12,727,000 to companies owned or controlled by Dr. Bernard C. Sherman, our
largest shareholder and a director until October 24, 2002. We also purchased
bulk pharmaceutical materials from a company owned by Dr. Sherman in the amount
of $3,583,000. As of June 30, 2003, our accounts receivable included $2,398,000
due from such companies and our accounts payable included $648,000 due to such
companies.
In August 1995, we entered into an agreement with a company owned by Dr.
Sherman to, among other things, share litigation and related costs in connection
with our multi-year Fluoxetine patent challenge. For the year ended June 30,
2003, we recorded $585,000 in connection with such agreement as a reduction to
our operating expenses. In accordance with the agreement, in return for sharing
our costs since 1995, Dr. Sherman's company was entitled to share the profits,
as defined, which we earned on the sale of Fluoxetine. Included in our cost of
sales for the year ended June 30, 2003 is approximately $1,440,000 for the
36
related party's share of the profit from the sale of Fluoxetine. We believe that
these transactions were negotiated at arms-length and on terms that approximate
amounts that we would have obtained with unaffiliated third parties.
Mr. Chefitz, a member of our Audit Committee and Chairman of our
Compensation Committee, serves as the Chairman of GliaMed, Inc., a privately
held company. GliaMed has created a platform of compounds designed for the
treatment of neurodegeneration diseases and primary brain cancers. We have made
a $500,000 investment in GliaMed, which represents approximately six percent of
the outstanding voting shares. In connection with this investment, we have
obtained options to elect to market, distribute and manufacture products
developed by GliaMed. We do not have the ability to exercise significant
influence on GliaMed's operations. The board of directors has determined that
our investment in GliaMed has not impaired Mr. Chefitz's independence.
In connection with our investment in GliaMed, Mr. McKee, our Chief
Financial Officer, became a member of GliaMed's board of directors.
OTHER MATTERS
SHAREHOLDER PROPOSALS
Under SEC rules, any shareholder who intends to present a proposal at the
Company's next annual meeting of shareholders must submit the proposal to the
Company at our principal executive offices no later than May 25, 2004, and must
satisfy the other requirements of SEC Rule 14a-8 in order for the proposal to be
considered for inclusion in our proxy statement and proxy for that meeting. Our
principal executive offices are located at 2 Quaker Road, Pomona, New York 10970
and any such proposals must be addressed to the attention of the Secretary.
For any proposal that is not submitted for inclusion in next year's proxy
statement, but is instead sought to be presented directly at the 2004 annual
meeting, SEC rules permit management to vote proxies in its discretion if we:
(1) receive notice of the proposal before the close of business on August 8,
2004, and advise shareholders in the 2004 proxy statement about the nature of
the matter and how management intends to vote on such matter; or (2) do not
receive notice of the proposal prior to the close of business on August 8, 2004.
Notices of intention to present proposals should be sent to the address above.
We reserve the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these and other
applicable requirements.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10% or greater shareholders to file forms with
the SEC to report their ownership of our common stock and any changes in
ownership. Anyone required to file forms with the SEC must also send copies of
the forms to the Company. We have reviewed all forms provided to us. Based on
that review, we believe that all Section 16(a) filing requirements were met by
our directors and executive officers during the fiscal year ended June 30, 2003,
other than the instances listed below. These oversights related to compliance
with the reporting requirements of Section 16 were identified during a review of
these forms with outside counsel. Immediately upon completing this review,
corrective filings that cover the individuals and transactions listed below were
made with the SEC.
The following individuals were delinquent in reporting a grant of stock
options: Messrs. Bisaro, Chefitz, Downey, Frankovic, Gilmore, Kay, Seaver,
Stephan and Dr. Ben-Maimon.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
If you are a beneficial owner, but not the record holder, of Company
shares, your broker, bank or other nominee may only deliver one copy of the
Company's proxy statement and annual report to multiple shareholders who share
an address unless that nominee has received contrary instructions from one or
more of
37
the shareholders. The Company will deliver promptly, upon written or oral
request, a separate copy of the proxy statement and annual report to a
shareholder at a shared address to which a single copy of the documents were
delivered. A shareholder who wishes to receive a separate copy of the proxy
statement and annual report, now or in the future, should submit their request
to the Company by telephone at 1-800-BARRLABS or by submitting a written request
to Ms. Carol A. Cox, Vice President, Investor Relations and Corporate
Communications, 400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677.
Beneficial owners sharing an address who are receiving multiple copies of proxy
materials and annual reports and wish to receive a single copy of such materials
in the future will need to contact your broker, bank or other nominee to request
that only a single copy of each document be mailed to all shareholders at the
shared address in the future.
ANNUAL REPORT AND ADDITIONAL MATERIALS
Our annual report to shareholders for the fiscal year ended June 30, 2003
is being distributed with this proxy statement. Copies of our annual report on
Form 10-K for the fiscal year ended June 30, 2003 may be obtained without charge
upon written or oral request to Barr Laboratories, Inc., Attention: Carol A.
Cox, Vice President, Investor Relations and Corporate Communications, 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, or by phoning
1-800-BARRLABS and asking for Ms. Cox.
OTHER BUSINESS
Our board of directors does not currently intend to bring any other
business before the annual meeting, and is not aware of any other business to be
brought before the annual meeting. If any other business is properly brought
before the annual meeting, the proxies will be voted in accordance with the best
judgment of the proxy holders.
By Order of the Board of Directors
FREDERICK J. KILLION
Secretary
38
ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is effective as of
, 2003, by and between Barr Laboratories, Inc., a New York corporation
("Barr-NY" or the "Non-Surviving Company"), and Barr Laboratories, Inc., a
Delaware corporation ("Barr-DE" or the "Surviving Company").
WHEREAS, pursuant to Section 252 of the Delaware General Corporation Law
(the "DGCL") and Section 907 of the New York Business Corporation Law (the
"NYBCL") and the Certificate of Incorporation and Bylaws of Barr-NY and Barr-DE,
the board of directors and shareholders of Barr-NY and Barr-DE have approved the
Merger (as hereinafter defined), whereby Barr-NY will merge with and into
Barr-DE, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto have agreed as follows:
1. THE MERGER.
(a) The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as such term is defined in Section 1(b)) hereof), Barr-NY
shall be merged with and into Barr-DE (the "Merger") in accordance with Section
252 of the DGCL and Section 907 of the NYBCL, the separate corporate existence
of Barr-NY shall cease and Barr-DE shall continue as the Surviving Company under
the laws of the State of Delaware under the name "Barr Laboratories, Inc."
