<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
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
Copley Pharmaceutical, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
not applicable
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
not applicable
-------------------------------------------------------------------------
(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):
not applicable
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
not applicable
-------------------------------------------------------------------------
(5) Total fee paid:
not applicable
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
not applicable
-------------------------------------------------------------------------
[_] 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:
not applicable
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
not applicable
-------------------------------------------------------------------------
(3) Filing Party:
not applicable
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(4) Date Filed:
not applicable
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<PAGE>
COPLEY PHARMACEUTICAL, INC.
25 John Road
Canton, Massachusetts 02021
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 27, 1999
----------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Copley
Pharmaceutical, Inc., a Delaware corporation (the "Corporation"), will be held
on Thursday, May 27, 1999, at 10:00 a.m., Eastern Time, at the Sheraton
Braintree Hotel, Braintree, Massachusetts 02184, for the following purposes:
1. To elect three Class III directors, each to serve for a three year term.
2. To ratify the selection of the firm of PricewaterhouseCoopers LLP as
auditors for the fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the meeting
and any adjournments thereof.
Only shareholders of record at the close of business on April 1, 1999 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Gene M. Bauer
Gene M. Bauer,
Secretary
Canton, Massachusetts
April 27, 1999
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED STAMPED ENVELOPE BY RETURN MAIL PROMPTLY IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES.
<PAGE>
COPLEY PHARMACEUTICAL, INC.
25 John Road
Canton, Massachusetts 02021
----------------
PROXY STATEMENT
FOR THE 1999 ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 27, 1999
----------------
April 27, 1999
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of Copley Pharmaceutical, Inc. (the "Corporation") for use
at the Annual Meeting of Shareholders to be held on Thursday, May 27, 1999, at
10:00 a.m., Eastern Time, at the Sheraton Braintree Hotel, Braintree,
Massachusetts 02184, and at any adjournments thereof.
Only shareholders of record at the close of business on April 1, 1999, the
record date fixed by the Board of Directors, will be entitled to notice of,
and to vote at, the Annual Meeting and any adjournments thereof. As of April
1, 1999, 19,216,982 shares of common stock, $0.01 par value per share, of the
Corporation were issued and outstanding. Shareholders are entitled to cast one
vote for each share of Common Stock held of record by them on each proposal
submitted to a vote at the Annual Meeting. Shareholders may vote in person or
by proxy. Any shareholder giving a proxy has the right to revoke that proxy by
(i) filing a later-dated proxy or a written notice of revocation with the
Secretary of the Corporation at any time before it is exercised or (ii) voting
in person at the Annual Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting will
constitute a quorum for the transaction of business. Votes withheld from any
nominee for election as a director, as well as abstentions and broker "non-
votes" with respect to all other matters being submitted to stockholders, are
counted as present or represented for purposes of determining the presence or
absence of a quorum for the meeting. A "non-vote" occurs when a nominee
holding shares for a beneficial owner votes on one proposal, but does not vote
on another proposal because, in respect of the other proposal, the nominee
does not have discretionary voting power and has not received instructions
from the beneficial owner.
The persons named as proxies, Gene M. Bauer and Daniel M.P. Caron, were
selected by the Board of Directors and are officers of the Corporation. All
properly executed proxies returned in time to be counted at the Annual Meeting
will be voted as stated below under "Voting Procedures." Any shareholder
giving a proxy has the right to withhold authority to vote for any individual
nominee to the Board of Directors by so marking the proxy in the space
provided thereon.
In addition to the election of three Class III directors, each to serve for
a three year term, the shareholders will consider and vote upon a proposal to
ratify the selection of the Corporation's auditors for the fiscal year ending
December 31, 1999, each as further described in this Proxy Statement. Where a
choice has been specified on the proxy with respect to the foregoing matters,
including the election of any director, the shares represented by the proxy
will be voted in accordance with the specifications indicated on the proxy and
will be voted FOR any such proposal if no specification is otherwise
indicated.
1
<PAGE>
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote properly may be taken, and upon which the persons named as
attorneys in the proxies may exercise discretion under applicable law, shares
represented by all proxies received by the Board of Directors will be voted
with respect thereto in accordance with the judgment and discretion of the
persons named as attorneys in the proxies.
An Annual Report to Shareholders containing the Corporation's Form 10-K and
financial statements for the year ended December 31, 1998 is being mailed
together with this Proxy Statement to all shareholders entitled to vote at the
Annual Meeting. This Proxy Statement and the form of proxy were first mailed
to shareholders on or about April 27, 1999.
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth as of April 1, 1999 certain information
regarding the ownership of shares of the Corporation's Common Stock by (i)
each person who, to the knowledge of the Corporation, beneficially owned more
than 5% of the shares of Common Stock outstanding at such date, (ii) each
director of the Corporation, (iii) each Named Executive Officer (as defined
below under "Compensation and Other Information Concerning Directors and
Officers-Executive Compensation") and (iv) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name and Address* of Beneficial Owner Ownership (1) Percent of Class
------------------------------------- ----------------- ----------------
<S> <C> <C>
HCCP Acquisition Corporation(2)............. 9,934,100 51.7%
30 Independence Blvd.
Warren, New Jersey 07059
Jane C.I. Hirsh(3)**........................ 1,404,563 7.3%
Theodore L. Iorio(4)**...................... 1,386,546 7.2%
Kenneth N. Larsen(5)........................ 132,037 ***
Daniel L. Korpolinski(6).................... 81,525 ***
Wei-wei Chang(7)............................ 62,154 ***
Gene M. Bauer(8)............................ 40,870 ***
Daniel M.P. Caron(9)........................ 16,047 ***
Robert P. Cook(10).......................... 10,000 ***
Charles T. Lay(11).......................... 5,000 ***
Jess G. Thoene(12).......................... 5,200 ***
Martin Zeiger(13)........................... 1,000 ***
William K. Hoskins(13)...................... 0 ***
David A. Jenkins(13)........................ 0 ***
All directors and executive officers as a
group (12 persons)(14)..................... 1,758,396 8.9%
</TABLE>
- --------
* Addresses furnished only for holders of five percent (5%) or more of the
Common Stock
** c/o Copley Pharmaceutical, Inc., 25 John Road, Canton, MA 02021
*** Less than 1%
(1) To the Corporation's knowledge, except as otherwise noted in the
footnotes to this table, each person or entity named in the table has
sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such person.
2
<PAGE>
(2) HCCP Acquisition Corporation is a wholly-owned subsidiary of Hoechst
Corporation ("Hoechst"). Hoechst is wholly-owned by Hoechst
Aktiengesellschaft ("Hoechst AG"), a large chemical and pharmaceutical
company headquartered in Frankfurt, Germany. For a description of certain
arrangements with respect to these shares, see "Compensation and Other
Information Concerning Directors and Officers--Certain Relationships and
Related Transactions."
