<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
CARACO PHARMACEUTICAL LABORATORIES, LTD
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CARACO PHARMACEUTICAL LABORATORIES, LTD
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
APRIL 28, 1999
Dear Shareholder,
We invite you to attend our 1999 Annual Meeting of Shareholders at 10:00
a.m., Eastern Daylight Savings Time, on June 2, 1999 at The Hotel St. Regis,
3071 W. Grand Blvd., Detroit, Michigan.
The annual report, which is enclosed, summarizes Caraco's major
developments during 1998 and includes the 1998 financial statements.
Whether or not you plan to attend the meeting, please complete and mail the
enclosed proxy card promptly so that your shares will be voted as you desire. IF
YOU WISH TO VOTE IN THE MANNER THE BOARD OF DIRECTORS RECOMMENDS, IT IS NOT
NECESSARY TO SPECIFY YOUR CHOICES ON THE PROXY CARD. SIMPLY SIGN, DATE AND
RETURN THE PROXY CARD.
Sincerely,
/s/ Dilip Shanghvi
Dilip Shanghvi
Chairman of the
Board of Directors
<PAGE> 3
CARACO PHARMACEUTICAL LABORATORIES, LTD.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 1999
Date: June 2, 1999
Time: 10:00 a.m., Eastern Daylight Savings Time
Place: The Hotel St. Regis
Detroit, Michigan 48202
We invite you to attend the Caraco Pharmaceutical Laboratories, Ltd. Annual
Meeting of Shareholders to:
1. Elect two directors for three-year terms expiring in 2002 or upon the
election and qualification of their successors.
2. Approve and adopt The 1999 Equity Participation Plan and to reserve
for issuance thereunder 3,000,000 shares of Caraco's common stock.
3. Transact any other business that is properly submitted before the
annual meeting or any adjournments of the meeting.
The record date for the meeting is April 19, 1999 (the "Record Date"). Only
shareholders of record at the close of business on that date can vote at the
annual meeting. Caraco is mailing this Notice of Annual Meeting to those
shareholders.
A proxy statement, proxy card, annual report, and Form 10-KSB are enclosed
with this Notice. Whether or not you plan to attend the meeting and whether you
own a few or many shares of stock, the board of directors urges you to vote
promptly. You may vote by signing, dating and returning the enclosed proxy card.
A list of shareholders who can vote at the annual meeting will be available
for inspection by shareholders at the meeting and for ten days prior to the
meeting during regular business hours at the offices of Caraco, 1150 Elijah
McCoy Drive, Detroit, MI 48202.
By Order of the board of directors,
/s/ Dilip Shanghvi
Dilip Shanghvi
Chairman of the
Board of Directors
April 28, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Questions and answers....................................... 3
Proposals
Proposal 1: Election of Board of Directors............ 5
Proposal 2: Proposal to Approve the 1999 Equity
Participation Plan.................................... 5
Information about nominees and incumbent directors.......... 8
Committees and meetings of directors........................ 9
Compensation of directors................................... 10
Security ownership of certain beneficial owners............. 10
Security ownership of management and directors.............. 11
Section 16(a) beneficial ownership reporting compliance..... 12
Transactions of directors and executive officers with
Caraco.................................................... 12
Executive officers.......................................... 13
Compensation of executive officers.......................... 13
Option grants in last fiscal year........................... 14
Aggregated option exercises in last fiscal year and fiscal
year-end option values.................................... 14
Employment Agreements....................................... 14
Relationships with independent auditors..................... 15
Appendix A.................................................. A-1
</TABLE>
2
<PAGE> 5
CARACO PHARMACEUTICAL LABORATORIES, LTD.
1150 ELIJAH MCCOY DRIVE
DETROIT, MICHIGAN 48202
1999 PROXY STATEMENT
QUESTIONS AND ANSWERS
1. Q: WHAT IS A PROXY?
A: A proxy is a document, also referred to as a proxy card (which is
enclosed), by which you authorize someone else to vote for you in the
way that you want to vote. Caraco's board of directors is soliciting
this proxy. You may also abstain from voting.
2. Q: WHAT IS A PROXY STATEMENT?
A: A proxy statement is the document the United States Securities and
Exchange Commission (the "SEC") requires to explain the matters on
which you are asked to vote on the proxy card.
3. Q: WHO CAN VOTE?
A: Only holders of Caraco's common stock at the close of business on April
19, 1999, the Record Date, can vote at the annual meeting. Each
shareholder of record has one vote for each share of common stock on
each matter presented for a vote at the meeting.
4. Q: WHAT WILL I VOTE ON AT THE MEETING?
A: At the annual meeting, shareholders will vote to:
(1) elect two directors for three-year terms expiring in 2002 or upon
the election and qualification of their successors;
(2) approve the 1999 Equity Participation Plan; and
(3) transact any other business that is properly submitted before the
annual meeting or any adjournments of the meeting.
5. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THE PROPOSAL?
A: The board of directors recommends a vote FOR each of the proposals.
6. Q: HOW CAN I VOTE?
A: You can vote in person or by proxy. To vote by proxy, sign, date and
return the enclosed proxy card. If you return your signed proxy card to
American Stock Transfer before the annual meeting, the persons named as
proxies on the card will vote your shares as you directed. You may
revoke a proxy at any time before the proxy is exercised by:
(1) giving written notice of revocation to the Assistant Corporate
Secretary of Caraco at 1150 Elijah McCoy Drive, Detroit, MI 48202;
(2) submitting another proxy that is properly signed and later dated;
(3) voting in person at the meeting (but only if the shares are
registered in Caraco's records in the name of the shareholder and
not in the name of a broker, dealer, bank or other third party);
7. Q: IS MY VOTE CONFIDENTIAL?
A: Yes, your vote is confidential. Only the inspectors of election and
certain employees associated with processing proxy cards and counting
the vote have access to your vote. All comments you direct to
management (whether written on the proxy card or elsewhere) will remain
confidential unless you ask that your name be disclosed.
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<PAGE> 6
8. Q: WHAT IS A QUORUM?
A: There were 16,179,695 shares of Caraco's common stock outstanding on
the Record Date. A majority of the outstanding shares, or 8,089,848
shares, present or represented by proxy, constitutes a quorum. A quorum
must exist to conduct business at the annual meeting.
9. Q: HOW DOES VOTING WORK?
A: If a quorum exists, each director must receive the favorable vote of a
majority of the shares voted, excluding abstentions and broker
non-votes. A broker non-vote is a proxy a broker submits that does not
indicate a vote for some or all the proposals because the broker does
not have discretionary voting authority and the broker did not receive
instructions as to how to vote on those proposals. The 1999 Equity
Participation Plan must receive the favorable vote of a majority of the
shares voted (with an abstention counted as a vote against and a broker
non-vote not counted).
Caraco will vote properly executed proxies it receives prior to the
meeting in the way you direct. If you do sign the proxy card but do not
specify instructions, the shares represented by proxies will be voted
FOR the nominees for directors and FOR the approval of the stock option
plan. No other matters are currently scheduled to be presented at the
meeting.
An independent third party acts as the inspector of the meeting and the
tabulator of votes.
10. Q: WHO PAYS FOR THE COSTS OF THE MEETING?
A: Caraco pays the cost of preparing and printing the proxy statement and
soliciting proxies. Caraco will solicit proxies primarily by mail, but
may also solicit proxies personally and by telephone. Caraco will
reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their out-of-pocket expenses for forwarding
solicitation material to beneficial owners of Caraco's common stock.
11. Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING DUE?
A: All shareholder proposals to be considered for inclusion in next year's
proxy statement must be submitted in writing to the Corporate
Secretary, Caraco Pharmaceutical Laboratories, 1150 Elijah McCoy Drive,
Detroit, Michigan 48202, by December 30, 1999.
Additionally, under Caraco's bylaws, shareholders of Caraco must
provide advance notice to Caraco if they wish to nominate persons for
election as directors or propose items of business at an annual meeting
of Caraco's shareholders. The shareholder must deliver this notice not
later than the close of business of the 90th day nor earlier than the
close of business on the 120th day prior to the first anniversary of
the immediately preceding year's annual meeting of shareholders.
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<PAGE> 7
THE TWO PROPOSALS ON WHICH YOU ARE VOTING:
PROPOSAL 1: ELECTION OF BOARD OF DIRECTORS
Caraco's board of directors is divided into three classes with each class
of directors elected to a three-year term of office. At each annual meeting of
shareholders, shareholders elect one class of directors for a three-year term to
succeed the class of directors whose term of office expires at that meeting.
This year you are voting on two candidate directors. Based on the recommendation
of the board of directors, the following individuals, each of whom is a current
director, are recommended for re-election: David W. Adamany and David A.
Hagelstein. Each of the nominees has consented to his nomination and has agreed
to serve as a director of Caraco if elected.
If any director is unable to stand for re-election, Caraco may vote the
shares to elect any substitute nominees recommended by the board of directors.
If the board of directors does not recommend any substitute nominees, the number
of directors to be elected at the annual meeting may be reduced by the number of
nominees who are unable to serve.
