UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/ Filed by a Party other than the Registrant / /
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 Rule 14a-11(c) or Rule 14a-12.
KENDLE INTERNATIONAL INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:........................................................
(2) Aggregate number of securities to which transaction
applies:........................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined): ..................................
(4) Proposed maximum aggregate value of transaction:................
(5) Total fee paid:.................................................
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:.........................................
(2) Form, Schedule or Registration Statement No.:...................
(3) Filing Party:...................................................
(4) Date Filed:.....................................................
[Kendle logo]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 2005
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TO THE SHAREHOLDERS OF KENDLE INTERNATIONAL INC.:
The Annual Meeting of Shareholders of Kendle International Inc. (the
"Company") will be held Thursday, May 5, 2005, at 9:30 a.m. Eastern Time in
the Green Room at the Aronoff Center for the Arts, 650 Walnut Street,
Cincinnati, Ohio for the following purposes:
1. To elect eight directors to hold office for the ensuing year or until
their respective successors are elected and qualified;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for 2005; and
3. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof.
The Board of Directors of the Company has designated the close of
business on March 17, 2005, as the record date for the determination of
shareholders entitled to receive notice of, and to vote at, the meeting or
any adjournment thereof. Only shareholders of record of the Company's Common
Stock at the close of business on that date will be entitled to vote.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to be personally present at the meeting, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed
envelope. If you later desire to revoke your proxy, you may do so at any
time before it is exercised.
By Order of the Board of Directors,
/s/ Douglas W. Campbell
Douglas W. Campbell
Secretary
DATED: APRIL 1, 2005
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WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE, SIGN AND
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PROMPTLY RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. A PROXY MAY BE
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REVOKED BY WRITTEN NOTICE OF REVOCATION, BY SUBMISSION OF A LATER PROXY OR
BY ATTENDING THE MEETING AND VOTING IN PERSON (ALTHOUGH PRESENCE AT THE
ANNUAL MEETING WILL NOT IN AND OF ITSELF CONSTITUTE REVOCATION OF THE
PROXY).
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[Kendle Logo]
1200 CAREW TOWER
441 VINE STREET
CINCINNATI, OHIO 45202
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION
The Board of Directors of Kendle International Inc. (the "Company") is
requesting your proxy for use at the Annual Meeting of Shareholders on May
5, 2005, and at any postponement or adjournment thereof (the "Annual
Meeting"), pursuant to the foregoing Notice. This Proxy Statement and the
accompanying proxy card are being mailed to shareholders with the Company's
2004 Annual Report to Shareholders on or about April 5, 2005.
VOTING AT THE ANNUAL MEETING
As of March 17, 2005, the record date for determining shareholders
entitled to notice of and to vote at the Annual Meeting, the Company had
13,335,006 shares of Common Stock, no par value ("Common Stock"), issued and
outstanding. Each share is entitled to one vote. Only shareholders of record
at the close of business on March 17, 2005, will be entitled to vote at the
Annual Meeting.
A quorum is necessary to conduct business at the Annual Meeting. To
reach a quorum, at least a majority of the outstanding shares of Common
Stock eligible to vote must be represented at the Annual Meeting, either in
person or by proxy. Abstentions from voting and broker non-votes (defined
below) will be included in determining the presence of a quorum, but, as
described below, will not count for voting purposes.
Shareholders may vote in person or by proxy at the Annual Meeting.
Proxies given may be revoked at any time prior to the Annual Meeting by
filing with the Company's Secretary, Douglas W. Campbell, either a written
revocation or a duly executed proxy card bearing a later date, or by
appearing at the Annual Meeting and voting in person (although presence at
the Annual Meeting will not in and of itself constitute revocation of the
proxy). You may receive more than one proxy or voting card depending on how
you hold your shares. Shares registered in your name are covered by one
card. If you hold shares through someone else, such as a stockbroker, you
may get material from them asking how you want to vote. With the exception
of the election of directors, for which a plurality is required, the vote
required on all matters to be voted upon is a majority of shares actually
voted. Shares of Common Stock represented by properly executed proxies
received in the accompanying form will be voted in accordance with the
instructions contained therein. In the absence of contrary instructions,
such shares will be voted: (1) to elect the director nominees named in this
Proxy Statement; and (2) to ratify the appointment of Deloitte & Touche LLP
as the Company's independent public accountants. If any other matters
properly come before the Annual Meeting, each proxy will be voted at the
discretion of the individuals named as proxies on the proxy card.
In the event a broker, bank, custodian, nominee or other record holder
of shares indicates on a proxy that it does not have discretionary authority
to vote certain shares on a particular matter(s) (a "broker non-vote"),
those shares will be considered as present for the purposes of determining a
quorum but not entitled to vote with respect to the matter(s).
PRINCIPAL SHAREHOLDERS
The following shareholders are the only persons known by the Company to
own beneficially at least five percent (5%) of its outstanding Common Stock
as of February 28, 2005:
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
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Common Stock Brown Capital Management, Inc.(2)........... 1,400,250 10.580%
1201 N. Calvert St.
Baltimore, MD 21202
Common Stock Candace Kendle(3)........................... 1,226,123 9.208%
1200 Carew Tower
441 Vine St.
Cincinnati, OH 45202
Common Stock Heartland Advisors, Inc. and
William J. Nasgoritz(4)................... 1,055,000 7.970%
789 Northwater Street
Milwaukee, WI 53202
Common Stock Christopher C. Bergen(5).................... 1,001,243 7.519%
1200 Carew Tower
441 Vine St.
Cincinnati, OH 45202
Common Stock Dimensional Fund Advisors Inc.(6)........... 980,018 7.410%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Common Stock Kennedy Capital Management, Inc.(7)......... 775,492 5.900%
10829 Olive Blvd.
St. Louis, MO 63141
Common Stock Wellington Management Company, LLP(8)....... 764,200 5.775%
75 State Street
Boston, MA 02109
<FN>
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(1) For each of Dr. Kendle and Mr. Bergen, percentages for each such owner are based on the following: (i)
13,305,931 shares of Common Stock issued and outstanding as of February 28, 2005; plus (ii) shares of
Common Stock that such owner has the right to acquire within 60 days of February 28, 2005, pursuant to
the exercise of stock options. For the other beneficial owners listed in the table, the percentages
listed reflect disclosures in the Schedule 13G filed by each respective beneficial owner.
