SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
CARACO PHARMACEUTICAL LABORATORIES, LTD
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
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(3) Filing Party:
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(4) Date Filed:
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CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
2002
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
APRIL 30, 2002
Dear Shareholder,
We invite you to attend our 2002 Annual Meeting of Shareholders at
10:00 a.m., Eastern Daylight Saving Time, on June 3, 2002 at The Hotel St.
Regis, 3071 W. Grand Blvd., Detroit, Michigan.
The annual report, which is enclosed, summarizes Caraco's major
developments during 2001 and includes the 2001 financials.
Whether or not you plan to attend the Meeting, please complete and mail
the enclosed proxy card promptly so that your shares will be voted as you
desire. IF YOU WISH TO VOTE IN THE MANNER THE BOARD OF DIRECTORS RECOMMENDS, IT
IS NOT NECESSARY TO SPECIFY YOUR CHOICES ON THE PROXY CARD. SIMPLY SIGN, DATE
AND RETURN THE PROXY CARD.
Sincerely,
/s/ NARENDRA N. BORKAR
---------------------
Narendra N. Borkar
Chief Executive Officer
CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 3, 2002
Date: June 3, 2002
Time: 10:00 a.m., Eastern Daylight Saving Time
Place: The Hotel St. Regis
Detroit, Michigan 48202
We invite you to attend the Caraco Pharmaceutical Laboratories, Ltd. Annual
Meeting of Shareholders to:
1. Elect two directors for three-year terms expiring in 2005 and upon the
election and qualification of their successors.
2. Transact any other business that is properly submitted before the Annual
Meeting or any adjournments of the Meeting.
The record date for the Meeting is April 24, 2002 (the "Record Date"). Only
shareholders of record at the close of business on that date can vote at the
Annual Meeting. Caraco is mailing this Notice of Annual Meeting to those
shareholders.
A proxy statement, proxy card and an annual report are enclosed with this
Notice. Whether or not you plan to attend the Meeting and whether you own a few
or many shares of stock, the Board of Directors urges you to vote promptly. You
may vote by signing, dating and returning the enclosed proxy card.
A list of shareholders who can vote at the Annual Meeting will be available for
inspection by shareholders at the Meeting and for ten days prior to the Meeting
during regular business hours at the offices of Caraco, 1150 Elijah McCoy Drive,
Detroit, MI 48202.
Caraco Pharmaceuticals Laboratories, Ltd.
/s/ NARENDRA N. BORKAR
------------------------
Narendra N. Borkar
Chief Executive Officer
April 30, 2002
TABLE OF CONTENTS
QUESTIONS AND ANSWERS.........................................................1
PROPOSAL ON WHICH YOU ARE VOTING:.............................................4
NOMINEES FOR DIRECTORS' TERMS EXPIRING 2002...................................4
INCUMBENT DIRECTORS' TERMS EXPIRING 2003......................................5
INCUMBENT DIRECTORS' TERMS EXPIRING 2004......................................6
COMMITTEES AND MEETINGS OF DIRECTORS..........................................7
REPORT OF THE AUDIT COMMITTEE.................................................8
COMPENSATION OF DIRECTORS.....................................................8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...............................9
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS................................9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE......................11
TRANSACTIONS OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN
BENEFICIAL HOLDERS OF CARACO...............................................12
EXECUTIVE OFFICERS...........................................................13
COMPENSATION OF EXECUTIVE OFFICERS...........................................13
RELATIONSHIP WITH INDEPENDENT AUDITORS.......................................15
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
2002 PROXY STATEMENT
QUESTIONS AND ANSWERS
1. Q: What is a proxy?
A: A proxy is a document, also referred to as a proxy card (which is
enclosed), by which you authorize someone else to vote for you in the
way that you want to vote. Caraco's Board of Directors is soliciting
this proxy. You may also abstain from voting.
2. Q: What is a proxy statement?
A: A proxy statement is the document the United States Securities and
Exchange Commission (the "SEC") requires to explain the matters on
which you are asked to vote on the proxy card. Caraco's proxy
statement, together with its enclosed proxy card, was first mailed to
shareholders on or about April 30, 2002.
3. Q: Who can vote?
A: Only holders of Caraco's common stock at the close of business on April
24, 2002, the Record Date, can vote at the Annual Meeting. Each
shareholder of record has one vote for each share of common stock on
each matter presented for a vote at the Meeting.