(3) Consists of 112,500 shares issuable upon the exercise of outstanding
stock options exercisable on April 1, 1999 or within 60 days thereafter
("Presently Exercisable Securities") and 25,321 shares allocated under
the Corporation's Employee Stock Ownership Plan. Also includes: (i)
200,000 shares held of record by NMJ Limited Partnership, of which Mrs.
Hirsh is a general partner; (ii) 888,416 shares held by Juliet Partners,
of which Mrs. Hirsh is a general partner; (iii) 170,569 shares held of
record by Romeo Partners, of which Mrs. Hirsh's husband, Dr. Mark Hirsh,
is a general partner; and (iv) 7,757 shares allocated under the
Corporation's Employee Stock Ownership Plan beneficially owned by Dr.
Hirsh. Mrs. Hirsh has shared voting and investment power with respect to
all shares listed.
(4) Includes: (i) 150,605 shares issuable upon the exercise of Presently
Exercisable Securities; (ii) 22,202 shares allocated under the
Corporation's Employee Stock Ownership Plan; (iii) 653,454 shares held by
The Theodore L. Iorio Standard Trust, a revocable trust of which Mr.
Iorio is the beneficiary and settlor and over which Mr. Iorio has shared
voting and investment power; (iv) 163,932 shares held by the Theodore L.
Iorio Charitable Remainder Trust, of which Mr. Iorio is a co-trustee and
over which Mr. Iorio has shared voting and investment power; and (v)
260,073 shares held by trusts for the benefit of certain members of Mr.
Iorio's family, for which Mr. Iorio's spouse is custodian, the beneficial
ownership of which Mr. Iorio disclaims. Mr. Iorio also disclaims
beneficial ownership of shares held by the Theodore L. Iorio Charitable
Remainder Trust.
(5) Includes 55,082 shares issuable pursuant to Presently Exercisable
Securities.
(6) Consists of Presently Exercisable Securities.
(7) Includes 57,500 shares issuable pursuant to Presently Exercisable
Securities.
(8) Includes 40,000 shares issuable pursuant to Presently Exercisable
Securities.
(9) Includes 10,000 shares issuable pursuant to Presently Exercisable
Securities.
(10) Consists of Presently Exercisable Securities.
(11) Consists of Presently Exercisable Securities.
(12) Includes 5,000 shares issuable pursuant to Presently Exercisable
Securities.
(13) Excludes 9,934,100 shares of common stock held by HCCP Acquisition
Corporation, of which such person may be deemed an affiliate. Mr. Zeiger
is Vice President of Hoechst Marion Roussel, Inc. ("HMRI"), a majority-
owned subsidiary of HMR Pharma, Inc. which is wholly-owned by Hoechst AG.
Mr. Hoskins was Vice President and General Counsel of HMRI and remains a
consultant to HMRI. Mr. Jenkins is President of Hoechst Corporation, a
subsidiary of Hoechst AG. Each of Messrs. Zeiger, Hoskins and Jenkins
disclaims beneficial ownership of any shares held by HCCP Acquisition
Corporation or any of its affiliates.
(14) Includes 527,212 shares issuable pursuant to Presently Exercisable
Securities.
3
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The business and affairs of the Corporation are managed under the direction
of its Board of Directors. The Board of Directors met fourteen (14) times
during the year ended December 31, 1998.
The following table sets forth for each nominee for election at the Annual
Meeting and for each director whose term of office will extend beyond the
Annual Meeting; the year each such nominee or director first became a
director; the positions currently held by each nominee or director with the
Corporation; the year each nominee's or director's term will expire; and the
class of director of each nominee or director.
<TABLE>
<CAPTION>
Nominee or Director's Name and Year Year Term Class of
Nominee or Director First Became a Director Position(s) Held Will Expire Director
- ------------------------------------------- -------------------------- ----------- --------
<S> <C> <C> <C>
Nominees:
William K. Hoskins (1997)...... Director 2002(*) III
Daniel L. Korpolinski (1998)... President, Chief Executive 2002(*) III
Officer and Director
Charles T. Lay (1999).......... Director 2002(*) III
Ongoing Directors:
Kenneth N. Larsen (1985)(**)... Director 2000 II
Jess G. Thoene, M.D. (1998).... Director 2000 II
Martin Zeiger (1995)........... Director 2000 II
Robert P. Cook (1997).......... Director 2001 I
Jane C.I. Hirsh (1972)......... President of International 2001 I
Business and Director
David A. Jenkins (1998)........ Chairman of the Board 2001 I
</TABLE>
- --------
(*) Assumes election of each of the Class III Directors at the Annual
Meeting.
(**) Mr. Larsen resigned as a Director in November 1986 and was re-elected to
the Board in 1989.
The Audit Committee of the Board of Directors currently consists of Kenneth
N. Larsen (Chairman), William K. Hoskins and Martin Zeiger. Mr. Larsen was
appointed to the Audit Committee by the Board of Directors on May 28, 1998,
replacing Jane C.I. Hirsh who had served since April 30, 1996. Mr. Zeiger was
appointed to the Audit Committee by the Board of Directors on May 28, 1998,
replacing Judith W. Fensterer who had served since May 24, 1995. The Audit
Committee is responsible for assisting the Board of Directors in fulfilling
its responsibilities by overseeing the annual audit process, including matters
relating to the appointment and activities of the Corporation's independent
auditors, assessing the adequacy of the Corporation's internal controls and
reviewing the reliability of the financial information provided to the
shareholders and others. The Audit Committee plans the scope of the
Corporation's annual audit and meets with the Corporation's independent
auditors to plan, and later to review the results of, the annual audit. The
Audit Committee met once as a Committee and met once as a committee of the
entire Board of Directors during the year ended December 31, 1998.
The Compensation Committee of the Board of Directors currently consists of
David A. Jenkins (Chairman), Robert P. Cook and Jane C.I. Hirsh. Mr. Cook was
appointed to the Compensation Committee by the Board of
4
<PAGE>
Directors on May 28, 1998, replacing Martin Zeiger who had served since May
30, 1997. Mrs. Hirsh was appointed to the Compensation Committee by the Board
of Directors on May 28, 1998. Mr. Jenkins was appointed to the Compensation
Committee by the Board of Directors on May 28, 1998, replacing Kenneth N.
Larsen who had served since April 30, 1996. Agnes Varis, who had served on the
Compensation Committee since March 24, 1992, resigned from the Board of
Directors and the Compensation Committee on July 24, 1998. The Compensation
Committee reviews executive performance, equity and non-equity executive
compensation and advises the Board of Directors on the Corporation's benefits
and compensation policies. The Compensation Committee met twice as a Committee
and met twice as a committee of the entire Board of Directors during the year
ended December 31, 1998.
During 1998, each director, other than Messrs. Cook and Thoene, attended at
least 75% of the aggregate of (i) the total number of meetings of the Board of
Directors and (ii) the total number of meetings held by all committees of the
Board on which such director served. Each of Agnes Varis and Judith Fensterer
resigned from the Board of Directors effective July 24, 1998 and July 26,
1998, respectively.
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Class III nominees for election at the
Annual Meeting, the current Class I and Class II directors who will continue
to serve as directors after the Annual Meeting, and the executive officers of
the Corporation, their ages and the positions currently held by them with the
Corporation:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gene M. Bauer........... 49 Executive Vice President, General Counsel and Secretary
Daniel M. P. Caron...... 37 Chief Financial Officer, Treasurer and Vice President of Finance
Wei-wei Chang........... 53 Executive Vice President--Scientific and Regulatory Affairs
Robert P. Cook(2)....... 67 Director
Jane C.I. Hirsh(2)...... 57 President of International Business and Director
William K. Hoskins(1)... 64 Director
David A. Jenkins(2)..... 58 Chairman of the Board
Daniel L. Korpolinski... 56 President, Chief Executive Officer and Director
Kenneth N. Larsen(1).... 73 Director
Charles T. Lay.......... 59 Director
Jess G. Thoene, M.D..... 56 Director
Martin Zeiger(1)........ 61 Director
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Nominees for Election at the Annual Meeting
William K. Hoskins, initially designated by Hoechst to serve as a director
of the Corporation pursuant to the Governance Agreement (as hereinafter
defined) (see "Compensation and Other Information Concerning Directors and
Officers-Certain Relationships and Related Transactions"), has been a director
since October 1997. Mr. Hoskins served as Vice President, Secretary and
General Counsel of HMRI, and its predecessors, from 1982 through June 1997. In
addition, Mr. Hoskins has served on the Board of Directors of J.C. Nichols Co.
since November 1995 and, effective May 1996, became Chairman of the Board.
5
<PAGE>
Daniel L. Korpolinski, a director of the Corporation since August, 1998, is
the Corporation's President and Chief Executive Officer. Mr. Korpolinski
served as President and Chief Executive Officer of Prodromics On Line from
1997 until August of 1998, President and Chief Executive Officer of CoCensys,
Inc. from 1991 through 1996 and President of Adria Laboratories North America
from 1988 to 1991.
Charles T. Lay, a director of the Corporation since February 1999, was
President and Chief Executive Officer of Geneva Pharmaceuticals, Inc. from
June 1988 through December 1998.
Directors Whose Terms Extend Beyond the Meeting
Robert P. Cook, a director of the Corporation since July 1997, is currently
the Senior Vice President of Marketing and Sales of Scinopharm Int. Ltd.,
which he founded in January of 1995. Prior to that, Mr. Cook served as
Director, Generics Business of Syntex Laboratories, Inc. from October 1986 to
December 1994.
Jane C.I. Hirsh, the founder of the Corporation, serves as its President of
International Business and as a director. Mrs. Hirsh has been a director of
the Corporation since 1972 and served as the Chairman of the Board of
Directors from 1984 to May 1995. Mrs. Hirsh served as President of the
Corporation from 1979 to early 1984, and from 1985 to June 1993. Mrs. Hirsh
also served as Treasurer from 1972 to 1992.
David A. Jenkins, Chairman of the Board of Directors since May 1998 was
initially designated by Hoechst to serve as a director pursuant to the
Governance Agreement. Mr. Jenkins has served as the Vice President--General
Counsel and a director of HNA Holdings, Inc. (formerly Hoechst Celanese
Corporation) since April 1989 and as President of HNA Holdings, Inc. since
December 1997. In addition, he has been the President of Hoechst Corporation
since December 1997, General Counsel and Secretary since October 1995, and a
director since May 1994.
Martin Zeiger, initially designated by Hoechst to serve as a director of the
Corporation pursuant to the Governance Agreement, has been a director of the
Corporation since November 1995. Mr. Zeiger serves as Vice President for HMRI.
He served as Vice President, Strategic Planning and Administration-Generics of
HMRI from October 1995 through December 1997. He served as Executive Vice
President, Administration and Legal Affairs for The Rugby Group, a
manufacturer and distributor of generic pharmaceutical products and formerly
an affiliate of HMRI or a predecessor, from October 1993 through October 1995
and prior to that as Executive Vice President, Administration and General
Counsel of the Rugby-Darby Group Companies, Inc., from December 1986 to
October 1993.
Kenneth N. Larsen, a director since 1989 and President from November 1994 to
May 1995 and July 1996 to January 1997, also served as Chairman of the Board
of the Corporation from May 1995 through May 1998, and as a director from
September 1985 to November 1986. Mr. Larsen served as Managing Director of
Midlar Pharma, Inc., a pharmaceutical product development company from January
1996 to July 1996. Mr. Larsen has been a consultant and advisor to numerous
healthcare companies from 1989 to the present.
Jess G. Thoene, M.D., a director of the corporation since October 1998, has
been a professor at the University of Michigan School of Medicine since 1977.
Dr. Thoene also served as a consultant to Mylan Laboratories, Inc. from 1992
to 1994. He also served on the Board of Scientific Advisors of Watson
Pharmaceuticals from 1992 to 1998 and currently serves on the Board of
Scientific Counselors, National Institute of Child Health and Human
Development of The National Institute of Health.
6
<PAGE>
Executive Officers
Gene M. Bauer, assumed the title of Executive Vice President, Secretary and
General Counsel of the Corporation in July 1997. He joined the Corporation in
May 1995 as Vice President, Secretary and General Counsel. Prior to joining
the Corporation he served as Associate General Counsel to The Cooper
Companies, Inc. from January 1993 through April 1995.
Daniel M.P. Caron, assumed the title of Chief Financial Officer, Treasurer
and Vice President of Finance in June 1998. He joined the Corporation in
November 1992 as Corporate Controller.
Wei-wei Chang, the Corporation's Executive Vice President--Scientific and
Regulatory Affairs since July 1997, joined the Corporation in August 1994 as
Vice President Quality Affairs. In September 1996 she became Vice President
Quality and Technical Affairs for the Corporation. Prior to joining the
Corporation, she served as President of NuTec Incorporated, a pharmaceutical
and medical devices consulting company, from 1991 through 1994.
Executive officers of the Corporation are elected by the Board of Directors
on an annual basis and serve until their successors have been duly elected and
qualified or until their earlier death, removal or resignation. There are no
family relationships among any of the executive officers or directors of the
Corporation.
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
Summary Compensation
The following table sets forth information for the years ended December 31,
1996, 1997 and 1998 concerning the total compensation awarded, earned by or
paid to the Corporation's President and Chief Executive Officer and each of
the other most highly compensated executive officers of the Corporation (other
than the President and Chief Executive Officer) whose salary and bonus earned
during the year ended December 31, 1998 exceeded $100,000, for services
rendered to the Corporation in all capacities. The persons listed below are
hereinafter collectively referred to as the "Named Executive Officers."
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards (2)
--------------------- ------------
Other Securities
Annual Underlying All Other
Name and Principal Position Year Salary Bonus(1) Compensation Options (#) Compensation (3)
- --------------------------- ---- ---------- ---------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Daniel L. Korpolinski... 1998 $ 103,846 $ 45,000 101,323(4) 150,000 --
President and Chief
Executive Officer
Gene M. Bauer........... 1998 175,356 37,180 -- 10,000 $6,483
Executive Vice 1997 161,039 17,324 -- 20,000 5,278
President, General
Counsel and Secretary
Daniel M.P. Caron....... 1998 125,803 28,600 -- 10,000 5,253
Vice President, Chief
Financial Officer and
Treasurer
Wei-wei Chang........... 1998 208,536 44,000 -- 10,000 6,483
Executive Vice- 1997 188,322 29,474 -- 20,000 8,869
President--Scientific
and Regulatory Affairs
</TABLE>
- --------
(1) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(2) The Corporation did not make any restricted stock awards, grant any stock
appreciation rights or make any long term incentive plan payouts in 1996,
1997 or 1998.
(3) Consists of contributions made by the Corporation to vested and unvested
defined contribution plans. Amounts contributed by the Corporation under
the Copley Pharmaceutical, Inc. Retirement Plan are allocated among all
eligible employees who participate in the Retirement Plan in accordance
with the terms of the Retirement Plan.
(4) Consists of relocation expenses.
8
<PAGE>
Option Grants
The following table sets forth information concerning stock options granted
during the year ended December 31, 1998 under the Corporation's 1992 Stock
Plan to the Named Executive Officers (the Corporation did not grant any stock
appreciation rights during the year ended December 31, 1998):
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------
Percent of
Total Potential Realizable Value at
Options Assumed Annual Rates
Granted to of Stock Price Appreciation for
No. of Employees Exercise Option Term (2)
Options in Price Per Expiration -------------------------------
Name Granted Year(1) Share Date 5% 10%
- ---- ------- ---------- --------- ---------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Daniel L. Korpolinski... 150,000 26.8% $9.93755 8/24/08 $ 937,446 $ 2,375,672
Gene M. Bauer........... 10,000 1.8 6.25 5/28/08 39,306 99,306
Daniel M. P. Caron...... 10,000 1.8 6.25 5/28/08 39,306 99,306
Wei-wei Chang........... 10,000 1.8 6.25 5/28/08 39,306 99,306
</TABLE>
- --------
(1) A total of 558,700 options were granted to employees in the year ended
December 31, 1998 under the Corporation's 1992 Stock Plan.
(2) The 5% and 10% assumed rates of appreciation are required by the rules and
regulations of the Securities and Exchange Commission and do not represent
the Corporation's estimate or projection of the price of the Common Stock
in the future. There can be no assurances that the rates of appreciation
in this table can be achieved or that the amounts reflected will be
received by the Named Executive Officer.
Option Exercises and Unexercised Option Holdings
The following table sets forth certain information concerning options held
by the Named Executive Officers on December 31, 1998. No options were
exercised by the Named Executive Officers during the year ended December 31,
1998.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying In-the-Money
Unexercised Options Options at
at Year-End Year-end
Exercisable/ Exercisable/
Name (Unexercisable)(#) (Unexercisable)($)(1)
- ---- -------------------- ---------------------
<S> <C> <C>
Daniel L. Korpolinski................ 57,071/(92,929) 24,969/40,656
Gene M. Bauer........................ 32,500/(17,500) 50,313/70,938
Daniel M. P. Caron................... 7,500/( 7,500) 10,313/30,938
Wei-wei Chang........................ 50,000/(17,500) 50,313/70,938
</TABLE>
- --------
(1) Value is based on the difference between the option exercise price and the
fair market value of the Corporation's Common Stock on December 31, 1998
($10.375, the last reported sale price of the Corporation's Common Stock
on the Nasdaq National Market on December 31, 1998, the last trading date
in 1998) multiplied by the number of shares underlying the options.
9
<PAGE>
Employment and Severance Agreements
The Corporation and each of Mr. Korpolinski, Mrs. Hirsh, Mr. Bauer and Dr.
Chang are parties to employment agreements which are substantially similar,
except as set forth below. The employment agreements provide for initial
annual base salaries of $300,000 for Mr. Korpolinski, $385,000 for Mrs. Hirsh,
$155,400 for Mr. Bauer and $175,000 for Dr. Chang. Under the employment
agreements, employment may be terminated for "cause," which includes: the
misappropriation of money, assets or property; willful, material and repeated
failure to perform reasonable assignments; conviction of a felony; and breach
of confidentiality, non-competition and non-solicitation provisions. If the
employee dies, or employment is terminated due to disability or without cause
each employee will be eligible for medical and other health insurance benefits
for a defined period of time, and all of the employee's stock options will be
accelerated and become fully exercisable for a period of 60 days after the
date of termination. In addition, each employment agreement provides for a
defined lump sum severance payment under such circumstances. Each is entitled
to receive discretionary bonuses as determined by the Board of Directors;
provided, however, that Mr. Korpolinski is entitled to a bonus of 30% of his
base salary for each of the Company's 1998 and 1999 fiscal years based upon
the achievement of certain performance goals. The original terms of the
employment agreements will expire in 2000 for Messrs. Korpolinski and Bauer
and 1999 for Dr. Chang and Mrs. Hirsh. Each agreement automatically renews for
successive one-year periods unless the Corporation gives the employee six
months' written notice of non-renewal, which for purposes of each agreement is
treated as termination without cause. The employment agreements contain non-
competition covenants which prohibit competing with the Corporation for one
year after employment terminates, during which time the employment agreements
also prohibit interfering with the Corporation's business or its relationships
with its customers and potential customers and from soliciting the
Corporation's employees.
Mr. Caron's employment agreement provides for a severance payment of 50% of
his then base salary, medical and other health insurance benefits for one
year, and acceleration of all unvested stock options exercisable for a period
of 60 days upon death, disability or termination without cause if such event
occurs within one year of a change in control of the Corporation. In addition,
if such death, disability or termination without cause occurs within six
months following a change in control of the Corporation, Mr. Caron is entitled
to an additional severance payment of 50% of his then base salary. This
agreement expires one year following a change in control of the Corporation.
Report on Executive Compensation
The Compensation Committee of the Board of Directors currently consists of
David A. Jenkins (Chairman), Robert P. Cook and Jane C.I. Hirsh. Mr. Cook was
appointed to the Compensation Committee by the Board of Directors on May 28,
1998, replacing Martin Zeiger who had served since May 30, 1997. Mrs. Hirsh
was appointed to the Compensation Committee by the Board of Directors on May
28, 1998. Mr. Jenkins was appointed to the Compensation Committee by the Board
of Directors on May 28, 1998 replacing Kenneth N. Larsen who had served since
April 30, 1996. Agnes Varis, who had served on the Compensation Committee
since March 24, 1992, resigned from the Board of Directors and the
Compensation Committee on July 24, 1998. The Compensation Committee reviews
executive performance, equity and non-equity executive compensation and
advises the Board of Directors on the Corporation's benefits and compensation
policies. The Board of Directors, however, has approval over all such matters.
The Compensation Committee met twice as a Committee and met twice as a
committee of the entire Board of Directors during the year ended December 31,
1998.
The Compensation Committee is responsible for developing the compensation
programs for the Corporation's executive officers, key employees and other
senior management. The Compensation Committee
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also recommends the option grants under the Corporation's 1992 Stock Plan and
has oversight responsibilities with respect to the Corporation's stock
purchase plan and Retirement Plan.
The Compensation Committee has designated three basic components of the
Corporation's compensation program to implement its philosophy. First, base
salaries are the fixed regular component of executive compensation and are
measured against (i) base salary levels among a competitive peer group, (ii)
the Corporation's past financial performance and future expectations, (iii)
the general and industry-specific business environment and (iv) individual
performance. The Compensation Committee does not assign relative weights or
rankings to these factors, but instead makes a subjective determination based
upon the consideration of all of these factors as well as the progress made
with respect to the Corporation's long-term goals and strategies. Second,
annual bonus compensation, paid in accordance with the Corporation's bonus
plan for key employees, is linked to the financial performance of the
Corporation and is designed to provide additional incentive in the form of
cash compensation determined as a function of the individual performance of
eligible key employees in a given year. Consideration is also given to
exemplary performance in the accomplishment of special and particularly
difficult tasks. Third, stock option grants under the Corporation's 1992 Stock
Plan are designed to motivate the executive officers and other employees to
deliver value to the Corporation's shareholders over a period of several
years. The objective of these awards is to advance the longer-term interests
of the Corporation and its shareholders and to complement the incentives tied
to annual performance. These awards provide rewards to executives upon the
creation of incremental shareholder value and the attainment of long-term
earnings goals. Stock options only produce value to executives if the price of
the Corporation's stock appreciates, thereby directly linking the interests of
executives with those of shareholders. The number of stock options granted is
based, among other things, on the level of an executive's position and the
executive's performance in the prior year. Stock options granted for this
purpose generally vest over a period of three years.
Chief Executive Officer Compensation
Daniel L. Korpolinski has served as the President and Chief Executive
Officer of the Corporation since August 1998. Mr. Korpolinski's initial base
salary was based on a number of factors, including the base salaries of
executives performing similar functions for peer companies, his level of
expertise in the industry, prior accomplishments as president and chief
executive officer of other companies, the Corporation's existing compensation
structure and anticipated preparation and implementation of a long term
strategic plan. Additionally, these factors played a key role in determine Mr.
Korpolinski's target bonus, initial option grant and severance provisions.
Deductibility of Executive Compensation
In general, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Corporation cannot deduct, for United States federal
income tax purposes, compensation in excess of $1,000,000 paid to certain
executive officers. This deduction limitation does not apply, however, to
compensation that constitutes "performance-based compensation" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. In order for certain forms of compensation, such as stock options,
to qualify as "performance-based compensation," among other things, the
granting board or committee must consist solely of "outside directors" as
defined in the regulations promulgated under Section 162(m). As the
Compensation Committee did not consist solely of "outside directors" in 1998,
stock options granted under the Corporation's 1992 Stock Plan and 1995 Non-
Employee Director Stock Option Plan during the year will not constitute
"performance-based compensation" and, therefore, any compensation resulting
from the exercise of such
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options will be aggregated with all other compensation to the executive
officer and to the extent compensation exceeds $1,000,000 the Corporation will
not receive the benefit of a tax deduction for United States federal income
tax purposes. The Board of Directors intends to periodically review the
potential consequences of Section 162(m) to the Corporation and may structure
the performance-based portion of its executive compensation in the future to
constitute "performance-based compensation" within the meaning of Section
162(m).
COMPENSATION COMMITTEE BOARD OF DIRECTORS
David A. Jenkins, Chairman David A. Jenkins, Chairman
Robert P. Cook Robert P. Cook
Jane C.I. Hirsh Jane C.I. Hirsh
William K. Hoskins
Daniel L. Korpolinski
Kenneth N. Larsen
Charles T. Lay
Jess G. Thoene
Martin Zeiger
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Robert P. Cook, Jane C.I. Hirsh and David A. Jenkins. Mrs. Hirsh currently
serves as the Corporation's President of International Business. Mrs. Hirsh
participated in two Compensation Committee meetings as a subset of the Board
of Directors while an employee of the Corporation.
Compensation of Directors
Effective as of October 1, 1994, directors who are not employees of the
Corporation or of Hoechst receive an annual fee of $12,000 and a participation
fee of $500 for each meeting of the Board of Directors or committee thereof
attended (provided such meetings are held on separate dates). All directors
are entitled to be reimbursed for expenses in connection with attending Board
of Directors and Committee meetings.
The Corporation's 1995 Non-Employee Director Stock Option Plan (the
"Director Plan") provides for the automatic grant of stock options to
directors of the Corporation who are not employees or officers of the
Corporation, or of an affiliate (including Hoechst) thereof (a "Non-Employee
Director"). The Director Plan was approved by the shareholders at the
Corporation's annual meeting held on May 24, 1995. Each Non-Employee Director,
who was a serving director as of March 30, 1995, the date the Board of
Directors approved the Director Plan (the "Board Approval Date") and who had
not received a grant of options under any other plan maintained by the
Corporation within a period of twelve months preceding the Board Approval Date
was granted an option to purchase Three Thousand Three Hundred and Thirty-
Three (3,333) shares of Common Stock, and will be granted an option to
purchase an additional Three Thousand Three Hundred and Thirty-Three (3,333)
shares of Common Stock on the anniversary of such date each year thereafter,
subject to such person continuing to be a Non-Employee Director, at each such
date. Each Non-Employee Director who was ineligible for the above-described
grant because of having received a grant of options under any other plan
maintained by the Corporation within a period of twelve months preceding the
Board Approval Date, shall be automatically granted on the third anniversary
of such grant an option to purchase an additional Three Thousand Three Hundred
and Thirty-Three (3,333) shares of Common Stock and an option to purchase an
additional Three Thousand Three Hundred and
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Thirty-Three (3,333) shares of Common Stock on the anniversary of such date
each year thereafter, subject to each person continuing to be a Non-Employee
Director at each such date. Each Non-Employee Director who first becomes a
member of the Board of Directors subsequent to the Board Approval Date, will
be automatically granted on the date such person is first elected or appointed
to the Board of Directors (the "Initial Election Grant Date") an option to
purchase Fifteen Thousand (15,000) shares of the Common Stock, and on the
third anniversary of the Initial Election Grant Date and each succeeding
anniversary of the Initial Election Grant Date thereafter, an option to
purchase an additional Three Thousand Three Hundred and Thirty-Three (3,333)
shares of Common Stock, subject to such person continuing to be a Non-Employee
Director at each such date. Any director who was an employee or officer of the
Corporation, or of an affiliate thereof (an "Employee"), on the Board Approval
Date or any person who becomes a director thereafter while already an Employee
or concurrently with becoming an Employee, and who thereafter ceases to be an
Employee but continues thereafter as a member of the Board (i.e., a Non-
Employee Director), shall be automatically granted as of the date such person
ceases to be an Employee, an option to purchase Three Thousand Three Hundred
and Thirty-Three (3,333) shares of Common Stock, and an option to purchase an
additional Three Thousand Three Hundred and Thirty-Three (3,333) shares of
Common Stock on the anniversary of such date each year thereafter, subject to
such person continuing to be a Non-Employee Director at each such date.
During the year ended December 31, 1998, Mr. Larsen received an option to
purchase Three Thousand Three Hundred Thirty-Three (3,333) shares and Dr.
Thoene received an option to purchase Fifteen Thousand (15,000) shares of the
Corporation's Common Stock pursuant to the Director Plan.
Stock Performance Graph
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Corporation's Common Stock during the period
from December 31, 1993 through December 31, 1998 with the cumulative total
return on (i) the Nasdaq Market Index, (ii) a peer group index prepared by the
Corporation consisting of the following publicly-traded companies: Alza
Corporation; A.L. Pharma, Inc.; Barr Laboratories, Inc.; Cygnus Therapeutic
Systems, Inc.; Elan Corporation, p.l.c.; Forest Laboratories, Inc.; Halsey
Drug Co. Inc.; Ivax Corp.; K-V Pharmaceutical Company; Mylan Laboratories,
Inc.; Noven Pharmaceuticals, Inc. (Class A Stock); Pharmaceutical Resources,
Inc.; Taro Pharmaceuticals Industries Ltd.; Teva Pharmaceuticals Industries
Ltd.; and Watson Pharmaceuticals, Inc. (the "New Peer Group"), and (iii) a
peer group index prepared by the Corporation consisting of the following
publicly-traded companies: A.L. Pharma, Inc.; Barr Laboratories, Inc.;
Carrington Laboratories Inc.; Duramed Pharmaceuticals, Inc.; Elan Corporation,
p.l.c.; Faulding, Inc.; Forest Laboratories, Inc., Gensia Pharmaceuticals,
Inc.; Halsey Drug Co. Inc.; Ivax Corp.; Jones Medical Industries Inc.; K-V
Pharmaceutical Company; Mylan Laboratories Inc.; Noven Pharmaceuticals Inc.
(Class A Stock); Perrigo Company; Pharmaceutical Resources, Inc.; Roberts
Pharmaceutical Corp.; Taro Pharmaceutical Industries Ltd.; and Teva
Pharmaceutical Industries Ltd. (the "Old Peer Group").
The Corporation believes that, prior to this year, the Old Peer Group
included those publicly traded companies which had the most comparable
operating characteristics of the Corporation. The Corporation also believes,
however, that the business activities of certain other companies are closer to
that of the Corporation than some of the companies included in the Old Peer
Group, and that as a result, the Old Peer Group now (i) doesn't include all of
those companies with which a comparison would be meaningful, and (ii) includes
certain companies with which a comparison is now less meaningful. The
Corporation has replaced Carrington Laboratories, Inc., Duramed
Pharmaceuticals, Inc., Faulding, Inc., Gensia Pharmaceuticals, Inc., Jones
Medical Industries Inc., Perrigo Company and Roberts Pharmaceutical, Corp. of
the Old Peer Group with Cygnus
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Therapeutic Systems, Inc., and Watson Pharmaceuticals Inc. in the New Peer
Group. The Corporation believes that the performances of the members of the New
Peer Group provide the most meaningful basis for comparison with the
Corporation's performance and intends to include the New Peer Group for
comparison purposes in this and future proxy statements. The comparison assumes
$100 was invested on December 31, 1993 in the Corporation's Common Stock, the
foregoing Nasdaq Market Index, the New Peer Group Index and the Old Peer Group
Index and assumes reinvestment of dividends, if any.
[LINE GRAPH APPEARS HERE]
Comparison of Cumulative Total Return of
Company, Old Peer Group, New Peer Group and
NASDAQ Market Index
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Copley Pharmaceutical.............................. 100.00 33.54 34.81 23.42 14.24 26.77
Old Peer Group..................................... 100.00 75.35 98.14 87.26 105.90 140.43
New Peer Group..................................... 100.00 84.68 117.09 100.91 125.82 188.38
NASDAQ Market Index................................ 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
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Certain Relationships and Related Transactions
The Corporation has adopted a policy that all transactions between the
Corporation and its officers, directors, affiliates and principal shareholders
be on terms no less favorable to the Corporation than terms of transactions
with unrelated parties and be approved by a majority of disinterested
directors. In addition, under the terms of the Governance Agreement (as
hereinafter defined), until October 8, 1998 every transaction or series of
related transactions between the Corporation and Hoechst (or any of its
affiliates) and every corporate action which presents a potential conflict of
interest between Hoechst (or any of its affiliates) and the Corporation and
its other shareholders was subject to the prior approval of a majority of the
Independent Directors (as defined in the Governance Agreement).
Pursuant to the Product Agreement (as hereinafter defined) and certain other
product distribution agreements, the Corporation purchased in 1998 an
aggregate of approximately $45,163,000 worth of generic products from HMRI.
The Corporation obtains its comprehensive general liability, product
liability, umbrella liability and all risks property insurance coverage
through an insurance and risk sharing arrangement with Hoechst AG, and its
various subsidiaries, including Hoechst and HNA. Insurance coverage is
provided through a wholly-owned insurance subsidiary of HNA, as well as by
external parties. Total premiums paid by the Corporation for these insurance
policies aggregated approximately $4,563,000 for the year ended December 31,
1998.
At December 31, 1998, the Corporation was a 49% owner of Chia Tai Copley
Pharmaceutical ("CTCP") which, in turn, was an 85% owner of Wuxi Chia Tai
Copley Pharmaceutical ("WCTCP"). CTCP and WCTCP were formed to manufacture and
market multi-source drug products in the People's Republic of China. The
Corporation's investment in CTCP totaled $2.1 million at December 31, 1998.
During 1995, the Company's Board of Directors voted to decrease the Company's
financial commitment to and de-emphasize the Company's role in CTCP and WCTCP.
Subsequently a subsidiary of Hoechst AG indicated its desire to purchase an
interest in WCTCP and it is anticipated that upon transfer of its indirect
ownership in WCTCP the Company will recover approximately $2.1 million of its
investment in CTCP. In 1998, the Company wrote down its investment of $2.4
million to $2.1 million and reclassified it to a long-term related party
receivable.
Governance Agreement
On November 11, 1993, HCCP Acquisition Corporation ("HCCP"), a wholly-owned
subsidiary of HNA, acquired a 51% interest in the Corporation on a fully
diluted basis (the "Acquisition"). In connection with the Acquisition, the
Corporation, HNA and HCCP entered into a Corporate Governance and Standstill
Agreement dated as of October 8, 1993, as amended (the "Governance
Agreement"), to govern the relationship between the Corporation and HNA and
its affiliates. On October 8, 1998, the Governance Agreement expired by its
terms, with the exception of certain limited protections that will continue in
force as described below.
Some of the more significant protections in the Governance Agreement that
expired are: (a) the requirement that the Board of Directors consist of nine
members, three being Corporation Directors, three being Hoechst Directors and
three being Independent Directors (meaning jointly selected by the Corporation
Directors and Hoechst Directors), and that committees of the Board of
Directors be similarly constituted; (b) the prohibition against Hoechst and
its affiliates acquiring additional shares (other than as necessary to
maintain its pre-existing percentage ownership) or otherwise seeking to
increase their control of ownership of the Corporation without the
Corporation's consent (including the consent of at least one Corporation
Director); (c) the prohibition against amendments of the Corporation's charter
and by-laws without the consent of at least one Corporation Director;
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<PAGE>
(d) the requirement that Hoechst vote its shares in accordance with all
recommendations of the Board of Directors and not vote in opposition to any
recommendation of the Board of Directors; (e) the requirement that all
transactions between the Corporation, on the one hand, and Hoechst and its
affiliates, on the other hand, and each transaction in which there is a
potential conflict of interest between the Corporation and its shareholders
(other than Hoechst and its affiliates) on the one hand, and Hoechst or its
affiliates on the other hand, must be approved by a majority of the
Independent Directors; and (f) the requirement that Hoechst not sell its
shares to any person whom Hoechst knows would own 5% or more of the
outstanding shares unless such person agrees in writing to be bound by the
restrictions of the Governance Agreement and to forego certain benefits under
the Governance Agreement.
The restrictions that continue in effect, are: (a) the prohibition against
Hoechst or its affiliates acquiring shares of the Corporation without the
approval of a majority of the Independent Directors, except in certain
privately negotiated, unsolicited transactions which do not reduce the
liquidity of the shares below the level expected to be necessary to maintain a
viable market for the shares and liquidity for the Corporation's shareholders;
and (b) the requirement that, so long as the Corporation is a public company,
the Board of Directors include at least three Independent Directors. For these
purposes, an "Independent Director" is a person who (i) is in fact
independent, (ii) does not have any direct financial interest or any material
indirect financial interest in Hoechst or the Corporation or any of their
respective affiliates, and (iii) is not connected with Hoechst or the
Corporation or any of their respective affiliates as an officer, employee,
consultant, agent advisor, representative, trustee, partner, director (other
than of the Corporation) or person performing similar functions. Other than
these limited restrictions and subject only to such fiduciary duties as a
majority shareholder may have to minority shareholders under Delaware law,
Hoechst, as a majority shareholder, will be able to exercise substantial
control of the Corporation, including the right to decide in its discretion
most matters requiring shareholder approval, such as the election of future
members of the Board of Directors and approval of any proposed merger or
acquisition of the Corporation.
Product Agreement
The Corporation and HNA also entered into a Product Agreement dated as of
October 8, 1993 (the "Product Agreement") to establish certain relationships
between the Corporation and HNA and its affiliates concerning the supply of
certain raw materials to the Corporation, the synthesis of certain new bulk
active ingredients, the establishment of a managed care market development and
sales organization with Hoechst-Roussel Pharmaceuticals Incorporated ("HRPI"),
at that time an affiliate of HNA, and the right of the Corporation to act as a
generic arm of HRPI with respect to any HRPI products which HRPI may decide to
sell in a generic version as they come off patent. The Product Agreement also
contemplated the Corporation pre-launching generic versions of certain HRPI
products before the relevant patent has expired. The Product Agreement will
expire on June 1, 1999.
On June 30, 1995, HNA transferred its ownership of HCCP to Hoechst
Corporation (the parent corporation of HNA), which assumed HNA's rights and
obligations pursuant to the Governance Agreement. On January 1, 1996, HRPI was
merged into HMRI, which was then a subsidiary of Hoechst and a sister
corporation to HNA. On December 19, 1996, HMRI became a subsidiary of HMR
Pharma, Inc. HMRI has agreed to be bound by the Product Agreement to the
extent that HRPI was bound; that is, the Product Agreement continues to be in
effect for products manufactured by the former HRPI but not for products
manufactured by HMRI prior to the merger with HRPI nor for products developed
by HMRI after January 1, 1996. Since the date of the Product Agreement, the
Corporation has entered into specific distribution agreements with HRPI with
respect to glyburide, micronized glyburide and pentoxyfylline; HRPI's
obligations under those agreements have also been assumed
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<PAGE>
by HMRI. The Corporation does not expect to distribute any new or additional
products pursuant to the Product Agreement.
CHANGES IN THE CORPORATION'S INDEPENDENT ACCOUNTANTS
On November 19, 1998, KPMG LLP's ("KPMG") appointment as principal
accountants was terminated and PricewaterhouseCoopers LLP was engaged as
principal accountants. The decision to change accountants was approved by the
Board of Directors on November 19, 1998.
In connection with the audits of the two fiscal years ended December 31,
1997 and the subsequent interim period through November 19, 1998, there were
no disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused
them to make reference in connection with their opinion to the subject matter
of the disagreement.
The audit reports of KPMG LLP on the consolidated financial statements of
the Corporation and subsidiaries as of and for the years ended December 31,
1997 and 1996, did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope or
accounting principles.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and holders of more than 10% of
the Corporation's Common Stock (collectively, "Reporting Persons") to file
with the Securities and Exchange Commission (the "SEC") initial reports of
beneficial ownership and reports of changes in beneficial ownership of
securities of the Corporation. Based solely upon its review of copies of such
filings and written representations that no other reports were required
pursuant to regulations promulgated by the SEC, the Corporation believes that
all Reporting Persons have complied with the filing requirements of Section
16(a) for the year ended December 31, 1998.
PROPOSAL RELATING TO ELECTION OF DIRECTORS
Three persons have been nominated by the Board of Directors for election as
Class III directors of the Corporation at the Annual Meeting. The nominees for
election as Class III directors are William K. Hoskins, Daniel L. Korpolinski
and Charles T. Lay. All are currently serving as directors of the Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR APPROVAL OF THE ELECTION OF
WILLIAM K. HOSKINS, DANIEL L. KORPOLINSKI AND CHARLES T. LAY AS
CLASS III DIRECTORS
The terms of the Class III directors expire at the Annual Meeting, the terms
of the Class II directors expire at the Annual Meeting of Shareholders to be
held following the completion of the Corporation's year ending December 31,
2000, and the terms of the Class I directors expire at the Annual Meeting of
Shareholders to be held following the completion of the Corporation's year
ending December 31, 2001. Thus, the shareholders will elect three Class III
directors at the Annual Meeting, each to serve for a three-year term.
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Shares represented by all proxies received by the Board of Directors and not
marked so as to withhold authority to vote for the nominees will be voted
(unless a nominee is unable or unwilling to serve) FOR the election of the
nominees. The Board of Directors knows of no reason why the nominees would be
unable or unwilling to serve, but if that should be the case, proxies shall be
voted in accordance with the judgment of the persons named as attorneys in the
proxies with respect to the resulting vacancy. A plurality of the votes cast
by the shareholders present or represented by proxy and entitled to vote at
the Annual Meeting is required for the election of directors. See "Voting
Procedures" below.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP,
independent certified public accountants, to serve as auditors for the year
ending December 31, 1999. PricewaterhouseCoopers LLP has served as the
Corporation's auditors since November 19, 1998. It is expected that a member
of PricewaterhouseCoopers LLP will be present at the meeting with the
opportunity to make a statement if so desired and will be available to respond
to appropriate questions. In the ratification of the selection of auditors,
the affirmative vote of a majority of the shares present, in person or
represented by proxy, and voting on that matter is required for approval.
The ratification of this selection is not required under the laws of the
State of Delaware, where the Corporation is incorporated, but the results of
this vote will be considered by the Board of Directors when selecting auditors
for future years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF THE FIRM OF
PRICEWATERHOUSECOOPERS LLP TO SERVE AS AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 1999
VOTING PROCEDURES
The presence, in person or by proxy, of at least a majority of the issued
and outstanding shares of Common Stock entitled to vote at the Annual Meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from any nominee and abstentions are counted as present or
represented for purposes of determining the presence or absence of a quorum
for the Annual Meeting. Broker non-votes (see below) are counted as present or
represented for quorum purposes. In the election of Class III Directors, the
three nominees receiving the highest number of affirmative votes of the shares
present, in person or represented by proxy, and entitled to vote at the Annual
Meeting shall be elected as Class III Directors. The affirmative vote of the
holders of a majority of the shares of Common Stock present, in person or
represented by proxy, and voting on that matter at the Annual Meeting is
required for ratification of the selection of PricewaterhouseCoopers, LLP as
the Corporation's auditors for the year ending December 31, 1999. An automated
system administered by the Corporation's transfer agent tabulates the votes.
The vote on each matter submitted to shareholders is tabulated separately.
Broker "non-votes" and shares voted to abstain are neither votes for nor
against a matter and therefore have the effect of reducing the number of
affirmative votes needed to obtain a majority of votes cast on a given matter.
A "non-vote" occurs when a broker or other nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the broker or other nominee does
not have discretionary voting power and has not received instructions from the
beneficial
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owner. If any other matter should be presented at the Annual Meeting upon
which a vote properly may be taken, and upon which the persons named as
attorneys in the proxies may exercise discretion under applicable law, shares
represented by all proxies received by the Board of Directors will be voted
with respect thereto in accordance with the judgment and discretion of the
persons named as attorneys in the proxies.
SHAREHOLDER PROPOSALS FOR 2000
Proposals of shareholders intended for inclusion in the proxy statement to
be furnished to all shareholders entitled to vote at the annual meeting of
shareholders of the Corporation in 2000 must be received at the Corporation's
principal executive offices not later than December 29, 1999. In addition, in
order for a stockholder's proposal to be eligible for consideration at the
next annual meeting of the Company, the proposal must be received at the
Company's principal executive offices not later than the close of business on
March 28, 2000, provided, however, notice will not be required to be given
more than sixty (60) days prior to the date of any annual meeting of
shareholders. Further, the proposal must comply with the other procedural
requirements set forth in the Corporation's By-laws, a copy of which is on
file with the Securities and Exchange Commission. In order to curtail
controversy as to the date on which a proposal is received by the Corporation,
it is suggested that proponents submit their proposals by Certified Mail,
Return Receipt Requested.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Corporation, and in
addition to soliciting shareholders by mail through its regular employees, the
Corporation may request banks, brokers and other custodians, nominees and
fiduciaries to solicit their customers who have stock of the Corporation
registered in the names of a nominee and, if so, will reimburse such banks,
brokers, and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by officers and employees of the Corporation
may also be made of some shareholders in person or by mail, telephone or
telegraph following the original solicitation.
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PROXY
COPLEY PHARMACEUTICAL, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS-MAY 27, 1999
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder of Copley Pharmaceutical, Inc., a Delaware
corporation, revoking all prior proxies, hereby appoints Gene M. Bauer and
Daniel M.P. Caron, and each of them, proxies with full power of substitution, to
vote all shares of Common Stock of Copley Pharmaceutical, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Corporation to be held at Sheraton Braintree Hotel, 37 Forbes Road, Braintree,
Massachusetts on May 27, 1999 at 10:00 a.m., local time, and at any adjournment
thereof, upon matters set forth in the Notice of Annual Meeting and Proxy
Statement, a copy of which has been received by the undersigned. The proxies are
further authorized to vote, in their judgment and discretion, upon such other
business as may properly come before the meeting or any adjournments thereof and
with respect to which the proxies are entitled to exercise discretion under
applicable law. Attendance of the undersigned at the meeting or at any adjourned
session thereof will not be deemed to revoke this proxy unless the undersigned
shall affirmatively indicate thereat the intention of the undersigned to vote
said shares in person.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE
<PAGE>
COPLEY PHARMACEUTICAL, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
DETACH HERE
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[X] Please mark
votes as in
this example.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS AS DESCRIBED
IN ITEM 1 AND FOR THE PROPOSAL IN ITEM 2. THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN THE JUDGMENT AND DISCRETION OF THE PROXIES NAMED HEREIN WITH
RESPECT TO ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, AND ANY
ADJOURNMENT THEREOF, AND WITH RESPECT TO WHICH THE PROXIES NAMED HEREIN ARE
ENTITLED TO EXERCISE DISCRETION UNDER APPLICABLE LAW.
1. Proposal to elect three (3) Class III Directors, each to serve for a
three-year term.
Class III Nominees: William K. Hoskins, Daniel L. Korpolinski
and Charles T. Lay
FOR [_] WITHHELD [_]
[_]______________________________________
For all nominees except as noted above
2. To ratify the selection of the firm of PricewaterhouseCoopers, LLP as
auditors for the fiscal year ending December 31, 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
THIS PROXY SHOULD BE DATED AND SIGNED BY THE SHAREHOLDER(S) EXACTLY AS HIS OR
HER NAME APPEARS HEREON AND RETURNED PROMPTLY IN THE ENCLOSED ENVELOPE, PERSONS
SIGNING IN A FIDUCIARY CAPACITY SHALL SO INDICATE, IF SHARES ARE HELD BY JOINT
TENANTS OR AS COMMUNITY PROPERTY, BOTH SHOULD SIGN.
Signature:______________________________________________ Date: ________________
Signature:______________________________________________ Date: ________________