(2) This information is taken from a Schedule 13G filed by the beneficial owner(s) with the Securities and
Exchange Commission (the "Commission") to report Common Stock ownership as of December 31, 2004. In this
Schedule 13G, the beneficial owner(s) reported having sole voting power with respect to 947,250 shares,
shared voting and shared dispositive power with respect to 0 shares and sole dispositive power with
respect to 1,400,250 shares.
(3) This total amount of beneficial ownership includes: (i) 10,190 shares for which Dr. Kendle holds options
exercisable within 60 days of February 28, 2005; and (ii) restricted stock awards in the amount of
20,000 shares of Common Stock, 13,333 of which have not vested. This total amount does not include: (i)
1,001,243 shares of Common Stock beneficially owned by Mr. Bergen, Dr. Kendle's husband; (ii) 18,236
shares held directly by Hazel Kendle, Dr. Kendle's mother; and (iii) 598,200 shares of Common Stock held
in trust by the Kendle Bryan and Mark Brettschneider Irrevocable Stock Trusts, under which the children
of Dr. Kendle are beneficiaries. Dr. Kendle does not exercise voting or investment control over either
trust.
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(4) This information is taken from a Schedule 13G filed by the beneficial owner(s) with the Commission to
report Common Stock ownership as of December 31, 2004. In this Schedule 13G, the beneficial owner(s)
reported having shared voting power with respect to 1,023,800 shares, shared dispositive power with
respect to 1,055,000 shares and sole voting and sole dispositive power with respect to 0 shares.
(5) This total amount of beneficial ownership includes: (i) 9,940 shares for which Mr. Bergen holds options
exercisable within 60 days of February 28, 2005; and (ii) restricted stock awards in the amount of 9,500
shares of Common Stock, 6,500 of which have not vested. This total amount does not include: (i)
1,226,123 shares of Common Stock beneficially owned by Dr. Kendle, Mr. Bergen's wife; and (ii) 598,200
shares of Common Stock held in trust by the Kendle Bryan and Mark Brettschneider Irrevocable Stock
Trusts, under which the children of Dr. Kendle, Mr. Bergen's wife, are beneficiaries. Mr. Bergen does
not exercise voting or investment control over either trust.
(6) This information is taken from a Schedule 13G filed by the beneficial owner(s) with the Commission to
report Common Stock ownership as of December 31, 2004. In this Schedule 13G, the beneficial owner(s)
reported having sole voting and sole dispositive power with respect to 980,018 shares and shared voting
and shared dispositive power with respect to 0 shares.
(7) This information is taken from a Schedule 13G filed by the beneficial owner(s) with the Commission to
report Common Stock ownership as of December 31, 2004. In this Schedule 13G, the beneficial owner(s)
reported having sole voting power with respect to 665,692 shares, sole dispositive power with respect to
775,492 shares and shared voting and shared dispositive power with respect to 0 shares.
(8) This information is taken from a Schedule 13G filed by the beneficial owner(s) with the Commission to
report Common Stock ownership as of December 31, 2004. In this Schedule 13G, the beneficial owner(s)
reported having shared voting power with respect to 564,500 shares, shared dispositive power with
respect to 737,100 shares and sole voting and sole dispositive power with respect to 0 shares.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
The Board is nominating for re-election the following current
directors: Dr. Candace Kendle, Christopher C. Bergen, Robert R. Buck, Dr. G.
Steven Geis, Dr. Donald C. Harrison, Dr. Timothy E. Johnson, Dr. Frederick
A. Russ and Robert C. Simpson. All of the foregoing nominees, except Dr.
Kendle and Mr. Bergen, are independent directors as defined by the Nasdaq
listing standards. All directors elected at the Annual Meeting will be
elected to hold office until the next Annual Meeting or until their
successors are elected and qualified.
During 2004, the Board of Directors held four meetings and acted by
unanimous written consent on one occasion. Directors are expected to attend
the Annual Meeting of Shareholders and all Board of Directors meetings and
meetings of committees on which they serve. During the last fiscal year,
each director attended at least seventy-five percent (75%) of the aggregate
of the total number of meetings of the Board of Directors and all committees
on which he or she served. Six of the eight current directors and nominees
attended the 2004 Annual Meeting of Shareholders.
Proxies will be voted in favor of election of the nominees named herein
unless authority to vote is withheld. If any of the nominees becomes unable
to accept election or declines to serve, neither of which the Board
anticipates, it is intended, in the absence of contrary direction, that the
proxies will be voted for the balance of those named above and for
substitute nominee(s) as the Board may designate. The proxies will in no
event be voted for a greater number of nominees than eight. The eight
nominees receiving the highest number of votes will be elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES LISTED BELOW.
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INFORMATION ABOUT NOMINEES
CANDACE KENDLE, PHARMD, 58, co-founded the Company in 1981 and has
served as Chief Executive Officer since its incorporation. Dr. Kendle has
been Chairman of the Board since 1991. From 1979 through 1981, she served as
Clinical Associate Professor of Pediatrics at The University of Pennsylvania
School of Medicine; Clinical Assistant Professor at Philadelphia College of
Pharmacy and Sciences; and Director, Department of Pharmacy, The Children's
Hospital of Philadelphia. She serves as a director of H. J. Heinz Company, a
food products manufacturer, and UMD, Inc., a privately owned medical device
company. She also serves on the Board of Trustees of University of
Cincinnati. She has published more than 15 scientific articles. She is the
wife of Christopher C. Bergen, President and Chief Operating Officer of the
Company.
CHRISTOPHER C. BERGEN, 54, co-founded the Company in 1981 and since its
incorporation has served as a director and its President and Chief Operating
Officer. From 1977 to 1981, Mr. Bergen served in various capacities at The
Children's Hospital of Philadelphia, most recently as Associate Vice
President. He is the husband of Candace Kendle, Chairman and Chief Executive
Officer of the Company.
ROBERT R. BUCK, 57, was appointed as a director of the Company in June
2003. Mr. Buck formerly served as a director of the Company from 1998
through August 2002. He currently serves as President and Chief Executive
Officer of Beacon Roofing Supply, Inc. and sits on its Board of Directors.
From 1982 through January 2003, he served in a number of management and
senior management positions with Cintas Corporation, most recently as
President of its Uniform Rental Division. He serves as a director of
Multi-Color Corporation, a provider of decorating solutions and packaging
services.
G. STEVEN GEIS, PHD, MD, 53, was appointed as a director of the Company
in November 2002. Now retired, Dr. Geis served in a number of management and
senior management positions with Pharmacia & Upjohn Company from 1985 to
July 2002, most recently as Group Vice President: Arthritis, Cardiovascular
and Oncology Clinical Development from March 2001 to July 2002 and Vice
President: Arthritis Clinical Development from August 1998 through March
2001. He has authored or co-authored numerous journal articles covering
several therapeutic areas.