4. Q: What will I vote on at the Meeting?
A: At the Annual Meeting, shareholders will vote to:
1. elect two directors for three-year terms expiring in 2005 and upon
the election and qualification of their successors;
2. transact any other business that is properly submitted before the
Annual Meeting or any adjournments of the Meeting.
5. Q: How does the Board of Directors recommend I vote on the proposal?
A: The Board of Directors recommends a vote "FOR" all of the nominees
listed in Proposal 1.
6. Q: How can I vote?
A: You can vote in person or by proxy. To vote by proxy, sign, date and
return the enclosed proxy card. If you return your signed proxy card to
American Stock Transfer before the
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Annual Meeting, the persons named as proxies on the card will vote your
shares as you directed. You may revoke a proxy at any time before the
proxy is exercised by:
1. giving written notice of revocation to the Chief Executive Officer
of Caraco at 1150 Elijah McCoy Drive, Detroit, MI 48202;
2. submitting another proxy that is properly signed and later dated;
3. voting in person at the Meeting (but only if the shares are
registered in Caraco's records in the name of the shareholder and
not in the name of a broker, dealer, bank or other third party);
7. Q: Is my vote confidential?
A: Yes, your vote is confidential. Only the inspector of election and
certain employees associated with processing proxy cards and counting
the vote have access to your vote.
8. Q: What is a quorum?
A: There were 21,438,818 shares of Caraco's common stock outstanding on
the Record Date. A majority of the outstanding shares, or 10,719,410
shares, present or represented by proxy, constitutes a quorum. For
purposes of a quorum, abstentions and broker non-votes are included. A
broker non-vote is a proxy a broker submits that does not indicate a
vote for some or all the proposals because the broker does not have
discretionary voting authority and the broker did not receive
instructions as to how to vote on those proposals. A quorum must exist
to conduct business at the Annual Meeting.
9. Q: How does voting work?
A: If a quorum exists, each director must receive the favorable vote of a
majority of the shares voted, excluding broker non-votes.
Caraco will vote properly executed proxies it receives prior to the
Meeting in the way you direct. IF YOU SIGN THE PROXY CARD BUT DO NOT
SPECIFY INSTRUCTIONS, THE SHARES REPRESENTED BY PROXIES WILL BE VOTED
"FOR" THE NOMINEES FOR DIRECTORS. No other matters are currently
scheduled to be presented at the Meeting. If any matter or matters are
properly brought before the Meeting or any adjournment thereof, it is
the intention of the persons named in the accompanying proxy card to
vote the shares represented by the proxy card as they determine.
10. Q: Who pays for the costs of the Meeting?
A: Caraco pays the cost of preparing and printing the proxy statement and
soliciting proxies. Caraco will solicit proxies primarily by mail, but
may also solicit proxies personally and by telephone. Caraco will
reimburse banks, brokerage houses and other custodians,
2
nominees and fiduciaries for their out-of-pocket expenses for
forwarding solicitation material to beneficial owners of Caraco's
common stock.
11. Q: When are shareholder proposals for the 2003 Annual Meeting due?
A: All shareholder proposals to be considered for inclusion in next year's
proxy statement must be submitted in writing to the Chief Executive
Officer, Caraco Pharmaceutical Laboratories, 1150 Elijah McCoy Drive,
Detroit, Michigan 48202, before December 30, 2002.
Additionally, under Caraco's bylaws, shareholders of Caraco must
provide advance notice to Caraco if they wish to nominate persons for
election as directors or propose items of business at an annual meeting
of Caraco's shareholders. The shareholder must deliver this notice for
next year's annual meeting before December 30, 2002.
3
PROPOSAL ON WHICH YOU ARE VOTING:
ELECTION OF BOARD OF DIRECTORS
Caraco's Board of Directors is divided into three classes with each class of
directors elected to a three-year term of office. At each annual meeting of
shareholders, shareholders elect one class of directors for a three-year term to
succeed the class of directors whose term of office expires at that meeting.
This year you are voting on two candidate directors. Based on the recommendation
of the Board of Directors, the following individuals, each of whom is a current
director, are recommended for re-election: Sailesh T. Desai and David A.
Hagelstein. Each of the nominees has consented to his nomination and has agreed
to serve as a director of Caraco if elected.
If any director is unable to stand for re-election, Caraco may vote the shares
to elect any substitute nominee recommended by the Board of Directors. If the
Board of Directors does not recommend any substitute nominees, the number of
directors to be elected at the Annual Meeting may be reduced by the number of
nominees who are unable to serve.