(b) The Effective Time of the Merger. Barr-NY shall file a duly executed
Certificate of Merger with the New York Secretary of State ("NY Certificate of
Merger"). Barr-DE shall file a duly executed Certificate of Merger with the
Delaware Secretary of State ("DE Certificate of Merger"). The "Effective Time"
of the Merger shall be the later of: (i) the date and time of acceptance for
filing with the New York Secretary of State of the NY Certificate of Merger and
(ii) the date and time of acceptance for filing with the Delaware Secretary of
State of the DE Certificate of Merger.
(c) Effect of the Merger. At the Effective Time, the Surviving Company
shall thereupon and thereafter possess all of the rights, privileges, powers and
franchises, both of a public and private nature, of each of Barr-NY and Barr-DE,
and shall be subject to all of the restrictions, disabilities and duties of each
of Barr-NY and Barr-DE; and all of the rights, privileges, powers and franchises
of each of Barr-NY and Barr-DE, and all property (real, personal and mixed), and
all debts due to either of Barr-NY or Barr-DE on whatever account, for stock
subscriptions as well as all other things in action or belonging to each of
Barr-NY or Barr-DE, shall be vested in the Surviving Company; and all property,
rights, privileges, powers and franchises and all and every other interest shall
thereafter be the property of the Surviving Company as they were of Barr-NY and
Barr-DE; but all rights of creditors and all liens upon any property of either
Barr-NY or Barr-DE shall be preserved unimpaired, and all debts, liabilities and
duties of each of Barr-NY and Barr-DE shall thenceforth attach to the Surviving
Company, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by the Surviving Company.
(d) Certificate of Incorporation of the Surviving Company. The Certificate
of Incorporation of Barr-DE in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Company from and
after the Effective Time until otherwise amended or repealed.
(e) Bylaws of the Surviving Company. The Bylaws of Barr-DE in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Company from and after the Effective Time until otherwise amended or repealed.
(f) Board of Directors of the Surviving Company. The Board of Directors of
Barr-NY in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the Board of
Directors of the Surviving Company from and after the Effective Time in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Company.
(g) Tax Treatment of the Merger. The parties hereto intend that the Merger
shall be treated as a tax-free a reorganization within the meaning of Section
368(a) of the United States Internal Revenue Code of 1986, as amended, and each
party shall file all tax returns, and take all other actions for tax purposes,
in a manner consistent therewith.
2. CONVERSION OF SHARES.
(a) Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof:
(i) All shares of the common stock, par value $.01 per share, of
Barr-DE ("Barr-DE Common Stock") issued and outstanding immediately prior
to the Effective Time shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist.
(ii) All shares of the common stock, par value $.01 per share, of
Barr-NY ("Barr-NY Common Stock") issued and outstanding immediately prior
to the Effective Time shall be converted into and represent the right to
receive, and shall be exchangeable for, one validly issued, fully paid and
non-assessable share of Barr-DE Common Stock.
(b) Exchange of Shares.
(i) Prior to the Effective Time, Barr-DE shall select and enter into
an agreement with a bank or trust company to act as Exchange Agent
hereunder (the "Exchange Agent"). No later than the Effective Time, Barr-DE
shall cause the Exchange Agent, pursuant to irrevocable instructions, to
make available and deliver, and each holder of Barr-NY Common Stock shall
be entitled to receive, upon surrender to the Exchange Agent of one or more
certificates representing such shares of Barr-NY Common Stock for
cancellation, certificates representing the number of shares of Barr-DE
Common Stock into which such shares of Barr-NY Common Stock are converted
in the Merger. The shares of Barr-DE Common Stock into which the shares of
Barr-NY Common Stock shall be converted in the Merger shall be deemed to
have been issued at the Effective Time.
(ii) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Barr-NY Common Stock (the "Certificates"), (A) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Barr-DE may reasonably specify) and
(B) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Barr-DE Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Barr-DE Common Stock which such
holder has the right to receive in respect of the Certificates surrendered
pursuant to the provisions of this Section 2.
(iii) In the event that any Certificate shall have been lost, stolen,
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen, or destroyed, Barr-DE shall
issue or cause to be issued in exchange for such lost, stolen, or destroyed
Certificate the number of shares of Barr-DE Common Stock into which such
shares are converted in the Merger in accordance with this Section 2. When
authorizing such issuance in exchange therefor, the Board of Directors of
Barr-DE may, in its sole discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen, or destroyed
certificate to deliver a bond to Barr-DE (in such amount as the Board of
Directors of Barr-DE may direct) as an indemnity against any claim that may
be made against Barr-DE with respect to the Certificate alleged to have
been lost, stolen, or destroyed.
(c) Stock Options, Warrants, Debentures, Preferred Stock and other
Agreements. As of the Effective Time, any stock options, warrants, convertible
securities or other contractual commitments or agreements of any kind to
purchase or issue shares of Barr-NY Common Stock that are outstanding
immediately prior to the Effective Time (whether or not contingent or otherwise
requiring further shareholder approval) shall be
2
converted into a stock option, warrant, convertible security or other
contractual commitment or agreement to purchase or issue shares of Barr-DE
Common Stock on the same terms as prior to the Effective Time, except that any
rights or obligations therein relating to shares of Barr-NY Common Stock shall
be converted to rights or obligations relating to shares of Barr-DE Common
Stock.
(d) Closing of Transfer Books. At the Effective Time, the stock transfer
books of Barr-NY shall be closed and no transfer of shares of Barr-NY Common
Stock shall thereafter be made. If, after the Effective Time, certificates
representing shares of Barr-NY Common Stock are presented to the Surviving
Company, they shall be canceled and exchanged for certificates representing
shares of Barr-DE Common Stock in accordance with the terms hereof. At and after
the Effective Time, the holders of shares of Barr-NY Common Stock to be
exchanged for shares of Barr-DE Common Stock pursuant to this Agreement shall
cease to have any rights as shareholders of Barr-NY except for the right to
surrender such stock certificates in exchange for shares of Barr-DE Common Stock
as provided hereunder.
3. MISCELLANEOUS.
(a) Fees and Expenses. Whether or not the Merger is consummated, each
party hereto shall pay its own costs and expenses incident to the preparation of
this Agreement, the consummation of the Merger, and the performance of and
compliance with all of the agreements and conditions contained herein.
(b) Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed by overnight delivery service or by first class mail postage prepaid,
or sent by telecopier, to the parties at the following address (or at such other
address of a party as shall be specified by like notice):
Barr Laboratories, Inc.
2 Quaker Road
Pomona, New York 10970
(c) Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(d) Amendment, Modification and Termination. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, or terminated in part or in its entirety, by written agreement of
Barr-NY and Barr-DE at any time prior to the Effective Time.
