<PAGE>
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:
[_] 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-12
HI-TECH PHARMACAL CO., 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:
-------------------------------------------------------------------------
(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:
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Notes:
<PAGE>
HI-TECH PHARMACAL CO., INC.
369 BAYVIEW AVENUE
AMITYVILLE, NEW YORK 11701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 3, 1998
To Hi-Tech Pharmacal Co., Inc. Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Hi-Tech
Pharmacal Co., Inc. (the "Company" or "Hi-Tech") will be held on December 3,
1998, at 10:00 a.m., Eastern Standard Time, at Fleet Bank, 300 Broad Hollow
Road, Melville, New York 11747 (the "Meeting"), for the following purposes,
all as more fully described in the accompanying Proxy Statement:
1. To elect Messrs. Bernard Seltzer, David S. Seltzer, Reuben Seltzer,
Martin M. Goldwyn and Yashar Hirshaut, M.D. to the Board of Directors, each
to serve for a term to expire at the 1999 Annual Meeting;
2. To amend the Company's Amended and Restated Stock Option Plan to
increase by 500,000 the number of shares of common stock reserved for
issuance thereunder;
3. To ratify the appointment of Richard A. Eisner & Company, LLP as the
Company's independent auditors for the fiscal year ending April 30, 1999;
and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on October 6, 1998 will
be entitled to receive notice of and to vote at the Meeting. A complete list
of stockholders entitled to vote at the Meeting will be maintained at the
offices of the Company for a period of at least ten days prior to the Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, WE URGE YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD, READ THE ACCOMPANYING PROXY STATEMENT, AND
THEN COMPLETE AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE AS SOON
AS POSSIBLE, SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
By Order of the Board of Directors,
David S. Seltzer
President, Chief Executive
Officer,Secretary and Treasurer
Dated: November 2, 1998
<PAGE>
HI-TECH PHARMACAL CO., INC.
369 BAYVIEW AVENUE
AMITYVILLE, NEW YORK 11701
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 3, 1998
----------------
This Proxy Statement is furnished to stockholders of Hi-Tech Pharmacal Co.,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company of proxies for use at
its Annual Meeting of Stockholders and any adjournments thereof (the
"Meeting"). The Meeting is scheduled to be held on December 3, 1998, at 10:00
a.m., Eastern Standard Time, at Fleet Bank, 300 Broad Hollow Road, Melville,
New York 11747.
INTRODUCTION
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company in connection with the Meeting to be held at Fleet
Bank, 300 Broad Hollow Road, Melville, New York 11747, on December 3, 1998, at
10:00 a.m., Eastern Standard Time, or any adjournment or adjournments thereof.
This Proxy Statement and the accompanying proxy will first be sent to
stockholders on or about November 2, 1998.
At the Meeting, stockholders will be asked to vote upon: (1) the election of
five directors; (2) the amendment of the Company's Amended and Restated Stock
Option Plan to increase the number of shares of common stock reserved for
issuance thereunder; (3) the ratification of the Company's independent
auditors; and (4) such other business as may properly come before the Meeting
and at any adjournments thereof.
Each proxy executed and returned by a stockholder may be revoked at any time
thereafter by written revocation, by execution of a written proxy bearing a
later date or by attending the Meeting and voting in person. No such
revocation will be effective, however, with respect to any matter or matters
upon which, prior to such revocation, a vote shall have been cast pursuant to
the authority conferred by such proxy. Where instructions are indicated,
proxies will be voted in accordance therewith. Where no instructions are
indicated, proxies will be voted for the election of the nominees for director
set forth herein and for the other proposals.
The Board of Directors has fixed October 6, 1998 as the record date (the
"Record Date") for the purpose of determining the stockholders entitled to
notice of and to vote at the Meeting. As of such date, there were issued and
outstanding and entitled to vote 4,526,717 shares of the Company's common
stock par value $.01 per share (the "Common Stock"), each such share being
entitled to one vote. A quorum of the stockholders, present in person or by
proxy, consists of the holders of a majority of the outstanding shares.
The cost of solicitation of proxies will be borne by the Company. The Board
of Directors may use the services of the individual directors, officers and
other regular employees of the Company to solicit proxies personally or by
telephone or facsimile and may request brokers, fiduciaries, custodians and
nominees to send proxies, Proxy Statements and other material to their
principals and reimburse them for their out-of-pocket expenses.
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold office
until the next Annual Meeting of Stockholders when their respective successors
are duly elected and qualified. The persons named in the enclosed proxy intend
to vote for the election of the five nominees listed below, unless
instructions to the contrary are given therein. All of the nominees are
currently directors.
The five nominees have indicated that they are able and willing to continue
to serve as directors. However, if some unexpected occurrence should require
the substitution of some other person or persons for any one or more of the
nominees, the person or persons voting the proxies will vote for such nominee
or nominees as the Company may select. The affirmative vote of a plurality of
the votes cast at the Annual Meeting is required to elect each nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
Nominees for director:
<TABLE>
<CAPTION>
SERVED AS
POSITION WITH THE COMPANY OR PRINCIPAL DIRECTOR
NAME OCCUPATION FROM
---- ------------------------------------------ ---------
<C> <S> <C>
Bernard Seltzer........ Chairman 1983
David S. Seltzer....... Chief Executive Officer, President, 1992
Secretary and Treasurer of the Company
Reuben Seltzer......... Consultant to the Company on legal matters 1992
and special projects, President of R.M.
