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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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-11(c) or 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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[ ] 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
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1) Amount Previously Paid:
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4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
2003
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
APRIL 30, 2003
Dear Shareholder,
We invite you to attend our 2003 Annual Meeting of Shareholders at
10:00 a.m., Eastern Daylight Saving Time, on June 3, 2003 at The Hotel St.
Regis, 3071 W. Grand Blvd., Detroit, Michigan.
The annual report, which is enclosed, summarizes Caraco's major
developments during 2002 and includes the 2002 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,
Narendra N. Borkar
Chief Executive Officer
CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 3, 2003
Date: June 3, 2003
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 three directors for three-year terms expiring in 2006 and upon the
election and qualification of their successors.
2. Approval of amendment to Amended and Restated Articles of Incorporation
increasing the number of common shares to 50 million and of preferred shares
to 15 million.
3. 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 25, 2003 (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.
By Order of the Board of Directors,
Narendra N. Borkar
Chief Executive Officer
April 30, 2003
TABLE OF CONTENTS
<Table>
QUESTIONS AND ANSWERS.............................................................................................1
PROPOSAL ON WHICH YOU ARE VOTING..................................................................................4
NOMINEES FOR DIRECTORS' TERMS EXPIRING 2006.......................................................................4
INCUMBENT DIRECTORS' TERMS EXPIRING 2004..........................................................................5
INCUMBENT DIRECTORS' TERMS EXPIRING 2005..........................................................................6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...................................................................8
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...........................11
EXECUTIVE OFFICERS...............................................................................................13
COMPENSATION OF EXECUTIVE OFFICERS...............................................................................13
RELATIONSHIP WITH INDEPENDENT AUDITORS...........................................................................16
PROPOSAL 2 - AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED COMMON
AND PREFERRED SHARES...........................................................................................
AUDIT COMMITTEE CHARTER..........................................................................................APPENDIX A
CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION...................................APPENDIX B
</Table>
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
2003 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 May 5, 2003.
3. Q: Who can vote?
A: Only holders of Caraco's common stock at the close of business on April
25, 2003, 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 three directors for three-year terms expiring in 2006 and upon
the election and qualification of their successors;
2. approval of amendment to Amended and Restated Articles of Incorporation
increasing the number of common shares to 50 million and of preferred
shares to 15 million (the "Amendment");
3. 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 and "FOR" the amendment to the Amended and Restated
Articles of Incorporation.
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 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 23,762,532 shares of Caraco's common stock outstanding on the
Record Date. A majority of the outstanding shares, or 11,881,266 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, present in
person or represented by proxy. The Amendment must receive the favorable
vote of a majority of the outstanding shares entitled to vote, present
either in person or represented by proxy. Accordingly, shares which are
not voted, broker non-votes and abstentions have the effect of a vote
against the Amendment.
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 AND "FOR" THE AMENDMENT. 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.
2
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, 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 2004 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, 2003.
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, 2003.
3
PROPOSAL 1 - ELECTION OF DIRECTORS:
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 three 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: Dilip S. Shanghvi,
Jitendra N. Doshi and Jay F. Joliat. 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 2006
<Table>
<Caption>
Principal Occupation and Business
Experience During Past 5 Years Director
Nominees Age and other Directorships Since
-------- --- -------------------------------------------- --------
Dilip S. Shanghvi 47 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.
Jitendra N. Doshi 52 Mr. Doshi has been the Chief Operating Officer of Caraco since 2001
June 2001 and the Chief Financial Officer since November 2002.
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 46 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.")
</Table>
4
INCUMBENT DIRECTORS' TERMS EXPIRING 2004
<Table>
<Caption>
Principal Occupation and Business
Experience During Past 5 Years Director
Directors Age and other Directorships Since
--------- --- --------------------------------------- --------
Narendra N. Borkar 62 Mr. Borkar has served as Chief Executive Officer of Caraco 1997
(since 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 66 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 46 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.