(e) Section Headings. The Section headings contained in this Agreement are
inserted for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(f) Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to the conflict of laws principles or rules
thereof.
(g) Integration. This Agreement sets forth and is intended to be an
integration of all of the promises, agreements, conditions, understandings,
covenants, warranties and representations among the parties with respect to the
Merger and there are no promises, agreements, conditions, understandings,
covenants, warranties or representations, oral or written, express or implied,
among the parties with respect to the transactions contemplated other than as
set forth herein. Any and all prior agreements among the parties with respect to
the Merger are hereby revoked.
* * * * *
3
IN WITNESS WHEREOF, the parties hereto have executed this Merger Agreement
effective as of the date first above written.
BARR LABORATORIES, INC.,
a New York corporation
By:
------------------------------------
Name:
Title:
BARR LABORATORIES, INC.,
a Delaware corporation
By:
------------------------------------
Name:
Title:
4
ANNEX B
CERTIFICATE OF INCORPORATION
OF
BARR LABORATORIES, INC.
ARTICLE ONE
The name of the Corporation is Barr Laboratories, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of Delaware
is 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The name of its
registered agent at such address is The Corporation Services Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
SECTION 1. Authorized Shares. The total number of shares of capital stock
which the Corporation has authority to issue is 102,000,000 shares, consisting
of:
(a) 2,000,000 shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"); and
(b) 100,000,000 shares of Common Stock, par value $.01 per share ("Common
Stock").
The Preferred Stock and the Common Stock shall have the rights, preferences
and limitations set forth below.
SECTION 2. Preferred Stock. The Preferred Stock may be issued from time
to time and in one or more series. The Board of Directors of the Corporation is
authorized to determine or alter the powers, preferences and rights, and the
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and within the limitations or
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series of Preferred Stock then outstanding) the number of shares of any such
series of Preferred Stock, and to fix the number of shares of any series of
Preferred Stock. In the event that the number of shares of any series of
Preferred Stock shall be so decreased, the shares constituting such decrease
shall resume the status which such shares had prior to the adoption of the
resolution originally fixing the number of shares of such series of Preferred
Stock subject to the requirements of applicable law. The powers, preferences and
relative, participating, optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time outstanding.
Any of the powers, preferences and rights, and the qualifications, limitations
and restrictions granted to or imposed upon any such series of Preferred Stock
may be made dependent upon facts ascertainable outside the resolutions or
resolutions providing for the issue of such Preferred Stock adopted by the Board
of Directors, provided that the manner in which such facts shall operate upon
the powers, preferences and rights, and the qualifications, limitations and
restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions providing for the issue of such series of
Preferred Stock adopted by the Board of Directors.
SECTION 3. Common Stock.
(c) Dividends. Except as otherwise provided by the Delaware General
Corporation Law or this Certificate of Incorporation (the "Certificate"), the
holders of Common Stock, subject to the rights of holders of any series of
Preferred Stock, shall share ratably in all dividends as may from time to time
be declared by the Board of Directors of the Corporation in respect of the
Common Stock out of funds legally available for the payment thereof and payable
in cash, stock or otherwise and in all other distributions, whether in respect
of liquidation or dissolution (voluntary or involuntary) or otherwise after
payment of liabilities and liquidation preference on any outstanding Preferred
Stock.
(d) Conversion Rights The Common Stock shall not be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same class of the Corporation's capital stock.
(e) Preemptive Rights. No holder of Common Stock shall have any preemptive
rights with respect to the Common Stock or any other securities of the
Corporation, or to any obligations convertible (directly or indirectly) into
securities of the Corporation whether now or hereafter authorized.
(f) Voting Rights. Except as otherwise provided by the Delaware General
Corporation Law or the Certificate and subject to the rights of holders of any
series of Preferred Stock, all of the voting power of the stockholders of the
Corporation shall be vested in the holders of the Common Stock, and each holder
of Common Stock shall have one vote for each share held by such holder on all
matters voted upon by the stockholders of the Corporation.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
Except as otherwise provided in this Certificate (including any duly
authorized certificate of designation of any series of Preferred Stock),
Directors shall be elected by a plurality of the votes of the shares entitled to
vote in the election of Directors present in person or represented by proxy at
the meeting of the stockholders in which Directors are elected. Elections of
directors need not be by written ballot unless the By-laws of the Corporation
shall so provide.
ARTICLE SEVEN
The number of directors which constitute the entire Board of Directors of
the Corporation shall be designated in the By-laws of the Corporation.
ARTICLE EIGHT
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the By-laws of the Corporation.
ARTICLE NINE
SECTION 1. Limitation of Liability.
(a) To the fullest extent permitted by the Delaware General Corporation Law
as it now exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), and except
as otherwise provided in the Corporation's Bylaws, no Director of the
Corporation shall be liable to the Corporation or its stockholders for monetary
damages arising from a breach of fiduciary duty owed to the Corporation or its
stockholders.
2
(b) Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
SECTION 2. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he or she is or was a Director or officer of the Corporation or a
wholly-owned subsidiary of the Corporation or, while a Director or officer of
the Corporation or a wholly-owned subsidiary of the Corporation, is or was
serving at the request of the Corporation or a wholly-owned subsidiary of the
Corporation as a director, officer, employee, partner, member, manager, trustee,
fiduciary or agent of another corporation or of a partnership, joint venture,
limited liability company, trust or other entity or enterprise, including
service with respect to an employee benefit plan (an "indemnitee"), shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee
in connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a Director, officer, employee, partner, member,
manager, trustee, fiduciary or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 3 of this Article Nine with respect to proceedings
to enforce rights to indemnification, the Corporation shall not indemnify any
such indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee except to the extent such proceeding (or part thereof) was
authorized in writing by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 2 of this Article Nine shall be a
contract right and shall include the obligation of the Corporation to pay the
expenses incurred in defending any such proceeding in advance of its final
disposition (an "advance of expenses"); provided, however, that an advance of
expenses incurred by an indemnitee in his or her capacity as a Director or
officer shall be made only upon delivery to the Corporation of an undertaking
(an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 2 of this Article Nine or otherwise. For purposes of this Article Nine,
a wholly-owned subsidiary of the Corporation shall be deemed to include any
subsidiary for which nominal equity interests have been issued to a persons
other than the Corporation or any of its subsidiaries pursuant to the laws of
such subsidiary's jurisdiction of incorporation or organization.