DONALD C. HARRISON, MD, 71, was appointed as a director of the Company
in November 2001. Dr. Harrison is Senior Vice President and Provost for
Health Affairs Emeritus at University of Cincinnati. He formerly served as
the Senior Vice President and Provost for Health Affairs at University of
Cincinnati from 1986 through 2002 and also served as the Chief Executive
Officer of University of Cincinnati Medical Center. He also is a practicing
cardiologist on a part-time basis and since 2004 has been a general partner
in Charter Life Sciences, a California-based venture capital firm for which
he manages the Cincinnati office. His professional experience includes 26
years at Stanford University School of Medicine and Stanford University
Hospital, where he was Chief of Cardiology from 1967 to 1968. He is past
national President of the American Heart Association and has served as a
director for several not-for-profit organizations. He also serves as a
director for start-up medical device and biotechnology companies, including
UMD, Inc., Medical Education and Consultation Inc., AtriCure, Inc. and
EnteroMedics, Inc.
TIMOTHY E. JOHNSON, PHD, 62, was appointed as a director of the Company
in November 2002. Dr. Johnson is a financial and investment consultant and
has served as President of Johnson Investment Counsel, Inc. since 1965.
Johnson Investment Counsel, Inc. is a registered investment adviser with the
Commission and manages portfolio assets for endowments, foundations,
corporations, individuals and pension and profit sharing plans. He also
serves as a Professor of Finance at University of Cincinnati where he has
taught since 1970. He serves as a director or trustee for several civic and
nonprofit organizations. He has written several articles on investment and
financial management.
FREDERICK A. RUSS, PHD, 60, was appointed as a director of the Company
in November 2002. Dr. Russ has served as the Senior Vice Provost for
University of Cincinnati since October 1, 2004. From 1994 through September
2004, he served as the Dean of the College of Business Administration at
University of Cincinnati. He serves on the Board of Directors of Charles &
Colvard, Ltd., a manufacturer and supplier of specialty jewelry, and
formerly served as its non-executive Chairman of the Board. He also serves
as a
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director for the Economics Center for Education & Research. He has
co-authored three textbooks and has written numerous articles on marketing
strategy and the behavior of consumers and sales personnel.
ROBERT C. SIMPSON, 73, was appointed as a director of the Company in
July 2001. Now retired, Mr. Simpson has more than 40 years of global drug
development experience. Most recently, he was Group President and Director
of West Pharmaceutical Services, Inc., a manufacturer of specialty packaging
products for the healthcare industry. He worked for West Pharmaceutical from
1978 to 1991. Prior to 1978, he spent 20 years with Pfizer Inc., serving in
a number of senior management positions, including Executive Vice President
of European Operations.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not separately
compensated for serving as directors. Directors who are not employees of the
Company receive compensation in the form of cash retainers, shares of Common
Stock and options to purchase shares of Common Stock, all of which are
described in more detail below.
Non-employee directors are paid retainers of $3,000 for each Board
meeting attended and $1,500 for each committee meeting attended. Their
compensation is paid quarterly, in arrears, in the form of cash and shares
of Common Stock in lieu of cash under the 2003 Directors' Compensation Plan.
This plan specifies that non-employee directors will receive cash for fifty
percent (50%) of the total retainer owed and shares of Common Stock in lieu
of cash for the balance of the retainer owed.
In addition to compensation under the 2003 Directors' Compensation
Plan, directors are eligible to receive non-qualified, immediately
exercisable options to purchase shares of Common Stock under the Company's
1997 Stock Option and Stock Incentive Plan. Under this plan, each
non-employee director is granted an option to purchase 5,000 shares of
Common Stock on the date of such director's first election or appointment to
serve on the Board. Upon each annual election to the Board thereafter, a
director will receive an option to purchase such number of shares of Common
Stock, if any, as determined by the Board. In 2004, the Board approved a
grant of options to purchase 5,000 shares of Common Stock to each
non-employee director who was elected to the Board at the 2004 Annual
Meeting of Shareholders. The exercise price for all such options is the fair
market value of Common Stock on the grant date.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established three committees that assist the
Board in discharging its responsibilities. These committees, their members
and functions are discussed below. The Board of Directors does not have an
executive committee.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee (the
"Compensation Committee") is responsible for monitoring the performance of
executive officers, review of the Company's compensation plans and general
review of the Company's employee compensation policies, administration of
the Company's stock-related benefit plans and succession plans for senior
management. The Compensation Committee's specific responsibilities and
duties are set forth in its Charter, which is available at the Company's Web
site at www.kendle.com under the Corporate Governance heading within the
section entitled "Investors." During 2004, the Compensation Committee met
two times and took action by unanimous written consent three times.
Frederick A. Russ and Robert C. Simpson served on the Compensation Committee
in 2004, and the Board added G. Steven Geis to the Compensation Committee in
February 2005 and designated him as Chairman. Each of the Compensation
Committee's members is an independent director as defined by the Nasdaq
listing standards.
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MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE
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COMPENSATION
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The Company's executive compensation program is designed to align
executive compensation with the achievement of strategic business goals that
promote the long-term financial growth of the Company. This program is
designed to attract and retain the highest caliber executive officers, to
maximize shareholder value and to provide a compensation package that
recognizes individual contributions as well as overall Company performance.
The Compensation Committee reviews the executive compensation program
annually in relation to the Company's annual financial goals and
performance.
The key elements of the Company's 2004 executive compensation program
consisted of base salary; the 2002 Profit Share Plan, which the Board
ratified and adopted for 2004 (the "Profit Share Plan"); and the 1997 Stock
Option and Stock Incentive Plan. The compensation of Dr. Candace Kendle,
Chief Executive Officer, consists of these same elements.
BASE SALARY. At a meeting held April 6, 2004, the Compensation
Committee set salaries, effective March 24, 2004, for the Named Executives
(defined below in the section entitled "Executive Compensation"), except Mr.
Higginbotham and Mr. Campbell whose respective salaries were set upon
joining the Company in 2004 and were not eligible for review. In
establishing these salaries at the April 2004 meeting, the Compensation
Committee reviewed recommendations of management against the pay practices
of comparable companies, including the Company's competitors. The
Compensation Committee considered corporate profitability, position
responsibility levels and individual qualifications and performance. The
Compensation Committee also considered efforts from the Named Executives in
connection with implementing the Company's new operating structure.
BONUSES. Pursuant to the Company's Profit Share Plan, annual incentive
awards may be paid to eligible employees of the Company on the basis of
achievement of specified Company financial results, such as revenue and
earnings per share thresholds and targets, or other discretionary factors,
including a general assessment of an employee's performance. Awards under
this plan are paid in cash. The eligible plan participants, including the
Named Executives, are assigned target awards, expressed as a percentage of
base salary, that are payable at the discretion of the Profit Share Plan's
Administration Committee or upon achievement of applicable performance
criteria. With respect to the Named Executives, the Compensation Committee
also must approve any bonus awards. In determining bonuses of the Chief
Executive Officer and the other Named Executives, the Compensation Committee
considered the Company's performance under four areas - Finance, Sales and
Marketing, Operations and Personnel - and several metrics under each of
these areas. For 2004, the Named Executives did not receive any bonus awards
under the Company's Profit Share Plan.
STOCK OPTIONS, RESTRICTED STOCK AWARDS AND OTHER PERFORMANCE AWARDS.
Under the Company's 1997 Stock Option and Stock Incentive Plan, the
Compensation Committee may grant stock options, restricted and unrestricted
stock awards and other performance awards to the Company's employees,
including the Named Executives. On April 6, 2004, the Compensation Committee
approved restricted stock awards of 10,000 shares to Dr. Kendle, 5,000
shares to Mr. Bergen and 3,000 shares to Mr. Brenkert. These restricted
stock awards vest over three (3) years in equal percentages. Additionally,
on June 18, 2004, the Compensation Committee granted to Simon Higginbotham
options to purchase 15,000 shares of Common Stock with an exercise price
equal to the fair market value of the Common Stock on the date of grant. On
August 5, 2004, the Compensation Committee granted to Douglas W. Campbell
options to purchase 15,000 shares of Common Stock with an exercise price
equal to the fair market value of the Common Stock on the date of grant. The
stock option grants were made to Mr. Higginbotham and Mr. Campbell in
conjunction with their acceptance of employment with the Company. All of the
foregoing option grants become exercisable at a rate of twenty percent (20%)
per year over five years beginning one year from the date of grant.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. As Chairman and Chief
Executive Officer, Dr. Kendle receives compensation consisting of three
basic components: salary, bonus and equity compensation. In 2004, Dr. Kendle
received the salary indicated on the Summary Compensation Table in the
section
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entitled "Executive Compensation." This salary was based on the Compensation
Committee's review and consideration of Dr. Kendle's individual
qualifications and performance and the Company's performance, as well as Dr.
Kendle's efforts in connection with implementing the Company's new operating
structure. Dr. Kendle is eligible for a target bonus, expressed as a
percentage of salary, on the basis of achievement of specified Company
financial results, such as revenue and earnings per share thresholds and
targets, or other discretionary factors, including a general assessment of
her individual performance. The Compensation Committee did not award Dr.
Kendle a bonus for 2004. In addition to cash compensation and pursuant to
the 1997 Stock Option and Stock Incentive Plan, Dr. Kendle received a
restricted stock award of 10,000 shares of Common Stock on April 6, 2004. In
determining Dr. Kendle's salary and equity compensation, the Compensation
Committee also reviewed and considered compensation practices of comparable
companies.
POLICY ON SECTION 162(m). Under Section 162(m) of the Internal Revenue
Code of 1986, as amended, a public company may not deduct compensation in
excess of $1 million paid to any of its Named Executives, unless such excess
amount is performance-based compensation satisfying certain rules. The
Company's 1997 Stock Option and Stock Incentive Plan is designed to qualify
under the compensation requirements of this provision. However, no
assurances can be made in this regard. Due to current salary levels and
anticipated bonus targets, the Compensation Committee believes that it is
unlikely that application of Section 162(m) will prevent the Company from
claiming a deduction for the amount of compensation paid to its Named
Executives.
Submitted by the Management Development and
Compensation Committee of the Board of
Directors
Frederick A. Russ
Robert C. Simpson
AUDIT COMMITTEE
The Audit Committee is comprised of Robert R. Buck (Chairman), Timothy
E. Johnson and Robert C. Simpson. During 2004, the Audit Committee met for
four regularly scheduled meetings and on four other occasions during which
the Audit Committee members met with the independent public accountants to
discuss financial statements related to the Company's quarterly and annual
reporting. The Audit Committee is responsible for engagement and oversight
of independent public accountants, supervision of matters relating to audit
functions and review of internal policies and procedures regarding audit,
accounting and other financial controls. The Audit Committee's specific
responsibilities and duties are set forth in its Charter, which is available
at the Company's Web site at www.kendle.com under the Corporate Governance
heading within the section entitled "Investors." Each of the members of the
Audit Committee is an independent director as defined by the Nasdaq listing
standards and is able to read and understand fundamental financial
statements. Mr. Buck has been designated as the Audit Committee financial
expert.
REPORT OF THE AUDIT COMMITTEE
-----------------------------
The Audit Committee, in accordance with its written charter adopted by
the Company's Board of Directors, assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During 2004, the
Audit Committee chairman, as a representative of the Audit Committee,
discussed the interim unaudited consolidated financial information contained
in each Quarterly Report on Form 10-Q with the Chief Financial Officer,
Controller and independent public accountants prior to the Company's filing
of each such Quarterly Report on Form 10-Q. The Audit Committee also
discussed the audited consolidated financial statements with management.
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In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from the independent public accountants a
formal written statement describing all relationships between the auditors
and the Company that might bear on the auditors' independence consistent
with Independence Standards Board Standard No. 1, "Independence Discussions
with Audit Committees," and discussed with the auditors any relationships
that may impact their objectivity and independence and satisfied itself as
to the auditors' independence. The Audit Committee has concluded that
Deloitte & Touche LLP's provision of non-audit services was compatible with
maintaining the independence of Deloitte & Touche LLP.
The Audit Committee also discussed with management and the independent
public accountants the quality and adequacy of the Company's internal
controls. In a meeting with the independent public accountants, the Audit
Committee reviewed the audit plans and audit scope and identified audit
risks.
The Audit Committee discussed and reviewed with the independent public
accountants all communications required by generally accepted auditing
standards, including those described in 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
public accountants' examination of the consolidated financial statements.
The Audit Committee reviewed the audited consolidated financial
statements of the Company as of and for the fiscal year ended December 31,
2004, with management and the independent public accountants. Management has
responsibility for the preparation of the Company's consolidated financial
statements and the independent public accountants have responsibility for
the examination of those statements.