Further information regarding the board of directors and these nominees
begins on page 11 of this proxy statement.
Caraco's board of directors recommends a vote FOR these directors.
PROPOSAL 2: PROPOSAL TO APPROVE THE 1999 EQUITY PARTICIPATION PLAN
GENERAL
On April 9, 1999, the board of directors adopted The 1999 Equity
Participation Plan (the "1999 Plan"), effective upon shareholder approval
thereof, for Caraco employees, consultants and non-employee directors, and
reserved for issuance thereunder 3,000,000 shares of common stock. As of April
19, 1999, no options to purchase shares of the common stock and no restricted
stock have been awarded under the 1999 Plan.
At the annual meeting, the shareholders are being asked to approve the 1999
Plan and the reservation of shares thereunder. The board of directors believes
that adopting the 1999 Plan will provide Caraco with equity award opportunities
to attract, retain and motivate the best available talent for the successful
conduct of its business. Currently, under Caraco's 1993 Stock Option Plan, there
are approximately only 50,249 shares available for grant. Caraco does not
believe that the number of remaining shares under the 1993 Stock Option Plan
will be sufficient to accomplish its purposes.
SUMMARY OF THE 1999 PLAN
The essential features of the 1999 Plan are outlined below.
PURPOSE. The purpose of the 1999 Plan is (i) to provide an incentive for
employees, consultants and non-employee directors to further the growth and
financial success of Caraco by personally benefiting through the ownership of
shares of common stock; and (ii) to obtain and retain the services of employees,
consultants and non-employee directors considered essential to the long-range
success of Caraco, by making available stock options and/or shares of restricted
stock.
ADMINISTRATION. The 1999 Plan will be administered by the Committee
(defined generally as the Compensation Committee or the board of directors). The
Committee has the power to interpret the 1999 Plan, the stock option agreements
issued thereunder and the agreements pursuant to which restricted stock awards
are granted. The Committee may adopt such rules for the administration,
interpretation and application of the 1999 Plan as are consistent with the 1999
Plan, and to interpret, amend or revoke any such rules. Caraco's Board of
Directors, acting by a majority of its members in office, shall administer the
1999 Plan with respect to options granted to non-employee directors.
ELIGIBILITY. Officers, consultants and other employees (including employee
directors) of Caraco and its subsidiaries and affiliates whom the Committee
believes have the potential to contribute to the future
5
<PAGE> 8
success of Caraco, and those non-employee directors who the board of directors
believes have the potential to contribute to the future success of Caraco, shall
be eligible to receive awards under the 1999 Plan.
AWARD. The maximum number of shares of common stock which may be subject
to a stock option award and a restricted stock award under the 1999 Plan to any
individual in any calendar year shall not exceed 200,000 shares of common stock.
STOCK OPTIONS. The 1999 Plan permits the granting of non-transferable
stock options that are either intended to qualify as incentive stock options or
not intended to so qualify and are non-statutory stock options. The Committee or
the board of directors shall determine whether stock options are to be non-
statutory or incentive and whether such stock options are to qualify as
performance-based compensation as described in Section 162(m)(4)(c) (see
reference below) of the Internal Revenue Code of 1986. The option exercise price
for each share covered by the option may be less than the fair market value of a
share of common stock on the date of grant; however in the case of incentive
stock options or in the case of a grant to the chief executive officer and the
four other highest compensated executive officers, the price shall be no less
than 100% of the fair market value of a share of common stock at the time such
option is granted. The term of an option shall be determined by the Committee
provided, however, that in the case of incentive stock options, the term shall
not be more than 10 years from the date the incentive stock option is granted.
The period during which the right to exercise an option in whole or in part
vests will be set by the Committee. Each option shall be evidenced by a written
stock option agreement which shall be executed by the optionee. Upon exercise of
an option, the optionee shall make full cash payment to Caraco; however, the
Committee may allow other types of payment.
RESTRICTED STOCK. Restricted stock may be awarded to any participant whom
the Committee determines should receive such an award. The Committee may
determine the purchase price, if any, and other terms and conditions applicable
to the restricted stock. The Committee may impose such conditions on the
issuance of the restricted stock as deemed appropriate. The Committee shall
determine whether such stock options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code. Restricted stock
shall be issued only pursuant to a written restricted stock agreement. The
shares of restricted stock may be placed into escrow by the Committee and held
until all the restrictions imposed under the restricted stock agreement have
been satisfied or removed.
SECTION 162(M) OF THE CODE. Section 162(m) precludes a public corporation
from taking a tax deduction for individual compensation in excess of $1 Million
dollars for its chief executive officer and its four other highest-paid
officers. Section 162(m) also provides for certain exemptions to this
limitation, specifically compensation that is performance based within the
meaning of Section 162(m). The Committee, however, reserves the right to award
compensation to its executives in the future that may not qualify under Section
162(m) as deductible compensation. The Committee will, however, continue to
consider all elements of the cost to Caraco of providing such compensation,
including the potential impact of Section 162(m).
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS, AND CHANGES IN CONTROL. In the
event of a stock dividend, stock split, reorganization, merger, or similar
corporate transaction (other than a change in control), the Committee is
authorized to make appropriate adjustments to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the 1999
Plan or with respect to an outstanding award. In addition, the Committee may
provide for the acceleration of the vesting period; for the assumption by any
successor or survivor corporation of the obligations of Caraco with respect to
an award; or for the removal of restrictions imposed under a restricted stock
agreement. In the event of a change in control as defined in the 1999 Plan
(which includes among other events, any person (other than Sun Pharma and its
affiliates) becoming the beneficial owner of a majority of the combined voting
power of Caraco or generally, over a period of 24 months or less, the current
members of the board of directors and any other individuals who become directors
of Caraco after that date who were approved by at least two-thirds of the then
current board of directors, ceasing for any reason to constitute a majority of
the board of directors), each option granted shall become exercisable as to all
shares covered thereby simultaneously with the consummation of such change in
control and any restricted stock awarded shall become fully vested and generally
the restrictions included in any restricted stock granted shall be deemed
rescinded and terminated.
6
<PAGE> 9
AMENDMENT OR TERMINATION OF THE 1999 PLAN. The 1999 Plan may be wholly or
partially amended or modified, suspended or terminated at any time by the
Committee. However, without approval of Caraco's shareholders given within 12
months before or after the action by the Committee, no action of the Committee
may, except as otherwise provided in the 1999 Plan, increase the limits of the
maximum number of shares which may be issued under the 1999 Plan to any
individual and no action of the Committee may be taken that would otherwise
require shareholder approval as a matter of law, regulation or rule. No
amendment, suspension, or termination of the 1999 Plan shall, without the
consent of the participants, alter or impair any rights or obligations under any
award theretofore granted, unless the award itself expressly so provides.
FEDERAL INCOME TAX INFORMATION. The following is only a brief summary of
the effect of federal income taxation upon the recipient and Caraco under the
1999 Plan based upon the Code. This summary does not purport to be complete and
does not discuss the income tax laws of any municipality, state or country
outside of the United States in which a participant may reside.
If any option granted under the 1999 Plan is an incentive stock option, the
optionee will recognize no income upon grant of the incentive stock option and
will incur no tax liability due to the exercise unless the optionee is subject
to the alternative minimum tax. Caraco will not be allowed a deduction for
federal income tax purposes as a result of the exercise of an incentive stock
option regardless of the applicability of the alternative minimum tax. Upon the
sale or exchange of the shares at least two years after the date of grant and at
least one year after exercise of the option, any gain (or loss) will be treated
as a capital gain (or loss). If these holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference between the
exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale price of the stock. A different rule may
operate to postpone the recognition date of ordinary income upon such premature
disposition if the optionee is subject to Section 16 of the Securities Exchange
Act of 1934. Caraco will be entitled to a deduction in the same amount as the
ordinary income recognized by the optionee.
Options which do not qualify as incentive stock options are taxed as
non-statutory options. An optionee will not recognize any taxable income at the
time he is granted a non-statutory option. However, upon the exercise of a
non-statutory option, the optionee will recognize ordinary income measured by
the excess of the then fair market value of the shares over the exercise price.
In certain circumstances, where the shares are subject to a substantial risk of
forfeiture when acquired or where the optionee is subject to Section 16 of the
Securities Exchange Act of 1934, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service under Section 83(b)
of the Code. The income recognized by an optionee who is also an employee of
Caraco will be subject to tax withholding by Caraco by payment in cash or out of
the current earnings paid to the optionee. Upon sale of such shares by the
optionee, any difference between sales price and the fair market value on the
date of exercise, will be treated as capital gain (or loss). Caraco will be
entitled to a tax deduction in the same amount as the ordinary income recognized
by the optionee with respect to shares acquired upon exercise of a non-statutory
option.
The grant of restricted stock will generally be subject to the tax
consequences discussed above for non-statutory options. At such times as the
restrictions on the stock lapses or the stock is sold, such shareholders will
recognize ordinary income to the extent of the fair market value of such stock
less the amount, if any, which is paid for the stock. The income recognized by a
shareholder who is an employee will be subject to tax withholding by Caraco by
payment in cash or out of the current earnings paid to the employee. Caraco will
be entitled to a tax deduction in the same amount as the ordinary income
recognized by the shareholder.
