<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
BARR LABORATORIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(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:
------------------------------------------------------------------------
<PAGE> 2
BARR LABORATORIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
The Annual Meeting of Shareholders of Barr Laboratories, Inc. will be
held on December 3, 1997 at 10:00 a.m. at the Sheraton Crossroads, Crossroads
Corporate Center, Mahwah, New Jersey for the following purposes:
1. To elect a Board of eight Directors to serve until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified;
2. To consider approval of an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares of
Common Stock from 30,000,000 to 100,000,000; and,
3. To transact such other business as may properly come before the
meeting.
Owners of record at the close of business on October 15, 1997 will be
entitled to vote at the meeting or at any adjournments or postponements thereof.
Each shareholder is requested to sign and date the enclosed proxy card
and to return it without delay in the enclosed postage-paid envelope. Any
shareholder present at the Annual Meeting may withdraw the proxy and vote
personally on each matter brought before the Annual Meeting.
By Order of the Board of Directors
Paul M. Bisaro
Secretary
2 Quaker Road
P.O. Box 2900
Pomona, New York 10970-0519
October 24, 1997
<PAGE> 3
BARR LABORATORIES, INC.
2 Quaker Road
P.O. Box 2900
Pomona, New York 10970-0519
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 3, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the management of Barr Laboratories, Inc., a New York corporation
(the "Company"), for use at the 1997 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at 10:00 a.m. on December 3, 1997 at
the Sheraton Crossroads, Crossroads Corporate Center, Mahwah, New Jersey and at
any adjournment or postponement thereof. It is anticipated that this Proxy
Statement, together with the form of proxy, will first be mailed to the
Company's shareholders on or before October 24, 1997.
A person giving the enclosed proxy has the power to revoke it at any
time before it is exercised by (i) attending the Annual Meeting and voting in
person, (ii) duly executing and delivering a proxy for the Annual Meeting
bearing a later date or (iii) delivering written notice of revocation to the
Secretary of the Company prior to use of the enclosed proxy at the Annual
Meeting.
The Company will bear the cost of this solicitation of proxies,
including expenses in connection with the preparing, assembling and mailing of
proxy solicitation materials and the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners. In addition
to solicitation by mail, proxies may be solicited personally or by telephone or
telegraph by Directors, Officers or employees of the Company, who will receive
no additional compensation for such services. The Company has retained
Continental Stock Transfer & Trust Company to aid in the solicitation of proxies
for which the Company expects to pay approximately $4,000, plus reimbursable
expenses.
RECORD DATE
The close of business on October 15, 1997 is the record date for
determination of holders of the Company's Common Stock, $.01 par value (the
"Common Stock"), entitled to notice of and to vote at the Annual Meeting and any
adjournment or postponement thereof. On that date there were outstanding and
entitled to vote 21,572,473 shares of Common Stock, each entitled to one vote.
ACTION TO BE TAKEN UNDER THE PROXY
The persons acting under the proxy will vote the shares represented
thereby for the election of the Company's nominees as Directors, and for
approval of an amendment to the Company's Certificate of Incorporation, or, if
otherwise directed by the person executing the proxy, in accordance with such
direction. The Board of Directors does not know of any other business to be
brought before the meeting, but it is intended that, as to any such other
business, a vote may be cast pursuant to the proxy in accordance with the
judgment of the person or persons acting thereunder. Directors are elected by a
majority of votes cast. The affirmative vote of a majority of all outstanding
shares is required to approve the amendment to the Company's Certificate of
Incorporation. Abstentions, broker non-votes and withheld votes will not be
considered as votes cast; however, an abstention in connection with the proposal
to approve the amendment to the Company's Certificate of Incorporation will have
the same legal effect as a vote against such proposal.