SECTION 3. Procedure for Indemnification. Any indemnification of a
Director or officer of the Corporation or advance of expenses under Section 2 of
this Article Nine shall be made promptly, and in any event within forty-five
days (or, in the case of an advance of expenses, twenty days), upon the written
request of the Director or officer. If a determination by the Corporation that
the Director or officer is entitled to indemnification pursuant to this Article
Nine is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advance of expenses, in whole or in part, or if payment in full pursuant to such
request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this Article Nine shall be enforceable by the Director or officer in any court
of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for advance of expenses where the undertaking
required pursuant to Section 2 of this Article Nine, if any, has been tendered
to the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that
3
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct. The procedure for indemnification of other employees and
agents for whom indemnification is provided pursuant to Section 2 of this
Article Nine shall be the same procedure set forth in this Section 3 for
Directors or officers, unless otherwise set forth in the action of the Board of
Directors providing indemnification for such employee or agent.
SECTION 4. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation or a wholly-owned subsidiary of the
Corporation or was serving at the request of the Corporation or a wholly-owned
subsidiary of the Corporation as a Director, officer, employee, partner, member,
manager, trustee, fiduciary or agent of another corporation, partnership, joint
venture, limited liability company, trust or other entity or enterprise against
any expense, liability or loss asserted against him or her and incurred by him
or her in any such capacity, whether or not the Corporation would have the power
to indemnify such person against such expenses, liability or loss under the
Delaware General Corporation Law.
SECTION 5. Service for Subsidiaries. Any person serving as a Director,
officer, employee, partner, member, manager, trustee, fiduciary or agent of
another corporation, partnership, joint venture, limited liability company,
trust or other entity or enterprise, at least 50% of whose equity interests are
owned by the Corporation (a subsidiary for purposes of this Article Nine) shall
be conclusively presumed to be serving in such capacity at the request of the
Corporation.
SECTION 6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article Nine shall not adversely affect any right
or protection hereunder of any Director or officer in respect of any act,
omission or condition existing or event or circumstance occurring prior to the
time of such repeal or modification.
SECTION 7. Reliance. Persons who after the date of the adoption of this
provision become or remain Directors or officers of the Corporation or who,
while a Director or officer of the Corporation, become or remain a Director,
officer, employee or agent of a subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other rights
contained in this Article Nine in entering into or continuing such service. The
rights to indemnification and to the advance of expenses conferred in this
Article Nine shall apply to claims made against an indemnitee arising out of
acts or omissions which occurred or occur both prior and subsequent to the
adoption hereof.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and
to the advance of expenses conferred in this Article Nine shall not be exclusive
of any other right which any person may have or hereafter acquire hereunder or
under any statute, by-law, agreement, vote of stockholders or disinterested
Directors or otherwise.
SECTION 9. Other Sources. The Corporation's obligation, if any, to
indemnify or to advance expenses to any Director or officer who was or is
serving at its request as a director, officer, employee or agent of an other
entity shall be reduced by any amount such Director or officer may collect as
indemnification or advancement of expenses from such other entity.
SECTION 10. Other Indemnification and Prepayment of Expenses. This
Article Nine shall not limit the right of the Corporation, to the extent and in
the manner permitted by applicable law, to indemnify and to advance expenses to
persons other than Directors or officers (including employees and agents) with
the same or lesser scope and effect as provided herein when and as authorized by
appropriate corporate action.
SECTION 11. Merger or Consolidation. For purposes of this Article Nine,
references to the "Corporation" shall include, in addition to the resulting
Corporation, any constituent Corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
Directors or officers, so that any person who is or was a Director or officer of
such constituent Corporation, or at the request of the Corporation or a wholly-
4
owned subsidiary of the Corporation as a Director, officer, employee, partner,
member, manager, trustee, fiduciary or agent of another corporation or of a
partnership, joint venture, limited liability company, trust or other entity or
enterprise, including service with respect to an employee benefit plan, shall
stand in the same position under this Article Nine with respect to the resulting
or surviving Corporation as he or she would have with respect to such
constituent Corporation if its separate existence had continued.
SECTION 12. Severability. If any provision of this Article Nine shall be
found to be invalid or limited in application by reason of any law or
regulation, it shall not affect the validity of the remaining provisions hereof.
ARTICLE TEN
SECTION 1. Terms of Directors. At each annual meeting of stockholders,
directors of the Corporation shall be elected to hold office until the
expiration of the term for which they are elected, and until their successors
have been duly elected and qualified; except that if any such election shall be
not so held, such election shall take place at stockholders' meeting called and
held in accordance with the Delaware General Corporation Law.
SECTION 2. Vacancies. Subject to the rights of the holders of any series
of Preferred Stock to remove Directors and fill the vacancies thereby created
(as specified in any duly authorized certificate of designation of any series of
Preferred Stock), newly created directorships resulting from any increase in the
number of Directors or vacancies occurring on the Board of Directors for any
reason may be filled by vote of a majority of the remaining members of the Board
of Directors, although less than a quorum, at any meeting of the Board of
Directors. A person so elected by the Board of Directors to fill a vacancy shall
hold office until the next succeeding annual meeting of stockholders of the
Corporation and until his or her successor shall have been duly elected and
qualified.
ARTICLE ELEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Delaware General Corporation Laws)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-laws of the
Corporation.
ARTICLE TWELVE
Subject to the rights of holders of any series of Preferred Stock to act by
written consent as specified in any duly authorized certificate of designation
of any series of Preferred Stock, the stockholders of the Corporation may not
take any action by written consent in lieu of a meeting, and must take any
actions at a duly called annual or special meeting of stockholders and the power
of stockholders to consent in writing without a meeting is specifically denied.
Except as otherwise required by law, special meetings of stockholders of the
Corporation may be called only by either the Board of Directors pursuant to a
resolution adopted by the affirmative vote of the majority of the total number
of directors then in office, by the chairman of the Board of Directors, or by
the chief executive officer or president of the Corporation.
ARTICLE THIRTEEN
Notwithstanding any other provisions of this Certificate or any provision
of law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of the capital stock required by law or this
Certificate, the affirmative vote of the holders of at least two-thirds (2/3) of
the combined voting power of all of the then outstanding shares of the
Corporation eligible to be cast in the election of directors shall be required
to alter, amend or repeal Article Eight, Article Nine, Article Ten, Article
Twelve or Article Fifteen hereof, or this Article Thirteen, or any provision
thereof or hereof.
5
ARTICLE FOURTEEN
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders, Directors or
any other person herein are granted subject to this reservation.
ARTICLE FIFTEEN
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law.
* * * * * *
6
ANNEX C
BY-LAWS
OF
BARR LABORATORIES, INC.