RECOMMENDATION
The discussion of the 1999 Plan is qualified in its entirety by the actual
terms and conditions of the 1999 Plan, a copy of which is included as Appendix
"A" to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL AND ADOPTION OF
THE 1999 PLAN
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<PAGE> 10
INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
The following tables provide information about each nominee for election as
a director and for each of the directors whose term of office will continue
after the meeting.
NOMINEES FOR DIRECTORS -- TERMS EXPIRING IN 2002
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS DIRECTOR
NAME AGE AND OTHER DIRECTORSHIPS SINCE
---- --- ------------------------------------------------------ --------
<S> <C> <C> <C>
David W. Adamany...... 62 Served as President of Wayne State University from 1994
1982 until 1997. He is presently President Emeritus
and Distinguished Professor of Law and Political
Science at Wayne State University.
David A. Hagelstein... 57 Engaged in the management of his personal real estate 1995
and business investments for the past thirty years. He
is a consultant to several companies in the
pharmaceutical and medical fields. (See "Transactions
of Directors and Executive Officers with Caraco")
</TABLE>
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS DIRECTOR
NOMINEES AGE AND OTHER DIRECTORSHIPS SINCE
-------- --- ----------------------------------------------------- --------
<S> <C> <C> <C>
Narendra N. Borkar...... 58 Chief Executive Officer (since August 1997), director 1997
of Sun Pharmaceutical Industries, Ltd., an Indian
specialty pharmaceutical company ("Sun Pharma") since
1997, head of the pharmaceutical business in India of
Ciba Geigy, now Novartis, a Swiss corporation, since
1982, responsible for the overall performance of the
business unit including marketing, finance,
technical, medical and development. (See
"Transactions of Directors and Executive Officers
with Caraco.")
Phyllis Harrison-Ross... 62 Has served more than 25 years in the community mental 1996
health profession. She presents a remarkably diverse
career as a hospital administrator, researcher,
academician, public health consultant, forensic
psychiatrist and public educator. Dr. Harrison-Ross
trained as an adult and child psychiatrist as well as
a pediatrician, and continues to lend her
administrative and clinical talents to serving the
diverse, hard to reach and underserved population of
New York.
Sudhir Valia............ 42 Has worked for Sun Pharma as a full time director 1997
responsible for finance, commercial, operations,
projects and quality control. For more than the past
five years Mr. Valia has been a chartered accountant
in private practice. (See "Transactions of Directors
and Executive Officers with Caraco.")
</TABLE>
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<PAGE> 11
INCUMBENT DIRECTORS -- TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE DURING PAST 5 YEARS DIRECTOR
NAME AGE AND OTHER DIRECTORSHIPS SINCE
---- --- --------------------------------------------------------- --------
<S> <C> <C> <C>
Jay F. Joliat....... 42 For more than the past five years, has served as 1995
President, Chief Executive Officer and Chairman of the
board of directors of Joliat & Company. Joliat & Company
is a private investment company involved in general
securities management, venture capital, real estate, and
business consulting. Mr. Joliat is also Chairman of the
Board, Chief Executive Officer and Treasurer of Sign of
the Beefcarver Restaurants, Inc. He is also CEO of Bad
Frog International, Inc., which is a franchise company
and worldwide licensee to all rights associated with Bad
Frog Taverns; and is trustee and Chief Executive Officer
of several family-related trusts with widely diverse
holdings including foreign and domestic securities,
venture capital and real estate. (See "Transactions of
Directors and Executive Officers with Caraco.")
Dilip S. Shanghvi... 43 Chairman of the board of directors since 1997. Co-founder 1997
of Sun Pharma and has been a Managing Director since
1992, responsible for marketing, research and development
and human resource development. (See "Transactions of
Directors and Executive Officers with Caraco.")
</TABLE>
COMMITTEES AND MEETINGS OF DIRECTORS
The board of directors has four committees, as set forth in the following
chart.
CURRENT MEMBERSHIP ROSTER
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION AUDIT FINANCE
NAME COMMITTEE COMMITTEE COMMITTEE COMMITTEE
---- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
David W. Adamany........................... *
Narendra N. Borkar......................... X *
David A. Hagelstein........................ X *
Phyllis Harrison-Ross...................... X
Jay F. Joliat.............................. X X
Dilip Shanghvi............................. * X
Sudhir Valia............................... X X X
</TABLE>
- -------------------------
* Chairman
EXECUTIVE COMMITTEE. This committee did not meet during 1998. It exercises, in
the intervals between the meetings of the board of directors, the powers of the
board of directors, subject to the Michigan Business Corporation Act, as it
relates to the management of the business and affairs of Caraco.
COMPENSATION COMMITTEE. This committee did not meet in 1998. It makes
recommendations to the board of directors relating to the overall compensation
arrangements for officers and staff of Caraco. It also interprets Caraco's 1993
Stock Option Plan, as amended, and such other executive and employee stock
options as may, from time to time, be designated by the board of directors. In
doing so, it has the authority to designate officers, directors or key employees
eligible to participate, to prescribe the terms of any award of stock options,
and to make all other determinations in administering the Plan.
AUDIT COMMITTEE. This committee did not meet in 1998. It recommends to the
board of directors a firm of certified public accountants to conduct audits of
the accounts and affairs of Caraco, reviews
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<PAGE> 12
accounting objectives and procedures of Caraco and the findings and reports of
the independent certified public accountants, and makes such reports and
recommendations to the board of directors as it deems appropriate.
FINANCE COMMITTEE. This committee did not meet in 1998. It reviews
Caraco's financial structure, and makes recommendations to the board of
directors on financial, short and long term investments and business planning
matters.
COMPENSATION OF DIRECTORS
Directors who are employees of Caraco do not receive additional
compensation for their service on the board of directors and its committees.
Each non-employee director of Caraco receives 100 shares of common stock of
Caraco for each board of directors or committee meeting in which he or she
participates. Non-employee directors are also reimbursed for out-of-pocket
expenses incurred in connection with attending board and committee meetings. In
addition, non-employee directors may also be awarded options for their service
on the board of directors. No director received an option for his or her
services on the board of directors during 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The SEC requires that Caraco provide information about any shareholder who
beneficially owns more than 5% of Caraco's common stock. The following table
provides the required information about the shareholders (who are not officers
or directors) known to Caraco to be the beneficial owner of more than 5% of
Caraco's common stock. Caraco relied solely on information furnished by its
transfer agent to provide this information.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
<S> <C> <C>
Cede & Co................................................... 2,829,414 16.9%
PO Box 20
Bowling Green Station
New York, NY 10271
C. Arnold Curry............................................. 1,384,447(1) 8.3%
TTEE Clevius Arnold Curry Living Trust
17815 Hamilton Road
Detroit, MI 48203
Sun Pharmaceutical Industries Ltd........................... 6,659,990(2) 39.8%
Synergy House, Subhanpura
Baroda 390-007 India
</TABLE>
- -------------------------
(1) Excludes 484,615 shares owned by his wife, Cara J. Curry, as to which he
disclaims beneficial ownership.
(2) Includes 90,657 shares owned by Sun Pharma Global Inc., an affiliate of Sun
Pharma. (See footnotes 2 and 10 "Security Ownership of Management and
Directors")
10
<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table contains information about the number of shares of
Caraco's common stock beneficially owned by incumbent directors, nominees and
the executive officers named in the Summary Compensation Table presented in this
Proxy Statement and by all incumbent directors, nominees and executive officers
as a group. The number of shares beneficially owned by each individual includes
shares over which the person shares voting power or investment power and also
any shares which the individual can acquire by May 31, 1999, through the
exercise of any stock option or other right. Unless indicated otherwise, each
individual has sole investment and voting power (or shares those powers with his
or her spouse) with respect to the shares listed in the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS*
------------------------ -------------------- ----------
<S> <C> <C>
David W. Adamany(9)......................................... 24,400(1) *
Narendra N. Borkar(9)....................................... 50,000(2) *
David A. Hagelstein(9)(10).................................. 1,742,149(3) 10.4%
Phyllis Harrison-Ross(9).................................... 3,900(4) *
Jay F. Joliat(9)(10)........................................ 2,413,134(5) 14.4%
John R. Morris(9)........................................... 139,270(6) *
Dilip S. Shanghvi(11)....................................... (2) *
Sudhir Valia(11)............................................ (2) *
Sherman N. Ginn(9).......................................... 16,000(7) *
Robert Kurkiewicz(9)........................................ 25,241(8) *
All executive officers and directors as a group............. 4,414,094(2) 26.4%
(10 persons)
</TABLE>
- -------------------------
* Less than 1.0% of the outstanding shares
(1) Includes stock options that are currently exercisable to purchase 4,800
shares of common stock.