Caraco's Board of Directors recommends a vote "FOR" these nominees.
NOMINEES FOR DIRECTORS' TERMS EXPIRING 2002
Principal Occupation and Business
Experience During Past 5 Years Director
Nominees Age and other Directorships Since
-------- --- -------------------------------------------- ------
Sailesh T. Desai 47 Mr. Desai has served as a full time director of Sun Pharmaceutical 2000
Industries Ltd., since 1999, responsible for domestic marketing of
pharmaceutical formulations. From 1994 to 1998, Mr. Desai was the
principal shareholder and Managing Director of Milmet Laboratories
Limited, a manufacturer and marketer of ophthalmic solutions which
was organized under the laws of the Commonwealth of India and
merged into Sun Pharmaceutical Industries Ltd. in 1998.
David A. Hagelstein 60 Mr. Hagelstein has been engaged in the management of his personal 1995
real estate and business investments for the past thirty years.
Mr. Hagelstein is a consultant to several companies in the
pharmaceutical and medical fields. (See "Transactions of
Directors, Executive Officers and Certain Beneficial Holders of
Caraco.")
4
INCUMBENT DIRECTORS' TERMS EXPIRING 2003
Principal Occupation and Business
Experience During Past 5 Years Director
Nominees Age and other Directorships Since
-------- --- --------------------------------------- ------
Jitendra N. Doshi 51 Mr. Doshi has been the Chief Operating Officer of Caraco since 2001
June 2001. Mr. Doshi commenced employment with Caraco as its
Senior Vice President - Commercial in April 2001. From September
1999 to April 2001, Mr. Doshi was employed by Sun Pharmaceutical
Industries Ltd. as General Manager - Operations. From 1991 to
1999, Mr. Doshi was Managing Director of Aqua Bearing Ltd., an
auto parts manufacturer organized under the laws of the
Commonwealth of India. (See "Transactions of Directors, Executive
Officers and Certain Beneficial Holders of Caraco.")
Jay F. Joliat 45 Mr. Joliat has served as President, Chief Executive Officer and 1995
Chairman of the Board of Directors of Joliat & Company, a private
investment company involved in general securities management,
venture capital, real estate and business consulting. Mr. Joliat
is also Chairman of the Board, Chief Executive Officer and
Treasurer of a 14-unit restaurant operation called Sign of the
Beefcarver Restaurants, Inc. (See "Transactions of Directors,
Executive Officers and Certain Beneficial Holders of Caraco.")
Dilip S. Shanghvi 46 Mr. Shanghvi has served as Chairman of the Board of Directors of 1997
Caraco since 1997. Mr. Shanghvi is the founder of Sun
Pharmaceutical Industries Ltd., its Managing Director since its
inception in 1993, responsible for marketing, research and
development and human resource development, and its Chairman since
1999. Mr. Valia is Mr. Shanghvi's brother-in-law.
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INCUMBENT DIRECTORS' TERMS EXPIRING 2004
Principal Occupation and Business
Experience During Past 5 Years Director
Nominees Age and other Directorships Since
-------- --- --------------------------------------- ------
Narendra N. Borkar 61 Mr. Borkar has served as Chief Executive Officer of Caraco (since 1997
August 1997). Mr. Borkar has been a director of Sun Pharmaceutical
Industries Ltd. since 1997. From 1992 until 1997, Mr. Borkar was
the head of the pharmaceutical business in India of Ciba Geigy,
now Novartis, a Swiss corporation, responsible for the overall
performance of the business unit including marketing, finance,
technical, medical and development.
Phyllis Harrison-Ross 65 Dr. Harrison-Ross, a physician, has served more than 35 years in 1996
the community mental health profession. Dr. Harrison-Ross presents
a remarkably diverse career as a hospital administrator,
researcher, academician, public health consultant, forensic
psychiatrist and public educator. Dr. Harrison-Ross trained as an
adult and child psychiatrist as well as a pediatrician, and
continues to lend her administrative and clinical talents to
service the diverse, hard-to-reach and underserved population of
New York in her private practice of Behavioral Medicine and
Telepsychiatry.
Sudhir Valia 45 Mr. Valia has worked for Sun Pharmaceutical Industries Ltd. as a 1997
full time director responsible for finance, commercial,
operations, projects and quality control. Mr. Valia is a qualified
chartered accountant in India. Prior to December 1993, Mr. Valia
was a chartered accountant in private practice. Mr. Shanghvi is
Mr. Valia's brother-in-law.