</Table>
INCUMBENT DIRECTORS' TERMS EXPIRING 2005
<Table>
<Caption>
Principal Occupation and Business
Experience During Past 5 Years Director
Directors Age and other Directorships Since
--------- --- --------------------------------------- --------
Sailesh T. Desai 48 Mr. Desai has served as a full time director of Sun 2000
Pharmaceutical 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 Pvt. Ltd., 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 61 Mr. Hagelstein has been engaged in the management of his 1995
personal 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.")
</Table>
5
Committees and Meetings of Directors
The Board of Directors, which met 8 times in 2002, has four standing
Committees, as set forth in the following chart.
CURRENT MEMBERSHIP ROSTER
<Table>
<Caption>
NAME EXECUTIVE COMPENSATION AUDIT FINANCE
Narendra N. Borkar * X
Jitendra N. Doshi X *
David A. Hagelstein X * X
Phyllis Harrison-Ross X
Jay F. Joliat X X * *
Dilip Shanghvi X X
Sudhir Valia X
</Table>
- ---------------
*Chairman
EXECUTIVE COMMITTEE. This Committee held two meetings in 2002. 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 2002. 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, which expired on December 31, 2002 and 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 one meeting in 2002. It recommends to the
Board of Directors a firm of certified public accountants to conduct audits of
the accounts and affairs of Caraco, reviews with the independent accountants the
plans and results of the audit engagement, approves professional services
provided by the independent public accountants, and considers the range of audit
and non-audit fees. (See "Report of the Audit Committee").
FINANCE COMMITTEE. This Committee did not meet in 2002. 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.
6
Report of the Audit Committee
In accordance with its written charter adopted by the Board of Directors, which
is attached as Appendix A to this Proxy Statement, 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. Each Audit
Committee member is "independent," as defined in Rule 4200 (a)(14) of the
National Association of Securities Dealers' Listing Standards.
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, 2002, with management and the
independent auditors.
The Audit Committee members are not auditors. They do not duplicate or certify
the activities of the independent auditors or management. Although they engage
in the procedures described above relating to the independence of the
independent auditors, they cannot certify that the auditors are "independent"
within the meaning of the applicable rules. Accordingly, the Audit Committee
cannot assure that the audit of Caraco's financial statements has been carried
out in accordance with generally accepted auditing standards or that the
financial statements are presented in accordance with generally accepted
accounting principles.
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, 2002 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
7
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. During 2002, Mr.
Hagelstein, Ms. Harrison-Ross and Mr. Joliat were issued 14,000, 8,000 and
14,000 shares of common stock of Caraco, respectively for their service on the
Board of Directors and its Committees.
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 25, 2003, 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 25, 2003
<Table>
<Caption>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Joliat Enterprises, LLC 2,229,168(1) 9.4%
36801 Woodward Avenue
Suite 300
Birmingham, MI 48009
Sun Pharmaceutical Industries, Ltd. 11,737,323(2) 49.4%
SPARC,
Akota Road, Akota
Vadodara, 390 020 India
Sun Pharma Global, Inc. 3,354,657(2) 14.1%
Akara Building, 24 DeCastro Street
Wickhams Clay 1 Road
Town Tartola, British Virgin Islands
C. Arnold Curry 1,195,447(3) 5.0%
TTEE C. Arnold Curry Living Trust
17815 Hamilton Road
Detroit, MI 48203
</Table>
- ----------
(1) See footnotes 6 and 10 under "Security Ownership of Management and
Directors."
8
(2) Sun Pharmaceutical Industries Limited directly owns 8,382,666 shares of
common stock of Caraco and beneficially owns 3,354,657 shares registered in
the name of Sun Pharma Global Inc. 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 25, 2003, 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 common stock beneficially
owned by each individual includes shares of common stock which the individual
can acquire by June 24, 2003, 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.