Realty Services Inc., a real estate
investment and consulting company
Martin M. Goldwyn...... Member of the law firm of Tashlik, 1992
Kreutzer & Goldwyn P.C.
Yashar Hirshaut, M.D... Associate Clinical Professor of Medicine 1992
at Cornell University Medical College,
Research Professor of Biology at Yeshiva
University, editor-in-chief of the
Professional Journal of Cancer
Investigation and practicing medical
oncologist
</TABLE>
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
The following table sets forth certain information with respect to the
executive officers, directors and significant employees of the Company,
including the nominees for election as director, as of November 2, 1998.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Bernard Seltzer......... Chairman of the Board
David S. Seltzer........ Chief Executive Officer, President, Secretary, Treasurer and Director
Martin S. Knopf......... Chief Operating Officer
Elan Bar-Giora.......... Executive Vice President-Operations
Arthur S. Goldberg...... Vice President-Finance and Chief Financial Officer
Martin M. Goldwyn....... Director
Yashar Hirshaut, M.D.... Director
Reuben Seltzer.......... Director
</TABLE>
BERNARD SELTZER, 74, has been Chairman of the Board of the Company since
January 1990. As of May 1, 1998 Mr. Seltzer resigned as President and Chief
Executive Officer of the Company. From May 1983 to January 1990, Mr. Seltzer
was Vice President of Sales of the Company. Prior thereto, Mr. Seltzer was the
Vice President of Sales and Marketing of Ketchum Laboratories, Inc., a
pharmaceutical manufacturer and the predecessor of the Company.
2
<PAGE>
DAVID S. SELTZER, 38, has been Chief Executive Officer and President of the
Company since May 1, 1998 and a Director, Secretary and Treasurer since
February 1992. From July 1992 to May 1, 1998, Mr. Seltzer was Executive Vice
President-Administration, and from March 1992 to May 1, 1998, Vice President-
Administration and Chief Operating Officer of the Company. From September 1986
to February 1990 Mr. Seltzer was employed as an account executive at a stock
brokerage firm. Mr. Seltzer received a B.A. in Economics from Queens College
in 1984. David S. Seltzer is the son of Bernard Seltzer.
MARTIN S. KNOPF, 52, has been the Chief Operating Officer of the Company
effective October 19, 1998. From 1987 to date, Mr. Knopf has held the position
of President and CEO of the health care consulting firm of Knopf Associates.
During this time, he also served as President and COO of two related
companies, Permeable Technologies, Inc. and The LifeStyle Company, Inc. and
Executive VP and COO of PolyVue Technologies. From 1986 to 1987 he held the
position of Corporate Vice President for Scientific Affairs at Delmed, Inc., a
public company which manufactures pharmaceuticals and critical medical
devices. From 1974 to 1986 Mr. Knopf held positions of increasing
responsibility at Johnson & Johnson. In his last position at Johnson &
Johnson, Mr. Knopf served on the Management Board heading up Regulatory
Affairs at Vistakon. He has also served as the Industry Representative to
FDA's Ophthalmic Devices panel from 1988 through 1992. Mr. Knopf received his
B.Sc. from Brooklyn College of Pharmacy in 1970 and is a Registered Pharmacist
and is Regulatory Affairs Certified.
MARTIN M. GOLDWYN, 46, was elected a Director of the Company in May 1992.
Mr. Goldwyn is a member of the law firm of Tashlik, Kreutzer & Goldwyn P.C.
Mr. Goldwyn received a B.A. in finance from New York University in 1974 and a
Juris Doctor from New York Law School in 1977.
YASHAR HIRSHAUT, M.D., 60, has been a Director of the Company since
September 1992. Dr. Hirshaut is a practicing medical oncologist and is
currently an Associate Clinical Professor of Medicine at Cornell University
Medical College. Since July 1986, he has been a Research Professor of Biology
at Yeshiva University. In addition, he has served as editor-in-chief of the
Professional Journal of Cancer Investigation since July 1981. Dr. Hirshaut
received a B.A. from Yeshiva University in 1959 and his medical degree from
Albert Einstein College of Medicine in 1963.
REUBEN SELTZER, 42, has been a Director of the Company since April 1992. Mr.
Seltzer is currently serving as a consultant to the Company on legal matters
and special projects. Mr. Seltzer has been president of R.M. Realty Services
Inc., a real estate investment and consulting company since May 1988. From May
1983 to May 1988 Mr. Seltzer was a vice president and attorney with Merrill
Lynch Hubbard Inc., a real estate investment subsidiary of Merrill Lynch and
Company. Mr. Seltzer received a B.A. in Economics from Queens College in 1978,
a Juris Doctor from the Benjamin N. Cardozo School of Law in 1981 and a L.L.M.
from the New York University School of Law in 1987. Reuben Seltzer is the son
of Bernard Seltzer.
SIGNIFICANT EMPLOYEES
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Gennaro P. Caccavale................. Director of Operations
Michael McConnell.................... Director of Product Development
Gary M. April........................ President of Health Care Products Division
Suzanne Fenton....................... Director of Compliance
Jesse Kirsh.......................... Director of Quality Assurance
</TABLE>
DIRECTORS' FEES
For their services on the Board, the Company pays each director a fee of
$300 per meeting. Each member of the Board is reimbursed for expenses incurred
in connection with each Board or Committee meeting attended. In addition, each
non-employee director is granted options annually to purchase 3,000 shares of
Common Stock under the Company's 1994 Directors Stock Option Plan.