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COMMITTEES AND MEETINGS OF DIRECTORS
THE BOARD OF DIRECTORS, WHICH MET 6 TIMES IN 2001, HAS FOUR COMMITTEES, AS SET
FORTH IN THE FOLLOWING CHART.
CURRENT MEMBERSHIP ROSTER
NAME EXECUTIVE COMPENSATION AUDIT FINANCE
Narendra N. Borkar * X
David A. Hagelstein X * X
Phyllis Harrison-Ross X
Jay F. Joliat X X * *
Dilip Shanghvi X X
Sudhir Valia X
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*Chairman
EXECUTIVE COMMITTEE. This Committee held one meeting in 2001. It exercises, in
the intervals between the meetings of the Board of Directors, the powers of the
Board of Directors, subject to the Michigan Business Corporation Act, as it
relates to the management of the business and affairs of Caraco. The Executive
Committee members receive a monthly report from management and is in continual
contact with management.
COMPENSATION COMMITTEE. This Committee held two meetings in 2001. It makes
recommendations to the Board of Directors relating to the overall compensation
arrangements for officers and staff of Caraco. It also interprets Caraco's 1993
Stock Option Plan, as amended, the 1999 Equity Participation Plan, and such
other executive and employee stock options as may, from time to time, be
designated by the Board of Directors. In doing so, it has the authority to
designate officers, directors or key employees eligible to participate, to
prescribe the terms of any award of stock options, and to make all other
determinations in administering Caraco's Plans.
AUDIT COMMITTEE. This Committee held three meetings in 2001. It recommends to
the Board of Directors a firm of certified public accountants to conduct audits
of the accounts and affairs of Caraco, reviews accounting objectives and
procedures of Caraco and the findings and reports of the independent certified
public accountants, and makes such reports and recommendations to the Board of
Directors as it deems appropriate (See "Report of the Audit Committee").
FINANCE COMMITTEE. This Committee did not meet in 2001. Its purpose is to review
Caraco's financial structure, and make recommendations to the Board of Directors
on financial, short and long term investments and business planning matters.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Committee") assists the
Board of Directors in fulfilling its responsibility for oversight of the quality
and integrity of the accounting, auditing and financial reporting practices of
Caraco. The Board of Directors has not adopted a written charter for the Audit
Committee.
The Committee received from the independent auditors and reviewed a statement
describing all relationships between the auditors and Caraco that might bear on
the auditors' independence, as required by Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," discussed with the
auditors any relationships that may impact their objectivity and independence
and satisfied itself as to the auditors' independence.
The Committee discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended, "Communication
with Audit Committees," and, with and without management present, discussed and
reviewed the results of the independent auditors' examination of the financial
statements.
The Committee reviewed and discussed the audited financial statements of Caraco
as of and for the year ended December 31, 2001, with management and the
independent auditors.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that Caraco's
audited financial statements be included in its Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the Securities and Exchange
Commission.
THE AUDIT COMMITTEE
Jay F. Joliat (Chairman)
David A. Hagelstein
Phyllis Harrison-Ross
COMPENSATION OF DIRECTORS
Directors who are employees of Caraco or who are directors and/or employees of
Sun Pharmaceutical Industries Ltd. and its affiliates do not receive additional
compensation for their service on the Board of Directors and its Committees.
Each non-employee director of Caraco receives 1000 shares of common stock of
Caraco for each Board of Directors or Committee meeting in which he or she
participates. Non-employee directors are also reimbursed for out-of-pocket
expenses incurred in connection with attending Board and Committee meetings. In
addition, non-employee directors may also be awarded options for their service
on the Board of Directors. On September 8, 2001, the Board of Directors granted
each of Messrs. Hagelstein and Joliat and Dr. Harrison-Ross non-qualified stock
options for 6,000 shares of Caraco's common stock, at an exercise price of $0.68
per share. The options are exercisable at the rate of 20% per year commencing
one year from the date of grant and may be exercised until September 8, 2007.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The SEC requires that Caraco provide information about any shareholder who
beneficially owns more than 5% of Caraco's common stock. The following table
provides the required information, as of April 24, 2002, about the shareholders
(who are not officers or directors) known to Caraco to be the beneficial owner
of more than 5% of Caraco's common stock. Caraco relied solely on information
furnished by its transfer agent, Schedule 13Ds and/or the beneficial owners
listed, to provide this information.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP AS OF APRIL 24, 2002
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Joliat Enterprises, LLC 1,943,454(1) 9.1%
36801 Woodward Avenue
Suite 300
Birmingham, MI 48009
Sun Pharmaceutical Industries, Ltd. 10,105,323(2) 47.1%
SPARC,
Akota Road, Akota
Vadodara, 390 020 India
C. Arnold Curry 1,195,447(3) 5.6%
TTEE C. Arnold Curry Living Trust
17815 Hamilton Road
Detroit, MI 48203
- ----------------------
(1) See footnotes 6 and 10 under "Security Ownership of Management and
Directors."