Based on the above-mentioned review and discussions with management and
the independent public accountants, the Audit Committee recommended to the
Board that the Company's audited consolidated financial statements be
included in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, for filing with the Commission. The Audit Committee also
reappointed Deloitte & Touche LLP as the Company's independent public
accountants for 2005. The Board concurred with both of these
recommendations.
Submitted by the Audit Committee of the Board of Directors
Robert R. Buck
Timothy E. Johnson
Robert C. Simpson
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee (the "Nominating
Committee") is comprised of Frederick A. Russ (Chairman), G. Steven Geis and
Donald C. Harrison. Each of the members of the Nominating Committee is an
independent director as defined by the Nasdaq listing standards. During
2004, the Nominating Committee met two times and acted by unanimous written
consent on one occasion.
The Nominating Committee advises and makes recommendations to the Board
of Directors with respect to: (i) director candidates for election by
shareholders; (ii) candidates to fill vacancies on the Board of Directors;
(iii) committee assignments on the Board of Directors; (iv) Board
compensation issues; and (v) other matters related to corporate governance.
The Nominating Committee's duties are described in more detail in its
Charter, which is available at the Company's Web site at www.kendle.com
under the Corporate Governance heading within the section entitled
"Investors."
The Nominating Committee considers all potential candidates to serve on
the Board, including those potential candidates recommended for nomination
by shareholders. The Nominating Committee identifies candidates through a
variety of sources but generally does not engage third parties to identify
and
8
evaluate candidates. Shareholders desiring to submit recommendations for
nominations by the Committee should direct them to the Chairman of the
Nominating Committee in care of the Company at its address shown on the
cover page of this Proxy Statement. Each shareholder may nominate one
candidate for election as a director at next year's Annual Meeting of
Shareholders provided the shareholder: (i) is a shareholder of the Company
of record at the time of the giving of notice for the meeting, (ii) is
entitled to vote at the meeting in the election of directors, and (iii) has
given timely written notice of the nomination to the Company's Secretary.
The Nominating Committee will assess the qualifications of all
candidates for the Board on an equal basis. In identifying and considering
candidates for nomination to the Board of Directors, the Nominating
Committee considers, among other factors, quality of experience, the needs
of the Company and the range of talent and experience currently represented
on the Board.
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership of Common Stock as of February 28,
2005, by each director and Named Executive (defined in the "Executive
Compensation" section below) and by all directors and Named Executives as a
group.
SHARES BENEFICIALLY
OWNED(1)
-----------------------
TITLE OF CLASS NAME OF BENEFICIAL OWNER NUMBER PERCENT
- -------------- ------------------------ --------- -------
Common Stock Christopher C. Bergen(2)..................... 1,001,243 7.52%
Common Stock Karl Brenkert III(3)......................... 10,000 *
Common Stock Robert R. Buck............................... 17,412 *
Common Stock Douglas W. Campbell(4)....................... 400 *
Common Stock G. Steven Geis............................... 21,120 *
Common Stock Donald C. Harrison........................... 23,600 *
Common Stock Simon S. Higginbotham(5)..................... -- *
Common Stock Timothy E. Johnson........................... 38,091 *
Common Stock Candace Kendle(2)............................ 1,226,123 9.21%
Common Stock Frederick A. Russ............................ 17,920 *
Common Stock Robert C. Simpson(6)......................... 25,047 *
Common Stock All Directors and Named Executives as a group
(11 persons)............................... 2,380,956 17.74%
<FN>
- --------
* Less than 1%
(1) Percentage of beneficial ownership is based on 13,305,931 shares of Common Stock outstanding as of
February 28, 2005. The number of shares beneficially owned includes all vested and unvested restricted
shares and options to purchase shares of Common Stock, which are exercisable by such individuals within
60 days of February 28, 2005. The following shares subject to such options are included in the totals:
9,940 shares of Common Stock for Mr. Bergen; 6,000 shares of Common Stock for Mr. Brenkert; 10,000
shares of Common Stock for Mr. Buck; 10,000 shares of Common Stock for Dr. Geis; 20,000 shares of Common
Stock for Dr. Harrison; 15,000 shares of Common Stock for Dr. Johnson; 10,190 shares of Common Stock for
Dr. Kendle; 15,000 shares of Common Stock for Dr. Russ; and 20,000 shares of Common Stock for Mr.
Simpson. The following unvested restricted stock awards, which are subject to vesting over three years
from their respective dates of grant, are also included in the totals: 6,500 shares of Common Stock for
Mr. Bergen; 3,000 shares of Common Stock for Mr. Brenkert; and 13,333 shares of Common Stock for Dr.
Kendle.
(2) Shares of Common Stock beneficially owned do not include the following: (i) 598,200 shares of the
Company's Common Stock held by the Kendle Bryan and Mark Brettschneider Irrevocable Stock Trusts, and
(ii) 18,236 shares of Common Stock held directly by Hazel Kendle, Dr. Kendle's mother.
9
The children of Dr. Kendle are the trusts' beneficiaries, and neither Dr. Kendle nor Mr. Bergen exercise
voting or investment control over either trust.
(3) Mr. Brenkert, 57, joined the Company in October 2002 and, upon Timothy M. Mooney's retirement effective
December 31, 2002, was appointed Senior Vice President, Chief Financial Officer and Treasurer. From
November 2003 until May 2004, Mr. Brenkert also served as the Company's Secretary. Prior to Mr.
Brenkert's employment with the Company, he served as Vice President, Finance at Ryobi Technologies, Inc.
in 2001. From 1995 through 2000, Mr. Brenkert served as the Chief Financial Officer-Public
Transportation Services Division at Ryder Systems, Inc.
(4) Mr. Campbell, 41, joined the Company in April 2004 as Vice President, Secretary and Chief Legal Counsel.
From 1998 to 2004, Mr. Campbell served in several roles of increasing responsibility for Structural
Dynamics Research Corporation and its acquirer, Electronic Data Systems Corporation ("EDS"). Most
recently, Mr. Campbell served as Vice President and General Counsel for Unigraphics Solutions Inc., a
wholly owned subsidiary of EDS. Before 1998 Mr. Campbell was a partner with the law firm of Dinsmore &
Shohl LLP.
(5) Mr. Higginbotham, 44, joined the Company in January 2004 as Vice President and Chief Marketing Officer.
Prior to joining the Company, Mr. Higginbotham was employed by Quintiles Transnational Corp. from 1998
through 2003 in director-level roles in marketing and new business development. Prior to joining
Quintiles Transnational Corp., Mr. Higginbotham held senior-level marketing and product management
positions with Proctor & Gamble Pharmaceuticals and Schering Healthcare, Ltd.
(6) Includes 400 shares of Common Stock held by Mr. Simpson's spouse.
10
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid
for the last three fiscal years to individuals who served as executive
officers of the Company in 2004 (the "Named Executives").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------ -------------------------
AWARDS
OTHER -------------------------
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING COMPEN-
SALARY BONUS SATION(2) AWARD(S)(3) OPTIONS SATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) (1)($) ($) ($) (#) ($)
- --------------------------- ---- ------- ------ --------- ----------- ---------- ---------
Dr. Candace Kendle............ 2004 331,134 - - 83,000 - -
Chairman of the Board and 2003 310,125 43,000 - - 7,500 -
Chief Executive Officer 2002 290,338 - - 70,000 20,300 -
Christopher C. Bergen......... 2004 286,983 - - 41,500 - 12,934
President and Chief 2003 268,775 33,000 - - 7,500 16,978
Operating Officer 2002 251,815 - - 31,500 14,800 16,519
Simon S. Higginbotham(5)...... 2004 210,777 7,320 37,715 - 15,000 -
Vice President and Chief
Marketing Officer
Karl Brenkert III(6).......... 2004 198,892 - - 24,900 - 5,967
Senior Vice President, 2003 185,016 17,000 - - 15,000 5,304
Chief Financial Officer and 2002 28,820 - - - - -
Treasurer
Douglas W. Campbell(7)........ 2004 120,692 8,000 - - 15,000 3,600
Vice President, Secretary
and Chief Legal Counsel
<FN>
- --------
(1) The bonuses paid to Mr. Higginbotham and Mr. Campbell in 2004 reflect bonuses in connection with their
becoming employees of the Company.
(2) Perquisites or other personal benefits, if any, received from the Company by any of the Named Executives
were substantially less than the reporting thresholds established by the Commission (the lesser of
$50,000 or 10% of the individual's cash compensation), except for Mr. Higginbotham who received
reimbursements for relocation costs in the amount of $26,289 and a car allowance of $11,426.
(3) Restricted stock awards were granted in October 2002 as follows: 10,000 shares for Dr. Kendle and 4,500
shares for Mr. Bergen. Restricted stock awards were granted in May 2004 as follows: 10,000 shares for
Dr. Kendle, 5,000 shares for Mr. Bergen and 3,000 shares for Mr. Brenkert. These awards vest over three
years with one-third of the award vesting per year; however, as required by Commission rules and
regulations, the compensation reported in the table reflects compensation from the entire award in the
year that it was awarded. The compensation values of the portions of the awards that vested in 2004 were
as follows: $17,737 for Dr. Kendle and $7,980 for Mr. Bergen. Holders of restricted shares are entitled
to receive dividends, but the Company has not paid dividends to date. Based on the closing price of the
Company's shares of Common Stock on December 31, 2004, the values of the unvested portion of these
restricted stock awards on December 31, 2004, were as follows: 13,333 shares for Dr. Kendle with a value
of $117,330; 6,500 shares for Mr. Bergen with a value of $57,200; and 3,000 shares for Mr. Brenkert with
a value of $26,400.
(4) Compensation paid to Mr. Bergen represents insurance premium payments. Compensation paid to Mr. Brenkert
and Mr. Campbell represents the Company's contributions to the 401(k) plan in which all Company
employees generally are eligible to participate.
11
(5) A portion of Mr. Higginbotham's 2004 compensation was paid by a non-U.S. subsidiary of the Company
before he relocated to the United States and was converted to U.S. dollars for reporting purposes.
(6) Mr. Brenkert's employment with the Company began October 31, 2002. The compensation reported in the
compensation table for 2002 reflects actual compensation paid to Mr. Brenkert during the portion of the
year in which he was employed by the Company.
(7) Mr. Campbell's employment with the Company began April 26, 2004. The compensation reported in the
compensation table for 2004 reflects actual compensation paid to Mr. Campbell during the portion of the
year in which he was employed by the Company.
STOCK OPTIONS
The tables below provide certain information with respect to grants of
stock options to, and exercises by, the Named Executives pursuant to the
Company's stock option plans during the year ended December 31, 2004.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATE OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(2)(3)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
GRANTED(1) YEAR PRICE DATE 5% 10%
NAME (#) (%) ($/SHARE) (MM/DD/YYYY) ($) ($)
- ---- ---------- ---------- --------- ------------ -------- ---------
Dr. Candace Kendle............... - - - - - -
Christopher C. Bergen............ - - - - - -
Karl Brenkert III................ - - - - - -
Simon S. Higginbotham............ 15,000 5.79 7.67 06/18/2014 72,354 183,360
Douglas W. Campbell.............. 15,000 5.79 7.20 08/05/2014 67,873 172,005
<FN>
- --------
(1) All options granted to the Named Executives are exercisable in five equal annual installments beginning
one year after the date of grant.
(2) Potential realizable value is calculated from the exercise price of the options granted.
(3) The dollar amounts under these columns are the result of calculations at the five percent (5%) and ten
percent (10%) rates set by the Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the price of shares of Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT AT DECEMBER 31,
ACQUIRED ON VALUE DECEMBER 31, 2004(#) 2004($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- -------------------------
Dr. Candace Kendle........... - - 8,690 12,360 7,590 29,975
Christopher C. Bergen........ - - 8,440 12,360 7,590 29,975
Karl Brenkert III............ - - 3,000 12,000 7,365 29,460
Simon S. Higginbotham........ - - - 15,000 - 18,750
Douglas W. Campbell.......... - - - 15,000 - 25,875
<FN>
- --------
(1) Value is calculated by using the difference between $8.92, the average of the high and low share price
of Common Stock on December 31, 2004, and the exercise price for the option.
12
PERFORMANCE GRAPH
The following graph shows cumulative total shareholder returns on $100
invested in each of the Company's Common Stock, the Nasdaq Stock Market
(U.S.) Index and the Nasdaq Health Services Index. The graph assumes that
$100 was invested on December 31, 1999. The graph further assumes the
reinvestment of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG KENDLE INTERNATIONAL INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
[Performance Graph]
Cumulative Total Return
---------------------------------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
- --------------------------------------------------------------------------------------------------------
KENDLE INTERNATIONAL INC. 100.00 100.64 204.15 89.12 64.20 89.11
- --------------------------------------------------------------------------------------------------------
NASDAQ STOCK MARKET (U.S.) 100.00 60.30 45.49 26.40 38.36 40.51
- --------------------------------------------------------------------------------------------------------
NASDAQ HEALTH SERVICES 100.00 78.33 83.23 75.37 95.63 112.45
- --------------------------------------------------------------------------------------------------------
13
PROTECTIVE COMPENSATION AND BENEFIT AGREEMENTS
The Company has entered into Protective Compensation and Benefit
Agreements with certain employees, including each of the Named Executives of
the Company. These agreements are subject to annual review by the Company's
Board of Directors and, upon their respective termination dates,
automatically will be extended in one-year increments unless cancelled by
the Company. The agreements provide for specified benefits, including two
years' compensation, upon the occurrence of certain events following a
change in control as that term is defined in the agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Management Development and Compensation Committee at
the end of 2004 were Frederick A. Russ and Robert C. Simpson. Neither Mr.
Russ nor Mr. Simpson is or was a current or former officer or employee of
the Company or any of its subsidiaries. No Named Executive of the Company
serves as a director or as a member of a committee of any company of which
any of the Company's non-employee directors are executive officers.
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
(ITEM 2 ON THE PROXY CARD)
The Audit Committee of the Company's Board of Directors reappointed
Deloitte & Touche LLP as the Company's independent public accountants for
2005. Although not required by law, the Board of Directors is seeking
shareholder ratification of this appointment. The affirmative vote of a
majority of shares voting at the Annual Meeting is required for
ratification. If ratification is not obtained, the Board of Directors
intends to continue the engagement of Deloitte & Touche LLP at least through
2005.
Representatives of Deloitte & Touche LLP are expected to be present at
the Annual Meeting and will be given an opportunity to comment, if they so
desire, and to respond to appropriate questions that may be asked by
shareholders.
FEES PAID TO INDEPENDENT PUBLIC ACCOUNTANTS
The Company incurs costs for professional services rendered by
independent public accountants. Professional services include audit
services, audit-related services, tax services and other services. The table
below sets forth fees paid by the Company for professional services billed
by the independent public accountants for each of the last two fiscal years.
These fees are described in more detail following the table.
2004 2003
-------- --------
Audit Fees...................................... $754,138 $424,274
Audit-Related Fees.............................. $ 52,900 $ 90,200
Tax Fees........................................ $ 64,812 $ 97,402
All Other Fees.................................. $ 8,272 $ 35,473
-------- --------
Total......................................... $880,122 $647,349
======== ========
The fees for 2003 represent fees billed for professional services
rendered by both PricewaterhouseCoopers LLP and Deloitte & Touche LLP during
their respective engagements as the Company's independent public
accountants. Further information on the change in independent public
accountants is set forth below in the section entitled "Engagement of New
Independent Public Accountants within Past Two Fiscal Years - Required
Disclosures."
AUDIT FEES. Audit fees are the fees billed for professional services
rendered by the Company's independent public accountants for their audit of
the Company's consolidated annual financial statements for the years ended
December 31, 2003 and 2004, respectively; statutory audits of the Company's
foreign operations; and reviews of the unaudited quarterly consolidated
financial statements contained in the Quarterly Reports on Form 10-Q filed
by the Company during those years. Audit fees in 2004 also include
14
fees related to testing of the Company's internal controls over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
AUDIT-RELATED FEES. Audit-related fees are the fees billed for
assurance and related services that are reasonably related to the
performance of the audit or review of the Company's financial statements.
For 2004, audit-related services performed for the Company by the Company's
independent public accountants related to audits of the Company's employee
benefit plans. Audit-related fees for 2004 also included approximately
$43,500 for consultation and guidance on preliminary matters related to
Section 404 of the Sarbanes-Oxley Act of 2002. For 2003, audit-related
services included both audits of the Company's employee benefit plans and
accounting consultation and guidance.
TAX FEES. Tax fees are the fees billed for services related to tax
compliance, tax advice and tax planning. Tax services performed for the
Company by the independent public accountants included compliance, planning
and advice with respect to both domestic and foreign subsidiaries of the
Company. In 2004, tax compliance services comprised $46,517 of the fees
billed. Tax services in 2003 included expatriate tax services for the
Company's employees, all of which services were rendered by the Company's
former independent public accountants and are not being performed by the
current independent public accountants.
ALL OTHER FEES. All other fees are the fees billed for services other
than those in the three categories previously described. In 2004, these fees
primarily relate to services in connection with the Company's analysis of
business expansion into new markets.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee pre-approves all audit, audit-related, tax and
other permissible services that will be provided by the independent public
accountants. To manage the pre-approval process, the Audit Committee adopted
in 2004 a Policy on Approval of Audit and Non-Audit Services Provided by
Outside Auditors (the "Pre-Approval Policy"). One hundred percent (100%) of
services rendered by the independent public accountants in 2004 were
pre-approved by the Audit Committee.
Under the Pre-Approval Policy, the independent public accountants are
required to provide the Audit Committee with detailed documentation about
the specific services that will be provided. In reviewing the request for
pre-approval, the Audit Committee will consider, among other things, whether
the proposed services are consistent with the rules on auditor independence.
A service pre-approved by the Audit Committee is valid for a term of 12
months unless the Committee considers a different approval term and approves
otherwise. Any services exceeding pre-approved cost levels or budgeted
amounts will require separate pre-approval by the Audit Committee. The
Pre-Approval Policy prohibits the Audit Committee from engaging the
independent public accountants to render services that are prohibited by the
Public Companies Accounting Oversight Board or the applicable rules and
regulations promulgated by the Commission.
The Pre-Approval Policy permits the Audit Committee to appoint a
designated committee member to approve certain services. The decisions of a
designated member to pre-approve services are required to be reported to the
Audit Committee at the ensuing Audit Committee meeting. The Pre-Approval
Policy prohibits the Audit Committee from delegating its pre-approval
responsibilities to the Company's management.
ENGAGEMENT OF NEW INDEPENDENT PUBLIC ACCOUNTANTS WITHIN PAST TWO FISCAL YEARS -
REQUIRED DISCLOSURES
Effective June 9, 2003, the Company dismissed PricewaterhouseCoopers
LLP ("PwC") and, at the direction of the Audit Committee of the Board of
Directors, engaged Deloitte & Touche LLP as the Company's independent public
accountants. In connection with the new engagement, the Company made
certain disclosures in a Current Report on Form 8-K, which was filed with the
Commission on June 13,
15
2003. These disclosures are provided below as required by the rules and
regulations of the Commission, relate to the date that the aforementioned
Form 8-K was filed, and are qualified in their entirety by the disclosures
made in such Form 8-K:
* PwC's report on the Company's financial statements for each of the
last two years did not contain an adverse opinion or a disclaimer
of opinion, nor was it qualified or modified as to uncertainty,
audit scope or accounting principles.