3
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During Fiscal Year 1998, the Board of Directors held three meetings. In
addition, there were four actions taken by unanimous written consent. Each
director, except for Yashar Hirshaut, M.D., attended at least 75% of the
aggregate of (a) the total number of meetings of the Board of Directors and
(b) the committees on which the director served.
The Board has two committees: the Audit Committee and the Stock Option
Committee.
Audit Committee. The Audit Committee makes recommendations to the Board of
Directors concerning the engagement of a firm of independent public auditors,
reviews with such firm the plans and results of the audit engagement, reviews
the independence of such firm, considers the range of audit and non-audit fees
and reviews the adequacy of the Company's internal controls. In addition, the
Audit Committee meets periodically with the independent auditors and
representatives of management to review accounting activities, financial
control and reporting. The Audit Committee is comprised of Messrs. David S.
Seltzer, Martin M. Goldwyn and Yashar Hirshaut, M.D. and held one meeting
during fiscal 1998.
Stock Option Committee. The Stock Option Committee is responsible for
administering the Company's Stock Option Plan. The Stock Option Committee has
full power to interpret the Plan and to establish and amend rules for its
administration. The Stock Option Committee is also authorized to determine who
from the eligible class of persons shall be granted options and the terms and
provisions of the options. The Stock Option Committee is comprised of Messrs.
Reuben Seltzer and Martin M. Goldwyn and held one meeting during fiscal 1998.
The Board of Directors of the Company is responsible for administering the
Company's 1994 Directors Stock Option Plan.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, and the
rules issued thereunder, the Company's directors and executive officers are
required to file with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company. Copies
of such reports are required to be furnished to the Company. Based solely on
review of the copies of such reports furnished to the Company, or written
representations that no other reports were required, the Company believes
that, during fiscal 1998, all of its executive officers and directors complied
with the requirements of Section 16(a).
4
<PAGE>
ADDITIONAL INFORMATION
STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 2, 1998, by (i) each
executive officer, identified in the Summary Compensation Table below; (ii)
each director and nominee for director; (iii) all executive officers and
directors as a group; and (iv) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of the Company's
Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED AS
OF
NOVEMBER 2, 1998(1)
-----------------------
EXECUTIVE OFFICERS, NUMBER OF PERCENT OF
DIRECTORS AND 5% STOCKHOLDERS SHARES CLASS
----------------------------- ------------ ----------
<S> <C> <C>
Bernard Seltzer.................................... 732,132(2) 16.2%
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
David S. Seltzer................................... 678,893(3) 14.5%
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
Martin S. Knopf.................................... -- --
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
Reuben Seltzer..................................... 400,485(4) 8.8%
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
Arthur S. Goldberg................................. 38,625(5) *
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
Elan Bar-Giora..................................... 50,000(6) 1.1%
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
Martin M. Goldwyn.................................. 16,500(7) *
c/o Tashlik, Kreutzer & Goldwyn P.C.
833 Northern Boulevard
Great Neck, New York 11021
Yashar Hirshaut, M.D............................... 8,250(8) *
c/o Hi-Tech Pharmacal Co., Inc.
369 Bayview Avenue
Amityville, New York 11701
All Directors and Executive Officers as a group (8
persons)........................................ 1,924,885(9) 39.9%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of Common Stock including
shares issuable to such beneficial owner under options which are presently
exercisable or will become exercisable within 60 days.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares shown as beneficially owned by such
person.
(2) Amount does not include 60,000 shares of Common Stock owned by Mr.
Seltzer's wife, as to which Bernard Seltzer disclaims beneficial
ownership.
5
<PAGE>
(3) Amount includes options to purchase 143,750 shares of Common Stock
exercisable within 60 days of November 2, 1998, and 102,406 shares of
Common Stock owned by Mr. Seltzer's wife and children.
(4) Amount includes options to purchase 35,750 shares of Common Stock
exercisable within 60 days of November 2, 1998 and 98,028 shares of Common
Stock owned by Mr. Seltzer's wife and children.
(5) Amount represents options to purchase 38,625 shares of Common Stock
exercisable within 60 days of November 2, 1998.
(6) Amount represents options to purchase 50,000 shares of Common Stock
exercisable within 60 days of November 2, 1998.
(7) Amount represents options to purchase 16,500 shares of Common Stock
exercisable within 60 days of November 2, 1998.
(8) Amount includes options to purchase 8,250 shares of Common Stock
exercisable within 60 days of November 2, 1998.