(2) Sun Pharmaceutical Industries Limited directly owns 7,657,333 shares of
common stock of Caraco and beneficially owns 725,333 shares registered in
the name of Sun Pharma Advanced Research Centre Pvt. Limited and 1,722,657
shares registered in the name of Sun Pharma Global Inc., affiliates of Sun
Pharmaceutical Industries Limited. See footnotes 2 and 10 under "Security
Ownership of Management and Directors."
(3) Excludes 430,000 shares of common stock owned by his wife, Cara J. Curry,
as to which Mr. Curry disclaims beneficial ownership.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table contains information, as of April 24, 2002, about the number
of shares of Caraco's common stock beneficially owned by incumbent directors,
nominees and the executive officers named in the Summary Compensation Table
presented in this Proxy Statement and by all incumbent directors, nominees and
executive officers as a group. The number of shares of
9
common stock beneficially owned by each individual includes shares of common
stock which the individual can acquire by June 24, 2002, through the exercise of
any stock option or other right. Unless indicated otherwise, each individual has
sole investment and voting power (or shares those powers with his or her spouse)
with respect to the shares of common stock listed in the table.
Amount and Nature of Percentage
Name of Beneficial Owner Beneficial Ownership of Class
Narendra N. Borkar(8) 260,100(1)(2) 1.2%
Sailesh T. Desai(9) 0(2) *
Jitendra N. Doshi(8) 2,000(3) *
David A. Hagelstein(10) 2,064,249(4) 9.4%
Phyllis Harrison-Ross 11,200(5) *
Jay F. Joliat(10) 3,332,034(6) 14.6%
Robert Kurkiewicz(8) 56,013(7) *
Dilip S. Shanghvi(9)(10) 0(2) *
Sudhir Valia(9) 0(2) *
All executive officers and directors as a group 5,725,596(2) 24.5%
(9 persons)
- -----------------------
* Less than 1.0% of the outstanding shares
(1) Includes stock options that are currently exercisable to purchase 210,000
shares of common stock.
(2) Excludes 10,105,323 shares of common stock owned by Sun Pharmaceutical
Industries Ltd. and its affiliates. (See footnote 1 under "Security
Ownership of Certain Beneficial Owners" and "Transactions of Directors,
Executive Officers and Certain Beneficial Holders of Caraco.") Messrs.
Borkar, Desai, Shanghvi and Valia are directors of, and Mr. Shanghvi,
together with his associate companies, is also the majority shareholder of,
Sun Pharmaceutical Industries Ltd., and, therefore, may be deemed to share
investment control over the shares of common stock held by Sun
Pharmaceutical Industries Ltd. and its affiliates. Each of Messrs. Borkar,
Desai, Shanghvi and Valia disclaims beneficial ownership of the shares of
common stock owned by Sun Pharmaceutical Industries Ltd. and its
affiliates.
10
(3) Mr. Jitendra Doshi was elected as a member of the Board of Directors on
December 15, 2001.
(4) The shares are held in trust (the "Hagelstein Trust"). Includes stock
options that are currently exercisable to purchase 580,158 shares of common
stock. Mr. Hagelstein's mailing address is 36801 Woodward Avenue, Suite
313, Birmingham, MI 48009. (See "Transactions of Directors, Executive
Officers and Certain Beneficial Holders of Caraco.")
(5) Includes stock options that are currently exercisable to purchase 6,000
shares of common stock.
(6) Includes 1,943,454 shares owned by Joliat Enterprises, LLC, of which Mr.
Joliat is managing partner. See "Security Ownership of Certain Beneficial
Owners." Also, includes 285,714 Series A Preferred Stock convertible to
common stock; and stock options that are currently exercisable to purchase
1,032,666 shares of common stock. Mr. Joliat's mailing address is 36801
Woodward Avenue, Suite 300, Birmingham, MI 48009. (See "Transactions of
Directors, Executive Officers and Certain Beneficial Holders of Caraco.")