A DELAWARE CORPORATION
(ADOPTED AS OF , 2003)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of Barr Laboratories,
Inc. (the "Corporation") in the State of Delaware shall be located at 2711
Centerville Road, Suite 400, Wilmington, DE 19808. The name of the Corporation's
registered agent at such address shall be The Corporation Service Company. The
registered office and/or registered agent of the Corporation may be changed from
time to time by action of the Board of Directors.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meeting. An annual meeting of the stockholders shall be
held at such date and time specified by the Board of Directors for the purpose
of electing Directors and conducting such other proper business as may come
before the annual meeting. At the annual meeting, stockholders shall elect
Directors and transact such other business as properly may be brought before the
annual meeting pursuant to Section 11 of ARTICLE II hereof.
SECTION 2. Special Meetings. Special meetings of the stockholders may
only be called in the manner provided in the Certificate of Incorporation.
SECTION 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal executive office of the Corporation. If for any reason any annual
meeting shall not be held during any year, the business thereof may be
transacted at any special meeting of the stockholders.
SECTION 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote on the record date,
determined in accordance with the provisions of Section 3 of ARTICLE V. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the Corporation. An affidavit of
the secretary or an assistant secretary or of the transfer agent of the
Corporation that the notice required by this Section 4 has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
Whenever the giving of any notice to stockholders is required by applicable law,
the Certificate of Incorporation or these By-laws, a waiver thereof, given by
the person entitled to said notice, whether before or after the event as to
which such notice is required, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting
of the stockholders need be specified in any waiver of notice unless so required
by applicable law, the Certificate of Incorporation or these By-laws.
SECTION 5. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, the stockholder's agent or
attorney, at the stockholder's expense, for any purpose germane to the meeting
for a period of at least 10 days prior to the meeting, (i) on a reasonably
accessible electronic network, provided that the information required to gain
access to such list shall be provided with the notice of the meeting, (ii) at a
place within the city where the meeting is to be held specified in the notice of
the meeting, or (iii) during ordinary business hours, at the principal place of
business of the Corporation. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. Except as provided by applicable
law, the stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 6. Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote at the meeting of stockholders, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by the Delaware General Corporation
Law or by the Certificate of Incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place. When a specified item of business requires a vote by
a class or series (if the Corporation shall then have outstanding shares of more
than one class or series) voting as a class or series, the holders of a majority
of the shares of such class or series shall constitute a quorum (as to such
class or series) for the transaction of such item of business, except as
otherwise provided by the Delaware General Corporation Law or by the Certificate
of Incorporation.
SECTION 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 8. Vote Required. When a quorum is present, the affirmative vote
of the majority in voting power of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter shall be the act
of the stockholders, unless (i) by express provisions of an applicable law, the
rules and regulations of any stock exchange applicable to the Corporation, or of
the Certificate of Incorporation a different vote is required, in which case
such express provision shall govern and control the decision of such question,
or (ii) the subject matter is the election of Directors, in which case Section 2
of ARTICLE III hereof shall govern and control the approval of such subject
matter.
SECTION 9. Voting Rights. Except as otherwise provided by the Delaware
General Corporation Law, the Certificate of Incorporation or these By-laws,
every stockholder entitled to vote at any meeting of stockholders shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of capital stock held by such stockholder which has voting power upon
the matter in question.
SECTION 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally. Any proxy is suspended when the person executing the
proxy is present at a meeting of stockholders and elects to vote, except that
when such proxy is coupled with an interest and the fact of the interest appears
on the face of the
2
proxy, the agent named in the proxy shall have all voting and other rights
referred to in the proxy, notwithstanding the presence of the person executing
the proxy. At each meeting of the stockholders, and before any voting commences,
all proxies filed at or before the meeting shall be submitted to and examined by
the secretary or a person designated by the secretary, and no shares may be
represented or voted under a proxy that has been found to be invalid or
irregular.
SECTION 11. Business Brought Before a Meeting of the Stockholders.
(A) Annual Meetings. At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) brought before the meeting by or
at the direction of the Board of Directors or (iii) otherwise properly brought
before the meeting by a stockholder who was a stockholder of record of the
Corporation at the time the notice of meeting is sent and who is entitled to
vote at the meeting. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation, not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to the first anniversary of the preceding year's
annual meeting (provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than seventy (70) days
after such anniversary date, notice by the stockholder must be so delivered not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Corporation). In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above. A stockholder's notice to the secretary shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to and
in accordance with Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (ii) such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the text of the proposal or business (including the text of
any resolutions proposed for consideration and in the event that such business
includes a proposal to amend the By-laws, the language of the proposed
amendment), the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (ii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, (iii) any material interest of the stockholder in such business,
(iv) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to propose such business or nomination, and (v) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group which intends (x) to deliver a proxy statement and/or form
of proxy to holders of at least the percentage of the Corporation's outstanding
capital stock required to approve or adopt the proposal or elect the nominee
and/or (y) otherwise to solicit proxies from stockholders in support of such
proposal or nomination. The foregoing notice requirements shall be deemed
satisfied by a stockholder if the stockholder has notified the Corporation of
his or her intention to present a proposal at an annual meeting in compliance
with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act
and such stockholder's proposal has been included in a proxy statement that has
been prepared by the Corporation to solicit proxies for such annual meeting. The
Corporation may require any proposed nominee to furnish such other information
as it may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. Notwithstanding anything in
this paragraph to the contrary, in the event that the number of
3
directors to be elected to the Board of Directors at an annual meeting is
increased and there is no public announcement by the Corporation naming the
nominees for the additional directorships at least one hundred (100) days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this paragraph (A) shall also be considered timely, but only
with respect to nominees for the additional directorships, if it shall be
delivered to the secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the Corporation.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this section. The presiding officer of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this section; if he or she should so determine, he or she shall so declare to
the meeting and any such business not properly brought before the meeting shall
not be transacted.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (1) by or at the direction of the Board of
Directors or (2) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time the notice provided for
in this paragraph (B) is delivered to the Corporation's secretary, who is
entitled to vote at the meeting and upon such election and who complies with the
notice procedures set forth in this Section 11. In the event the Corporation
calls a special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder entitled to vote in
such election of directors may nominate a person or persons (as the case may be)
for election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (A) of this Section
11 shall be delivered to the Corporation's secretary at the principal executive
offices of the Corporation not earlier than the close of business on the one
hundred twentieth (120th) day prior to such special meeting and not later than
the close of business on the later of the ninetieth (90th) day prior to such
special meeting or the tenth (10th) day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment or postponement of a
special meeting commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above.
(C) General.
(1) Only such persons who are nominated in accordance with the procedures
set forth in this Section 11 shall be eligible to be elected at an annual or
special meeting of stockholders of the Corporation to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section 11. Notwithstanding the foregoing provisions of this Section 11, if
the stockholder (or a qualified representative of the stockholder) does not
appear at the annual or special meeting of stockholders of the Corporation to
present a nomination or business, such nomination shall be disregarded and such
proposed business shall not be transacted, notwithstanding that proxies in
respect of such vote may have been received by the Corporation.
