<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 LOGO]
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 9, 1998 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 transact such other business as may properly come before
the meeting.
Owners of record at the close of business on October 16, 1998 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 22, 1998
<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 9, 1998
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 1998 Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held at 10:00 a.m. on December 9, 1998 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 22, 1998.
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 $10,000, plus reimbursable
expenses.
RECORD DATE
The close of business on October 16, 1998 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 22,379,847 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, or, if
otherwise directed by the person executing the proxy, in accordance with each
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. Abstentions, broker non-votes and withheld votes will
not be considered as cast votes.
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), Paul M. Bisaro, Robert J. Bolger, Michael F. Florence, Jacob M.
Kay, Bernard C. Sherman and George P. Stephan, who will serve as Directors until
the 1999 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.
Eight meetings of the Board of Directors were held during the fiscal year
ended June 30, 1998. In addition, there were eleven committee meetings. With the
exception of Messrs. Florence and Harrell, 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, 1998, is composed of
Messrs. 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 and Stephan. Four meetings of the Committee were held during the fiscal
year ended June 30, 1998.
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. Three meetings of the Committee were
held during the fiscal year ended June 30, 1998.
COMPENSATION OF DIRECTORS
Directors, excluding Dr. Sherman, Mr. Downey and Mr. Bisaro 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, Mr. Bolger received
$16,100 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. On December 3, 1997, each participating Director
received a grant of an option to purchase 11,250 shares at an exercise price of
$36.00 per share.
2
<PAGE> 5
INFORMATION ON NOMINEES
BRUCE L. DOWNEY, 50, 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. Mr. Downey is a Director of Warner Chilcott, plc. (NASDAQ).
EDWIN A. COHEN, 66, 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.
PAUL M. BISARO, 37, was elected a Director of the Company in June 1998.
Mr. Bisaro is employed by the Company as Senior Vice President-Strategic
Business Development, General Counsel and Secretary. Prior to joining the
Company in 1992 as General Counsel, Mr. Bisaro was associated with the law firm
of Winston & Strawn, and a predecessor firm, Bishop, Cook, Purcell and Reynolds.
Prior to his association with Winston & Strawn, Mr. Bisaro was a consultant with
Arthur Andersen & Co.
ROBERT J. BOLGER, 76, 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, 61, 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), a Director
of Nutrition for Life International, Inc. (NASDAQ) and was previously a Director
of Kinesis, Inc. Mr. Florence and Dr. Sherman are brothers-in-law.
JACOB ("JACK") M. KAY, 57, 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 Humber River Regional Hospital (Toronto) and Cangene Corporation.
BERNARD C. SHERMAN, 56, 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, 65, 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
OWNERSHIP OF SECURITIES
The following table sets forth information regarding the beneficial
ownership of the Company's voting securities on June 30, 1998, except as noted
below, 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) 9,914,426(2) 42.1%
150 Signet Drive
Weston, Ontario, Canada M9L 1T9
FMR, Edward C. Johnson, 3d 1,388,550(4) 5.9%
82 Devonshire Street,
Boston, MA 02109
Edwin A. Cohen(1) 395,321(3) 1.7%
Bruce L. Downey(1) 433,103(3) 1.8%
George P. Stephan(1) 101,250(3) *
Robert J. Bolger(1) 46,250(3) *
Michael F. Florence(1) 11,700(3) *
Jacob M. Kay(1) 29,250(3) *
Paul M. Bisaro(1) 117,116(3) *
Salah U. Ahmed 46,698(3) *
Timothy P. Catlett 54,661(3) *
Mary E. Petit 54,373(3) *
All Directors and Officers
as a group (17 persons) 11,517,625(3) 49%
</TABLE>
* Less than 1%
(1) A Director of the Company
(2) Consists of 9,914,426 common shares held of record by Sherman Delaware,
Inc. ("SDI") and excludes 350,000 shares, owned by a charitable
foundation, as to which Dr. Sherman disclaims beneficial ownership. The
trustees of that foundation are Messrs. Sherman, Florence and Kay.
4
<PAGE> 7
(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 424,996 shares for Mr. Downey,
164,646 shares for Mr. Cohen, 93,375 shares for Mr. Stephan, 36,250 shares
for Mr. Bolger, 11,250 shares for Mr. Florence, 29,250 shares for Mr. Kay,
43,122 shares for Mr. Ahmed, 115,807 shares for Mr. Bisaro, 48,496 shares
for Ms. Petit, 34,230 shares for Mr. Catlett and 1,224,219 shares for all
Directors and officers as a group.