(7) Includes stock options that are currently exercisable to purchase 54,000
shares of common stock.
(8) The mailing address of each of these holders is 1150 Elijah McCoy Drive,
Detroit, Michigan 48202.
(9) The mailing address of Sun Pharmaceutical Industries Ltd., S. Desai, D.
Shanghvi and S. Valia is Sun Pharmaceutical Industries Limited, SPARC,
Akota Road, Akota, Vadodara - 390 020, India.
(10) Pursuant to a Voting Agreement dated August 1997, Joliat and the Hagelstein
Trust have agreed not to dispose of their shares for a period of four years
without the consent of Sun Pharmaceutical Industries Ltd., and thereafter
for a period of three years, to give Sun Pharmaceutical Industries Ltd. a
right of first refusal on the sale of their respective shares. The
restriction on disposition of their respective shares for the four-year
period terminates in the event of (i) any sale of shares by Sun
Pharmaceutical Industries Ltd. to anyone other than an affiliate; (ii)
approval by the Board of Directors of Caraco of a merger, consolidation, or
sale of substantially all of the assets of Caraco to another entity; or
(iii) a tender offer for the shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Caraco's
directors, executive officers and persons who own more than ten percent of a
registered class of Caraco's equity securities file reports of stock ownership
and any subsequent changes in stock ownership with the SEC not later than
specified deadlines. To Caraco's knowledge, based solely on a review of the
copies of such reports furnished to Caraco, all directors, executive officers
and persons who
11
own more than ten percent of Caraco's equity securities complied with applicable
Section 16(a) filing requirements, except for Mr. Hagelstein who filed one late
report in connection with an acquisition.
TRANSACTIONS OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN
BENEFICIAL HOLDERS OF CARACO
The following discloses transactions during 2001 and 2000 and proposed
transactions between Caraco and several of the incumbent directors, director
nominees, executive officers and security holders who beneficially hold in
excess of five percent of the outstanding shares of Caraco.
On April 1, 2000 Messrs. Hagelstein and Joliat received 416,000 and 960,000
shares of common stock, respectively, in lieu of principal and interest on their
outstanding respective promissory notes, based on a value of $1.00 per share.
During 2000 Caraco issued to Sun Pharmaceutical Industries Ltd. 1,088,000 shares
of its common stock for two ANDAs.
During 2001 and 2000, Caraco purchased approximately $1,398,000 and $707,000,
respectively, of its raw materials from Sun Pharmaceutical Industries Ltd.
Management believes that the terms and conditions of its agreements to purchase
such raw materials are fair and comparable to those, which could have been
obtained from independent parties. Caraco intends to continue to purchase raw
materials from Sun Pharmaceutical Industries Limited in 2002.
In December 1999 and part of 2000, Sun Pharmaceutical Industries Ltd. made a
$2.0 million secured loan to Caraco at an annual interest rate of 10% which was
repaid in May, 2000. During 2001, Sun Pharmaceutical Industries, Ltd. lent
Caraco Pharmaceuticals Laboratories, Ltd., an additional $2,450,000. Sun
Pharmaceutical Industries, Ltd. reduced the rate of interest on its loans to
Caraco from 10% to 8% per annum with an effective date of April 1, 2001. During
the first quarter of 2002, Sun Pharmaceutical Industries Limited loaned Caraco
an additional $1,400,000 at an annual interest rate of 8%. The loans are secured
and are due and payable in October 2003.
In December 2001, the Board extended the exercise date to December 31, 2005 with
respect to options for 224,158 and 65,000 shares of Caraco common stock,
respectively, previously granted to Messrs. Hagelstein and Joliat. The exercise
price of such options of Messrs. Hagelstein and Joliat are $1.50 and $3.50,
respectively.
On December 20, 2001, the Board of Directors granted to Jitendra N. Doshi a
qualified stock option for 125,000 shares of Caraco's common stock at an
exercise price of $1.25 per share. The options are exercisable at the rate of
20% per year commencing one year from the date of grant and may be exercised
until December 20, 2007.
12
EXECUTIVE OFFICERS
The following table provides information about Caraco's executive officer who is
not a director.