<Table>
<Caption>
Amount and Nature of Percentage
Name of Beneficial Owner Beneficial Ownership of Class
Narendra N. Borkar(8) 330,100(1)(2) 1.4%
Sailesh T. Desai(9) 0(2) *
Jitendra N. Doshi(8) 27,000(3) *
David A. Hagelstein(10) 2,068,649(4) 8.5%
Phyllis Harrison-Ross 12,600(5) *
Jay F. Joliat(10) 3,341,434(6) 13.5%
Robert Kurkiewicz(8) 71,013(7) *
Dilip S. Shanghvi(9)(10) 0(2) *
Sudhir Valia(9) 0(2) *
All executive officers and directors as a group 5,850,796(2) 22.7%
(9 persons)
</Table>
- ----------
* Less than 1.0% of the outstanding shares
9
(1) Includes stock options that are currently exercisable to purchase 280,000
shares of common stock.
(2) Excludes 11,737,323 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.
(3) Includes stock options that are currently exercisable to purchase 25,000
shares of Common Stock. See "Transactions of Directors, Executive Officers
and Certain Beneficial Holders of Caraco."
(4) The shares are held in trust (the "Hagelstein Trust"). Includes stock
options that are currently exercisable to purchase 576,558 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 2.400
shares of common stock.
(6) Includes 2,229,168 shares owned by Joliat Enterprises, LLC, of which Mr.
Joliat is managing partner. See "Security Ownership of Certain Beneficial
Owners." Also, includes stock options that are currently exercisable to
purchase 1,029,066 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 69,000
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 until August 2004 without
giving Sun Pharmaceutical Industries Ltd. a right of first refusal on the
sale of their respective shares to a third party or the right to purchase
the shares at the prevailing market price if there is no third party, and
until August 2004, not to sell their shares to any competitor, distributor
or buyer or business associate of Caraco without the consent of Sun
Pharmaceutical.
10
Equity Compensation Plan Information
12-31-02
- ----------------------------- ------------------------- -------------------------- ------------------------------
Plan category Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under equity
warrants and rights warrants and rights. compensation plans
(excluding securities
reflected in column (a))
- ----------------------------- ------------------------- -------------------------- ------------------------------
(a) (b) (c)
- ----------------------------- ------------------------- -------------------------- ------------------------------
Equity compensation plans
approved by security holders 809,375 $0.95 2,453,000
- ----------------------------- ------------------------- -------------------------- ------------------------------
Equity compensation plans
not approved by security 2,106,824 $2.09 __
holders
- ----------------------------- ------------------------- -------------------------- ------------------------------
Total
- ----------------------------- ------------------------- -------------------------- ------------------------------
The equity compensation plans approved by security holders consist of the 1993
Stock Option Plan and the 1999 Equity Participation Plan. Options under these
plans generally were granted as incentive stock options to employees (791,375)
and as non-qualified stock options to directors (18,000). The 1993 Stock Option
Plan terminated on December 31, 2002. Options granted under such plan, however,
continue until their respective expiration dates. Caraco has also granted
non-qualified stock options to David A. Hagelstein, a director of Caraco
(574,158) and to Jay F. Joliat, a director of Caraco, and certain family members
of Mr. Joliat (1,332,666). Mr. Hagelstein's options are all exercisable, are
exercisable at exercise prices ranging from $0.88 to $1.56 and expire at various
times over the next several years. Mr. Joliat's and his family members' options,
are all exercisable, are exercisable at exercise prices ranging from $1.25 to
$3.50 and expire at various times over the next several years. In addition,
Caraco has granted two sign-up options (100,000 each) and a product option each
exercisable at $3.50 per option to a pharmaceutical company who transferred the
formula for a generic drug to Caraco which received FDA approval. The options
may be exercised and payment made only from royalties. At December 31, 2002,
royalties totaled $801,144, and were included in accrued expenses. Caraco is
currently determining, however, whether the formula provided to it by such
pharmaceutical company is different than the formula currently used. If the
formula is different, Caraco would cease to accrue any royalties.
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 own more than ten percent of Caraco's equity securities complied
with applicable Section 16(a) filing requirements, except as follows: Sun Pharma
Global, Inc. filed a late report when it initially became a more than 10.0%
owner of the outstanding shares; Sun Pharma Global, Inc. and Sun Pharmaceutical
Industries Limited each filed a late report with respect to two transactions
pursuant to which Sun Pharma Global, Inc. acquired shares of common stock in
exchange for the delivery to Caraco of generic pharmaceutical products; and Mr.
Hagelstein filed a late report in connection with shares acquired for services
on the Board and Committees.
TRANSACTIONS OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN
BENEFICIAL HOLDERS OF CARACO
The following discloses transactions during 2002 and 2001 and proposed
transactions between Caraco and several of the incumbent directors, executive
officers and security holders who beneficially hold in excess of five percent of
our outstanding shares:
During 2002 we issued to Sun Global 1,632,000 shares of our common
stock in exchange for three ANDAs.
During 2002 and 2001, we purchased approximately $2,422,000 and
$1,138,000, respectively, of our raw materials from Sun Pharmaceutical.
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. We intend to continue to purchase raw
materials from Sun Pharmaceutical in 2003.
During 2002 and 2001, Caraco purchased approximately $310,000 and
$260,000, respectively, of equipment from Sun Pharmaceutical. Management
believes that the terms and conditions of its agreements to purchase such
equipment are fair and comparable to those which could have been obtained from
independent parties. We intend to continue to purchase equipment from Sun
Pharmaceutical in 2003.
During the first quarter of 2002, Sun Pharmaceutical loaned us
$1,400,000 at an annual interest rate of 8%. During 2001, Sun Pharmaceutical
lent us $2,450,000. Sun Pharmaceutical reduced the rate of interest on such loan
from 10% to 8% per annum with an effective date of April 1, 2001. The loans are
due and payable in October 2006.
11
On November 21, 2002, we entered into a products agreement with Sun
Global. In exchange for each new generic drug transferred to us by Sun Global
which passes a bioequivalency test, we shall issue Sun Global 544,000 shares of
a newly created preferred stock.
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 previously granted to Messrs. Hagelstein and Joliat. The exercise prices
of such options are $1.50 and $3.50, respectively. Mr. Joliat, however has
declined such extension. During 2002, Mr. Joliat also converted 285,714 shares
of Series A Preferred Stock for 285,714 shares of Caraco's common stock pursuant
to the terms of the Series A Preferred Stock.
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.
On June 4, 2001, the Board of Directors granted to Robert Kurkiewicz a
qualified stock option for 10,000 shares of Caraco's common stock at an exercise
price of $0.80 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 June
4, 2007.
12
EXECUTIVE OFFICERS
The following table provides information about Caraco's executive officer who is
not a director.
<Table>
<Caption>
Executive
Officer
Name Age Five-Year Business Experience Since
Robert Kurkiewicz 52 Commenced employment with Caraco as its Vice President -- 1993
Quality Assurance in November 1993 and was promoted to
Sr. Vice President - Technical, October 1998.
</Table>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, as to the Chief Executive Officer, and as to
the two most highly compensated executive officers whose salary plus bonus
exceeded $100,000 during the last fiscal year, information concerning all
compensation paid for services to Caraco during the last three fiscal years:
<Table>
<Caption>
Annual Compensation Long Term Compensation
Awards Payouts
Securities
Name and Principal Other Annual Restricted Underlying LTP All Other
Position Year Salary Bonus Compensation Stock Awards Options Payments Compensation
($) ($) ($) ($) (#) ($) ($)
Narendra N. Borkar 2002 128,385 0 0 0 0 0 9,960(1)
Chief Executive Officer 2001 120,000 0 0 0 0 0 9,960(1)
2000 120,000 0 0 0 0 0 9,960(1)
Jitendra N. Doshi 2002 109,769 0 0 0 0 0 4,560(3)
Chief Operating Officer 2001 71,817 0 0 0 125,000(2) 0 3,040
Robert Kurkiewicz 2002 127,492 0 0 0 10,000(4) 0 4,560(3)
Sr. Vice President 2001 122,400 0 0 0 0 0 4,560(3)
Technical 2000 120,000 0 0 0 0 0 4,560(3)
</Table>
(1) $5,400.00 was contributed to Mr. Borkar for his retirement account and
$380.00 per month was given for car allowance.
(2) A stock option of 125,000 was awarded to Mr. Doshi in December
2001. See "Certain Transactions of Directors, Executive Officers and Certain
Beneficial Owners of Caraco".
(3) $380.00 per month was given for car allowance.
(4) A stock option of 10,000 was awarded to Mr. Kurkiewicz in June 2001. See
"Certain Transactions of Directors, Executive Officers and Certain Beneficial
Owners of Caraco".
13
Option Grants in Last Fiscal Year
No stock options were granted in 2002 to the named executive officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information for the named executive
officers with regard to the aggregate stock options exercised during the year
ended December 31, 2002, and the stock options held as of December 31, 2002.
<Table>
<Caption>
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options at FY-End
Acquired Realized Options at FY-End (#) ($) (1)
Name on Exercise ($) Exercisable/Unexercisable Exercisable/Unexercisable
Narendra N. Borkar 0 0 240,000/110,000 $423,600/$181,900
Jitendra N. Doshi 0 0 25,000/100,000 $ 35,500/$142,000
Robert Kurkiewicz 0 0 54,000/21,000 $ 100,980/$39,270
</Table>
(2) The value is based on the difference between the exercise prices and the
closing sale price of Caraco's common stock on December 31, 2002.
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, a stock
option of 150,000 shares, at an exercise price of $.66 per share and a car
allowance of $380.00 per month. The option expires on September 22, 2004 and
vests over a five-year period. On June 10, 2002, Mr. Borkar's salary was
increased to $156,000 annually.
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 (90) days notice. In the event Caraco terminates Mr.
Borkar without cause, he will receive base salary payments, his bonus and
premium payments for life and health insurance benefits for six (6) months from
the date of termination. 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. 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
14
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.
Jitendra N. Doshi, the Chief Operating Officer of Caraco, entered into
an employment agreement dated August 30, 2002. The employment agreement provides
Mr. Doshi with a salary at the rate of $129,800 annually and a car allowance of
$380.00 per month. The employment agreement is for a term of five (5) years,
commencing on January 1, 2002 and ending on December 31, 2006. The Agreement
automatically renews for successive one-year periods unless terminated by Caraco
or Mr. Doshi upon ninety (90) days notice. In the event Caraco terminates Mr.
Doshi without cause, he will receive base salary payments and his premium
payments for health insurance benefits for six (6) months from the date of
termination. 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
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 and which was further
amended on August 30, 2002 to extend the term until December 31, 2007. The
agreement, as amended, provides Mr. Kurkiewicz' with a salary of $129,800 per
year and provides for a car allowance of $380.00 per month. The agreement
provides that at the end of the term, it 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 and his premium
payments for health insurance benefits for six (6) months from the date of
termination. 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.
Change in Control Arrangements
Under our 1999 Equity Participation Plan, options granted under that plan
will become fully exercisable following certain changes in control of our
company, such as:
o A person, other than Sun Pharmaceutical, becomes the owner of a majority
of the outstanding shares of our company;
o A public announcement is made of a tender or exchange offer by any
person, other than Sun Pharmaceutical, for 50% or more of the
outstanding shares of our company;
o The shareholders of our company approve a merger or consolidation with
any other corporation or entity, unless, following the merger, the
shares outstanding immediately before the merger continue to represent a
majority of the outstanding shares of the surviving entity immediately
following the merger;
o Where shareholders approve a plan of complete liquidation of our company
or an agreement for the sale of disposition by the company of all or
substantially all of the assets of our company; or
o Certain changes in the composition of our Board of Directors.
15
RELATIONSHIP WITH INDEPENDENT AUDITORS
Rehmann Robson audited the financial statements of Caraco for the year ended
December 31, 2002. The Board is in the process of evaluating Caraco's auditing
requirements for 2003 and, accordingly, has not yet selected independent
accountants to audit Caraco's financial statements for 2003. 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, 2002 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: $43,500.
FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES
No professional services were rendered by Rehmann Robson for the year ended
December 31, 2002, 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 $67,815. These fees
were principally for tax related services, including preparation of corporate
tax returns and property taxes for services related to Caraco's registration
statement for the registration of common stock for sale under the Securities
Act of 1933, as amended, and other corporate related services.
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, 2002
were attributed to work performed by persons other than Rehmann Robson's full
time permanent employees.
PROPOSAL 2 - AMENDMENT TO AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
INCREASE AUTHORIZED COMMON AND PREFERRED SHARES
On November 21, 2002, the Board of Directors unanimously approved a resolution,
subject to shareholder approval, to amend Article III, Section 1 of Caraco's
Amended and Restated Articles of Incorporation, as amended, by increasing the
number of authorized common shares from 30,000,000 to 50,000,000 and by
increasing the number of authorized preferred shares from
16
5,000,000 to 15,000,000. The affirmative vote of holders of a majority of the
outstanding shares of common stock entitled to vote, present in person or
represented by proxy, is required to adopt the proposed amendment.
The Board of Directors recommends a vote "FOR" the approval of the
amendment, a copy of which is attached as Appendix B.
Caraco presently is authorized to issue 30,000,000 common shares, no par value.
As of March 31, 2003, there were 23,762,532 common shares outstanding. There are
2,916,199 options outstanding under Caraco's option plans. An additional
2,453,000 options are reserved under Caraco's 1999 Equity Participation Plan.
Caraco also has filed a pending registration statement with the Securities and
Exchange Commission to register for sale 4,365,000 shares. Pursuant to its
products agreement with Sun Pharma Global, Inc. (see below), Caraco may issue up
to 13,600,000 preferred shares which are convertible into 13,600,000 common
shares. Caraco presently is authorized to issue 5,000,000 preferred shares, no
par value. At this date, no preferred shares are issued and outstanding.
As noted, on November 21, 2002, Caraco entered into a products agreement with
Sun Pharma Global, Inc. pursuant to the approval of a committee of its
non-employee independent directors. Under the agreement, Sun Pharma Global, Inc.
has agreed to provide Caraco with 25 new generic drugs over a five-year period.
In return for the technology transfer, Sun Pharma Global, Inc. will receive
544,000 shares of a newly created preferred stock for each generic drug
transferred when such drug has passed its bioequivalency study. The terms and
conditions of the newly created preferred stock were designated by the
independent committee pursuant to a Certificate of Determination of Rights,
Privileges and Preferences Series B Preferred Stock and filed with the State of
Michigan. Among other things, the preferred shares are non-voting, do not
receive dividends and are convertible into common shares after three years (or
immediately upon a change in control) on a one-to-one basis. In addition, the
Series B Preferred Shares have a liquidation preference, in an amount per share
equal to the value of the Series B Preferred Shares on the respective dates on
which they were earned, ahead of the holders of the common shares, to the assets
and surplus funds, if any, of Caraco after the payment of all outstanding debt.
The Series B Preferred Shares also prohibit Caraco from issuing any securities
having a preference ahead of the Series B Preferred Shares without the consent
of a majority of the outstanding shares of the Series B Preferred Shares.
The purpose of the amendment is to provide Caraco with sufficient common shares
and preferred shares to fulfill its obligations under its option plans,
registration statement, product agreement with Sun Pharma Global, Inc., and for
other general corporate purposes. Other than as disclosed, Caraco has no other
current plans, arrangements or understandings for the issuance of additional
shares that would be authorized by this proposed amendment. If the amendment
is approved, Caraco also will have greater flexibility in the future to issues
shares in excess of those presently authorized, without the expense and delay
of a special shareholders' meeting. No holder of common shares has any
preemptive right with respect to the common shares. If the Board deems it in
the best interests of Caraco and its shareholders to issue additional shares
in the future, the Board will have the authority to determine the terms of the
issuance and, generally, would not seek further authorization by vote of the
shareholders unless authorization is required by applicable law or regulations.
Should the Board desire to issue additional common shares in the future, such
issuance of additional shares could dilute the voting power of a person seeking
control of Caraco, thereby deterring or rendering more difficult a merger,
tender offer, proxy contest or an extraordinary transaction opposed by Caraco's
Board. Caraco has no knowledge that any person intends to effect such a
transaction
17
SHAREHOLDERS OF RECORD AS OF APRIL 25, 2003 ARE ENTITLED TO RECEIVE A COPY
WITHOUT CHARGE OF THE COMPANY'S 2002 ANNUAL REPORT TO THE SEC ON FORM 10-K.
SHAREHOLDERS WHO WISH TO RECEIVE A COPY OF THIS REPORT SHOULD WRITE TO JITENDRA
N. DOSHI, CHIEF OPERATING OFFICER, CARACO PHARMACEUTICAL LABORATORIES, LTD, 1150
ELIJAH MCCOY DRIVE, DETROIT, MICHIGAN 48202.
Narendra N. Borkar
Chief Executive Officer
April 30, 2003
18
APPENDIX A
CARACO PHARMACEUTICAL LABORATORIES, LTD.
AUDIT COMMITTEE CHARTER
PURPOSE AND COMPOSITION
The charter details the composition, roles and responsibilities of the
audit committee. The board of directors shall appoint three directors who are
independent of the management of Caraco Pharmaceutical Laboratories, Ltd. (the
"Company") and has no relationships that could interfere with its independence
and execution of the committee's responsibilities. For purposes of determining
independence, the Company shall use the definition of independence in Rule
4200(a) (14) of the NASD's listing standards. At least one member must have
expertise in accounting or other aspects of financial management, and all
members are expected to be financially literate or to gain such literacy after
appointment. The committee shall review this charter annually and receive
approval for its continued use (and any recommended amendments) from the board
of directors. Management shall cause a copy of this charter to be filed as an
appendix to the Company's Proxy Statement, not less than once every three years.
THE ROLE OF THE COMMITTEE
The audit committee assists the board of directors in their oversight
of the Company to protect the interests of current and potential shareholders,
the investment industry, and others affected by the Company's operations in the
areas of adequacy and accuracy of financial statements and the financial
reporting process. In this role, the committee shall have complete access to all
records, employees and facilities of the Company, along with the ability to
retain outside counsel, accountants or other experts to assist it in the
completion of its responsibilities, and the freedom to investigate any situation
brought to its attention. The committee is expected to maintain clear
communication with Company management, internal auditors, as applicable, and
independent auditors.
A-1
DELINEATION OF RESPONSIBILITIES
The committee shall take a flexible approach to the execution of its role to
best reflect current circumstances and changing business conditions, and is
expected to establish on the board's behalf the overall attitude of the Company
as it pertains to financial reporting and risk management.
ONGOING PROCESSES
In performing these responsibilities, the audit committee shall follow a
number of prescribed guidelines, and may augment these when appropriate:
o Independent auditors are accountable to the committee and the board in
their roles as appointed representatives of the Company's shareholders.
As such, the committee is expected to evaluate, and if necessary,
recommend replacement of the independent auditors to the board and
shareholders. The committee shall review the nature of this
independence, and any written disclosures prepared by the auditors, with
the auditors.
o The committee shall discuss the plans and scope of audits, including
staffing and compensation, with both internal auditors, as applicable,
and independent auditors. The committee shall conduct separate meetings
with both the internal auditors, as applicable, and independent
auditors, both with and without members of the management team present.
Finally, the committee shall receive and review reports from internal
auditors, as applicable, and independent auditors concerning the
effectiveness and adequacy of financial controls, accounting procedures
and risk management.
o Before the filing of the Company's quarterly Form 10-Q report, the
committee, management and the independent auditors shall review the
interim financial statements.
o Before the filing of the Company's Annual Report on Form 10-K and Proxy
Statement, the committee, management and the independent auditors shall
review and discuss the financial statements. In addition:
o the committee shall receive a report from the independent auditors
concerning the matters required to be discussed by SAS 90 and SAS 61
(Codification of Statements on Auditing Standards, AU Section 380),
as may be modified or supplemented, and shall discuss with the
independent accountant the matters contained in such report.