(2) Excludes 6,569,333 shares of common stock owned by Sun Pharma and 90,657
shares of common stock owned by Sun Pharma's affiliate, Sun Pharma Global,
Inc. (See "Security Ownership of Certain Beneficial Owners" and
"Transactions of Directors and Executive Officers with Caraco.") Messrs. D.
Shanghvi, Borkar and Valia are principals of Sun Pharma, and, therefore,
may be deemed to share investment control over the shares of Common Stock
held by Sun Pharma and Sun Pharma Global, Inc. Each of Messrs. D. Shanghvi,
Borkar and Valia disclaims beneficial ownership of the shares of Common
Stock owned by Sun Pharma and Sun Pharma Global, Inc.
(3) The majority of shares are held in trust (the "Hagelstein Trust"). Includes
stock options that are currently exercisable to purchase 577,758 shares of
common stock. (See "Transactions of Directors and Executive Officers with
Caraco.")
(4) Includes stock options that are currently exercisable to purchase 2,400
shares of common stock.
(5) The majority of shares are held in trust (the "Joliat Trust"). Includes
285,714 Series A Preferred Stock convertible to Common Stock; and stock
options that are currently exercisable to purchase 880,266 shares of common
stock. (See "Transactions of Directors and Executive Officers with
Caraco.")
(6) Includes stock options that are currently exercisable to purchase 2,400
shares of common stock.
(7) Includes stock options that are currently exercisable to purchase 16,000
shares of common stock.
(8) Includes stock options that are currently exercisable to purchase 21,328
shares of common stock.
(9) The mailing address of each of these holders is 1150 Elijah McCoy Drive,
Detroit, Michigan 48202.
(10) The Joliat Trust, the Hagelstein Trust and Sun Pharma have entered into a
Voting Agreement dated August 1997 pursuant to which, among other things,
Sun Pharma may designate a majority of the directors of the board of
directors of the Company and the Joliat Trust and the Hagelstein Trust may
each designate one director. The Voting Agreement also provides that the
Executive Committee shall
11
<PAGE> 14
consist of three directors, two selected by Sun Pharma and one selected by
the Joliat Trust and the Hagelstein Trust. In addition, the Joliat Trust
and the Hagelstein Trust have also agreed that they will respectively vote
their shares in accordance with Sun Pharma's directions with respect to any
matter relating to the investment, merger, alliance, share dilution,
appointment of key executives, major restructuring or reorganizing, bank
borrowing, funding or giving credit. If Sun Pharma sells within a period of
four years shares of Caraco Common Stock so that Sun Pharma's ownership
falls below 30% of the then outstanding shares of Caraco or Sun Pharma
defaults in its payment for the Caraco Common Stock, then the board of
directors will be reconstituted in accordance with the proportionate share
holdings of each of the parties to the Voting Agreement and the Executive
Committee shall be reconstituted so that it consists of one director
selected by Sun Pharma and two directors selected by the Joliat Trust and
the Hagelstein Trust. In the event that Sun Pharma owns 10% or less of the
outstanding shares of Caraco, the Voting Agreement shall terminate. In
addition, the Voting Agreement shall terminate after the fourth anniversary
thereof. The Joliat Trust and the Hagelstein Trust have also agreed not to
dispose of their shares for a period of four years without the consent of
Sun Pharma, and thereafter for a period of three years, to give Sun Pharma
a right of first refusal on the sale of their respective shares. The
restriction on disposition of their respective shares for the four-year
period terminates in the event of (i) any sale of shares by Sun Pharma to
anyone other than an affiliate; (ii) approval by the board of directors of
Caraco of a merger, consolidation, or sale of substantially all of the
assets of Caraco to another entity; or (iii) a tender offer for the shares.
(11) The mailing address of Sun Pharma, D. Shanghvi and S. Valia is Synergy
House Subhanpura, Gorwa Road, Baroda, 390-007, India.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that Caraco's
directors, executive officers and persons who own more than ten percent of a
registered class of Caraco's equity securities file reports of stock ownership
and any subsequent changes in stock ownership with the SEC not later than
specified deadlines. During 1998, all of the required reports were filed by the
specified deadlines. In making this disclosure, Caraco relied on the directors'
and executive officers' written representations and a review of copies of the
reports filed with the SEC.
TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS WITH CARACO
The following discloses transactions between Caraco and several of the
incumbent directors, director nominees and executive officers of Caraco during
1998.
In August 1997, Caraco and Sun Pharma completed an agreement whereby in
exchange for 5,300,000 shares of Caraco common stock, Sun Pharma agreed to
invest $7.5 million into Caraco over a period of approximately two years in four
installments. Caraco received the final installment in 1998.
In August 1997, Sun Pharma also agreed, during a five year period, to
provide Caraco with 25 generic pharmaceutical products (consisting of ANDAs
(abbreviated new drug applications) which count as one product and DESIs (drug
efficiency study implementation products) which count as 1/3 of a product) in
exchange for 544,000 shares of Caraco common stock for each product (181,333
shares for each DESI product). In March 1999, Caraco issued Sun Pharma 1,269,333
shares of its common stock for two ANDAs and one DESI product.
Sun Pharma has agreed to lend Caraco up to $5.3 million as an unsecured
loan on an as needed basis at an annual interest rate of 10%. As of March 31,
1999, Sun Pharma has loaned Caraco $750,000 of the $5.3 million.
In connection with the purchase by Sun Pharma in August 1997 of the
5,300,000 shares of Caraco common stock, and in satisfaction of their agreement
with Sun Pharma, in July 1998 Jay F. Joliat contributed
12
<PAGE> 15
$150,000 to Caraco, and Jay F. Joliat and David A. Hagelstein surrendered to
Caraco 100,000 and 250,000 shares of Caraco common stock, respectively.
On January 20, 1999, the Board of Directors granted David A. Hagelstein a
non-qualified stock option for 250,000 shares of Caraco's common stock at an
exercise price of $1.50 per share and a non-qualified stock option for 100,000
shares of Caraco's common stock at an exercise price of $.88 per share. Both
options are exercisable until January 20, 2005. The Board of Directors also
granted to Jay F. Joliat on January 20, 1999, a non-qualified stock option for
100,000 shares of Caraco's common stock at an exercise price of $1.50 per share.
The options are exercisable until January 20, 2005.
In December 1998, Caraco commenced a private placement of its common stock
to raise up to $5 million. Pursuant to such private placement through March 31,
1999, Jay F. Joliat has purchased 400,000 shares of Caraco's common stock and
David A. Hagelstein has purchased 79,090 of Caraco's common stock at prices
ranging between $.88 and $1.00 per share.
EXECUTIVE OFFICERS
The following table provides information about Caraco's executive officers
who are not directors.
<TABLE>
<CAPTION>
AGE EXECUTIVE
AS OF OFFICER
NAME MARCH 31, 1999 FIVE-YEAR BUSINESS EXPERIENCE SINCE
---- -------------- ----------------------------- ---------
<S> <C> <C> <C>
Sherman N. Ginn 59 Vice President -- Sales and Marketing (since 1994
December 1994), director of Sales and Marketing
(August to December 1994). From February 1994
until August 1994, Mr. Ginn was employed by
Global Source as Vice President, Sales.
Robert Kurkiewicz 48 Commenced employment with Caraco as its Vice 1993
President -- Quality Assurance in November 1993
and was promoted to Senior Vice
President -- Technical, October, 1998.
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation of the two most highly
compensated executive officers of Caraco (the "named executive officer"), whose
compensation exceeded $100,000 during the year ended December 31, 1997 and
December 31, 1998, as applicable:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------
PAYOUTS
AWARDS ----------
------------ RESTRICTED SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND --------------------------- COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) $ $ # $ $
------------------ ---- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Narendra N. Borkar(1)... 1998 $120,000 0 0 $33,000(2) 150,000(3) 0 $4,560(4)
Chief Executive 1997 $ 45,592 0 0 0 0 0 0
Officer
Robert Kurkiewicz....... 1998 $120,000 0 0 0 65,000(5) 0 0
Sr. Vice President -- 1997 $ 92,000 0 0 0 0 0 0
Technical 1996 $123,000 0 0 0 0 0 0
</TABLE>
- -------------------------
(1) Mr. Borkar began his employment with Caraco August 1997.
(2) 50,000 shares of restricted stock were awarded by Caraco on September 22,
1998 (with a fair market value of $.66 per share on such date) as part of
Mr. Borkar's employment agreement dated September 22, 1998.
13
<PAGE> 16
(3) A stock option of 150,000 shares was awarded to Mr. Borkar as part of his
employment agreement dated September 22, 1998. (See
"Executive -- Compensation -- "Employment Agreements" and "Option Grants in
Last Fiscal Year.")
(4) $380.00 per month is given for car allowance.