Executive
Officer
Name Age Five-Year Business Experience Since
Robert Kurkiewicz 51 Commenced employment with Caraco as its Vice President -- 1993
Quality Assurance in November 1993 and was promoted to
Sr. Vice President - Technical, October 1998.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, as to the Chief Executive Officer, and as to the one
most highly compensated executive officer whose salary plus bonus exceeded
$100,000 during the last fiscal year, information concerning all compensation
paid for services to Caraco during the last three fiscal years:
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Name and Principal Other Annual Restricted Underlying LTP All Other
Position Year Salary Bonus Compensation Stock Awards Options Payouts Compensation
($) ($) ($) ($) (#) ($) ($)
Narendra N. Borkar 2001 120,000 0 0 0 0 0 9,960(1)
Chief Executive Officer 2000 120,000 0 0 0 0 0 9,960(1)
1999 120,000 0 0 75(2) 200,000(3) 0 4,560(4)
Robert Kurkiewicz 2001 122,400 0 0 0 10,000(5) 0 4,560(4)
Sr. Vice President 2000 120,000 0 0 0 0 0 4,560(4)
Technical 1999 120,000 0 0 75(2) 0 0 4,560(4)
(1). $5,400.00 was contributed to Mr. Borkar for his retirement account and
$380.00 per month was given for car allowance.
(2). 100 shares of restricted stock were awarded by the Board of Directors
to all employees during the month of December, 1999 (with a fair market
value of $0.75 per share on such date).
(3). A stock option of 200,000 shares was awarded to Mr. Borkar in June,
1999. See "Certain Transactions of Directors, Executive Officers and
Certain Beneficial Holders of Caraco."
(4). $380.00 per month was given for car allowance.
(5). See "Option Grants in the Last Fiscal Year."
13
OPTION GRANTS IN LAST FISCAL YEAR
Stock options granted in 2001 to the named executive officers.
(a) (b) (c) (d) (e)
Name Number of Securities Individual Grants Percent of Exercise Price Expiration Date
Underlying Options Total Options Granted to All Per Share
Granted Employees in Fiscal Year
Narendra N. Borkar 0 -- -- --
Robert Kurkiewicz 10,000 3.1% $0.80 6-4-07
- -----------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information for the named executive officers with
regard to the aggregate stock options exercised during the year ended December
31, 2001, and the stock options held as of December 31, 2001.
Name Shares Acquired on Value Number of Securities Underlying Value of Unexercised
Exercise Realized Unexercised Options at FY-End In-the-Money Options at FY-End
($) (#) Exercisable/Unexercisable ($) (1)
Exercisable/Unexercisable
Narendra N. Borkar 0 0 170,000/180,000 $44,100/$29,400
Robert Kurkiewicz 0 0 39,000/36,000 $8,190/$8,960
- -------------
(1) The value is based on the difference between the exercise prices and the
closing bid price of Caraco's common stock on December 31, 2001.
EMPLOYMENT AGREEMENTS
NARENDRA N. BORKAR, the Chief Executive Officer of Caraco, entered into an
employment agreement dated September 22, 1998. The employment agreement provides
Mr. Borkar with a salary at the rate of $120,000 annually, a cash bonus in an
amount up to 25% of the base salary contingent upon achievement of corporate
objectives, a stock bonus of 50,000 shares of Caraco common stock and a stock
option of 150,000 shares, at an exercise price of $.66 per share. The option
expires on September 22, 2004 and vests over a five-year period.
The employment agreement is for a term of five years, however, the agreement
automatically renews for successive one year periods unless terminated by Caraco
or Mr. Borkar upon ninety
14
(90) days notice. In the event Caraco terminates Mr. Borkar without cause, he
will receive base salary payments, his bonus and his benefits for six (6) months
from the date of termination. In the event of a change in control of ownership
of Caraco and a significant change in Mr. Borkar's duties, then Mr. Borkar may
terminate and receive a lump sum amount equal to his base salary for six (6)
months. Mr. Borkar would also be entitled to immediate vesting of any stock
option which would have been exercised at the close of the year during the
change in control.
ROBERT KURKIEWICZ, the Senior Vice President - Technical, entered into a
five-year employment agreement on November 22, 1993 which was amended on January
1, 1999 to extend the term until January 1, 2003. The agreement increases Mr.
Kurkiewicz' salary to $120,000 per year and provides for a car allowance of
$380.00 per month. The agreement is renewable for successive one-year terms. In
the event that Caraco terminates the agreement without cause, Mr. Kurkiewicz is
entitled to receive monthly base salary payments for six (6) months from the
date of termination together with premium benefits for such period. In addition,
any stock options that would become available for exercise at the end of the
year during which such termination occurred shall immediately vest. The salary
for Mr. Robert Kurkiewicz was increased to $124,800 per annum with an effective
date of June, 2001.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors on June 4, 2001 selected Rehmann Robson PC, independent
accountants, to audit the financial statements for the year ended December 31,
2001. A representative of Rehmann Robson is expected to be present at the
Meeting with the opportunity to make a statement if such representative desires
to do so and is expected to be available to respond to appropriate questions.