1
<PAGE> 4
PROPOSAL 1. ELECTION OF DIRECTORS
If all of the Company's nominees are elected, the Board of Directors of
the Company will consist of Bruce L. Downey (Chairman), Edwin A. Cohen
(Vice-Chairman), Robert J. Bolger, Michael F. Florence, Wilson L. Harrell, Jacob
M. Kay, Bernard C. Sherman and George P. Stephan, who will serve as Directors
until the 1998 Annual Meeting of Shareholders and until their respective
successors are duly elected and qualified. If any nominee becomes unable or
declines to accept nomination or election, which is not anticipated, it is
intended that the persons acting under the proxy will vote for the election in
his stead of such other person as the Board of Directors recommends. The Company
does not have a standing nominating committee; the current nominees for
Directors have been proposed by the Company's Chairman and the Company's
principal shareholder.
Seven meetings of the Board of Directors were held during the fiscal
year ended June 30, 1997. In addition, there were 11 committee meetings. No
Director attended fewer than 75% of the total number of meetings of the Board
and all committees on which the Director served.
AUDIT COMMITTEE
The functions of the Audit Committee are to assist the Board in
overseeing and reviewing the Company's internal accounting controls, to review
the audited financial statements and to investigate and make recommendations to
the Board with respect to the appointment of independent auditors. The
Committee, which met four times during the fiscal year ended June 30, 1997, is
composed of Messrs. Florence, Harrell, Stephan and Bolger.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing and authorizing
the granting of stock options to Officers and other key employees under the
Company's stock option plans and for reviewing compensation to be paid to
Officers and other key personnel of the Company. Current members of the
Committee, none of whom is an employee of the Company, are Messrs. Cohen,
Florence, Harrell and Stephan. Four meetings of the Committee were held during
the fiscal year ended June 30, 1997.
BUSINESS DEVELOPMENT COMMITTEE
The Business Development Committee is responsible for evaluating and
providing advice to management on the merits of various business ventures,
including but not limited to, mergers, acquisitions, joint ventures, strategic
partnerships and other business arrangements. Current members of the Committee
are Messrs. Downey, Cohen, Bolger and Kay. Four meetings of the Committee were
held during the fiscal year ended June 30, 1997.
COMPENSATION OF DIRECTORS
Directors, excluding Dr. Sherman and Mr. Downey, receive an annual
retainer of $15,000 and a fee of $750 for attendance at each meeting of the
Board and at each Committee meeting. In addition, Messrs. Harrell and Bolger
received $16,500 and $14,791, respectively, for consulting services provided to
the Company. See Executive Agreements for amounts paid to Mr. Cohen pursuant to
his consulting agreement with the Company.
Under the Company's 1993 Stock Option Plan for Non-Employee Directors,
as amended, each Director who is not an employee of the Company (other than a
Director who owns 40% or more of the Common Stock) receives an annual option
grant to purchase 11,250 shares at an option price equal to 100% of the fair
market of the Common Stock on the date of grant. Each option has a ten-year term
and becomes exercisable on the date of the first annual shareholders' meeting
immediately following the date of the grant. In the case of the first grant (the
date of the 1993 Annual Meeting of Shareholders), the number of shares covered
by each grant was 27,000. In December 1994 each eligible Director received
options for 6,750 shares. On December 4, 1996, each participating Director
received a grant of an option to purchase 11,250 shares at an exercise price of
$17.25 per share.
2
<PAGE> 5
INFORMATION ON NOMINEES
BRUCE L. DOWNEY, 49, became the Company's President, Chief Operating
Officer and a member of the Board of Directors in January 1993 and was elected
Chairman of the Board and Chief Executive Officer in February of 1994. Prior to
assuming these positions, from 1981 to 1993, Mr. Downey was a partner in the law
firm of Winston & Strawn and a predecessor firm of Bishop, Cook, Purcell and
Reynolds.
EDWIN A. COHEN, 65, founded the Company in 1970. Mr. Cohen served as
President, Chairman of the Board and Chief Executive Officer until 1994. In
February of 1994, he was elected to the position of Vice Chairman of the Board
and became a Consultant to the Company.
ROBERT J. BOLGER, 75, was elected a Director of the Company in February
1988. Mr. Bolger has been President of Robert J. Bolger Associates, a marketing
consulting company since January 1988. From 1962 through 1987, he served as
President of the National Association of Chain Drug Stores, a major trade
association. Mr. Bolger is also a Director of General Computer Corporation.