(5) A stock option of 65,000 shares was awarded to Mr. Kurkiewicz on June 1,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on stock options granted in 1998
to the named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
--------------
(A) (B) (C) (D) (E)
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO ALL
SECURITIES UNDERLYING EMPLOYEES EXERCISE PRICE
NAME OPTIONS GRANTED IN FISCAL YEAR PER SHARE EXPIRATION DATE
---- --------------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Narendra N. Borkar.................. 150,000 33.9% $ .66 9/20/04
Robert Kurkiewicz................... 65,000 14.7% $ .94 6/1/04
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information for the named executive officers
with regard to the aggregate stock options exercised during the year ended
December 31, 1998, and the stock options held as of December 31, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
OPTIONS AT FY-END($)(1)
SHARES ACQUIRED VALUE REALIZED FY-END(#)
NAME ON EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Narendra N. Borkar...... 0 0 0/150,000 0/0
Sherman N. Ginn......... 0 0 16,000/14,000 0/0
Robert Kurkiewicz....... 0 0 21,328/65,886 0/0
</TABLE>
- -------------------------
(1) Value based on the difference between the closing bid price of the
Corporation's Common Stock on December 31, 1998 and the exercise price. The
options held by the named executive officers have exercise prices which are
higher than the closing bid price of the Corporation's Common Stock on
December 31, 1998.
EMPLOYMENT AGREEMENTS
NARENDRA N. BORKAR, the Chief Executive Officer of Caraco, entered into an
employment agreement dated September 22, 1998. The employment agreement provides
Mr. Borkar with a salary at the rate of $120,000 annually, a cash bonus in an
amount up to 25% of the base salary contingent upon achievement of corporate
objectives, a stock bonus of 50,000 shares of Caraco restricted common stock and
a stock option of 150,000 shares. Caraco also agreed to pay Mr. Borkar his tax
liability arising from the grant of the restricted stock.
The employment agreement is for a term of five years, however, the
agreement automatically renews for successive one year periods unless terminated
by Caraco or Mr. Borkar upon ninety (90) days notice. In the event Caraco
terminates Mr. Borkar without cause, he will receive base salary payments, his
bonus and his
14
<PAGE> 17
benefits for six (6) months from the date of termination. In the event of a
change in control of ownership of Caraco and a significant change in Mr.
Borkar's duties, then Mr. Borkar may terminate and receive a lump sum amount
equal to his base salary for six (6) months. Mr. Borkar would also be entitled
to immediate vesting of any stock option which would have been exercised at the
close of the year during the change in control.
ROBERT KURKIEWICZ, the Senior Vice President -- Technical, entered into a
five-year employment agreement on November 22, 1993 which was amended on January
1, 1999 to extend the term until January 1, 2003. The amendment confirms Mr.
Kurkiewicz' salary of $120,000 per year and provides a car allowance of $380.00
per month. The agreement is renewable for successive one-year terms. In the
event that Caraco terminates the agreement without cause, Mr. Kurkiewicz is
entitled to receive monthly base salary payments for six (6) months from the
date of termination together with premium benefits for such period. In addition,
any stock options that would become available for exercise at the end of the
year during which such termination occurred shall immediately vest.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors on June 1, 1998 selected Rehmann Robson, P.C.,
independent accountants, to audit the financial statements for the year ended
December 31, 1998. A representative of Rehmann Robson, P.C. is expected to be
present at the meeting with the opportunity to make a statement if such
representative decides to do so is expected to be available to respond to
appropriate questions.
/s/ Narendra Borkar
Narendra N. Borkar
Chief Executive Officer
15
<PAGE> 18
APPENDIX A
THE 1999 EQUITY PARTICIPATION PLAN
OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
Caraco Pharmaceutical Laboratories, Ltd. (the "Company"), a Michigan
corporation, has adopted The Equity Participation Plan of Caraco Pharmaceutical
Laboratories, Ltd. (the "Plan"), effective upon shareholder approval thereof,
for the benefit of its Employees (as such term is defined below), Consultants
(as such term is defined below) and Non-Employee Directors (as such term is
defined below).
The purposes of this Plan are as follows:
(1) To provide an additional incentive for Employees, Consultants and
Non-Employee Directors to further the growth, development and
financial success of the Company by personally benefiting through
the ownership of Company stock.
(2) To enable the Company to obtain and retain the services of
directors, Employees, Consultants and Non-Employee Directors
considered essential to the long range success of the Company by
offering them an opportunity to own stock in the Company.
ARTICLE I.
DEFINITIONS
SECTION 1.1. GENERAL
Wherever the following terms are used in this Plan they shall have the
meanings specified below, unless the context clearly indicates otherwise.
SECTION 1.2. DEFINITIONS
"Acquiring Person" means any Person other than Sun Pharmaceutical
Industries Ltd. & its affiliates, the Company, any of the Company's
Subsidiaries, any employee benefit plan of the Company or of a Subsidiary of the
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Subsidiary of the Company.
SECTION 1.3. AFFILIATE
"Affiliate" shall mean (a) with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person, and (b) with respect to the Company, also any entity designated by
the Board of Directors of the Company in which the Company or one of its
Affiliates has an interest. For purposes of the Plan, "control" shall have the
meaning given such term under Rule 405 of the Securities Act of 1933.
SECTION 1.4. AWARD
"Award" shall mean a grant of an Option or Restricted Stock under this
Plan.
SECTION 1.5. AWARD LIMIT
"Award Limit" shall mean 200,000 shares of Common Stock, during a calendar
period.
SECTION 1.6. BOARD
"Board" shall mean the Board of Directors of the Company.
A-1
<PAGE> 19
SECTION 1.7. CHANGE IN CONTROL
"Change in Control" means the event that is deemed to have occurred if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing a majority of
the combined voting power of the then outstanding Voting Securities
of the Company; or
(b) over a period of twenty-four months or less, members of the
Incumbent Board cease for any reason to constitute at least a
majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer by any
Acquiring Person for fifty percent or more of the outstanding
Voting Securities of the Company, and the Board of Directors
approves or fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; or its
statements in Schedule 14D-9 under the Exchange Act; or
(d) the stockholders of the Company approve a merger or consolidation
of the Company or any Subsidiary with any other corporation or
entity (or, if no such approval is required, the consummation of
such a merger or consolidation of the Company), other than a merger
or consolidation that would result in the Voting Securities of the
Company outstanding immediately before the consummation thereof
continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity or
of a parent of the surviving entity) a majority of the combined
voting power of the Voting Securities of the surviving entity (or
its parent) outstanding immediately after that merger or
consolidation; or
(e) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a
liquidation, sale or disposition of all or substantially all the
Company's assets in one transaction or a series of related
transactions to a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
SECTION 1.8. CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.9. COMMITTEE
"Committee" shall mean the Compensation Committee of the Board, or the full
Board or another committee of the Board, appointed as provided in Section 7.1.
SECTION 1.10. COMMON STOCK
"Common Stock" shall mean the common stock of the Company, no par value,
and any equity security of the Company issued or authorized to be issued in the
future, but excluding any preferred stock and any warrants, options or other
rights to purchase Common Stock. Debt securities of the Company convertible into
Common Stock shall be deemed equity securities of the Company.
SECTION 1.11. COMPANY
"Company" shall mean Caraco Pharmaceutical Laboratories, Ltd., a Michigan
corporation.
A-2
<PAGE> 20
SECTION 1.12. CONSULTANT
"Consultant" shall mean an individual who is engaged to perform services
for the Company or any Subsidiary or Affiliate who is not an Employee or
Non-Employee Director and who is designated as a Consultant by the Committee.
SECTION 1.13. DIRECTOR
"Director" shall mean a member of the Board.
SECTION 1.14. EMPLOYEE
"Employee" shall mean any officer or other employee (as defined in
accordance with Section 3401(c) of the Code) and including employee directors of
the Company, or of any corporation which is a Subsidiary or Affiliate.
SECTION 1.15. EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.16. FAIR MARKET VALUE
"Fair Market Value" of a share of Common Stock as of a given date shall be
(i) the closing price of a share of Common Stock on the Nasdaq National Market
or on the principal exchange on which shares of Common Stock are then trading,
if any (or as reported on any composite index which includes such principal
exchange), on the trading day previous to such date, or if shares were not
traded on the trading day previous to such date, then on the next preceding date
on which a trade occurred, or (ii) if Common Stock is not traded on an exchange
but is quoted on the Nasdaq OTC Market or a successor quotation system or the
OTC Bulletin Board, the mean between the closing representative bid and asked
prices for the Common Stock on the trading day previous to such date as reported
by the Nasdaq OTC Market or such successor quotation system or the OTC Bulletin
Board; or (iii) if Common Stock is not publicly traded on the Nasdaq National
Market or an exchange and not quoted on the Nasdaq OTC Market or a successor
quotation system or the OTC Bulletin Board, the Fair Market Value of a share of
Common Stock as established by the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) acting in good faith.
SECTION 1.17. GROUP
"Group" shall mean two or more Persons acting together as a partnership,
limited partnership, syndicate or other group for the purpose of acquiring,
holding or disposing of securities of the Company.
SECTION 1.18. INCENTIVE STOCK OPTION
"Incentive Stock Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
SECTION 1.19. INCUMBENT BOARD
"Incumbent Board" means the individuals who, as of the date on which the
Plan is approved by the stockholders of the Company, constitute the Board of
Directors and any other individual who becomes a director of the Company after
that date and whose election or appointment by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then comprising the Incumbent Board.