(2) For purposes of this section, "public announcement" shall mean
disclosure in a press release reported by Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 11.
(4) Nothing in this section shall be deemed to affect any rights (a) of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act, or (b) of
4
the holders of any series of Preferred Stock to elect directors pursuant to any
applicable provisions of the Certificate of Incorporation.
SECTION 12. Voting Procedures and Inspectors of Election at Meetings of
Stockholders. The Board of Directors, in advance of any meeting of
stockholders, may, and shall if required by applicable law, appoint one or more
inspectors, who may be employees of the Corporation, to act at the meeting and
make a written report thereof. The Board of Directors may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting, the person presiding at the
meeting may, and shall if required by applicable law, appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of proxies and ballots, (c) count
all votes and ballots, (d) determine and retain for a reasonable period a record
of the disposition of any challenges made to any determination by the
inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. Unless otherwise provided by the
Board of Directors, the date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting shall
be determined by the person presiding at the meeting and shall be announced at
the meeting. No ballot, proxies or votes, or any revocation thereof or change
thereto, shall be accepted by the inspectors after the closing of the polls
unless the Court of Chancery of the State of Delaware upon application by a
stockholder shall determine otherwise. In determining the validity and counting
of proxies and ballots cast at any meeting of stockholders, the inspectors may
consider such information as is permitted by applicable law. No person who is a
candidate for office at an election may serve as an inspector at such election.
SECTION 13. Conduct of Meetings; Organization. The Board of Directors may
adopt by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. At each meeting of stockholders, the
Chairman, or in the absence of the Chairman, the President, or if there is no
President or if there be one and the President is absent, a Vice President, and
in case more than one Vice President shall be present, that Vice President
designated by the Board of Directors (or in the absence of any such designation,
the most senior Vice President, based on length of service to the Corporation,
present), shall preside over the meeting. Except to the extent inconsistent with
such rules and regulations as adopted by the Board of Directors, the person
presiding over any meeting of stockholders shall have the right and authority to
convene and to adjourn the meeting, to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of such person, are
appropriate for the proper conduct of the meeting. Such rules, regulations or
procedures, whether adopted by the Board of Directors or prescribed by the
presiding officer of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the person presiding over the
meeting shall determine; (iv) restrictions on entry to the meeting after the
time fixed for the commencement thereof; and (v) limitations on the time
allotted to questions or comments by participants. The presiding officer at any
meeting of stockholders, in addition to making any other determinations that may
be appropriate to the conduct of the meeting, shall, if the facts warrant,
determine and declare to the meeting that a matter or business was not properly
brought before the meeting and if such presiding officer should so determine,
such person shall so declare to the meeting and any such matter or business not
properly brought before the meeting shall not be transacted or considered.
Unless and to the extent determined by the Board of Directors or the person
presiding over the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure. The secretary, or
in his or her absence, one of the assistant secretaries, shall act as secretary
of the meeting. In case none of the officers above designated to act as the
person presiding over the meeting or as secretary of the meeting, respectively,
shall be present, a person presiding over the meeting or a secretary of the
meeting, as the case may be, shall be designated by the Board
5
of Directors, and in case the Board of Directors has not so acted, in the case
of the designation of a person to act as secretary of the meeting, designated by
the person presiding over the meeting.
SECTION 14. Order of Business. The order of business at all meetings of
stockholders shall be as determined by the person presiding over the meeting.
ARTICLE III
DIRECTORS
SECTION 1. General Powers. Except as provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to such powers as
are herein and in the Certificate of Incorporation expressly conferred upon it,
the Board of Directors shall have and may exercise all the powers of the
Corporation, subject to the provisions of the laws of Delaware, the Certificate
of Incorporation and these By-laws.
SECTION 2. Number, Election and Term of Office. Subject to any rights of
the holders of any series of Preferred Stock to elect additional Directors under
specified circumstances, the number of Directors which shall constitute the
Board of Directors shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the total number of Directors then in office.
The Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of Directors; provided that, whenever the holders of any class or
series of capital stock of the Corporation are entitled to elect one or more
Directors pursuant to the provisions of the Certificate of Incorporation of the
Corporation (including, but not limited to, for purposes of these By-laws,
pursuant to any duly authorized certificate of designation), such Directors
shall be elected by a plurality of the votes of such class or series present in
person or represented by proxy at the meeting and entitled to vote in the
election of such Directors. The Directors shall be elected and shall hold office
only in the manner provided in the Certificate of Incorporation.
SECTION 3. Resignation. Any Director may resign at any time upon written
or electronic notice to the Corporation. Such resignation shall take effect at
the time therein specified, and, unless otherwise specified in such resignation,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the total number of Directors may be filled only in the
manner provided in the Certificate of Incorporation.
SECTION 5. Nominations.
(a) Subject to the provisions contained in the Certificate of
Incorporation, only persons who are nominated in accordance with the procedures
set forth in these By-laws shall be eligible to serve as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in these By-laws, who is
entitled to vote generally in the election of Directors at the meeting and who
shall have complied with the notice procedures set forth above in Section 11 of
ARTICLE II.
(b) Subject to any duly authorized certificate of designation, no person
shall be eligible to serve as a Director of the Corporation unless nominated in
accordance with the procedures set forth above in Section 11 of ARTICLE II or
Section 4 of this ARTICLE III. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this section, and if he or she
should so determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded. A stockholder seeking to nominate a person to
serve as a Director must also comply with all applicable requirements of the
Exchange Act, and the rules and regulations thereunder with respect to the
matters set forth in this section.
6
SECTION 6. Annual Meetings. The annual meeting of the Board of Directors
shall be held without other notice than these By-laws immediately after, and at
the same place as, the annual meeting of stockholders.
SECTION 7. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the Board of Directors. Special meetings of the Board of Directors may be called
by the chairman of the board, the chief executive officer, the president (if the
president is a Director) or, upon the written request of at least three
Directors then in office, the secretary of the Corporation on at least 24 hours
notice to each Director, either personally, by telephone, by mail, by telecopy
or by other means of electronic transmission (notice by mail shall be deemed
delivered 3 days after deposit in the U.S. mail).
SECTION 8. Quorum, Required Vote and Adjournment. A majority of the total
number of Directors then in office shall constitute a quorum for the transaction
of business. Unless by express provision of an applicable law, the Certificate
of Incorporation or these By-laws a different vote is required, the vote of a
majority of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn the
meeting. At least 24 hours' notice of any adjourned meeting of the Board of
Directors shall be given to each Director whether or not present at the time of
the adjournment, if such notice shall be given by one of the means specified in
Section 7 of this ARTICLE III other than by mail, or at least three days' notice
if by mail. Any business may be transacted at an adjourned meeting that might
have been transacted at the meeting as originally called.