MICHAEL F. FLORENCE, 60, was elected a Director of the Company in
February 1988. Mr. Florence is President of Sherfam, Inc. and has been since
1989. He is also Vice President of Shermfin Corp., Vice President of Apotex,
Inc. and Vice President of Sherman Delaware, Inc. From January 1964 through
April 1989, Mr. Florence was a partner in Wm. Eisenberg & Co., Canadian
Chartered Accountants. He is President and a Director of Citadel Gold Mines,
Inc. (NASDAQ), Nutrition for Life International, Inc. (NASDAQ) and was
previously a Director of Kinesis, Inc. Mr. Florence and Dr. Sherman are
brothers-in-law.
WILSON L. HARRELL, 78, was elected a Director of the Company in
February 1988. Since July 1990, Mr. Harrell has been a columnist, consultant and
speaker, and President of Harrell Consulting, Inc. He is author of the book, For
Entrepreneurs Only. From 1987 to July 1991, he was publisher of INC. magazine.
JACOB ("JACK") M. KAY, 56, was elected a Director of the Company in
December 1994. Mr. Kay is President of Apotex, Inc., and also serves as Chairman
of the Canadian Drug Manufacturers Association. He is also a Director of York
Finch Hospital (Toronto).
BERNARD C. SHERMAN, 55, was Chairman of the Board of the Company from
July 1981 to January 1993. He remains a Director of the Company. Dr. Sherman is
Chief Executive Officer and Chairman of the Board of Apotex, Inc., a Canadian
manufacturer of generic and brand name drugs. He is also Chairman of the Board
of Cangene Corp., President of Sherman Delaware, Inc., President of Shermfin
Corp., President of Apotex Holdings, Inc. and a Director of Citadel Gold Mines,
Inc. (NASDAQ). In July 1994, Dr. Sherman and Shermfin Corp. consented to the
issuance of an Order of the Securities and Exchange Commission (the
"Commission") that they cease and desist from violations of certain reporting
and anti-fraud provisions of the Securities Exchange Act of 1934. Dr. Sherman
and Shermfin Corp. consented to this Order without admitting or denying the
findings of the Commission that they had failed to file reports of beneficial
ownership of the common stock of Kinesis, Inc. with the Commission on Form 3 and
Schedule 13G. The Company has no relationship with Kinesis, Inc.
GEORGE P. STEPHAN, 64, was elected a Director of the Company in
February 1988. Since 1994, Mr. Stephan has been Managing Director of Stonington,
Inc., (financial intermediaries and consultants). From 1992 to 1994, Mr. Stephan
was counsel to Murtha, Cullina, Richter and Pinney in Hartford, Connecticut.
From January 1991 to November 1991, he served as Interim Chief Executive Officer
of Kollmorgen Corporation (NYSE), a diversified technology company. He also
served as Chairman of Kollmorgen's Board of Directors from 1991 to February
1996. Mr. Stephan continues to serve as a Director of Kollmorgen Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE
NOMINEES.
3
<PAGE> 6
PROPOSAL 2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION
The Board recommends approval of an amendment to the Certificate of
Incorporation to increase the number of shares of Common Stock, par value, $0.01
per share, which the corporation shall have the authority to issue from
30,000,000 shares to 100,000,000 shares.
To effect the foregoing, the first sentence of Article Fourth of the
Certificate of Incorporation, relating to the aggregate number of shares which
the corporation shall have authority to issue, would be amended to read as
follows:
"FOURTH: The number of shares of all classes of stock
which the corporation shall have the authority to issue is
100,000,000 shares of common stock of the par value of $.01
per share, entitled to one vote per share, and 2,000,000 of
preferred stock of the par value of $1.00 per share."
Although the Company does not have any present understanding or
agreement to issue the additional shares of Common Stock, the Board of Directors
believes that the proposed increase in the amount of authorized but unissued
shares of Common Stock is desirable to enhance the Company's flexibility in
connection with possible future actions, such as declaration of stock dividends,
financings, mergers, acquisitions of properties and other corporate purposes. If
the proposed amendment is approved, the Board of Directors will determine
whether, when and on what terms the issuance of shares of Common Stock may be
advisable in connection with any of the foregoing purposes. The additional
shares of Common Stock will have the same rights and privileges as the shares of
Common Stock now issued and outstanding. Holders of Common Stock have no
preemptive rights.