SECTION 1.20. NON-EMPLOYEE DIRECTOR
"Non-Employee Director" shall mean a member of the Board who is not an
Employee of the Company.
A-3
<PAGE> 21
SECTION 1.21. NON-QUALIFIED STOCK OPTION
"Non-Qualified Stock Option" shall mean an Option which is designated as
such at the time of grant or which is not designated as an Incentive Stock
Option by the Committee.
SECTION 1.22. OPTION
"Option" shall mean a stock option granted under Article III of this Plan.
An Option granted under this Plan shall, as determined by the Committee, be
either a Non-Qualified Stock Option or an Incentive Stock Option; provided,
however, that Options granted to Non-Employee Directors and Consultants shall be
Non-Qualified Stock Options.
SECTION 1.23. OPTIONEE
"Optionee" shall mean an Employee, Consultant or Non-Employee Director
granted an Option under this Plan.
SECTION 1.24. PARTICIPANT
"Participant" shall mean an individual who is an Optionee or Restricted
Stockholder.
SECTION 1.25. PERSON
"Person" shall mean an individual, partnership, corporation, business
trust, limited liability company, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
SECTION 1.26. PLAN
"Plan" shall mean The 1999 Equity Participation Plan of Caraco
Pharmaceutical Laboratories, Ltd.
SECTION 1.27. QDRO
"QDRO" shall mean a qualified domestic relations order as defined by the
Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
SECTION 1.28. RESTRICTED STOCK
"Restricted Stock" shall mean Common Stock awarded under Article VI of this
Plan.
SECTION 1.29. RESTRICTED STOCKHOLDER
"Restricted Stockholder" shall mean an Employee, Consultant or Non-Employee
Director granted an award of Restricted Stock under Article VI of this Plan.
SECTION 1.30. RULE 16B-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended from time to time.
SECTION 1.31. SECTION 162(M) PARTICIPANT
"Section 162(m) Participant" shall mean any Employee designated by the
Committee as an Employee whose compensation for the fiscal year in which the
Employee is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
A-4
<PAGE> 22
SECTION 1.32. STOCKHOLDER'S AGREEMENT
"Stockholder's Agreement" shall mean the Stockholder's Agreement between
the Company and any Participant applicable to any grant or award to such
Participant.
SECTION 1.33. SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
SECTION 1.34. TERMINATION OF CONSULTANCY
"Termination of Consultancy" shall mean the time when the engagement of a
Participant as a Consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its sole discretion, shall determine the effect of
all matters and questions relating to Termination of Consultancy, including, but
not by way of limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a Consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
SECTION 1.35. TERMINATION OF DIRECTORSHIP
"Termination of Directorship" shall mean the time when a Participant who is
a Non-Employee Director ceases to be a Director for any reason, including, but
not by way of limitation, a termination by resignation, failure to be elected,
death or retirement. The Board, in its sole discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship with
respect to Non-Employee Directors.
SECTION 1.36. TERMINATION OF EMPLOYMENT
"Termination of Employment" shall mean the time when the employee-employer
relationship between a Participant and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of a Participant by the Company or any
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Subsidiary with
the former employee. The Committee, in its sole discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Employment;
provided, however, that, with respect to Incentive Stock Options unless
otherwise determined by the Committee in its discretion, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section. Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.
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SECTION 1.37. VOTING SECURITIES
"Voting Securities" means any securities that are entitled to vote
generally in the election of directors.
ARTICLE II.
SHARES SUBJECT TO PLAN
SECTION 2.1. SHARES SUBJECT TO PLAN
(a) The shares of stock subject to Awards shall be Common Stock, initially
shares of the Company's Common Stock, no value per share. The
aggregate number of such shares which may be issued upon the exercise
of Awards under the Plan shall not exceed three million (3,000,000).
The shares of Common Stock issuable upon the exercise of such Awards
may be either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject to Awards granted
under the Plan to any individual in any calendar year shall not exceed
the Award Limit. To the extent required by Section 162(m) of the Code,
shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction will be
treated as a cancellation of the Option and a grant of a new Option
and both the Option deemed to be canceled and the Option deemed to be
granted will be counted against the Award Limit.
SECTION 2.2. ADD-BACK OF OPTIONS AND OTHER RIGHTS
If any Option expires or is canceled without having been fully exercised,
or is exercised in whole or in part for cash as permitted by this Plan, the
number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Options or other awards which are
adjusted pursuant to Section 8.3 and become exercisable with respect to shares
of stock of another corporation shall be considered canceled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Shares of Common Stock which are delivered by the Optionee or withheld by
the Company upon the exercise of any Option or other award under this Plan, in
payment of the exercise price thereof, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any share of Restricted
Stock is forfeited by the Grantee or repurchased by the Company pursuant to
Section 6.7 hereof, such share may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. Notwithstanding the
provisions of this Section 2.2, no shares of Common Stock may again be optioned,
granted or awarded if such action would cause an Incentive Stock Option to fail
to qualify as an Incentive Stock Option under Section 422 of the Code unless the
Committee determines that such Option is no longer intended to so qualify.
ARTICLE III.
GRANTING OF OPTIONS
SECTION 3.1. ELIGIBILITY
Any Employee or Consultant selected by the Committee pursuant to Section
3.4(a)(i) and each Non-Employee Director selected by the Board pursuant to
Section 3.4(d) shall be eligible to be granted an Option.
SECTION 3.2. DISQUALIFICATION FOR STOCK OWNERSHIP
No person may be granted an Incentive Stock Option under this Plan if such
person, at the time the Incentive Stock Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any then existing Subsidiary or parent corporation
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(within the meaning of Section 422 of the Code) unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code.
SECTION 3.3. QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted to any person who is not an
Employee.
SECTION 3.4. GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its sole discretion, and
subject to applicable limitations of this Plan:
(i) Select from among the Employees and Consultants (including
Employees or Consultants who have previously received Options
or other awards under this Plan) those who in its opinion
should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected Employees or
Consultants;
(iii) Subject to Section 3.3, determine whether such Options are to
be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code;
and
(iv) Determine the terms and conditions of such Options, consistent
with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code
shall include, but not be limited to, such terms and conditions
as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.
(b) Upon the selection of an Employee or Consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the
Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such
terms as it deems appropriate, require as a condition on the grant of
an Option to an Employee or Consultant that the Employee or Consultant
surrender for cancellation some or all of the unexercised Options,
Awards or other rights which have been previously granted to him under
this Plan or otherwise. An Option, the grant of which is conditioned
upon such surrender, may have an Option price lower (or higher) than
the exercise price of such surrendered Option, Award or other right,
may cover the same (or a lesser or greater) number of shares as such
surrendered Option, Award or other right, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares,
price, exercise period or any other term or condition of such
surrendered Option, Award or other right.
(c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code.
(d) During the term of the Plan, the Board shall from time to time, in its
sole direction, and subject to applicable limitations of this Plan:
(i) Select from among the Non-Employee Directors such of them as in
its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of shares to
be subject to such Options granted to the selected Non-Employee
Directors; and
(iii) Determine the terms and conditions of such Options.
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ARTICLE IV.
TERMS OF OPTIONS
SECTION 4.1. OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee (or the Board, in
the case of Options granted to Non-Employee Directors) shall determine,
consistent with this Plan. As deemed necessary or advisable, Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
SECTION 4.2. OPTION PRICE
The price per share of the shares subject to each Option shall be set by
the Committee or with respect to Non-Employee Directors, by the Board; provided,
however, (i) in the case of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted; (ii) in the case of Incentive Stock Options, such
price shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code); and (iii) in
the case of Incentive Stock Options granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code) such price
shall not be less than 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted (or the date the Option is modified, extended
or renewed for purposes of Section 424(h) of the Code).
SECTION 4.3. OPTION TERM
The term of an Option shall be set by the Committee or by the Board in the
case of Non-Employee Directors in their respective discretion; provided,
however, that, in the case of Incentive Stock Options, the term shall not be
more than ten (10) years from the date the Incentive Stock Option is granted, or
five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of
the Optionee, or amend any other term or condition of such Option relating to
such a termination.
SECTION 4.4. OPTION VESTING
(a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee or by the
Board in the case of Non-Employee Directors, and the Committee or the
Board, as applicable, may determine that an Option may not be
exercised in whole or in part for a specified period after it is
granted. At any time after grant of an Option, the Committee or the
Board, as applicable, may, in their respective sole discretion,
accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy,
as applicable, shall thereafter become exercisable, except as may be
otherwise provided by the Committee or the Board, as applicable,
either in the
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Stock Option Agreement or by action of the Committee or the Board, as
applicable, following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the
Code) are exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other incentive stock option
plans of the Company and any parent or subsidiary corporation (within
the meaning of Section 422 of the Code of the Company) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to
the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account
in the order in which they were granted. For purposes of this Section
4.4(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.
SECTION 4.5. CONSIDERATION
In consideration of the granting of an Option, the Optionee shall agree, in
the written Stock Option Agreement, to render faithful and efficient service to
the Company or any Subsidiary. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a Consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.