SECTION 9. Committees. The Board of Directors may, by resolution passed
by a majority of the total number of Directors then in office, designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation, which to the extent provided in such resolution or these
By-laws shall have, and may exercise, the powers of the Board of Directors in
the management and affairs of the Corporation, except as otherwise limited by
law. The Board of Directors may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors upon request. Each committee
designated by the Board of Directors shall be formed and function in compliance
with applicable law and the rules and regulations of any securities exchange on
which any securities of the Corporation are listed.
SECTION 10. Committee Rules. Subject to applicable law and the rules and
regulations of any national securities exchange on which any securities of the
Corporation are listed, each committee of the Board of Directors may fix its own
rules of procedure and shall hold its meetings as provided by such rules, except
as may otherwise be provided by a resolution of the Board of Directors
designating such committee. Unless otherwise provided in such a resolution, the
presence of at least a majority of the members of the committee shall be
necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the Board of Directors, of such committee is or are
absent or disqualified, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member.
SECTION 11. Communications Equipment. Members of the Board of Directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
SECTION 12. Waiver of Notice and Presumption of Assent. Any member of the
Board of Directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
7
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
SECTION 13. Action by Written Consent. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of such board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be elected by
the Board of Directors and shall consist of a chairman of the board, a chief
executive officer, a president, one or more vice-presidents, a secretary, a
chief financial officer and such other officers and assistant officers as may be
deemed necessary or desirable by the Board of Directors. Any number of offices
may be held by the same person, except that neither the chief executive officer
nor the president shall also hold the office of secretary. In its discretion,
the Board of Directors may choose not to fill any office for any period as it
may deem advisable, except that the offices of president and secretary shall be
filled as expeditiously as possible.
SECTION 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the Board of Directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
Board of Directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
SECTION 3. Removal. Any officer or agent elected by the Board of
Directors may be removed by the Board of Directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
SECTION 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise may be filled by the
Board of Directors.
SECTION 5. Compensation. Compensation of all executive officers shall be
approved by the compensation committee, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a Director of the
Corporation.
SECTION 6. Chairman of the Board. The Board of Directors shall elect, by
the affirmative vote of a majority of the total number of Directors then in
office, a chairman of the board. The chairman of the board shall preside at all
meetings of the stockholders and of the Board of Directors and shall have such
other powers and perform such other duties as may be prescribed to him or her by
the Board of Directors or provided in these By-laws. If the chairman of the
board is not present at a meeting of the stockholders or the Board of Directors,
the chief executive officer or the president (if the president is a Director and
is not also the chairman of the board) shall preside at such meeting, and, if
the chief executive officer or the president is not present at such meeting, a
majority of the Directors present at such meeting shall elect one of their
members to so preside.
SECTION 7. Chief Executive Officer. The chief executive officer shall
have the powers and perform the duties incident to that position. Subject to the
powers of the Board of Directors and the chairman of the board, the chief
executive officer shall be in the general and active charge of the entire
business and affairs of the Corporation, and shall be its chief policy making
officer. The chief executive officer shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or provided in
these By-
8
laws. The chief executive officer is authorized to execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation.
Whenever the president is unable to serve, by reason of sickness, absence or
otherwise, the chief executive officer shall perform all the duties and
responsibilities and exercise all the powers of the president.
SECTION 8. The President. The president of the Corporation shall, subject
to the powers of the Board of Directors, the chairman of the board and the chief
executive officer, have general charge of the business, affairs and property of
the Corporation, and control over its officers, agents and employees. The
president shall see that all orders and resolutions of the Board of Directors
are carried into effect. The president is authorized to execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the Corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the chairman of the board, the chief executive officer, the Board
of Directors or as may be provided in these By-laws.
SECTION 9. Vice Presidents. The vice president, or if there shall be more
than one, the vice presidents in the order determined by the Board of Directors
or the chairman of the board, shall, in the absence or disability of the
president, act with all of the powers and be subject to all the restrictions of
the president. The vice presidents shall also perform such other duties and have
such other powers as the Board of Directors, the chairman of the board, the
chief executive officer, the president or these By-laws may, from time to time,
prescribe. The vice presidents may also be designated as executive vice
presidents or senior vice presidents, as the Board of Directors may from time to
time prescribe.
SECTION 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the Board of Directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman of the board's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these By-laws or by law; shall have
such powers and perform such duties as the Board of Directors, the chairman of
the board, the chief executive officer, the president or these By-laws may, from
time to time, prescribe; and shall have custody of the corporate seal of the
Corporation. The secretary, or an assistant secretary, shall have authority to
affix the corporate seal to any instrument requiring it and when so affixed, it
may be attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, any of
the assistant secretaries, shall in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors, the
chairman of the board, the chief executive officer, the president, or the
secretary may, from time to time, prescribe.
SECTION 11. The Chief Financial Officer. The chief financial officer
shall have the custody of the corporate funds and securities; shall keep full
and accurate all books and accounts of the Corporation as shall be necessary or
desirable in accordance with applicable law or generally accepted accounting
principles; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the chairman of the board
or the Board of Directors; shall cause the funds of the Corporation to be
disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements; shall render to the Board of Directors, at its
regular meeting or when the Board of Directors so requires, an account of the
Corporation; and shall have such powers and perform such duties as the Board of
Directors, the chairman of the board, the chief executive officer, the president
or these By-laws may, from time to time, prescribe.
9
SECTION 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these By-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the Board of Directors.
SECTION 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may by resolution delegate the powers and
duties of such officer to any other officer or to any Director, or to any other
person selected by it.
ARTICLE V
CERTIFICATES OF STOCK
SECTION 1. General. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the president or vice president and the secretary or an assistant secretary of
the Corporation, certifying the number of shares owned by such holder in the
Corporation. If such a certificate is countersigned by a transfer agent or a
registrar, the required signatures may be facsimiles. In case any officer or
officers who have signed, or whose facsimile signature or signatures have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the Corporation whether because of death, resignation or otherwise
before such certificate or certificates have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the Corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name of the person
to whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the Corporation. Shares of stock
of the Corporation shall only be transferred on the books of the Corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the Corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization and
other matters as the Corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates and record the transaction on its books.
Each such new certificate will be registered in such name as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate. The Board of Directors may appoint one or
more transfer agents or registrars or both in connection with the transfer of
any class or series of securities of the Corporation.