(4) Pursuant to a Schedule 13G filed on September 10, 1998, 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 1,360,050
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.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the
funds each has sole power to dispose of the 1,360,050 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' Boards of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Funds' Boards of Trustees.
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 28,500 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, 3d and FMR Corp., through its control of Fidelity
Management Trust Company, each has sole voting and dispositive power over
28,500 shares of common stock owned by the institutional account(s) as
reported above.
5
<PAGE> 8
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, 1998, 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, 1998, 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 1998 498,846 300,000 5,028 40,000 15,000
Chairman,CEO 1997 449,038 225,000 5,945 59,999 15,000
& President 1996 399,039 200,000 3,266 90,000 15,000
Mary E. Petit 1998 229,539 90,000 7,908 15,000 15,000
Senior Vice President 1997 193,904 80,000 7,695 22,498 15,000
Operations 1996 165,000 65,000 4,989 22,500 15,000
Paul M. Bisaro 1998 229,539 90,000 8,651 10,000 15,000
Senior Vice President 1997 193,904 80,000 6,866 22,498 15,000
Strategic Business 1996 164,712 65,000 3,859 44,998 15,000
Development, General
Counsel & Secretary
Timothy P. Catlett 1998 209,307 80,000 9,497 15,000 15,000
Senior Vice President 1997 179,711 70,000 9,001 22,498 15,000
Sales & Marketing 1996 165,000 65,000 27,615(4) 22,500 15,000
Salah U. Ahmed 1998 169,539 95,000 8,226 10,000 15,000
Vice President 1997 -- -- -- -- --
Product 1996 -- -- -- -- --
Development
</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.
6
<PAGE> 9
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, 1998. 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)
--------------------------
Number of % of Total Potential Realizable Value at
Shares Options Assumed Annual Rates
Underlying Granted to Per Share Of Stock Price Appreciation
Options Employees In Exercise or Expiration for Option Term
Name Granted (#) Fiscal Year Base Price Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Downey 40,000 20% $ 39.66 9/09/07 $ 997,678 $ 2,528,313
Mary E. Petit 15,000 8% $ 39.66 9/09/07 374,129 948,117
Paul M. Bisaro 10,000 5% $ 39.66 9/09/07 249,420 632,078
Timothy P. Catlett 15,000 8% $ 39.66 9/09/07 374,129 948,117
Salah U. Ahmed 10,000 5% $ 39.66 9/09/07 249,420 632,078
All Shareholders (2) $ 39.66 9/09/07 $557,635,160 $1,413,156,980
</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 22,306,690 outstanding shares as of June 30, 1998 and the market price
on that date ($39.75)
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.
7
<PAGE> 10
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, 1998 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 $ -- $ -- 424,996 79,998 $13,669,644 $821,959
Mary E. Petit 4,000 108,420 48,496 29,998 1,335,566 308,209
Paul M. Bisaro 4,187 129,127 115,807 24,998 3,502,571 307,759
Timothy P. Catlett -- -- 34,230 29,998 932,991 308,209
Salah U. Ahmed -- -- 43,122 21,998 1,253,104 246,379
</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, 1998 ($39.75) and the options' grant price.
8
<PAGE> 11
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, 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, 1998, 1997 and 1996,
Mr. Cohen received $150,000 in annual compensation and earned an additional fee
of $100,000, $100,000 and $63,000, respectively. The consulting agreement, as
amended in June 1995, June 1996 and 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 reverted 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 1999 and for each of the next three 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 (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,
which may be increased by the Company; (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.
9
<PAGE> 12
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 1998, the Company, under Mr. Downey's leadership,
met strategic objectives approved by the Board in the Company's fiscal 1998
Business Plan.
During fiscal 1998, the Company reported the most successful and
profitable year in its history, resulting from the achievement of several key
corporate objectives. These included the successful launch of Warfarin Sodium
and continued expansion the Company's product line with the addition of nine new
products, resulting in the more than $100 million in sales for manufactured
products. The benefits of successful execution of the patent challenge strategy,
including the contributions of Tamoxifen and payments resulting from the
settlement of the ciprofloxacin patent challenge demonstrated how this unique
business development strategy offers a complement to the traditional generic
pharmaceutical products business.
In addition, the Company completed construction and brought on-line the
Virginia manufacturing and distribution center, continued to prepare for the
fluoxetine patent challenge, refinanced long-term debt at very favorable
interest rates and initiated a product rationalization and facility
restructuring program. Mr.Downey also spearheaded the transfer of the Company's
common stock to the New York Stock Exchange, and a successful primary/secondary
offering of 3.9 million shares of the Company's common stock. Finally, Mr.
Downey also played an active strategic and tactical role in the Company's
opposition to DuPont Pharmaceuticals' state legislative initiative to limit
generic substitution of Warfarin Sodium.
Section 162(m) of the Internal Revenue Code limits deductibility of
compensation in excess of $1,000,000 paid in any one year to the Company's chief
executive officer and to each of the other four highest paid executive officers.
Under the Code and corresponding regulations compensation that is based on
attainment of pre-established, objective performance goals and complies with
certain other requirements will be excluded from the $1,000,000 deduction
limitation. During the fiscal year ended June 30, 1998, no executive officer
subject to Section 162(m) was paid compensation in excess of $1,000,000.
Regulations under Section 162(m) provide that gain realized upon the exercise of
stock options can qualify as "performance-based" compensation if various
conditions are satisfied. Certain of those conditions were not satisfied with
respect to some of the stock options granted under the Company's 1993 Stock
Incentive Plan and 1986 Stock Option Plan. Accordingly, compensation arising
from an executive officer's exercise of a nonqualified option (or
10
<PAGE> 13
the sale of underlying stock acquired through the exercise of an incentive stock
option before the required holding period is met) may not be excluded from the
$1,000,000 deduction limitation. The Company is reviewing this matter in order
to determine what changes, if any, can be made so that all the conditions
necessary to qualify future grants of stock options as "performance-based"
compensation will be satisfied.
The Compensation Committee
Edwin A. Cohen
Michael F. Florence
George P. Stephan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Cohen is a former officer of the Company and in the fiscal year ended
June 30, 1998, received $250,000 for consulting services rendered to the
Company.
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,
1993, and reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[CHART OMITTED]
*
FISCAL YEAR ENDED JUNE 30,
$100 Invested on 06/30/93
<TABLE>
<CAPTION>
JUNE 30,
COMPANY/INDEX NAME 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Barr Laboratories, Inc. $100 $103.47 $120.14 $ 214.59 $550.00 $496.88
S&P500 Index 100 101.41 127.84 161.08 216.98 282.42
S&P Health Care Drugs Index 100 96.64 150.58 223.94 350.10 523.80
S&P500 Index
</TABLE>
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1998, the Company sold certain of
its pharmaceutical products and bulk pharmaceutical materials to five other
companies owned or controlled by Dr. Bernard Sherman, a Director of the Company.
The Company was paid an aggregate of $7,536,515 upon such sales. The Company
also purchased bulk pharmaceutical materials from a company owned by Dr. Sherman
in the amount of $1,799,430. 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, 1998,
the Company received $1,170,000 in connection with such agreement.
During the fiscal year ended June 30, 1998, the Company maintained
directors and officers liability insurance coverage from National Union Fire
Insurance Company of Pittsburgh, Pennsylvania and Federal Insurance Company.
These policies insure the Company for certain obligations incurred in the
indemnification of its Directors and Officers under New York law and insure
Directors and Officers where such indemnification is not provided by the
Company. The one-year cost of the policies is $242,000.
The Company has also purchased an insurance policy from Federal 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 $6,120.
RECEIPT OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the 1999 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 24, 1999.
OTHER MATTERS
Services performed by Deloitte & Touche LLP, the Company's independent
accountants, for the year ended June 30, 1998, consisted of an audit of the
consolidated financial statements of the Company, 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.
12
<PAGE> 15
BARR LABORATORIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 9, 1998
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 9, 1998, 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).
Paul M. Bisaro, Robert J. Bolger, Edwin A. Cohen, Bruce L. Downey,
Michael F. Florence, Jacob M. Kay, Bernard C. Sherman, George P. Stephan
2. 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> 16
BARR LABORATORIES, INC. PROXY
The undersigned hereby acknowledge receipt of the Proxy Statement and Notice of
Annual Meeting to be held December 9, 1998.
Date:_______________________, 1998
____________________________(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