ARTICLE V.
EXERCISE OF OPTIONS
SECTION 5.1. PARTIAL EXERCISE
An exercisable Option may be exercised in whole or in part. However, an
Option shall not be exercisable with respect to fractional shares and the
Committee (or the Board, in the case of Options granted to Non-Employee
Directors) may require that, by the terms of the Option, a partial exercise be
with respect to a minimum number of shares.
SECTION 5.2. MANNER OF EXERCISE
All or a portion of an exercisable Option shall be deemed exercised upon
delivery of all of the following to the Secretary of the Company or his office:
(a) A written notice complying with the applicable rules established
by the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee
or other person then entitled to exercise the Option or such
portion of the Option;
(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Non-Employee Directors),
in its sole discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act
of 1933, as amended, and any other federal or state securities
laws or regulations. The Committee or Board may, in its sole
discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to
exercise the Option; and
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(d) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is
exercised. However, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors), may in its discretion
(i) allow a delay in payment up to thirty (30) days from the date
the Option, or portion thereof, is exercised; (ii) allow payment,
in whole or in part, through the delivery of shares of Common
Stock owned by the Optionee, duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to
the aggregate exercise price of the Option or exercised portion
thereof; (iii) allow payment, in whole or in part, through the
surrender of shares of Common Stock then issuable upon exercise
of the Option having a Fair Market Value on the date of Option
exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; (iv) allow payment, in whole or in
part, through the delivery of property of any kind which
constitutes good and valuable consideration; (v) allow payment,
in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as
shall then preclude the imputation of interest under the Code)
and payable upon such terms as may be prescribed by the Committee
or the Board; (vi) allow payment, in whole or in part, through
the delivery of a notice that the Optionee has placed a market
sell order with a broker with respect to shares of Common Stock
then issuable upon exercise of the Option, and that the broker
has been directed to pay a sufficient portion of the net proceeds
of the sale to the Company in satisfaction of the Option exercise
price; or (vii) allow payment through any combination of the
consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the
Committee (or the Board, in the case of Options granted to
Non-Employee Directors) may also prescribe the form of such note
and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension of
credit is prohibited by law.
SECTION 5.3. CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in
its sole discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the
case of Options granted to Non-Employee Directors) shall, in its
sole discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Committee (or Board, in the case of Options
granted to Non-Employee Directors) may establish from time to time
for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
SECTION 5.4. RIGHTS AS STOCKHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
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SECTION 5.5. OWNERSHIP AND TRANSFER RESTRICTIONS
The Committee (or Board, in the case of Options granted to Non-Employee
Directors), in its sole discretion, may impose such restrictions on the
ownership and transferability of the shares purchasable upon the exercise of an
Option as it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement or Stockholder's Agreement or other written
agreement between the Company and the Optionee and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two years from the
date of grant (including the date the Option is modified, extended or renewed
for purposes of Section 424(h) of the Code) or (ii) one year after the transfer
of such shares to such Employee. The Committee may direct that the certificates
evidencing shares acquired by exercise of an Option refer to such requirement.
ARTICLE VI.
AWARD OF RESTRICTED STOCK
SECTION 6.1. ELIGIBILITY
Subject to the Award Limit, Restricted Stock may be awarded to any Employee
or any Consultant whom the Committee determines should receive such an award. In
addition, each Non-Employee Director shall be eligible to receive an award of
Restricted Stock if so determined by the Board.
SECTION 6.2. AWARD OF RESTRICTED STOCK
(a) The Committee or the Board in the case of Non-Employee Directors,
may from time to time, in their respective sole discretion:
(i) Select from among the Employees and Consultants or
Non-Employee Directors such of them as in its opinion should
be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent
with this Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock. In all cases, legal
consideration shall be required for each issuance of Restricted
Stock.
(c) Upon the selection of a Participant to be awarded Restricted
Stock, the Committee or the Board, as applicable, shall instruct
the Secretary of the Company to issue such Restricted Stock and
may impose such conditions on the issuance of such Restricted
Stock as it deems appropriate.
SECTION 6.3. RESTRICTED STOCK AGREEMENT
Restricted Stock shall be issued only pursuant to a written Restricted
Stock Agreement, which shall be executed by the selected Employee, Consultant or
Non-Employee Director and an authorized officer of the Company and which shall
contain such terms and conditions as the Committee or the Board, as applicable,
shall determine, consistent with this Plan.
SECTION 6.4. CONSIDERATION
As consideration for the issuance of Restricted Stock, in addition to
payment of any purchase price, the Restricted Stockholder shall agree, in the
written Restricted Stock Agreement, to render faithful and efficient service to
the Company or any Subsidiary. Nothing in this Plan or in any Restricted Stock
Agreement hereunder shall confer on any Restricted Stockholder any right to
continue in the employ of, as a Consultant for, or as a Non-Employee Director of
the Company or any Subsidiary or shall interfere with or restrict in any
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way the rights of the Company and any Subsidiary, which are hereby expressly
reserved, to discharge any Restricted Stockholder at any time for any reason
whatsoever, with or without good cause.
SECTION 6.5. RIGHTS AS STOCKHOLDERS
Subject to Section 6.6, upon delivery of the shares of Restricted Stock to
the escrow holder pursuant to Section 6.8, the Restricted Stockholder shall
have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 6.6.
SECTION 6.6. RESTRICTION
All shares of Restricted Stock issued under this Plan (including any shares
received by holders thereof with respect to shares of Restricted Stock as a
result of stock dividends, stock splits or any other form of recapitalization)
shall, in the terms of each individual Restricted Stock Agreement, be subject to
such restrictions, if any, as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however,
that, except with respect to shares of Restricted Stock granted pursuant to
Section 6.10, by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire; provided, however, that, except with
respect to shares of Restricted Stock granted pursuant to Section 6.10, by
action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Stock Agreement.
Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire.
SECTION 6.7. REPURCHASE OF RESTRICTED STOCK
The Committee or the Board, as applicable, shall provide in the terms of
each individual Restricted Stock Agreement that the Company shall have the right
to repurchase from the Restricted Stockholder the Restricted Stock then subject
to restrictions under the Restricted Stock Agreement immediately upon
Termination of Employment, Termination of Consultancy or Termination of
Directorship, where such termination is determined by the Committee to be a
discharge for good cause, as applicable between the Restricted Stockholder and
the Company, at a cash price per share equal to the price paid by the Restricted
Stockholder for such Restricted Stock; provided, however, that no such right of
repurchase shall exist in the event of a Change in Control of the Company or
because of the Restricted Stockholder's death or disability.
SECTION 6.8. ESCROW
The Secretary of the Company or such other escrow holder as the Committee
may appoint shall retain physical custody of each certificate representing
Restricted Stock until all of the restrictions that may have been imposed under
the Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
SECTION 6.9. LEGEND
In order to enforce the restrictions that may be imposed upon shares of
Restricted Stock hereunder, the Committee or the Board, as applicable, shall
cause a legend or legends to be placed on certificates representing all shares
of Restricted Stock that are still subject to any such restrictions under
Restricted Stock Agreements, which legend or legends shall make appropriate
reference to the conditions imposed thereby.
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SECTION 6.10. PROVISIONS APPLICABLE TO SECTION 162(M) PARTICIPANTS.
(a) Notwithstanding anything in the Plan to the contrary, the Committee
may grant Restricted Stock to a Section 162(m) Participant the
restrictions with respect to which lapse upon the attainment of
performance goals for the Company which are related to one or more of
the following business criteria: (i) pre-tax income, (ii) operating
income, (iii) cash flow, (iv) earnings per share, (v) return on
equity, (vi) return on invested capital or assets, (vii) cost
reductions or savings, (viii) funds from operations, (ix) appreciation
in the fair market value of Common Stock and (x) earnings before any
one or more of the following items: interest, taxes, depreciation or
amortization.
(b) To the extent deemed necessary or advisable to comply with the
performance-based compensation requirements of Section 162(m)(4)(C) of
the Code, with respect to Restricted Stock which may be granted to one
or more Section 162(m) Participants, no later than ninety (90) days
following the commencement of any fiscal year in question or any other
designated fiscal period or period of service (or such other time as
may be required or permitted by Section 162(m) of the Code), the
Committee shall, in writing, (i) designate one or more Section 162(m)
Participants, (ii) select the performance goal or goals applicable to
the fiscal year or other designated fiscal period or period of
service, (iii) establish the various targets and amounts of Restricted
Stock which may be earned for such fiscal year or other designated
fiscal period or period of service and (iv) specify the relationship
between performance goals and targets and the amounts of Restricted
Stock to be earned by each Section 162(m) Participant for such fiscal
year or other designated fiscal period or period of service. To the
extent deemed necessary or advisable to comply with the performance-
based compensation requirements of Section 162(m)(4)(C) of the Code,
following the completion of each fiscal year or other designated
fiscal period or period of service, and determining the amount earned
by a Section 162(m) Participant, the Committee shall certify in
writing whether the applicable performance targets have been achieved
for such fiscal year or other designated fiscal period or period of
service, and determining the amount earned by a Section 162(m)
Participant, the Committee shall have the right to reduce (but not to
increase) the amount payable at a given level of performance to take
into account additional factors that the Committee may deem relevant
to the assessment of individual or corporate performance for the
fiscal year or other designated fiscal period or period of service.