SECTION 2. Lost Certificates. A new certificate or certificates may be
issued in place of any certificate or certificates previously issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Corporation may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his or her legal representative, to
give the Corporation a bond sufficient to indemnify the Corporation against any
claim that may be made against the Corporation on account of the loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 3. Fixing a Record Date for Stockholder Meetings. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is first given. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
10
SECTION 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine: (i) the stockholders entitled to receive payment of
any dividend or other distribution or allotment or any rights; or (ii) the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than 60 days nor less than 10 days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
SECTION 6. Subscriptions for Stock. Unless otherwise provided for in any
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
Board of Directors. Any call made by the Board of Directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, in accordance with applicable law. Dividends may be paid in cash, in
property or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
any other purpose and the Directors may modify or abolish any such reserve in
the manner in which it was created.
SECTION 2. Checks, Drafts or Orders. All checks, drafts or other orders
for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the Board of Directors or a duly
authorized committee thereof.
SECTION 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to ARTICLE IV hereof, the Board of Directors may authorize any
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
SECTION 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
Director of the Corporation or its subsidiaries, whenever, in the judgment of
the Directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation and would not violate applicable law. The loan, guaranty
or other assistance may be with or without interest, and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the Corporation, subject to
applicable law. Nothing in this section shall be deemed to deny, limit or
restrict the powers of guaranty or warranty of the Corporation at common law or
under any statute.
11
SECTION 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 6. Corporate Seal. The Board of Directors may provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the Corporation and the words "Corporate Seal, Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise applied.
SECTION 7. Voting Securities Owned By Corporation. Voting securities in
any other company held by the Corporation shall be voted by the chief executive
officer, the president or a vice president, unless the Board of Directors
specifically confers authority to vote with respect thereto, which authority may
be general or confined to specific instances, upon some other person or officer.
Any person authorized to vote securities shall have the power to appoint
proxies, with general power of substitution.
SECTION 8. Inspection of Books and Records. The Board of Directors shall
have power from time to time to determine to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution of the
Board of Directors or of the stockholders of the Corporation.
SECTION 9. Section Headings. Section headings in these By-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
SECTION 10. Inconsistent Provisions. In the event that any provision of
these By-laws is or becomes inconsistent with any provision of the Certificate
of Incorporation, the General Corporation Law of the State of Delaware, the
Exchange Act or any regulation thereunder, or any other applicable law or
regulation, the provision of these By-laws shall not be given any effect to the
extent of such inconsistency but shall otherwise be given full force and effect.
SECTION 11. Notices. Except as provided in Section 4 of ARTICLE II hereof
and Section 7 of ARTICLE III hereof, all notices referred to herein shall be in
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
SECTION 12. Certificate of Incorporation. Unless the context requires
otherwise, references in these By-laws to the Certificate of Incorporation of
the Corporation (as it may be amended and restated from time to time) shall also
be deemed to include any duly authorized certificate of designation relating to
any series of Preferred Stock of the Corporation that may be outstanding from
time to time.
ARTICLE VII
AMENDMENTS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend, change, add to or repeal these By-laws by the affirmative vote of
a majority of the total number of Directors then in office, subject to further
action by stockholders. Any alteration or repeal of these By-laws by the
stockholders of the Corporation shall require the affirmative vote of at least a
majority of the combined voting power of the then outstanding shares of the
Corporation entitled to vote on such alteration or repeal.
12
THE UNDERSIGNED HEREBY ACKNOWLEDGE RECEIPT OF THE PROXY STATEMENT AND NOTICE OF
ANNUAL MEETING TO BE HELD OCTOBER 23, 2003.
Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE
SIDE
1. Election of Directors FOR all nominees listed [ ]
(except as marked)
(Instructions: To withhold authority to vote for
any individual nominee strike a line through
the nominee's name in the list below). WITHHOLD AUTHORITY [ ]
to vote for nominees
01 Bruce L. Downey, 02 Paul M. Bisaro,
03 Carole S. Ben-Maimon, 04 George P. Stephan,
05 Jack M. Kay, 06 Harold N. Chefitz,
07 Richard R. Frankovic, 08 Peter R. Seaver,
09 James S. Gilmore, III
FOR AGAINST ABSTAIN
2. Approval of the reincorporation of the [ ] [ ] [ ]
Company in the state of Delaware.
FOR AGAINST ABSTAIN
3. Approval of an increase in the number of [ ] [ ] [ ]
authorized shares of the Company's Common
Stock from 100,000,000 to 200,000,000.
PLEASE DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
YES NO
DO YOU PLAN TO ATTEND [ ] [ ] By checking the box to the right, [ ]
THE MEETING? I consent to future delivery of
annual reports, proxy statements,
prospectuses and other materials
and shareholder communications
electronically via the Internet at
a webpage which will be disclosed
to me. I understand that the
Company may no longer distribute
printed materials to me for any
future shareholder meeting until
such consent is revoked. I
understand that I may revoke my
consent at any time by contacting
the Company's transfer agent,
Mellon Investor Services LLC,
Ridgefield Park, NJ and that costs
normally associated with
electronic delivery, such as usage
and telephone charges as well as
any costs I may incur in printing
documents, will be my
responsibility.
SIGNATURE SIGNATURE DATE
---------------------- ---------------------- ------------
(PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. IF STOCK IS REGISTERED IN MORE THAN
ONE NAME, EACH HOLDER SHOULD SIGN. WHEN SIGNING AS AN ATTORNEY, ADMINISTRATOR,
EXECUTOR, GUARDIAN OR TRUSTEE, PLEASE ADD YOUR TITLE AS SUCH. IF EXECUTED BY A
CORPORATION, THE PROXY SHOULD BE SIGNED BY A DULY AUTHORIZED OFFICER.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING ARE AVAILABLE UNTIL 11 P.M. EASTERN TIME
ON OCTOBER 22, 2003.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/BRL 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
BARR LABORATORIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
OCTOBER 23, 2003
The undersigned hereby appoints Bruce L. Downey and Frederick J. Killion,
and each of them, as proxies, each with the power to appoint his substitute, to
vote all shares the undersigned is entitled to vote at the Annual Meeting of
Shareholders at 10:00 a.m. local time, on October 23, 2003, at The Plaza Hotel,
Fifth Avenue at Central Park, New York, New York, and any postponements or
adjournments thereof. In their discretion, the proxies are authorized to vote
upon such other business as may come before the meeting or adjournments thereof.
UNLESS YOU INDICATE OTHERWISE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NO.
1, "FOR" PROPOSAL NO. 2 AND "FOR" PROPOSAL NO. 3. IN ADDITION, THIS PROXY WILL
BE VOTED IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -