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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1997
To The Shareholders of Caraco Pharmaceutical Laboratories, Ltd.:
Please take notice that the Annual Meeting of Shareholders of Caraco
Pharmaceutical Laboratories, Ltd. will be held on Wednesday, May 21, 1997 at
10:00 a.m. at the Hotel St. Regis, 3071 W. Grand Blvd., Detroit, Michigan 48202
for the purpose of:
1. electing two directors to serve for terms of three years each;
2. increasing the number of shares authorized to be issued under the 1994
Stock Option Plan from 350,000 to 450,000;
3. approving the amendment of the Corporation's Amended and Restated
Articles of Incorporation to increase the number of authorized Common
Shares from 20,000,000 to 30,000,000; and
4. acting on such other business as may properly come before the meeting, or
any adjournments thereof.
You are cordially invited to attend the Annual Meeting.
Holders of Common Shares of record at the close of business on April 21,
1997 will be entitled to vote at the meeting. A list of such shareholders will
be available for inspection during normal business hours from April 30, 1997
through May 20, 1997, at the offices of the Corporation, 1150 Elijah McCoy
Drive, Detroit, Michigan.
A Proxy Statement, Proxy Card, Annual Report and 10-KSB are enclosed with
this Notice. Each shareholder is urged to execute and return the enclosed Proxy
Card promptly. In the event a shareholder decides to attend the meeting, he or
she may, if so desired, revoke the Proxy and vote the shares in person.
By Order of the Board of Directors,
Allan J. Hammer, Secretary
Detroit, Michigan
April 22, 1997
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY. IF MAILED
IN THE U. S. IN THE ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED.
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CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors of Caraco
Pharmaceutical Laboratories, Ltd. (the "Corporation" or "Caraco") in connection
with its solicitation of proxies for use at the Annual Meeting of Shareholders
on May 21, 1997, and at any and all adjournments thereof. This Proxy Statement
and accompanying Proxy Card are first being mailed on or about April 22, 1997.
The Corporation's Annual Report (including audited financial statements) for
the fiscal year ended December 31, 1996 and the Corporation's 1996 10-KSB are
enclosed with this Proxy Statement.
The Annual Report is not incorporated in or part of this Proxy Statement
and does not constitute proxy-soliciting material.
The 10-KSB is not incorporated in or part of this Proxy Statement and does
not constitute proxy-soliciting material.
If the Proxy is properly executed and returned, the Common Shares it
represents will be voted at the 1997 Annual Meeting in accordance with the
instructions noted thereon. If no instructions are indicated, it will be voted:
(1) FOR the nominated director(s); (2) FOR the increase in the number of shares
authorized for issuance under the 1993 Stock Option Plan; (3) FOR the Amendment
of the Amended and Restated Articles of Incorporation; and (4) FOR or AGAINST,
in the discretion of the Proxy holders, such other matters as may properly come
before the meeting. The Corporation's management knows of no matter to be
brought before the meeting which is not referred to in this Proxy Statement.
If, however, any other matters come before the meeting, the Proxy will be voted
in accordance with the judgment of the person or persons voting such Proxy,
unless the Proxy contains instructions to the contrary. Any shareholder
executing a Proxy has the power to revoke it at any time before it is voted by
submitting a duly executed Proxy bearing a later date, by delivering written
notice of such revocation to the Corporation's Secretary prior to the 1997
Annual Meeting or by attending the 1997 Annual Meeting and orally withdrawing
the Proxy. The cost of this solicitation is being paid for by the Corporation.
The Corporation will solicit proxies by mail and may also solicit proxies in
person or by telephone.
The Corporation has 20,000,000 common shares ("Common Shares") authorized,
of which 7,842,106 shares were issued and outstanding at the close of business
on April 21, 1997, the record date for determining voting rights. The
Corporation has no other class of voting securities outstanding. Each share
issued and outstanding on April 21, 1997 will be entitled to one vote.
Shareholders presently do not have cumulative voting rights.
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ELECTION OF DIRECTORS
Pursuant to Article VI of the Amended and Restated Articles of
Incorporation of the Corporation, the Board of Directors shall be divided into
three classes with terms expiring on three successive annual meeting dates.
Generally, one-third of the Caraco Board is elected each year. The Amended and
Restated Bylaws authorize the Board of Directors exclusively to set the number
of directors to serve on the Board of Directors, by resolution, but at no time
shall the number of directors be less than [six].
Unless otherwise instructed on the Proxy, the Proxy holders intend to vote
FOR the election of William R. Hurd and Jay F. Joliat to a three-year term as a
director(s). The Caraco Board believes that, if elected, the nominee(s) will be
able and willing to serve. However, if a nominee should be unable to serve as
a director, the Caraco Board may select a substitute nominee and, in that
event, the Proxy will be voted for the person so selected. The remaining five
(5) directors will continue to serve in accordance with their previous
elections.
The shareholder vote cast for all items considered at the meeting will be
calculated by American Stock Transfer & Trust Corporation, the Corporation's
Registrar and Transfer Agent, as the Board designated Inspector of Election.
The Inspector of Election shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, and the validity and effect of proxies, and shall receive votes,
hear and determine challenges and questions arising in connection with the
right to vote, count and tabulate votes, determine the result, and do such acts
as are proper to conduct the election. Abstentions will be counted neither for
nor against any actions for which cast.
Information concerning the two (2) directors nominated for a term of three
years, and the five (5) continuing Caraco Board members, is set forth below.