(9) Amount includes options to purchase 294,000 shares of Common Stock
exercisable within 60 days of November 2, 1998.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the year ended
April 30, 1998 to (i) the Chief Executive Officer and (ii) the Company's three
other most highly compensated individuals who were serving as officers on
April 30, 1998, 1997 and 1996 and whose salary plus bonus exceeded $100,000
for such years (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) (1)($) (#) (2)($)
------------------ ---- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Seltzer 1998 199,000 18,000 -- 0 4,420
Chairman 1997 186,000 16,000 -- 0 3,910
1996 186,000 20,000 -- 0 3,408
David S. Seltzer 1998 236,000 18,000 -- 50,000 3,207
President, Chief 1997 186,000 16,000 -- 50,000 3,175
Executive Officer, 1996 186,000 25,000 -- 37,500 1,040
Secretary and Treasurer
Elan Bar-Giora 1998 100,000 17,000 -- 10,000 1,715
Executive Vice 1997 102,000 0 -- 10,000 1,475
President-Operations 1996 100,000 0 -- 10,000 0
Arthur S. Goldberg 1998 110,000 0 -- 7,500 --
Vice President of 1997 101,000 0 -- 7,500 --
Finance 1996 93,000 0 -- 7,500 --
and Chief Financial
Officer
</TABLE>
- --------
(1) The named executive officers received various perquisites, the cost of
which did not exceed the lesser of $50,000 or 10% of annual salary plus
bonus.
(2) Represents the dollar value of the premium paid by the Company during the
fiscal years ended April 30, 1998, 1997 and 1996 with respect to term life
insurance for the benefit of the named executive officer.
6
<PAGE>
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table contains information concerning stock option grants made
to each of the Named Executive Officers in fiscal 1998. No stock appreciation
rights were granted to these individuals during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#)(1)(2) FISCAL YEAR ($/SH) DATE
---- ---------------- ------------- -------- ----------
<S> <C> <C> <C> <C>
Bernard Seltzer........... 0 0 0 0
David S. Seltzer.......... 50,000 36.6% 5.25 1/15/08
Elan Bar-Giora............ 10,000 7.3% 5.25 1/15/08
Arthur S. Goldberg........ 7,500 5.6% 5.25 1/15/08
</TABLE>
- --------
(1) Options granted in fiscal year 1998 are scheduled to vest and become
exercisable in yearly increments of 25% beginning on January 15, 1999,
with full vesting occurring on January 15, 2002. Options expire ten years
after grant under the terms of the Company's Plan.
(2) Granted January 15, 1998.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning option exercises and
option holdings for the fiscal year 1998 with respect to each of the Named
Executive Officers. No Named Executive Officers exercised any options during
such year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR-END AT FISCAL YEAR-END
(#)(1) ($)(2)
--------------- ----------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Bernard Seltzer......... 0 0 0/0 0/0
David S. Seltzer........ 0 0 143,750/106,250 150,000/108,125
Elan Bar-Giora.......... 0 0 50,000/25,000 78,125/32,500
Arthur S. Goldberg...... 0 0 38,625/16,875 47,718/20,156
</TABLE>
- --------
(1) Adjusted to reflect a 3-for-2 stock split declared on November 1, 1993.
(2) Amounts reflect the market value of the underlying shares of Common Stock
on April 30, 1998 less the exercise price.
7
<PAGE>
EMPLOYMENT CONTRACTS
Bernard Seltzer serves as Chairman of the Company and David S. Seltzer
serves as President, Chief Executive Officer, Secretary and Treasurer of the
Company pursuant to employment agreements, as amended, effective as of May 1,
1992 and expiring April 30, 2000, pursuant to which they have agreed to serve
in their respective capacities. Bernard Seltzer resigned as President and
Chief Executive Officer effective as of May 1, 1998. David Seltzer was elected
to serve as President and Chief Executive Officer effective May 1, 1998. Such
employment agreements were modified to provide that the annual base salary for
each of Bernard Seltzer and David Seltzer would be $199,000 and $236,000 for
the fiscal year commencing May 1, 1997 through April 30, 1998, respectively.
The increase in annual base salary for each fiscal year thereafter for Bernard
Seltzer and David S. Seltzer is determined by multiplying their respective
annual base salary for the prior fiscal year by the greater of 5% or the
increase in the Consumer Price Index as of May 1 of each such year over the
index as of May 1 of the prior year. The Board of Directors in its discretion
will determine the annual bonus, if any, to be received by Bernard Seltzer and
David S. Seltzer. The employment agreements also contain standard
confidentiality provisions and a non-compete provision for a term of one year
after the termination of their employment.
Under the employment agreements for each of Bernard Seltzer and David S.
Seltzer, the Company will pay to each person's estate upon his death, his base
salary for a period of twelve (12) months after the end of the month in which
death occurred. In the event of total disability, each will continue to
receive his base salary for the remaining term of his employment agreement. In
addition to base salary, Bernard Seltzer and David S. Seltzer each will be
paid an amount equal to a percentage of the bonus, if any, based on the
portion of such year in which death, total disability or termination of
employment occurred. If termination is for cause, total disability or because
he wrongfully leaves his employment, then, upon such occurrence, the
employment agreement shall be deemed terminated and the Company shall be
released from all obligations.
Arthur S. Goldberg serves as Vice President-Finance and Chief Financial
Officer of the Company pursuant to a two year employment agreement ending on
August 31, 2000. Mr. Goldberg's annual base salary is $116,000 for the period
commencing on September 1, 1997 through August 31, 1998. Such annual salary
shall be adjusted annually, commencing September 1, 1998, by the annual change
in the Consumer Price Index or an agreed upon substitute but no less than 5%
per annum. The Board of Directors in its discretion will determine the annual
bonus, if any, to be received by Mr. Goldberg. Such employment agreement
contains standard confidentiality provisions.
CERTAIN TRANSACTIONS
For the fiscal year ended April 30, 1998, Mr. Reuben Seltzer, a director of
the Company, was engaged by the Company to provide new business development
and legal services. For such services, Mr. Reuben Seltzer received $50,000.
Mr. Reuben is the son of Mr. Bernard Seltzer, the Company's Chairman of the
Board.
The Company and Reuben Seltzer each has a 23.3% interest in Marco Hi-Tech JV
Ltd., a New York corporation, which markets raw materials for nutraceutical
products and has licensed the patent rights to Huperzine and analogues from
the Mayo Clinic. Huperzine is a naturally derived compound belonging to a
class known as acetylcholinesterase inhibitors. Huperzine has been shown to
inhibit the enzyme responsible for the breakdown of acetylcholine, a
neurotransmitter or brain chemical, which is believed to be critical in
learning and memory. Marco Hi-Tech JV Ltd. plans to manufacture and distribute
Huperzine as a dietary supplement under the Dietary Supplement Health and
Education Act of 1994 and to develop analogues and derivatives to Huperzine.
It also plans to develop other products for the nutraceutical market.
The Company believes that material affiliated transactions between the
Company and its directors, officers, principal stockholders or any affiliates
thereof have been, and will be in the future, on terms no less favorable than
could be obtained from unaffiliated third parties.
8
<PAGE>
PROPOSAL 2: PROPOSAL TO AMEND THE HI-TECH PHARMACAL CO., INC.
AMENDED AND RESTATED STOCK OPTION PLAN TO INCREASE THE NUMBER OF
SHARES RESERVED FOR ISSUANCE THEREUNDER
At the Meeting, the stockholders will be asked to approve an amendment to
the Company's Amended and Restated Stock Option Plan (the "Plan") to increase
by 500,000 the number of shares of Common Stock reserved for issuance
thereunder.
There are 675,000 shares of the Company's Common Stock reserved for issuance
under the Plan, exclusive of the 500,000 shares subject to stockholder
approval at the Meeting. Upon approval of the amendment, 1,175,000 shares of
the Company's Common Stock will be reserved for issuance under the Plan. As of
the Record Date, options to purchase an aggregate of 647,425 shares were
outstanding and 9,975 shares, exclusive of the 500,000 shares subject to
stockholder approval at the Meeting, were available for future grants. The
purpose of the Plan is to advance the interests of the Company and its
stockholders by providing officers, key management employees and other
eligible participants with financial incentives tied directly to the Company's
long term business objectives. The Board of Directors believes that the
remaining shares available for grant under the Plan are insufficient to
accomplish these purposes.
Approval of the amendment requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE PLAN.
The following summary describes the features of the Plan.
TYPES OF INCENTIVE AWARDS
The Plan contains two forms of incentive awards which may be used at the
sole discretion of the Stock Option Committee (the "Committee"). Incentive
awards under the Plan may take the form of stock options or stock appreciation
rights ("SARs"). The stock options may be incentive stock options ("ISOs")
intended to qualify for special tax treatment or non-qualified stock options
("NQSOs").
The type of incentive award being granted, as well as the terms and
conditions of the award, will be determined by the Committee at the time of
grant.
ELIGIBLE PERSONS
All officers of the Company are eligible to participate in the Plan. Also
eligible to participate, if so identified by the Committee, are officers of
wholly-owned subsidiaries of the Company, other key management employees of
the Company or any wholly-owned subsidiary of the Company, other employees or
consultants of the Company or any subsidiary or affiliate of the Company, and
other persons whose participation in the Plan is deemed by the Committee to be
in the best interests of the Company.
ADMINISTRATION OF THE PLAN
The Committee will determine the eligible participants who will be granted
incentive awards, determine the amount and type of award, determine the terms
and conditions of awards, construe and interpret the Plan and make all other
determinations with respect to the Plan, to the extent permitted by applicable
law.
DURATION OF THE PLAN
The Plan is a fifteen year program and will terminate on January 31, 2009,
unless terminated sooner according to the terms of the Plan.
STOCK OPTION PLAN
The Committee may grant ISOs, NQSOs and tandem SARs to eligible
participants, subject to the terms and conditions of the Plan.
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STOCK OPTIONS
ISOs allow the optionee to buy certain number of shares of the Company's
Common Stock at an option price equal to the market price at the time the
option is granted. NQSOs allow the optionee to buy a certain number of shares
of the Company's Common Stock at an option price equal to, more than, or less
than the market price at the time the option is granted. An option may not be
exercised until the right to do so has vested under a schedule approved by the
Committee. The vesting schedule generally approved by the Committee generally
provides that one-quarter of the options may be exercised on or after the
first anniversary of the date of grant, one-half on or after the second
anniversary, three-quarters on or after the third anniversary and 100 percent
on or after the fourth anniversary.
TANDEM SARS
At the discretion of the Committee, options may be granted with or without
tandem SARs which permit an optionee to surrender an option or a portion
thereof in exchange for a cash payment equal to the difference between the
current market value of the stock and the option price. A tandem SAR is
subject to the same terms and conditions as the related option, except that it
may be exercised only when the market value exceeds the option price. In
addition, executive officers of the Company and other participants who are
subject to Section 16 of the Securities Exchange Act of 1934 may exercise SARs
only during certain quarterly window periods.
PAYMENT FOR SHARES UPON EXERCISE OF STOCK OPTIONS
At the time an option is exercised, shares of Common Stock may be purchased
by (i) cash; (ii) shares of the Company's Common Stock owned by the optionee
for at least one year; (iii) a "cashless exercise" procedure (whereby a broker
sells the shares or holds them as collateral for a margin loan, delivers the
option price to the Company, and delivers the remaining sale or loan proceeds
to the optionee); or (iv) any combination of the foregoing or any other method
of payment which the Committee may allow.
TERM OF OPTIONS AND TANDEM SARS
The term of each ISO and related tandem SAR is ten years and the term of
each NQSO and related tandem SAR is fifteen years, subject to earlier
termination as described below.
TERMINATION OF EMPLOYMENT OR RELATIONSHIP WITH THE COMPANY
Upon termination of the optionee's employment or relationship with the
Company, any unexercised options shall be cancelled and terminated
immediately, except that any unexercised options which are vested may be
exercised during the balance of their term or within nine months of
termination, whichever is shorter. If an optionee is terminated for cause or
discharged, any unexercised options shall be terminated immediately. In the
event of a termination by reason of retirement by reason of death or
disability, or by reason of a divestiture or change in control of the Company,
special rules allow the optionee to exercise all vested and unvested options
within certain time periods after termination.
ADJUSTMENTS UPON CHANGES IN NUMBER OR VALUE OF SHARES OF COMMON STOCK
In order to prevent enlargement or dilution of rights resulting from stock
dividends, stock splits, recapitalizations, mergers, consolidations, or other
events that materially increase or decrease the number or value of shares of
the Company's Common Stock, the Committee may adjust (1) the number of shares
of Common Stock available for future grants of incentive awards under the
Plan, (2) the number of shares represented by outstanding awards, and (3) the
price of those shares.
NON-TRANSFERABILITY OF OPTIONS
Options shall not be transferable otherwise than by will or by the laws of
descent and distribution, and, subject to the Committee's discretion,
generally may be exercised during the lifetime of the recipient only by the
recipient.
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CHANGE IN CONTROL
In the event the Committee determines that a change in control (as defined
in the Plan) is in the best interests of stockholders of the Company and will
not adversely impact the recipients of incentive awards under the Plan, (1)
any time periods relating to the exercise or realization of any incentive
award shall be accelerated so that such award may be exercised or realized in
full immediately upon the change in control, and (2) the Committee may offer
recipients the option of having the Company purchase their awards for an
amount of cash which could have been attained upon the exercise or realization
of such awards if they had been fully exercisable or realizable.
AMENDMENT AND TERMINATION OF THE PLAN AND OPTIONS
The Board of Directors or the Committee may at any time suspend, terminate,
modify or amend the Plan in any respect. However, stockholder approval of
amendments shall be obtained in the manner and to the degree required by
applicable laws or regulations. The Committee also has broad discretion to
amend or modify the terms and conditions of any incentive award or cancel or
annul any grant of an award, subject to certain restrictions.
FUNDING
Inasmuch as the Plan is designed to encourage financial performance and to
improve the value of stockholders' investment in the Company, the costs of the
Plan will be funded from corporate earnings.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of federal income tax consequences does not purport to
be a complete statement of the law in this area. Furthermore, the discussion
below does not cover the tax consequences of the Plan (or the grant or
exercise of options thereunder) under state and/or other local tax laws, and
such tax laws may not correspond to the federal tax treatment described
herein. Accordingly, individuals eligible to receive options under the Plan
should consult their personal tax advisors prior to engaging in any
transactions under the Plan.
The characterization of income as either ordinary income or capital gain is
still required by the Internal Revenue Code ("IRC"), and may have important
tax consequences to participants under the Plan in some situations. Therefore,
the following summary continues to characterize income from various
transactions as either ordinary income or capital gain.
INCENTIVE STOCK OPTIONS. In general, an option holder will not be treated as
receiving taxable income upon either the grant or exercise of an option which
qualifies as an ISO and the option holder generally will receive capital gain
or loss treatment, as the case may be, upon the sale of the shares acquired
upon the exercise of an ISO if certain conditions relating to employment
requirements and holding period requirements under Section 422 of the IRC are
satisfied. Under most circumstances, the shares of Common Stock acquired
pursuant to the exercise of an ISO (a) must not be sold or otherwise disposed
of for two years from the date of the grant of such option, and (b) must be
held for at least one year after the transfer of such stock to the option
holder upon exercise of the option. (Neither of such holding periods apply to
the disposition of shares by the option holder's estate or the option holder's
heirs after death.)
If shares acquired upon exercise of an ISO are disposed of in violation of
the holding period requirements described above (a "Disqualifying
Disposition"), the option holder generally will recognize ordinary income in
the year of such Disqualifying Disposition in an amount equal to the
difference between (a) the option exercise price, and (b) the lesser of (i)
the amount realized on such disposition or (ii) the fair market value of such
shares as of the date of exercise of the option under which the shares were
acquired. Any gain realized on a Disqualifying Disposition in excess of such
ordinary income amount generally will be treated as capital gain (short-term
or long-term depending on the option holder's holding period with respect to
such shares).
In the case of ISOs, the excess of the fair market value of the stock as of
the exercise date over the option exercise price is included in alternative
minimum taxable income in the year of exercise, and thus may be subject to the
alternative minimum tax.
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NON-QUALIFIED STOCK OPTIONS. In general, there are no tax consequences to
the option holder upon the grant of a NQSO, but upon exercise the option
holder generally will recognize ordinary income equal to the difference
between the purchase price paid for the shares on exercise of the option and
the fair market value of such shares as of the date of exercise. However, a
special rule (the "Section 16(b) Deferral Rule") applies in the case of option
holders (generally officers, directors and 10% stockholders) who are subject
to Section 16(b) of the Exchange Act (under which an "insider's" profit on the
purchase and sale or sale and purchase within less than six months of equity
securities of the issuer may be recovered by the issuer). Under the Section
16(b) Deferral Rule, such ordinary income attributable to the exercise of a
NQSO generally will not be recognized until the expiration of the period
during which a sale of the stock could subject the option holder to suit under
Section 16(b), with the amount of such ordinary income being measured by the
fair market value of the stock at the expiration of such period (the "Section
16(b) Expiration Date").
The Section 16(b) Deferral Rule can be waived by an option holder if he or
she makes a timely election (generally, within 30 days following exercise)
under Section 83(b) of the IRC to recognize ordinary income at the time of
exercise of the NQSO.
An option holder's tax basis in shares acquired on exercise of a NQSO
generally will be equal to the exercise price paid for such shares by the
option holder plus the amount of income recognized by the option holder by
reason of his or her exercise of the option under the rules described above.
Upon a subsequent disposition of the shares received on exercise of a NQSO the
difference between the amount realized on such disposition and the option
holder's tax basis for such shares generally will be treated as a capital gain
or loss, which will be short-term or long-term depending on whether the shares
are held for the applicable long-term holding period following exercise of the
option (currently more than one year). However, in the case of an option
holder who is subject to the Section 16(b) Deferral Rule described above and
who does not waive such rule by filing an election under Section 83(b) of the
IRC, such option holder's capital gain holding period generally will not
commence until the Section 16(b) Expiration Date.
TANDEM STOCK APPRECIATION RIGHTS
There will be no federal income tax consequences to either the optionee or
the Company upon the grant of a tandem SAR or during the period that the
unexercised right remains outstanding. Upon the exercise of a tandem SAR, the
amount received will be taxable to the optionee as ordinary income and the
Company will be entitled to a corresponding deduction.
USE OF COMMON STOCK TO PAY EXERCISE PRICE. Subject to the provisions of the
Plan, an option holder may be permitted to use shares of the Company's Common
Stock (previously acquired by the option holder) to pay the exercise price
under an ISO or a NQSO. The option holder should consult with his or her
personal tax advisor to review the tax consequences of delivering shares of
Common Stock to exercise stock options. If an individual exercises a NQSO by
delivering other shares, the individual will not recognize gain or loss with
respect to the exchanged shares, even if their then fair market value is
different from the individual's tax basis in such shares. The individual,
however, will be taxed as described above with respect to the exercise of the
NQSO as if the individual had paid the exercise price in cash, and the Company
generally will be entitled to an equivalent tax deduction. Provided the
individual receives a separate identifiable stock certificate therefor, the
individual's tax basis in that number of shares received on such exercise,
which is equal to the number of shares surrendered on such exercise, will be
equal to the individual's tax basis in the shares surrendered and the
individual's holding period for such number of shares received will include
the individual's holding period for the shares surrendered. The individual's
tax basis and holding period for the additional shares received on exercise of
a NQSO paid for, in whole or in part, with shares will be the same as if the
individual had exercised the NQSO solely for cash. It should be noted,
however, that the use by an option holder of Common Stock acquired through the
previous exercise of an ISO to pay the exercise price under another incentive
stock option will be treated as a Disqualifying Disposition of the previously
acquired Common Stock if the applicable holding period requirements have not
yet been satisfied with respect to such previously acquired stock. In such
circumstances,
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the option holder will be taxed as if such previously acquired shares had been
sold (in a Disqualifying Disposition) for their fair market value as of the
date on which they are used to pay the exercise price under such other ISO.
COMPANY DEDUCTIONS. In general, the Company will not be entitled to any
deductions with respect to ISOs granted under the Plan. However, if an
employee is required to recognize ordinary income upon a Disqualifying
Disposition of stock acquired under the Plan, then the Company generally will
be allowed a deduction to the extent of such ordinary income. In that regard,
the Company may require any option holder disposing of stock in a
Disqualifying Disposition to notify the Company of such disposition. In the
case of NQSOs, the Company generally will be entitled to a deduction in an
amount equal to the ordinary income recognized by the option holder upon
exercise of such option (or as of the Section 16(b) Expiration Date if the
Section 16(b) Deferral Rule applies).
WITHHOLDINGS AND INFORMATION REPORTS. The Company generally is required to
make applicable federal payroll withholdings with respect to compensation
income recognized by employees under the Plan. Such withholdings ordinarily
will be accomplished by withholding the required amount from other cash
compensation due from the Company to the employee, by having the employee pay
to the Company the required withholding amount, or by such other permissible
methods as the Company may deem appropriate. Whether or not such withholdings
are required, the Company will make such information reports to the Internal
Revenue Service as may be required with respect to any income (whether or not
that of an employee) attributable to transactions involving the Plan.
The grant of options under the Plan is within the discretion of the Stock
Option Committee. For this reason, the options to be granted to officers and
key employees under the Plan are not determinable.
PROPOSAL 3: RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the appointment of Richard
A. Eisner & Company, LLP as the Company's independent auditors for the fiscal
year ending April 30, 1999.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the Board
of Directors feels that such a change would be in the Company's and its
stockholders' best interests.
Richard A. Eisner & Company, LLP has audited the Company's financial
statements annually since fiscal 1992. Its representatives will be present at
the Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF RICHARD A. EISNER & COMPANY, LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 1999.
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OTHER BUSINESS
The Board does not intend to present, and does not have any reason to
believe that others intend to present, any matter of business at the meeting
other than as set forth above. If any other matter should be presented
properly, it is the intention of the persons named as proxies to vote on such
matters in accordance with their judgment.
VOTING PROCEDURES
Directors of the Company must be elected by a plurality of the vote of the
shares of Common Stock present in person or represented by proxy at the
Meeting. Consequently, only shares that are voted in favor of a particular
nominee will be counted toward such nominee's achievement of a plurality.
Shares present at the Meeting that are not voted for a particular nominee or
shares present by proxy where the stockholder properly withheld authority to
vote for such nominee (including broker non-votes) will not be counted toward
such nominee's achievement of a plurality.
With respect to any other matter that may be submitted to the stockholders
for a vote, the affirmative vote of the holders of at least a majority of the
shares of Common Stock present in person or represented by proxy at the
Meeting for a particular matter is required to become effective. With respect
to abstentions, the shares are considered present at the Meeting for the
particular matter, but since they are not affirmative votes for the particular
matter, they will have the same effect as votes against the matter. With
respect to broker votes, the shares are not considered present at the Meeting
for the particular matter as to which the broker withheld authority.
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1999 PROPOSALS FOR ANNUAL MEETING
Proposals by stockholders which are intended to be presented at the 1999
Annual Meeting must be received by the Company at its principal executive
offices on or before June 17, 1999.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal year ended April 30, 1998 accompanies this Proxy Statement. THE COMPANY
WILL SEND TO A STOCKHOLDER, UPON REQUEST WITHOUT CHARGE, A COPY OF THE ANNUAL
REPORT ON FORM 10-KSB (WITHOUT EXHIBITS) FOR THE YEAR ENDED APRIL 30, 1998,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE COMPANY HAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REQUEST MUST BE
DIRECTED TO THE ATTENTION OF DAVID S. SELTZER, SECRETARY, AT THE ADDRESS OF
THE COMPANY SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT.
By Order of the Board of Directors,
Hi-Tech Pharmacal Co., Inc.
David S. Seltzer
President, Chief Executive Officer,
Secretary and Treasurer
Dated: November 2, 1998
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HI-TECH PHARMACAL CO., INC.
Annual Meeting of Stockholders - December 3, 1998
(Solicited on Behalf of the Board of Directors)
PROXY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of Hi-
Tech Pharmacal Co., Inc. (the "Company") constitutes and appoints Bernard
Seltzer and David S. Seltzer or either of them, the attorneys and proxies of the
undersigned with full power of substitution to vote for and in the name, place
and stead of the undersigned at the Annual Meeting of the Stockholders of the
Company, to be held at Fleet Bank, 300 Broad Hollow Road, Melville, New York
11747 on December 3, 1998 at 10:00 A.M., and at any adjournment or adjournments
thereof, upon the following matters (which are more fully described in the
accompanying Proxy Statement).
(1) FOR the election of the following nominees to the Board of
Directors for the ensuing year: Bernard Seltzer, David S. Seltzer,
Reuben Seltzer, Martin M. Goldwyn and Yashar Hirshaut, M.D. [ ]
(except as marked to the contrary below).
WITHHOLD authority to vote for all nominees listed above. [ ]
----------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual
nominee, write the nominee's name in the space provided above.)
(2) FOR [ ] AGAINST [ ] ABSTAIN [ ] the proposal to amend the Company's
Amended and Restated Stock Option Plan to increase by 500,000 the
number of shares of common stock reserved for issuance thereunder.
(3) FOR [ ] AGAINST [ ] ABSTAIN [ ] the proposal to ratify the
appointment of Richard A. Eisner & Company, LLP as the Company's
independent auditors for the fiscal year ending April 30, 1999.
(4) In their discretion, upon other matters as may properly come before
the meeting or any adjournments thereof.
UNLESS YOU SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES AS DIRECTORS AND "FOR" ITEMS 2 AND 3.
(Continued and signed on the reverse side)
<PAGE>
A majority of such attorneys and proxies, or their substitutes at the
meeting, or any adjournment or adjournments thereof, may exercise all of the
powers hereby given. Any proxy to vote any of the shares, with respect to which
the undersigned is or would be entitled to vote, heretofore given to any person
or persons other than the persons named above, is revoked.
IN WITNESS WHEREOF, the undersigned has signed and sealed this proxy and
hereby acknowledges receipt of a copy of the notice of such meeting and proxy
statement in reference thereto both dated November 2, 1998.
Dated: 1998
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(Stockholder(s) Signature)
(L.S.)
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Printed Name of Stockholder
NOTE: Signature should correspond with name appearing
on stock certificate. When signing in a fiduciary or
representative capacity, sign full title as such.
Where more than one owner, each should sign.