o the committee shall receive the written disclosures and the letter
from the independent accountants required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit
Committees," as may be modified or supplemented, and shall discuss
with the independent accountant the independent accountant's
independence.
o based on the review and discussions referred to in this item, the
audit committee shall recommend to the board of directors that the
audited
A-2
financial statements be included in the Company's Annual Report on
Form 10-K to be filed with the Securities and Exchange Commission
(unless based on the audit committee's review, it concludes that
such recommendation cannot be given).
o with the assistance of counsel for the Company, the committee shall
prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual Proxy
Statement to be filed with the Securities and Exchange Commission.
While the audit committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the audit committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations governing the Company.
A-3
APPENDIX B
CERTIFICATE OF AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION
Article III, Section 1 of the Amended and Restated Articles of
Incorporation is hereby amended to read as follows:
1. The total authorized capital stock is:
Common Shares: 50,000,000
Preferred Shares 15,000,000
B-1
CARACO PHARMACEUTICAL LABORATORIES, LTD.
This Proxy is Solicited by the Board of Directors of Caraco
Pharmaceutical Laboratories, Ltd.
The undersigned hereby appoints Amit Shah and Robert Kurkiewicz, or either of
them, each with power of substitution, as proxies, to represent the undersigned
at the Annual Meeting of Shareholders ("Annual Meeting") of Caraco
Pharmaceutical Laboratories, Ltd. ("Caraco") to be held at The Hotel St. Regis,
3071 W. Grand Blvd., Detroit, Michigan 48202 on Tuesday, June 3, 2003 at 10:00
a.m. Eastern Daylight Saving Time and at any adjournment(s) thereof, and to vote
the number of shares the undersigned would be entitled to vote if personally
present on all matters coming before the Annual Meeting, including the business
identified on this Proxy and described in the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 30, 2003 ("2003 Proxy Statement").
This revocable Proxy, when properly executed, will be voted in the manner
directed by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED BY THE PROXIES "FOR" THE ELECTION AS DIRECTORS OF THE PERSONS
NAMED IN PROPOSAL 1 AND "FOR" THE APPROVAL OF THE AMENDMENT TO THE AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF CARACO INCREASING THE NUMBER OF COMMON AND
PREFERRED AUTHORIZED SHARES AS SET FORTH IN PROPOSAL 2, AND AS DISCLOSED IN MORE
DETAIL IN THE 2003 PROXY STATEMENT. Discretionary authority is conferred by this
Proxy with respect to certain matters as described in the 2003 Proxy Statement.
The undersigned acknowledges receipt of the 2003 Proxy Statement.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
<Table>
[X] Please mark
votes as in
this example.
CARACO PHARMACEUTICAL LABORATORIES, LTD.
A VOTE "FOR" PROPOSALS 1 AND 2 IS RECOMMENDED
BY THE BOARD OF DIRECTORS.
1. The election of three directors. 2. Approval of amendment to Amended and Restated
Nominees: Articles of Incorporation increasing the number of
common shares to 50 million and of preferred shares to
(01) Dilip S. Shanghvi 15 million.
(02) Jitendra N. Doshi
(03) Jay F. Joliat
FOR THE NOMINEES WITHHOLD FROM THE NOMINEES FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
[ ] -----------------------------------------------
For all nominees except as noted above
3. To transact such other business as may properly come before the Annual Meeting or any adjournment(s) or
continuation thereof.
Mark box at right if an address change or comment has been noted on the reverse side of this card: [ ]
Please be sure to sign and date this Proxy.
IMPORTANT: In signing this Proxy, please sign your name or names in the exact form appearing on this Proxy. If the
shares are issued in the names of two or more persons, all such persons should sign the Proxy. When signing as an
attorney, executor, administrator, trustee or guardian, please give your full title as such. If the signer is a
corporation, limited liability company or other entity, please sign in full entity name by a duly authorized person.
Signature: Date: Signature: Date:
-------------------------------- --------------- ------------------------- -------------
</Table>