NOMINEE FOR ELECTION AS A DIRECTOR FOR THREE-YEAR TERM TO EXPIRE 2000.
WILLIAM R. HURD
AGE: 61
MEMBER: None
Mr. Hurd commenced employment with the Corporation as its Executive Vice
President and Chief Operating Officer on December 6, 1993 and on May 10, 1995
was promoted to President and Chief Operating Officer of the Corporation.
Prior thereto, Mr. Hurd was employed, since 1987, as Director of Operations of
the Warner Chilcott Laboratories Division of Warner Lambert Company, and was
responsible for the start up of this newly established generic division,
including facility design, equipment evaluation and staffing, and operations,
including supervision of manufacturing,
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quality assurance, quality control, pharmaceutical technology, finance,
purchasing, production planning, and interfacing with the regulatory, sales and
marketing departments. Mr. Hurd is a graduate of Massachusetts College of
Pharmacy (B.S. in Pharmacy, 1960) and is a registered pharmacist in
Massachusetts and Pennsylvania.
JAY F. JOLIAT
AGE: 40
MEMBER: Audit, Executive and Finance Committees
JAY F. JOLIAT for more than the past five years has served as President,
Chief Executive Officer and Chairman of the Board of Joliat & Company, a
registered investment advisor furnishing investment management surveillance,
reporting and consulting services to endowment funds, charitable foundations,
ERISA plans and others who utilize professional money managers; Chairman of the
Board, Chief Executive Officer and Treasurer of Sign of the Beefcarver
Restaurants, Inc., which owns and operates 13 cafeteria style family
restaurants, three casual dining/bar restaurants and one fine dining restaurant
in the Detroit metropolitan area; and as trustee and Chief Executive Officer of
several family-related trusts with widely diverse holdings including foreign
and domestic securities, venture capital and real estate.
NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERM TO EXPIRE 1999.
DAVID W. ADAMANY
AGE: 60
MEMBER: Audit, Executive and Compensation Committees
DAVID W. ADAMANY has been President of Wayne State University since 1982.
Previously he served as Academic Vice President for the University of Maryland
System and Academic Vice President at California State University, Long Beach.
Dr. Adamany also served as a member of the Board of Directors of BIOFOR, INC.,
a non-publicly traded company and is involved as a director or trustee of many
civic organizations. Dr. Adamany has been a member of the Board of Directors
since July 1994.
CARA J. CURRY
AGE: 60
MEMBER: Compensation and Audit Committees
CARA J. CURRY has been President of New Center Radiology, Inc. since 1979,
owned by Dr. and Mrs. Curry, and was the owner and Chief Executive Officer,
from 1981 to 1986, of Innovative Home Health Care Corporation, which provided
in-home care in the Greater Detroit Metropolitan Area. She has been active in
health care related organizations and was a member of the Board and Executive
Vice President of the Lula Bell Stewart Center, Inc. (a non-profit women's
shelter). Mrs. Curry is a Commissioner of the Detroit Zoo, and a participant in
the National Medical Association Health
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Summit, Washington, D.C., and in the Congressional Black Caucus Health Forum.
DAVID A. HAGELSTEIN
AGE: 55
MEMBER: Compensation and Executive Committees
DAVID A. HAGELSTEIN has more than thirty years experience in running
various businesses. Mr. Hagelstein established and ran up to four restaurants
from 1964 to 1993. The profits from these operations were used to acquire and
develop several real estate ventures, including building and leasing an office
building for General Motors. He has supplied venture capital for a number of
start up companies and has been a consultant to four companies in the
pharmaceutical and medical fields. Mr. Hagelstein has been a member of the
Board of Directors since September 8, 1995.
JOHN R. MORRIS
AGE: 66
MEMBER: Audit, Compensation and Finance Committees
JOHN R. MORRIS has more than 40 years of experience, including
multinational experience with pharmaceutical giants. Mr. Morris has been
President of Biotrade Group, a Company he founded, since 1978. Biotrade, a
worldwide healthcare and chemical company has offices in Australia, Southeast
Asia, South Africa, Switzerland and the United Kingdom. Biotrade is also
active in the pharmaceutical and fine chemical industries. In addition to his
knowledge of the pharmaceutical world, Mr. Morris brings considerable
experience in the banking and finance area. For several years he was Financial
Director and Senior Vice President of Finance of a world-leading commodity
trader. Mr. Morris was employed by Glaxo at which time he was chief executive
officer of several Glaxo operating companies. Mr. Morris is also a director of
Bigmar, Inc.
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NOMINEES FOR ELECTION AS DIRECTORS FOR THREE-YEAR TERMS TO EXPIRE 1998
PHYLLIS HARRISON-ROSS, M.D.
AGE: 60
MEMBER: Compensation and Finance Committees
DR. HARRISON-ROSS has more than 25 years in the Community Mental Health
profession. She 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 serving the diverse, hard-to reach and
undeserved population of New York. Dr. Harrison-Ross joined Caraco's Board of
Directors September 18, 1996. Dr. Harrison-Ross filed a Form 3 late.
DIRECTOR COMPENSATION
Each independent director of the Corporation receives 100 shares of Common
Stock of the Corporation for each board or committee meeting in which he or she
participates effective after September 8, 1995. In addition, Dr. Adamany
received a non-qualified stock option to purchase 6,000 shares of Common Stock
on July 14, 1994, at an exercise price of $4.13 per share pursuant to the terms
and provisions of the Corporation's 1993 Stock Option Plan. Messrs. Hagelstein
and Joliat each on September 8, 1995 received a non-qualified stock option to
purchase 6,000 shares of Common Stock, at an exercise price of $5.00 per share,
pursuant to the terms and provisions of the Corporation's 1993 Stock Option
Plan. Mr. John Morris on August 14, 1996 received a non-qualified stock option
to purchase 6,000 shares of Common Stock, at an exercise price of $2.50 per
share, pursuant to the terms and provisions of the Corporation's 1993 Stock
Option Plan. Dr. Phyllis Harrison-Ross received a non-qualified stock option
to purchase 6,000 shares of Common Stock, at an exercise price of $1.562 per
share, pursuant to the terms and provisions of the Corporation's 1993 Stock
Option Plan. In addition, Mrs. Curry received a non-qualified stock option to
purchase 6,000 shares of Common Stock, at an exercise price of $1.25 per share,
pursuant to the terms and provisions of the Corporation's 1993 Stock Option
Plan. Employees and/or dependent Directors of the Corporation receive no
additional compensation for services as a director. All directors are
reimbursed for expenses incurred in attending board or committee meetings.
EXECUTIVE OFFICERS
ROBERT KURKIEWICZ (Age 46) -- commenced employment with the Corporation as
its Vice President -- Quality Assurance on November 22, 1993. Prior thereto,
Mr. Kurkiewicz was employed, since 1988, as Manager, Quality Assurance by the
Warner Chilcott Laboratories Division of Warner Lambert Company, for which he
was responsible
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for the establishment of the Quality Control and Quality Assurance Departments
at the inception of this division (including the design and implementation
of all quality systems for proper operation of a pharmaceutical manufacturing
organization) and the ongoing supervision of Quality Control, and Quality
Assurance for manufacturing and research and development. Mr. Kurkiewicz is a
graduate of the University of Wisconsin (B.S. cum laude, 1973).
ALLAN J. HAMMER (Age 51) -- joined the Corporation in July 1994 as Chief
Financial Officer, Treasurer and Secretary. Prior thereto, Mr. Hammer was
employed, since 1988, with the Warner Chilcott division of Warner Lambert
where, as manager of finance and logistics, he was responsible for all
activities in finance, purchasing, production planning, inventory control and
warehousing. Mr. Hammer holds a BBA degree from Hofstra University.
SHERMAN N. GINN (Age 57) -- joined the Corporation in August 1994 as
Director of Sales and Marketing and in December 1994 was promoted to Vice
President -- Sales and Marketing. Prior thereto Mr. Ginn was employed by
Global Source as Vice President, Sales. From 1992 to 1994 Mr. Ginn was Vice
President, Sales and Vice President, Chain Store Sales at Watson Laboratories.
From 1990 to 1992 he was employed by Qualitest Products in Huntsville, Alabama
as Vice President, Marketing.
STOCK OPTION PLAN
In April 1993, the Board of Directors adopted the 1993 Stock Option Plan
(the "Plan), pursuant to which 350,000 shares of Common Stock of the
Corporation were reserved for issuance. The Plan was approved by the
shareholders of the Corporation in October 1993. Under the Plan, incentive
stock options may be granted to employees, and non-qualified stock options may
be granted to employees, independent directors, and such other persons as the
Board's Stock Option Committee determines will contribute to the Corporation's
success, at exercise prices equal to at least 100% of the fair market value of
the Common Shares, with respect to non-qualified stock options, on the date of
the grant. In addition to selecting the optionees, the Stock Option Committee
determines the number of Common Shares subject each option and, with respect to
non-qualified stock options, the exercise price. The plan provides, among
other things, for administration by disinterested directors and formula grants
of stock options to such disinterested directors. The Stock Option Committee
is presently the Compensation Committee which is comprised of David W. Adamany,
Cara J. Curry, David A. Hagelstein, John R. Morris and Phyllis Harrison-Ross.
At the 1995 Annual Meeting of Shareholders the Shareholders of the Corporation
approved an increase of 100,000 shares of Common Stock for a total of 450,000
shares of Common Stock.
Management has granted 72% of the 450,000 shares of Common Stock of the
Corporation that were reserved for issuance under the Plan. In order to allow
additional options to be granted, the Board of Directors has adopted a
resolution amending the Plan to increase
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the number of Common Shares authorized for issuance under the Plan to 550,000.
This Amendment must be approved by a majority of the votes present by Proxy or
in person at the Annual Meeting of Shareholders. The text of the Amendment is
in APPENDIX A, which is incorporated herein by reference. The Board of
Directors recommends that shareholders vote FOR the Amendment to the Plan to
increase the number of Common Shares authorized from 450,000 to 550,000 shares.
AMENDMENT TO ARTICLES OF INCORPORATION
The Corporation's Articles of Incorporation currently provide for
20,000,000 authorized Common Shares. The Board of Directors believes it is in
the best interest of the Corporation to increase the number of authorized
Common Shares to 30,000,000 in order to allow for future equity financing
through the issuance of securities. Accordingly, the Board of Directors has
adopted a resolution approving the Amendment to the Amended and Restated
Articles of Incorporation attached hereto as APPENDIX B, which is incorporation
herein by reference. Before the Amendment may become effective, affirmative
votes constituting a majority of the votes present by Proxy or in person at the
Annual Meeting of Shareholders must approve the Amendment. The Board of
Directors recommends that shareholders vote FOR the Amendment of the Amended
and Restated Articles of Incorporation to increase the number of authorized
Common Shares to 30,000,000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Corporation's Board of
Directors conducted its business by holding sixteen (16) Board Meetings (in
accordance with the requirements of the Michigan Business Corporation Act). The
Board of Directors has four (4) active standing committees, which facilitate
the carrying out of its responsibilities. The Executive, Audit, Compensation
and Finance Committees were established by the Board of Directors on May 31,
1994. The Board of Directors does not have a standing Nominating Committee.
Dr. Curry attended less than 75% of the Finance Committee Meetings.
The Executive Committee, which met zero (0) times during 1996, is
empowered to exercise, in the intervals between the meetings of the Board of
Directors, the powers of the Board, subject to the Michigan Business
Corporation Act, as it relates to the management of the business and affairs of
the Corporation.
The Audit Committee, which met zero (0) times in 1996, is empowered to
recommend to the Board of Directors a firm of certified public accountants to
conduct audits of the accounts and affairs of the Corporation and to review
accounting objectives and procedures of the Corporation and the findings and
reports of the independent certified public accountants, and to make such
reports and recommendations to the Board of Directors as it deems appropriate.
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The Compensation Committee, conducted its business in 1996 by holding five
(5) meetings (in accordance with the requirements of the Michigan Business
Corporation Act). The Compensation Committee is empowered to make
recommendations to the Board of Directors relating to the overall compensation
arrangements for officers and staff of the Corporation and to make
recommendations to the Board of Directors pertaining to any compensation plans
in which officers and directors of the Corporation are eligible to participate
(including making recommendations regarding the amount they receive as
directors of the Corporation. The Committee also interprets the Corporation's
1993 Stock Option 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 in the Plan, to prescribe the terms of any award of stock
options, and to make all other determinations for administering the Plan. The
Committee is also empowered to withdraw, modify and substitute the
Corporation's Stock Bonus Plan.
The Finance Committee, which met six (6) times in 1996, is responsible for
ensuring that the Corporation maintains a sound financial structure, and is
empowered to make recommendations to the Board of Directors on financial, short
and long term investments and business planning matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information, as of April 1, 1997,
with respect to the Common Stock owned by each director and nominee for
election to the Board of Directors, each executive officer named in the Summary
Compensation Table, all executive officers and directors as a group, and by
each person (including any "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) who is known to the Corporation to
be the beneficial owner of more than five (5%) percent of the outstanding
shares of the Corporation's Common Stock. The shares and percentages shown
below include shares which may be acquired by the persons listed pursuant to
presently exercisable and outstanding stock options, warrants, and convertible
stock. Except as indicated below, each person listed has sole voting and
investment power as to the shares listed.
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AMOUNT AND
NATURE OF
NAME OF BENEFICIAL BENEFICIAL PERCENTAGE OF
OWNER OWNERSHIP CLASS
- ------------------ --------------- -------------
David W. Adamany 10,200(1) .13
C. Arnold Curry 1,384,447(2) 17.65
Cara J. Curry 484,615(3) 6.18
David A. Hagelstein 1,482,452(4) 18.36
Phyllis Harrison-Ross 0 *
William R. Hurd 63,401(5) .80
Jay F. Joliat 1,848,591(6) 20.76
John R. Morris 107,600(7) 1.37
Sherman N. Ginn, Jr. 8,000(8) .10
Allan J. Hammer 18,648(9) .24
Robert Kurkiewicz 16,356(10) .21
All executive officers and
directors as a group
(11 persons) 5,424,310 58.79
- -------------------------
* Less than 0.10%
(1) Includes stock options that are currently exercisable to purchase 2,400
shares.
(2) Excludes 484,615 shares owned by his wife, Cara J. Curry, as to which he
disclaims beneficial ownership. Includes 10,000 shares of Common Stock
underlying an option granted to a third party pursuant to an option
agreement.
(3) Excludes 1,384,447 shares owned by her husband, C. Arnold Curry, as to
which she disclaims beneficial ownership.
(4) Includes an option to purchase 224,158 shares of Common Stock until
February 20, 2002; stock options to purchase 1,200 shares of Common Stock
until September 7, 2001; and warrants to purchase 5,000 shares of Common
Stock until February 11, 1999. See "Certain Relationships and Related
Transactions."
(5) Includes 900 shares and 100 warrants owned by Richard and Kimberly Hurd
minor children to William R. Hurd; 4,800 shares owned by Joan Hurd, spouse
to William R. Hurd; and stock options that are currently exercisable to
purchase 39,608 shares.
(6) Includes 285,714 Series A Preferred Stock convertible to Common Stock;
warrants to purchase 65,000 shares which are exercisable through December
31, 2004; warrants to purchase 486,666 exercisable through March 31, 2006;
option to purchase 225,000 shares which are exercisable through
October 18, 2006; and stock option to purchase 1,200 shares. See
"Certain Relationships and Related Transactions."
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(7) Includes 10,000 warrants exercisable until February 11, 1999.
(8) Includes stock options that are currently exercisable to purchase 8,000
shares.
(9) Includes 500 warrants exercisable until February 11, 1999 and stock
options that are currently exercisable to purchase 12,384 shares.
Excludes 1,000 shares of Common Stock beneficially owned by Donna Hammer,
spouse of Allan J. Hammer, in which reporting person disclaims beneficial
ownership.
(10) Includes stock options that are currently exercisable to purchase 12,443
shares.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the 1993, 1994, 1995
and 1996 annual salary, bonus and all other compensation awards to the
Corporation's three most highly compensated executive officers, other than the
CEO, whose respective salary and bonus compensation exceeded $100,000 in 1996.
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Awards Payouts
------------ ----------
Annual Compensation Restricted Securities
Name and ------------------------------ Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary($) Bonus($) Compensation Award(s) Options Payouts Compensation
- ------------------ ---- --------- -------- $ $ # $ $
------------ --------- ------------ -------- -------------
William R. Hurd...... 1996 $164,307 0 0 0 0 0 0
President and COO 1995 $167,612 $16,000(1) 0 18,827(2) 3,040(3) 0 0
1994 $171,333(5) 0 0 0 0 0 44,697(4)
1993 $ 0 0 0 0 65,000(3) 0 0
Allan J. Hammer...... 1996 $120,000 0 0 0 0 0 10,250(4)
CFO and Secretary 1995 $120,000 0 0 12,233(2) 1,920(3) 0 0
1994 $ 55,000 0 0 0 30,000(3) 0 24,153(4)
1993 $ 0 0 0 0 0 0 0
Robert Kurkiewicz.... 1996 $123,000 0 0 0 0 0 0
VP of QA 1995 $123,000 0 0 $12,717(2) 2,214(3) 0 0
1994 $123,000 0 0 0 0 0 30,265(4)
1993 $ 13,088 0 0 0 20,000(3) 0 0
(1) Bonus given per employment contract in Caraco Common Stock (5,334 shares).
(2) 5,793, 3,764, and 3,913 shares were awarded by the Corporation on May 10,
1995, to Messrs. Hurd, Hammer and Kurkiewicz, respectively, as
reimbursement for the payment of the taxable portion of moving expenses
they incurred.
(3) The Options were granted pursuant to the Corporation's 1993 Employee Stock
Option Plan. Under the Plan, the options vest over a five year period
commencing one year from date of grant.
(4) Moving expenses paid to employee.
(5) Includes salary actually paid of $160,000, and accrued 1993 salary of
$11,333.
No other executive officer of the Corporation earned more than $100,000
during the 1996 fiscal year.
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OPTIONS GRANTED IN LAST FISCAL YEAR
There were no options granted to executive officers in 1996.
The following table sets forth information for the executive officers
named above with regard to the aggregate stock options exercised during the
year ended December 31, 1996, and the stock options held as of December 31,
1996.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
FY-End(#) FY-End($)(1)
Shares Acquired Value Realized
Name on Exercise# ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- -------------- ------------------------- -------------------------
William R. Hurd..... 0 0 39,608/28,432 0/0
Allan J. Hammer..... 0 0 12,384/19,536 0/0
Robert Kurkiewicz... 0 0 12,442/ 9,772 0/0
__________________
(1) Value based on the difference between the closing bid price of the
Corporation's Common Stock on March 19, 1997 and the exercise price. The
options held by the named executive officers have exercise prices which
are higher than the closing bid price of the Corporation's Common Stock on
March 19, 1997.
EMPLOYMENT AGREEMENTS
[ C. ARNOLD CURRY, the former Chief Scientific Advisor and Chairman,
Emeritus, of the Corporation, entered into a five-year employment agreement, on
February 16, 1996, with the Corporation expiring February 16, 2001, subject to
automatic renewal for successive one-year terms unless terminated by the
Corporation or Dr. Curry upon 90 days' notice prior to the end of the initial
term or the renewal terms, as the case may be. (Dr. Curry resigned as the
Corporation's Chairman of the Board and Chief Executive Officer on February 16,
1996.) Under the employment agreement, the position of Chairman, Emeritus is
an honorary, nonsalaried position and the position of Chief Scientific Advisor
(a research and consulting position without policy making responsibilities) is
compensated at an annual base salary of $90,000. Dr. Curry is entitled to
receive stock bonuses in the amount of 35,000 shares of the Corporation's
Common Stock for each of the first five (5) occasions when the Corporation
secures an Abbreviated New Drug Application from the U.S. Food and Drug
Administration. Dr. Curry was also granted an option of up to 250,000 shares
of Common Stock at the closing price as reported on NASDAQ at October 4, 1995,
with the number of shares dependent on the amount of the Corporation's net
income for the year ending December 31, 1998, as follows: $2,650,000 --
150,000 shares; $3,060,000 -- an additional 50,000; and $3,600,000 -- an
additional 50,000. In addition, Dr. Curry was
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also granted an option of up to 250,000 of Common Stock, at the closing price as
reported on NASDAQ at February 16, 1996, with the number of shares dependent on
the amount of the Corporation's net income for the years ending December 31,
1996 through December 31, 2001 as follows: 50,000 shares if net income equals
$4,100,000 and an additional 50,000 shares for each additional $500,000 of net
income.
Under the employment agreement, Dr. Curry may, upon giving 30 days written
notice, terminate the agreement in the event there is a change of control or
ownership (as defined in the employment agreement) of the Corporation and his
powers and duties significantly change or he has good reason (as defined in the
employment agreement) to terminate or, as a result of the change of control or
ownership, Dr. Curry reasonably determines that he is unable to exercise or
perform his powers, functions and duties. In the event of such termination, Dr.
Curry will receive (i) a lump sum severance payment equal to his base salary
for 36 months at the rate payable at the time notice of termination was given,
and (ii) the immediate vesting in any stock option which would have been
exercisable at the close of the year during which the change of control
occurred. Based upon Dr. Curry's current base salary, the Corporation estimates
that the lump sum severance payment payable to Dr. Curry under this provision
would be approximately $270,000 for the present fiscal year.
In the event that Dr. Curry terminates his employment for cause not
attributable to himself, or if the Corporation terminates the Agreement without
cause, then he shall be entitled to receive monthly base salary payments for
eighteen (18) months from the date of termination, and the Corporation shall
continue premium coverage payments for health and life insurance for the same
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.
In event that Dr. Curry terminates his employment without cause, or his
employment is terminated for cause, death or disability, then he (or his
estate) will receive earned and unpaid salary accrued to the date of
termination.
On November 2, 1996 the Corporation terminated Dr. Curry's Employment
Agreement without cause.]
ROBERT KURKIEWICZ, the Vice President of Quality Assurance, entered into a
five-year employment agreement with the Corporation expiring November 22, 1998,
subject to automatic renewal for successive one-year terms unless terminated by
the Corporation or Mr. Kurkiewicz upon 30 days notice prior to the commencement
of any such renewal period. ......../
In the event that Mr. Kurkiewicz terminates his employment for cause not
attributable to himself, or if the Corporation terminates this Agreement
without cause, then he shall be entitled to receive
15
monthly base salary payments for twelve (12) months from the date of
termination, and the Corporation shall continue premium coverage payments for
health insurance for the same 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.
In the event that Mr. Kurkiewicz terminates his employment without cause,
or his employment is terminated for cause, death or disability, then he (or his
estate) will receive earned and unpaid salary accrued to the date of
termination.
On April 1, 1997 Mr. Kurkiewicz entered into an amendment to his
Employment Agreement. Under the Amendment Mr. Kurkiewicz's salary is reduced
to $92,250 and the "termination without Cause" has been revised to read
"...shall be entitled to receive monthly base salary payments for six (6)
months from date of termination. This Agreement shall become effective on the
date that Sun and the Corporation execute the Stock Purchase Agreement.
WILLIAM R. HURD, the President and Chief Operating Officer of the
Corporation, entered into an employment agreement with the Corporation expiring
December 6, 2000, subject to automatic renewal for successive one-year terms
unless terminated by the Corporation or Mr. Hurd upon 90 days notice prior to
the end of the initial term or the renewal terms, as the case may be. In
addition Mr. Hurd may receive an annual bonus to be based upon performance
specifications and/or goals to be agreed upon by the Corporation and Mr. Hurd,
with the bonus payable to Mr. Hurd for any year of employment to be not more
than 30% of his base salary for such year.
Under the employment agreement, Mr. Hurd may, upon giving 30 days written
notice, terminate the agreement in the event there is a change of control or
ownership (as defined in the employment agreement) of the Corporation and his
powers and duties significantly change or he has good reason (as defined in the
employment agreement) to terminate or, as a result of the change of control or
ownership, Mr. Hurd reasonably determines that he is unable to exercise or
perform his powers, functions and duties. In the event of such termination, Mr.
Hurd will receive (i) a lump sum severance payment equal to his base salary for
36 months at the rate payable at the time notice of termination was given, (ii)
the bonus which he would otherwise be entitled to for the year in which his
employment is terminated, and (iii) the immediate vesting in any stock option
which would have been exercisable at the close of the year during which the
change of control occurred. Based upon Mr. Hurd's current base salary, the
Corporation estimates that the lump sum severance payment payable to Mr. Hurd
under this provision would be approximately $502,836 for the present fiscal
year.
In the event that Mr. Hurd terminates his employment for cause not
attributable to himself, or if the Corporation terminates the Agreement without
cause, then he shall be entitled to receive
16
monthly base salary payments for eighteen (18) months from the date of
termination, and the Corporation shall continue premium coverage payments for
health and life insurance for the same 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.
In event that Mr. Hurd terminates his employment without cause, or his
employment is terminated for cause, death or disability, then he (or his
estate) will receive earned and unpaid salary accrued to the date of
termination.
On April 1, 1997 Mr. Hurd entered into an amendment to his Employment
Agreement. Under the Amendment Mr. Hurd's salary is reduced to $120,000 and
the "termination without Cause" has been revised to read "...shall be entitled
to receive monthly base salary payments for six (6) months from date of
termination. In addition there shall be no change in control upon signing of
final documents with Sun Pharmaceutical. This Agreement shall become effective
on the date that Sun and the Corporation execute the Stock Purchase Agreement.
MR. HAMMER, the Chief Financial Officer, Treasurer and Secretary of the
Corporation, entered into a five-year employment agreement with the Corporation
expiring July 1, 1999, subject to automatic renewal for successive one-year
terms unless terminated by the Corporation or Mr. Hammer, upon 30 days written
notice prior to the end of the initial term or the renewal terms, as the case
may be.
In the event that Mr. Hammer terminates his employment for cause not
attributable to himself, or if the Corporation terminates the agreement without
cause, then he shall be entitled to receive monthly base salary payments for
twelve (12) months from the date of termination, and the Corporation shall
continue premium coverage payments for health insurance for the same 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.
In event that Mr. Hammer terminates his employment without cause, or his
employment is terminated for cause, death or disability, then he (or his
estate) will receive earned and unpaid salary accrued to the date of
termination.
On April 1, 1997 Mr. Hammer entered into an amendment to his Employment
Agreement. Under the Amendment Mr. Hammer's salary is reduced to $90,000 and
the "termination without Cause" has been revised to read "...shall be entitled
to receive monthly base salary payments for six (6) months from date of
termination. This Agreement shall become effective on the date that Sun and
the Corporation execute the Stock Purchase Agreement.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
C. Arnold Curry and Cara J. Curry guaranteed the Corporation's
indebtedness to the Economic Development Corporation of the City of Detroit
(the "EDC") in the aggregate principal amount of approximately $9.1 million in
connection with the funding of the construction of the Corporation's
pharmaceutical manufacturing facility and executive offices.
Additionally, in 1994, Dr. Curry agreed to indemnify the Corporation for a
defalcation by the Corporation's former controller, who is Dr. Curry's son.
Through December 31, 1995, the Corporation had accrued approximately $623,202
in damages, costs and expenses. Of this amount Dr. Curry has paid the
Corporation approximately $568,202 pursuant to his indemnification and the
Corporation has agreed to waive the difference. The Corporation has been
notified that the SEC has uncovered a minimum of $300,000 in further
defalcation which took place in 1993 and before.
The Corporation borrowed from David A. Hagelstein the principal sum of
$200,000 represented by its Demand Promissory Note dated November 29, 1994,
bearing interest at the annual rate equal to 2% over the prime rate announced
from time to time by Comerica Bank ("Prime plus two"), payment of which was
personally guaranteed by C. Arnold Curry, M.D. On January 12, 1995, Mr.
Hagelstein advanced an additional $300,000 by means of a direct payment to the
vendor of certain equipment purchased by and delivered to Caraco for $285,237
and a direct payment to Caraco of $14,763. The foregoing $200,000 Demand
Promissory Note was replaced on January 12, 1995 by a new $500,000 Demand
Promissory Note, which bears interest at Prime plus two and is secured by a
security interest in the Corporation's accounts receivable and certain existing
equipment and a purchase money security interest in certain additional
equipment then to be acquired by Caraco. In February 1995 Mr. Hagelstein,
under a promissory note, purchased by and delivered to Caraco totalling
$230,000. On June 30, 1995 the $730,000 in notes were exchanged for 584,000
shares of the Corporation's common stock. Mr. Hagelstein also undertook to
advance an additional $500,000 to Caraco upon the occurrence of certain events.
On August 21, 1996 the Corporation borrowed from Mr. Hagelstein $100,000,
which bears interest at 10% and is secured by a security interest in certain
existing equipment of the Corporation. On November 15, 1996 Mr. Hagelstein
advanced a loan to the Corporation in the amount of $90,000 which bears
interest at 10% and is secured by a security interest in certain existing
equipment of the Corporation. On February 11, 1997 Mr. Hagelstein further
advanced a loan to the Corporation in the amount of $200,000 which bears
interest at 10% and is secured by a security interest in certain existing
equipment of the Corporation.
The Corporation borrowed from Jay F. Joliat the principal sum of $250,000
represented by its Secured Promissory Note dated February 15, 1996, bearing
interest at 6.0% per annum secured by a security interest in certain equipment
associated with a packaging line.
18
The loan is due and payable on or before February 15, 1999. In consideration of
such loan, Mr. Joliat exchanged the debt for 111,111 shares of common stock and
was granted 111,111 warrants exercisable at one warrant for one share of
Common Stock. In connection with the conversion to common stock for each share
converted, Mr. Joliat shall receive five (5) warrants with the same terms and
conditions noted above.
On August 21, 1996, October 18, 1996, November 15, 1996, December 19,
1996, January 30, 1997 and February 3, 1997 respectively borrowed $100,000,
$300,000, $100,000, $65,000, $100,000, $300,000 each bears interest at 10% and
is secured by a security interest in certain existing equipment of the
Corporation. On January 16, 1997 the $65,000 loan was paid back.
On August 21, 1996 the Corporation borrowed from Mr. Morris $100,000,
which bears interest at 10% and is secured by a security interest in certain
existing equipment of the Corporation. On November 15, 1996 Mr. Morris
advanced a loan to the Corporation in the amount of $100,000 which bears
interest at 10% and is secured by a security interest in certain existing
equipment of the Corporation.
COMPLIANCE WITH SECTION 16 (A)
To the Corporation's knowledge based solely on review of the copies of
reports on Form 3, 4 and 5 required by Section 16(a) of the Securities Exchange
Act of 1934, as amended, and written representations furnished to the
Corporation, all of the directors, officers and persons who own more than ten
percent of the Corporation's Common Stock filed the Forms 3 and Forms 4
required by Section 16(a) in a timely manner.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Effective November 6, 1995 the Corporation dismissed Grant Thornton LLP as
its principal accountant to audit its financial statements. On November 8,
1995, the Board of Directors of the Corporation ratified the approval of the
appointment of Rehmann Robson effective November 6, 1995 as the Corporation's
principal independent accountants for the year ending December 31, 1995. The
decision to invite proposals for a change in accountants was recommended by the
Board of Directors on May 10, 1995.
The reports on the financial statements of Grant Thornton LLP on the
Corporation for either of the past two years did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to audit scope
or accounting principles.
During the Corporation's two most recent years ended December 31, 1993 and
1994, and any subsequent interim period preceding the former accountant's
dismissal, the Corporation had no disagreements with the former accountants on
any matter of accounting principles
19
or practices, financial statement disclosure or auditing scope or procedure.
Rehmann Robson audited the Corporation's financial statements for the year
ended December 31, 1996. Representatives of Rehmann Robson are expected to be
present at the Annual Meeting and will be given the opportunity to make a
statement if they desire to do so. It is also expected that they will be
available to respond to appropriate questions from stockholders at that time.
1997 ANNUAL MEETING
Shareholders may present proposals to be considered for inclusion in the
Proxy Statement for the 1997 Annual Meeting of the Shareholders provided such
proposals are submitted in accordance with all applicable rules and regulations
of the SEC and received by the Corporation no later than December 10, 1997.
Allan J. Hammer, Secretary
Detroit, Michigan
April 22, 1997
20
APPENDIX A
Section 5 of the 1993 Stock Option Plan shall be amended to read as follows:
5. Shares Subject to Plan. Subject to adjustments as provided
in Section 7b and 8 hereof, the aggregate number of shares of common
stock of the Corporation ("Shares") as to which Options may be
granted under the Plan shall not exceed 550,000 shares.
21
APPENDIX B
- --------------------------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
- ------------------------------------------------------------------
Name Caraco Pharmaceutical Laboratories, Ltd.
Jennifer Evans
- ------------------------------------------------------------------
Address
1150 Elijah McCoy Drive
- ------------------------------------------------------------------
City State Zip Code
Detroit MI 48202
- ------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO THE NAME AND ADDRESS YOU ENTER ABOVE EFFECTIVE DATE:
- ------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is:
2. The identification number assigned by the Bureau is: 345-364
3. The location of the registered office is:
1150 Elijah McCoy Drive Detroit, Michigan 48202
- -------------------------------------------------------- -------------
(Street Address) (City) (Zip Code)
4. Article III, Section 1 of the Articles of Incorporation is hereby amended
--------------
to read as follows:
1. The total authorized capital stock is:
Common Shares 30,000,000
Preferred Shares 5,000,000
22
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS OR
TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. / / The foregoing amendment to the Articles of Incorporation was duly
adopted on the _________ day of __________________, 19 ________, in accordance
with the provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the Board of Directors or Trustees.
Signed this________day of _____________, 19_______________.
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
________________________________ ________________________________
(Signature) (Signature)
________________________________ ________________________________
(Type or Print Name) (Type or Print Name)
b. /X/ The foregoing amendment to the Articles of Incorporation was duly
adopted on the _________ day of__________________, 19 __________. The
amendment: (check one of the following)
/X/ was duly adopted in accordance with Section 611(2) of the Act by the vote
of the shareholders if a profit corporation, or by the vote of the shareholders
or members if a nonprofit corporation, or by the vote of the directors if a
nonprofit corporation organized on a nonstock directorship basis. The
necessary votes were cast in favor of the amendment.
/ / was duly adopted by the written consent of all directors pursuant to
Section 525 of the Act and the corporation is a nonprofit corporation organized
on a nonstock directorship basis.
/ / was duly adopted by the written consent of the shareholders or members
having not less than the minimum number of votes required by statue in
accordance with Section 407(1) and (2) of the Act if a nonprofit corporation,
or Section 407(1) of the Act if a profit corporation. Written notice to
shareholders who have not consented in writing has been given. (Note: Written
consent by less than all of the shareholders or members is permitted only if
such provision appears in the Articles of incorporation.)
/ / was duly adopted by the written consent of all the shareholders or members
entitled to vote in accordance with section 407(3) of the Act if a nonprofit
corporation, or Section 407(2) of the Act if a profit corporation.
Signed this______________ day of _____________, 19 ______________
By_______________________________________________________________
(Only Signature of President, Vice-President, Chairperson, or
Vice-Chairperson)
_________________________________________________________________
(Type or Print Name) (Type or Print Title)
23
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
The undersigned shareholder hereby appoints Jennifer Evans and Allan J.
Hammer, 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 May 21, 1997 at 10:00
a.m. at the Hotel St. Regis, 3071 W. Grand Blvd., Detroit, MI 48202, and at any
adjournment 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 Common Shares and
ratifies any and all actions taken by the above-named proxies hereunder.
Set forth on the reverse side are the number of Common Shares held of
record by the undersigned as of April 22, 1997. You are asked to vote on the
business identified below.
Indicate your vote by marking an (X) in the appropriate boxes below. The
Board of Directors recommends voting FOR each of the nominees named in the
following proposal.
ITEM
1. ELECTION OF DIRECTORS
/ / FOR / / FOR
Jay F. Joliat William R. Hurd
/ / WITHHOLD / / WITHHOLD
2. Increasing the number of shares authorized to be issued under the 1993
Stock Option Plan from 450,000 to 550,000
/ / FOR / / AGAINST / / ABSTAIN
3. Amending the Company's Amended and Restated Articles of Incorporation to
increase the number of authorized shares of Common Stock from 20,000,000
to 30,000,000
/ / FOR / / AGAINST / / ABSTAIN
__________(To be signed and dated on the reverse side)______________
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES SHALL BE VOTED FOR EACH OF THE NOMINEES NAMED
IN THE PROPOSAL LISTED ABOVE, AND FOR OR AGAINST ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE CHECK BOX:
DATED:__________________, 1997
__________________________________________
Signature of Shareholder
__________________________________________
Signature(s) of Joint Owner(s)
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.
PLEASE RETURN THIS PROXY IN THE ENCLOSED ENVELOPE