As of October 15, 1997, 21,572,473 shares of Common Stock (exclusive of
117,955 shares held in the treasury) were outstanding and a total of 1,599,296
shares of Common Stock were reserved for issuance under the Company's various
stock option and stock purchase plans.
The affirmative vote of at least a majority of the outstanding shares
of Common Stock is required to approve the Amendment to the Certificate of
Incorporation. Unless otherwise indicated, it is intended that the shares
represented by all executed proxies received will be voted for approval of said
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION.
4
<PAGE> 7
OWNERSHIP OF SECURITIES
The following table sets forth information regarding the beneficial
ownership of the Company's voting securities on June 30, 1997 by (i) each person
who beneficially owns more than 5% of the Company's voting securities; (ii) each
Director of the Company; (iii) each Officer of the Company named in the Summary
Compensation Table; and (iv) all Directors and Officers of the Company as a
group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER OF SHARES COMMON PERCENT
<S> <C> <C>
Bernard C. Sherman(1) 13,744,426(2) 60.9%
150 Signet Drive
Weston, Ontario, Canada M9L 1T9
FMR, Edward C. Johnson, 3rd 2,190,150(4) 9.7%
82 Devonshire Street,
Boston, MA 02109
Edwin A. Cohen(1) 799,166(3) 3.5%
Bruce L. Downey(1) 322,511(3) *
George P. Stephan(1) 90,000(3) *
Wilson L. Harrell(1) 42,000(3) *
Robert J. Bolger(1) 35,000(3) *
Michael F. Florence(1) 18,450(3) *
Jacob M. Kay(1) 29,250(3) *
Gerald F. Price 140,030(3) *
Paul M. Bisaro 90,698(3) *
Mary E. Petit 39,911(3) *
Timothy P. Catlett 35,028(3) *
All Directors and Officers
as a group (16 persons) 15,656,259(3) 69.3%
* Less than 1%
</TABLE>
(1) A Director of the Company
(2) Consists of 13,248,621 common shares held of record by Sherman Delaware,
Inc. ("SDI") and 495,805 common shares held of record by Glastex
Investments, Inc.
5
<PAGE> 8
(3) Includes shares of common stock which Directors and Officers have currently
exercisable rights to acquire through the exercise of incentive and
non-qualified options, in the amount of 314,996 shares for Mr. Downey,
224,896 shares for Mr. Cohen, 82,125 shares for Mr. Stephan, 42,000 shares
for Mr. Harrell, 35,000 shares for Mr. Bolger, 18,000 shares for Mr.
Florence, 18,000 shares for Mr. Kay, 123,742 shares for Mr. Price, 89,996
shares for Mr. Bisaro, 33,746 shares for Ms. Petit, 15,480 shares for Mr.
Catlett, and 1,255,781 shares for all Directors and officers as a group.
(4) Pursuant to a Schedule 13G filed on February 14, 1997, Fidelity Management
& Research Company ("Fidelity") a wholly-owned subsidiary of FMR Corp. and
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, is the beneficial owner of 2,170,800 shares of the
common stock outstanding of the Company as a result of acting as investment
adviser to various investment companies registered under Section 8 of the
Investment Company Act of 1940, and as a result of acting as sub-adviser to
Fidelity American Special Situations Trust ("FASST").
FASST is a unit trust established and authorized by the Department of Trade
and Industry under the laws of England. The investment adviser of FASST is
Fidelity Investment Services Limited, an English company and a subsidiary
of Fidelity International Limited ("FIL").
The ownership of one investment company, Fidelity VIP Equity-Income
Portfolio, amounted to 1,712,700 shares of the common stock outstanding.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the
funds each has sole power to dispose of the 2,152,800 shares owned by the
Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Funds' Board of Trustees.
Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Board of Trustees.
FIL, FMR Corp., through its control of Fidelity, and FASST each has sole
power to vote and to dispose of the 18,000 shares held by FASST.
Fidelity Management Trust Company, a wholly-owned subsidiary of FMR Corp.
and a bank as defined in Section 3 (a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 19,350 shares of the common stock
outstanding of the Company as a result of its serving as investment manager
of the institutional account(s).
Edward C. Johnson, 3rd and FMR Corp., through its control of Fidelity
Management Trust Company, each has sole voting and dispositive power over
19,350 shares of common stock owned by the institutional account(s) as
reported above.
CHANGES IN CONTROL
All of the shares held of record by Sherman Delaware Inc. and affiliated
companies ("SDI") have been pledged to banks to secure a guaranty made by SDI. A
change in control of the Company could result in the event SDI were to default
in its guaranty obligation.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth as to the Chairman and Chief Executive
Officer, and the four other Executive Officers earning the highest aggregate
compensation in the fiscal year ended June 30, 1997, the compensation earned,
awarded or paid for services rendered to the Company in all capacities during
each of the three fiscal years ended June 30, 1997, in which each such person
served as an Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
-------------------------------------------------------------------------------------
Stock All Other
Name & Year Salary Bonus ($) Other ($) Options Compensation
Principal Position ($)(1) (#)(2) ($)(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Downey 1997 449,038 225,000 5,945 59,999 15,000
Chairman,CEO 1996 399,039 200,000 3,266 90,000 15,000
& President 1995 349,231 200,000 1,132 90,000 14,607
Mary E. Petit 1997 193,904 80,000 7,695 22,498 15,000
Senior Vice President, 1996 165,000 65,000 4,989 22,500 15,000
Operations 1995 76,154 60,365 -- 22,497 6,980
Paul M. Bisaro 1997 193,904 80,000 6,866 22,498 15,000
Senior Vice President 1996 164,712 65,000 3,859 44,998 15,000
Strategic Business 1995 149,461 50,000 236 33,750 13,346
Development, General
Counsel & Secretary
Timothy P. Catlett 1997 179,711 70,000 9,001 22,498 15,000
Vice President 1996 165,000 65,000 27,615(4) 22,500 15,000
Sales & Marketing 1995 74,250 30,000 -- 22,500 6,980
Gerald F. Price 1997 204,904 -- 24,147(5) -- 15,000
Executive Vice 1996 199,904 60,000 23,181(5) 44,998 14,982
President 1995 194,836 50,000 15,121(5) 33,750 11,536
</TABLE>
(1) Includes amounts deferred by the employee under the Company's Savings and
Retirement Plan.
(2) Stock options adjusted for the May 1997 and March 1996 3-for-2 stock
splits effected in the form of 50% stock dividends.
(3) The amounts shown in this column represent the Company's annual
contributions to its Savings and Retirement Plan.
(4) Amount primarily represents reimbursement of relocation expenses.
(5) Amount primarily represents reimbursement of interest.
7
<PAGE> 10
OPTION GRANTS
The following table shows all stock options that were granted to the
Officers named in the Summary Compensation Table during the fiscal year ended
June 30, 1997. The exercise price of all such options was the fair market value
on the date of the grant.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants (1)
--------------------- Potential Realizable Value at
Number of % of Total Assumed Annual Rates
Shares Options Of Stock Price Appreciation
Underlying Granted to Per Share for Option Term
Options Employees In Exercise or Expiration ---------------
Name Granted (#) Fiscal Year Base Price Date 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Downey 59,999 18% $19.290 09/12/06 727,871 1,844,567
Mary E. Petit 22,498 7% $19.290 09/12/06 272,932 691,663
Paul M. Bisaro 22,498 7% $19.290 09/12/06 272,932 691,663
Timothy P. Catlett 22,498 7% $19.290 09/12/06 272,932 691,663
All Shareholders (2) 593,441,530 1,503,897,352
</TABLE>
(1) Consists of options granted under the Company's 1993 Stock Incentive Plan,
as amended. This plan permits the Compensation Committee in its discretion
to cancel any option granted under such plan and re-grant it at a lower
price, however, no such action was taken during the fiscal year.
(2) Total dollar gains on assumed rates of appreciation shown here calculated
on 21,328,098 outstanding shares as of June 30, 1997 and the market price
on that date ($44.00)
Note: The dollar amounts under the 5% and 10% columns in the table above
are the result of calculations required by the Securities and Exchange
Commission's rules and therefore are not intended to forecast possible
future appreciation of the stock price of the Company. Although permitted
by the SEC's rules, the Company did not use an alternate formula for a
grant date valuation because the Company is not aware of any formula which
will determine with reasonable accuracy a present value based on future
unknown or volatile factors. As shown in the % columns above, no gain to
the named officers is possible without appreciation in the price of the
Company's Common Stock, which will benefit all shareowners.
8
<PAGE> 11
OPTION EXERCISES AND OPTION VALUES
The following table provides information as to the value of options
exercised and options held by Officers named in the Summary Compensation Table
at fiscal year end measured in terms of the closing price of the Common Stock
(see Notes 1 and 2 below).
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END JUNE 30, 1997 OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Subject to Value of Unexercised In-the-
Shares Acquired Value Unexercised Options at Year-End Money Options at Year-End(2)
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Downey -- $ -- 314,996 149,998 $11,699,842 $4,764,386
Mary E. Petit -- -- 33,746 33,748 1,113,619 932,576
Paul M. Bisaro -- -- 89,996 44,996 3,210,495 1,309,159
Timothy P. Catlett 18,270 299,080 15,480 33,748 516,494 932,576
Gerald F. Price 15,000 358,050 123,742 22,498 4,485,530 753,233
</TABLE>
(1) Valued at the difference between the fair market value of the shares at
the time of exercise and the options' grant price.
(2) Valued at the difference between the fair market value of the shares at
June 30, 1997 ($44.00) and the options' grant price.
EXECUTIVE AGREEMENTS
In January 1994, the Company entered into a consulting agreement with Mr.
Cohen for a term ending June 30, 2002. From January 31, 1994, when the agreement
commenced, and through June 30, 1995, Mr. Cohen provided consulting services
related to certain business development projects and received compensation at
the rate of $250,000 per annum. For the fiscal years ended June 30, 1997 and
1996, Mr. Cohen received $150,000 in annual compensation and earned an
additional fee of $100,000 and $63,000, respectively. The consulting agreement,
as amended in June 1995, June 1996 and again in June 1997, provides that Mr.
Cohen's duties will, among other things, include consulting and advising with
regard to products and process development and attendance at industry
associations and technology groups for up to 120 days from the 80 days
originally contemplated under the agreement. Beginning July 1, 1998, the
agreement reverts back to the original term of 80 days per year for each fiscal
year thereafter until June 30, 2002 and Mr. Cohen will be compensated at the
rate of $100,000 per annum. During fiscal 1998 and for each of the next four
years, Mr. Cohen will also receive an additional fee equal to one percent of the
Company's pre-tax earnings between $5 million and $15 million for each such
year. In the event of Mr. Cohen's death during the term of the agreement, all
amounts which would otherwise have been payable thereafter will be paid at the
times provided in the agreement to his designated beneficiary or his estate. In
addition, during the term of the agreement, Mr. Cohen is entitled to receive the
same compensation as other non-employee Directors of the Company for his
services as a Director, to exercise any outstanding non-qualified stock options
granted to him prior to January 21, 1994 and to be provided with medical and
dental benefits equivalent to those which the Company provides for its senior
officers from time to time on the same terms and conditions.
On January 4, 1993, the Company employed Mr. Downey as President and Chief
Operating Officer. The Agreement, initially for three years, and year-to-year
thereafter unless terminated by either party, provides for
9
<PAGE> 12
(i) a base annual salary of approximately $350,000 (as of July 1, 1994) which
may be increased by the Company; (ii) participation in the executive incentive
plan with the opportunity to receive an annual bonus of up to 50% of the then
base salary; (iii) grant of options to purchase 225,000 shares of common stock,
after giving effect to the May 1997 and March 1996 3-for-2 stock splits; and
(iv) financial assistance in relocating, including indemnification of up to
$30,000 of any loss sustained on the sale of his present residence. If the
Agreement is terminated by the Company without cause or by Mr. Downey for good
reason (as defined therein), Mr. Downey will be entitled to a lump sum payment
equal to 18 months base salary.
On August 9, 1989 the Company entered into an Agreement with Mr. Hamza in
order to induce him to remain as an employee until at least August 9, 1993 at
which time the benefits accrued pursuant to the Agreement vested. The Agreement
provides for deferred payments to Mr. Hamza annually from 1997 to 2004, both
inclusive, in order to coincide with the higher education requirements of his
three children. The total amount payable is $300,000, of which $25,000 is
payable in each of four of the eight years and $50,000 is payable in each of the
other four years. Such obligation is recorded at its present value and is
included as part of Accrued Liabilities and Other Liabilities in the
consolidated balance sheets.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Regulations of the Securities and Exchange Commission require the
compensation committee of the board of directors of a publicly-traded company to
publish in each proxy statement involving the election of directors a report
addressing certain aspects of executive officer compensation for the last
completed fiscal year. The following report is provided pursuant to those
regulations.
The Compensation Committee decides or recommends to the Board for its
decision on all matters of policy relating to compensation of executive
management and approves the salaries of Officers (other than an
Officer-Director, whose salary is approved by the Board). The Committee also
approves grants of stock options.
Compensation programs for Executive Officers are designed to attract,
retain and motivate employees who will contribute to the achievement of
corporate goals and objectives. Elements of Executive compensation include
salaries, bonuses and awards of stock options, with the last two being variable.
In making its decisions or recommendations, the Committee takes into account
factors it deems relevant to the specific compensation component being
considered, including compensation paid by other business organizations of
comparable size in the same industry and related industries, profitability, the
attainment of annual individual and business objectives, an assessment of
individual contributions relative to others and historic compensation awards.
The Committee considered the factors described above in determining Mr.
Downey's total compensation. Specifically, the Committee and the Board
recognized that during fiscal 1997, the Company, under Mr. Downey's leadership,
met and exceeded strategic objectives approved by the Board in the Company's
fiscal 1997 Business Plan. The Company reported the most successful and
profitable year in its history, resulting from the achievement of several key
corporate objectives. These included completing the ciprofloxacin patent
challenge, receiving approval for generic Warfarin Sodium, continuing to expand
the Company's product line through new product approvals, and entering the final
stages of a multi-year, $50 million capital expansion program. The settlement of
the ciprofloxacin patent challenge demonstrated how this unique business
development strategy offers a complement to the traditional generic
pharmaceutical products business. The revenues to be received under the
resulting Supply Agreement will help to create a solid base for fiscal 1998
earnings. In addition to these business initiates, Mr.Downey also spearheaded
the negotiations of the Company's strategic equity investment in Warner Chilcott
plc., a developer, marketer and distributor of specialty pharmaceutical
products. Finally, Mr. Downey also played an active strategic and tactical role
in the Company's opposition to DuPont Merck's state legislative initiative to
limit generic substitution of Warfarin Sodium.
10
<PAGE> 13
The Committee is responsible for addressing issues raised by the change in
the Internal Revenue Code which establishes a limit on the deductibility of
annual compensation for certain Executives which exceeds $1,000,000. The change
had no impact for the fiscal year ended June 30, 1997 since no Executive Officer
received compensation in excess of $1,000,000. The Committee intends to review
this matter from time to time in the future to determine whether changes should
be made to meet the requirements for deductibility.
The Compensation Committee
Edwin A. Cohen
Michael F. Florence
Wilson L. Harrell
George P. Stephan
11
<PAGE> 14
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder returns on the
Common Stock (BRL) for the last five fiscal years with the cumulative total
return of the Standard & Poor's Health Care Drugs Index and the Standard &
Poor's 500 Index over the same period, assuming an investment of $100 in the
Common Stock, the S&P Health Care Drugs Index and the S&P 500 Index on June 30,
1992, and reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG BARR LABORATORIES, THE S&P HEALTH CARE DRUGS
INDEX, AND THE S&P 500 INDEX
FISCAL YEAR ENDED JUNE 30,
$100 Invested on 06/30/92
<TABLE>
<CAPTION>
JUNE 30,
COMPANY/INDEX NAME 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Barr Laboratories, Inc. $ 100 $ 236 $ 244 $ 284 $ 507 $1,298
S&P 500 Index 100 84 81 126 188 294
S&P Health Care Drugs Index 100 114 115 145 183 247
</TABLE>
12
<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1997 the Company sold certain of its
pharmaceutical products and bulk pharmaceutical materials to five other
companies owned by Dr. Bernard Sherman, a Director of the Company. The Company
was paid an aggregate of approximately $4,971,366 upon such sales. The Company
also purchased bulk pharmaceutical materials from a company owned by Dr. Sherman
in the amount of $1,800,000. The Company believes the amounts of such
transactions approximate the amounts of similar transactions with unaffiliated
third parties. During fiscal 1996, the Company also entered a multi-year
agreement with a company owned by Dr. Sherman to share litigation costs in
connection with one of its patent challenges. For the year ended June 30, 1997
the Company received $987,000 in connection with such agreement.
The Company has purchased a directors' and officers' liability insurance
policy from the National Union Fire Insurance Company of Pittsburgh,
Pennsylvania that insures the Company for certain obligations incurred in the
indemnification of its Directors and Officers under New York law and insures
Directors and Officers where such indemnification is not provided by the
Company. The one-year cost of the current policy is $242,000.
The Company has also purchased an insurance policy from Chubb Insurance
Company that provides coverage for employees (including officers) who are
fiduciaries of the Company's employee benefit plans against expenses and defense
costs incurred as a result of alleged breaches of fiduciary duty as defined in
ERISA. The one-year cost of the current policy is $6,500.
RECEIPT OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1998 Annual
Meeting must be received by the Company at 2 Quaker Road, P.O. Box 2900, Pomona,
New York 10970-0519; Attention: The Secretary, not later than June 26, 1998.
OTHER MATTERS
Services performed by Deloitte & Touche LLP, the Company's independent
accountants, for the year ended June 30, 1997, consisted of an audit of the
consolidated financial statements of the Company, an audit of the Company's
Employee Savings Plan, preparation of the Company's federal and state tax
returns, and limited assistance and consultation in connection with filings with
the Securities and Exchange Commission and on pending accounting and tax
matters.
The Company expects representatives of Deloitte & Touche LLP to be present
at and available to respond to appropriate questions which may be raised at the
Annual Meeting. Representatives of Deloitte & Touche LLP will have the
opportunity to make a statement if they so desire.
13
<PAGE> 16
BARR LABORATORIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 3, 1997
The undersigned hereby appoints Bruce L. Downey and Edwin A. Cohen, jointly or
individually, proxies with the power of substitution to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders on
December 3, 1997, or adjournments thereof.
1. ELECTION OF DIRECTORS [ ] For all nominees listed below (except as marked)
[ ] Withhold authority to vote for nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW).
Robert J. Bolger, Edwin A. Cohen, Bruce L. Downey, Michael F. Florence, Wilson
L. Harrell, Jacob M. Kay, Bernard C. Sherman, George P. Stephan
<TABLE>
<S> <C> <C> <C>
2. AMENDMENT OF THE CERTIFICATE OF INCORPORATION For [ ] Against [ ] Abstain [ ]
</TABLE>
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY COME BEFORE THE MEETING OR ADJOURNMENTS THEREOF.
THIS PROXY, DULY EXECUTED, WILL BE VOTED AS SPECIFIED. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 and 2.
<PAGE> 17
BARR LABORATORIES, INC. PROXY
The undersigned hereby acknowledge receipt of the Proxy Statement and Notice of
Annual Meeting to be held December 3, 1997.
Date:______________,1997
__________________(SEAL)
__________________(SEAL)
(Please sign exactly as
your name appears
hereon. If stock is
registered in more than
one name, each holder
should sign. When
signing as an attorney,
administrator, executor,
guardian or trustee,
please add your title as
such. If executed by a
corporation, the proxy
should be signed by a
duly authorized
officer).
PLEASE DATE AND PROMPTLY
RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF
MAILED IN THE UNITED
STATES.
I PLAN TO ATTEND:____Yes
____No