* During the Company's two most recent fiscal years and the
subsequent interim period through June 9, 2003: (i) there were no
disagreements between the Company and PwC on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreement(s),
if not resolved to the satisfaction of PwC, would have caused PwC
to make a reference to the subject matter of the disagreement(s)
in connection with its report; (ii) no reportable events of the
type described under Item 304(a)(1)(v) of Regulation S-K occurred;
(iii) neither the Company nor anyone on its behalf consulted
Deloitte & Touche LLP regarding either: (a) the application of
accounting principles to a specified transaction (either completed
or proposed) or the type of audit opinion that might be rendered
on the Company's financial statements, and no written report or
oral advice was provided to the Company that Deloitte & Touche LLP
concluded was an important factor considered by the Company in
reaching a decision as to an accounting, auditing or financial
reporting issue; or (b) any matter that was the subject of either
a disagreement or a reportable event.
* The Company authorized PwC to respond fully to any inquiries by
Deloitte & Touche LLP. The Company provided PwC with a copy of its
Current Report on Form 8-K filed with the Commission on June 13,
2003, prior to its filing with the Commission. Attached to the
Current Report as Exhibit 16 is a letter from PwC addressed to the
Commission pursuant to Regulation S-K, Item 304(a)(3). This letter
states PwC's agreement with the above disclosures related to PwC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL TO RATIFY
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR
2005.
OTHER MATTERS
The Board knows of no other matters which will be presented at the
Annual Meeting. If, however, any other matter is properly presented at the
Annual Meeting, it will require the affirmative vote of a majority of shares
voting for approval.
OTHER INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than ten percent
(10%) of the Company's Common Stock to file reports of ownership with the
Commission and to furnish the Company with copies of these reports. Based
solely upon its review of reports received, or upon written representation
from certain reporting persons that no reports were required, the Company
believes that during 2004 all filing requirements were met.
SOLICITATION OF PROXIES
The costs of soliciting proxies will be borne by the Company. In
addition to this solicitation by mail, directors, officers and other
employees of the Company may solicit proxies in person or by telephone, make
additional requests for the return of proxies and may receive proxies on
behalf of the Company. Brokers, nominees, fiduciaries and other custodians
will be requested to forward soliciting material to the beneficial owners of
Common Stock and will be reimbursed for their expenses.
16
SHAREHOLDER COMMUNICATIONS WITH BOARD
Shareholders may communicate with the full Board or individual
directors on matters concerning the Company by mail to the attention of the
Company's Secretary. All mail addressed to a particular Director will be
forwarded or delivered to that Director. Mail addressed to the "Board of
Directors" will be forwarded or delivered to the Chairman of the Board.
SHAREHOLDER PROPOSALS
Shareholders who desire to have proposals included in the notice for
the Annual Meeting of Shareholders to be held in spring 2006 must submit
their proposals in writing by December 8, 2005, to the Company, Attention:
Douglas W. Campbell, Vice President, Secretary and Chief Legal Counsel, 1200
Carew Tower, 441 Vine Street, Cincinnati, Ohio 45202.
The form of Proxy for this meeting grants authority to the designated
proxies to vote in their discretion on any matters that come before the
meeting except those set forth in the Company's Proxy Statement and except
for matters as to which adequate notice is received. For notice to be deemed
adequate for the 2006 Annual Meeting of Shareholders, it must be received
prior to February 21, 2006. If there is a change in the anticipated date of
next year's Annual Meeting of Shareholders or in the notice deadline by more
than 30 days, the Company will notify you of this change through its Form
10-Q filings.
FINANCIAL STATEMENTS AVAILABLE
The Company's Annual Report to Shareholders for the year 2004 is
enclosed with this mailing. A copy of the Annual Report to the Commission on
Form 10-K is available without charge upon written request to: Investor
Relations, Kendle International Inc., 1200 Carew Tower, 441 Vine Street,
Cincinnati, Ohio 45202. The Company's Annual Report to the Commission on
Form 10-K and certain other recent filings with the Commission are available
at the Company's Web site at www.kendle.com. The Company's Annual Report to
the Commission on Form 10-K and its other filings with the Commission are
also available at the Commission's Web site at www.sec.gov. Additionally,
these filings may be read or copied at the Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 70549.
By Order of the Board of Directors,
/s/ Douglas W. Campbell
Douglas W. Campbell
Secretary
April 1, 2005
17
KENDLE INTERNATIONAL INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
1. Authority to elect as directors the following eight For Withhold For All
(8) nominees: All All Except
Candace Kendle, Christopher C. Bergen, Robert R. / / / / / /
Buck, G. Steven Geis, Donald C. Harrison, Timothy
E. Johnson, Frederick A. Russ, & Robert C. Simpson
(INSTRUCTION: WRITE THE NAME OF ANY NOMINEE(S)
FOR WHOM AUTHORITY TO VOTE IS WITHHELD)
--------------------------------------------------
2. To ratify and approve the appointment of Deloitte For Against Abstain
& Touche LLP as independent public accountants / / / / / /
for 2005.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders dated April 1, 2005 and the Proxy Statement furnished
therewith. Any proxy heretofore given to vote said shares is hereby revoked.
Dated: , 2005
-------------------------------
- ------------------------------------------------------------------------------
(Signature)
- ------------------------------------------------------------------------------
(Signature)
(Important: Please sign exactly as name appears hereon indicating, where
proper, official position or representative capacity. In the case of joint
holders, all should sign.)
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE DATE, SIGN AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
PROXY KENDLE INTERNATIONAL INC. PROXY
1200 Carew Tower
441 Vine Street
Cincinnati, Ohio 45202
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Douglas W. Campbell and Jarrod B. Pontius,
or either of them, proxies of the undersigned, each with the power of
substitution, to vote all shares of Common Stock that the undersigned would
be entitled to vote on the matters specified below and in their discretion
with respect to such other business as may properly come before the Annual
Meeting of Shareholders of Kendle International Inc. to be held on May 5,
2005 at 9:30 A.M. Eastern Time in the Green Room at the Aronoff Center for
the Arts, 650 Walnut Street, Cincinnati, Ohio or at any adjournment of such
Annual Meeting.
THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS UNLESS A
CONTRARY CHOICE IS SPECIFIED.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
(This proxy is continued and is to be signed on the reverse side.)
- ------------------------------------------------------------------------------
APPENDIX
Page 13 of the proxy statement contains a Performance Graph. The
information contained within the graph is presented in a tabular format
immediately following the graph.