AUDIT FEES
Aggregate fees billed for professional services rendered for the audit of
Caraco's annual consolidated financial statements for the fiscal year ended
December 31, 2001 and the review of financial statements included in the
quarterly Form 10-Qs filed with the Securities and Exchange Commission for that
fiscal year were: $37,875.
FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES
No professional services were rendered by Rehmann Robson for the year ended
December 31, 2001, with respect to, directly or indirectly, operating or
supervising the operations of Caraco's information systems or managing Caraco's
local area network or designing or implementing hardware or software that
aggregates source data underlying the financial statements or generates
information that is significant to Caraco's financial statements taken as a
whole.
ALL OTHER FEES
The aggregate fees billed for services rendered by Rehmann Robson PC for
services not covered under the two preceding captions was $5,050. These fees
were principally for tax related services, including preparation of corporate
tax returns and property taxes.
15
Caraco's Audit Committee has concluded that the provision of services covered
under the caption "All Other Fees" is compatible with Rehmann Robson maintaining
its independence. None of the hours expended on Rehmann Robson's engagement to
audit the consolidated financial statements for the year ended December 31, 2001
were attributed to work performed by persons other than Rehmann Robson's full
time permanent employees.
/s/ NARENDRA N. BORKAR
-----------------------
Narendra N. Borkar
Chief Executive Officer
16
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE.
ANNUAL MEETING OF SHAREHOLDERS
CARACO PHARMACEUTICAL LABORATORIES, LTD.
June 3, 2002
\/ PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED \/
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees listed WITHHOLD
(except as marked to AUTHORITY to vote THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" ALL NOMINEES
the contrary below) for all nominees listed LISTED IN PROPOSAL 1.
1. Election of [ ] [ ] NOMINEES: 2. To transact such other business as
Directors Sailesh T. Desai may properly come before the Annual
David A. Hagelstein Meeting or any adjournment(s) thereof.
(INSTRUCTIONS: To withhold authority to vote for any
indiviwrite the nominee's name in the space provided THE SHARES REPRESENTED HEREBY SHALL BE
below.) VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THE SHARES SHALL BE VOTED "FOR"
ALL NOMINEES LISTED IN PROPOSAL 1. WITH
_____________________________________________________ RESPECT TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT(S) THEREOF, THE SHARE
REPRESENTED HEREBY SHALL BE VOTED AS
DETERMINED BY THE PROXIES.
PLEASE RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE.
_____________________________________________________ DATE _________ ___________________________________________ DATE _____________
SIGNATURE OF SHAREHOLDER SIGNATURE(S) OF JOINT OWNER(S)
NOTE: Please sign exactly as your name(s) is imprinted on this proxy. If your shares are held in a joint account, each joint
owner should sign. If you are signing for a corporation or partnership or as agent, attorney, executor, administrator,
trustee, guardian or other fiduciary, indicate the capacity in which you are signing.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
The undersigned shareholder hereby appoints Amit Shah and Robert
Kurkiewicz, and each of them, with full power of substitution, as true and
lawful attorneys and proxies of the undersigned to represent and vote the shares
of Common Stock owned by the undersigned in Caraco Pharmaceutical Laboratories,
Ltd. at the Annual Meeting of Shareholders to be held on June 3, 2002 at 10:00
a.m., Eastern Daylight Saving Time, at the Hotel St. Regis, 3071 W. Grand Blvd.,
Detroit, MI 48202, and at any adjournments thereof, with like effect and as if
the undersigned was personally present and voting, upon all business that may
properly come before the Meeting, including the business identified (and in the
manner indicated) on this proxy and described in the Notice of Meeting and Proxy
Statement furnished herewith (the receipt of which is hereby acknowledged).
The undersigned hereby revokes any proxy or proxies heretofore given by the
undersigned to any person or persons with respect to such shares of Common Stock
and ratifies any and all actions taken by the above-named proxies hereunder.
Set forth on the reverse side are the number of shares of Common Stock held
of record by the undersigned as of April 24, 2002. You are asked to vote on
the business identified on the reverse side.
(TO BE SIGNED AND DATED ON THE REVERSE SIDE)