ARTICLE VII.
ADMINISTRATION
SECTION 7.1. COMPENSATION COMMITTEE; SUBCOMMITTEE
(a) The Compensation Committee shall consist of two or more Directors,
appointed by and holding office at the pleasure of the Board, none of
whom shall be an Employee. Appointment of Committee members shall be
effective upon acceptance of appointment. Committee members may resign
at any time by delivering written notice to the Board. Vacancies in
the Committee may be filled by the Board.
(b) A Subcommittee consisting of two or more Committee members, appointed
by and serving office at the pleasure of the Board, each of whom is
both a "non-employee director" as defined by Rule 16b-3 and an
"outside director" for purposes of Section 162(m) of the Code may be
appointed at any time during which (i) two or more Board members
qualify as both "non-employee directors" and "outside directors" and
(ii) any other member of the Committee does not qualify as both a
"non-employee director" and an "outside director."
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SECTION 7.2. DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration
of this Plan in accordance with its provisions. The Committee and the
Subcommittee shall have the power to interpret this Plan, the Stockholders'
Agreements and the agreements pursuant to which Awards are granted and to adopt
such rules for the administration, interpretation and application of this Plan
as are consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan (i) with
respect to Options granted to Non-Employee Directors and (ii) at any time when
there is no Subcommittee as described in Section 7.1(b) and not all of the
Committee members are "non-employee directors" as defined by Rule 16b-3, with
respect to any person who is subject to Section 16 of the Exchange Act at the
time such person is granted an Option. Any such grant or award under this Plan
need not be the same with respect to each Participant. Any such interpretations
and rules with respect to Incentive Stock Options shall be consistent with the
provisions of Section 422 of the Code. In its sole discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under this Plan except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code (as each may be applicable), or any regulations or
rules issued thereunder, are required to be determined in the sole discretion of
the Committee (or the Subcommittee, as applicable).
SECTION 7.3. MAJORITY RULE
The Committee and the Subcommittee shall each act by a majority of its
members in attendance at a meeting where quorum is present or by a memorandum or
other written instrument signed by all members of the Committee.
SECTION 7.4. COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee and the Subcommittee may, with
the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee, the Board or the
Subcommittee in good faith shall be final and binding upon all Participants, the
Company and all other interested persons. No members of the Committee or the
Board shall be personally liable for any action, determination or interpretation
made in good faith with respect to this Plan or any Award, and all members of
the Committee and the Board shall be fully protected by the Company in respect
of any such action, determination or interpretation.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 8.1. NOT TRANSFERABLE
Awards under this Plan may not be sold, pledged, assigned, or transferred
in any manner other than by will or the laws of descent and distribution or
pursuant to a QDRO, unless and until such rights or awards have been exercised,
or the shares underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Award or interest therein
shall be liable for the debts, contracts or engagements of the Participant or
his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
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During the lifetime of the Participant, only he may exercise an Award (or
any portion thereof) granted to him under the Plan, unless it has been disposed
of pursuant to a QDRO. After the death of the Participant, any exercisable
portion of an Award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Participant's will or under the then
applicable laws of descent and distribution.
SECTION 8.2. AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
Except as otherwise provided in this Section 8.2, this Plan may be wholly
or partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, without approval of
the Company's stockholders given within twelve months before or after the action
by the Board or the Committee, no action of the Board or the Committee may,
except as provided in Section 8.3, increase the limits imposed in Section 2.1 on
the maximum number of shares which may be issued under this Plan, and no action
of the Board or the Committee may be taken that would otherwise require
stockholder approval as a matter of applicable law, regulation or rule. The
Award Limit may be increased by the Board or the Committee at any time and from
time to time, and Awards may be granted with respect to a number of shares not
in excess of such increased Award Limit; provided, however, that no such
increase of the Award Limit shall be effective unless and until such increase is
approved by the Company's stockholders and if such approval is not obtained all
Awards granted with respect to a number of shares in excess of the Award Limit
in effect prior to such increase shall be canceled and shall become null and
void.
No amendment, suspension or termination of this Plan shall, without the
consent of the Participant alter or impair any rights or obligations under any
Awards theretofore granted, unless the Award itself otherwise expressly so
provides. No Award may be granted during any period of suspension or after
termination of this Plan, and in no event may any Incentive Stock Option be
granted under this Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted by the
Board; or
(b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 8.4.
SECTION 8.3. CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY, ACQUISITION OR
LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS
(a) Subject to Section 8.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Non-Employee Directors)
determines that any of the following events (other than those
constituting a Change in Control, which will be governed by Section
8.3(e)): a dividend or other distribution (whether in the form of
cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the
assets of the Company, or exchange of Common Stock or other securities
of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or
in the case of Options granted to Non-Employee Directors, the Board's
sole discretion), affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to an Award, then
the Committee (or the Board, in the case of Options granted to
Non-Employee Directors) shall, in such manner as it may deem
equitable, adjust any or all of:
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Awards may be
granted (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of
shares which may be issued and adjustments of the Award Limit);
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(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Awards; and
(iii) the grant or exercise price with respect to any Option.
(b) Subject to Section 8.3(d) and Section 8.3(e), in the event of any
transaction or event described in Section 8.3(a) or in the event of a
Change in Control or any unusual or nonrecurring transactions or
events affecting the Company, any affiliate of the Company, or the
financial statements of the Company or any affiliate, or of changes in
applicable laws, regulations, or accounting principles, the Committee
(or the Board, in the case of Options granted to Non-Employee
Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in
the case of Options granted to Non-Employee Directors) determines that
such action is appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option, other award under this
Plan, to facilitate such transactions or events or to give effect to
such changes in laws, regulations or principles:
(i) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either
by the terms of the agreement or by action taken prior to the
occurrence of such transaction or event and either
automatically or upon the request of the Participant, for
either the purchase of any such Award for an amount of cash
equal to the amount that could have been attained upon the
exercise of such Award had such Award been currently
exercisable or payable or fully vested or the replacement of
such Award with other rights or property selected by the
Committee (or the Board, in the case of Options granted to
Non-Employee Directors) in its sole discretion;
(ii) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either
by the terms of such Award or by action taken prior to the
occurrence of such transaction or event, that for a specified
period of time prior to such transaction or event, such Award
shall be exercisable as to all shares covered thereby,
notwithstanding anything to the contrary in (A) Section 4.4 or
(B) the provisions of such Award;
(iii) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may provide, either
by the terms of such Award or by action taken prior to the
occurrence of such transaction or event, that upon such event,
such Award be assumed by the successor or survivor corporation,
or a parent or subsidiary thereof, or shall be substituted for
by similar Awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and
prices; and
(iv) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may make adjustments
in the number and type of shares of Common Stock (or other
securities or property) subject to outstanding Awards and/or in
the terms and conditions of (including the grant or exercise
price), and the criteria included in, Awards which may be
granted in the future.
(v) In its sole discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide by the terms of a
Restricted Stock award or by action taken prior to the
occurrence of such event that, for a specified period of time
prior to such event, the restrictions imposed under a Restricted
Stock Agreement upon some or all shares of Restricted Stock may
be terminated.
(c) Subject to Section 8.3(d) and 8.8, the Committee (or the Board, in the
case of Options granted to Non-Employee Directors) may, in its
discretion, include such further provisions and limitations in
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<PAGE> 34
any Award agreement or certificate, as it may deem equitable and in
the best interests of the Company.
(d) To the extent deemed necessary or advisable by the Committee, with
respect to any Award granted to any Section 162(m) Participant that is
intended to qualify as performance-based compensation under Section
162(m)(4)(C), no adjustment or action described in this Section
8.3(a) -- (d) shall be authorized to the extent that such adjustment
or action would cause such Award to fail to so qualify under Section
162(m)(4)(C) or any successor provision thereto. The Committee
reserves the right to make an Award to the executives of the Company
that may not qualify under Section 162(m) as deductible compensation.
Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board, in the case of Options
granted to Non-Employee Directors) determines that the Option or other
award is not to comply with such exemptive conditions. The number of
shares of Common Stock subject to any Award shall always be rounded to
the next whole number.
(e) Notwithstanding any other provision of this Plan, in addition to
whatever actions are taken by the Committee or by the Board, as
applicable under Section 8.3(b) which are not inconsistent with the
following, in the event of a Change in Control:
(i) Except as otherwise specifically provided in a Stock Option
Agreement, each Option granted or awarded hereunder shall
automatically become exercisable as to all shares covered
thereby simultaneously with the consummation of such Change in
Control, notwithstanding anything to the contrary in Section
4.4, and
(ii) Except as otherwise specifically provided in a Restricted Stock
Agreement, the Restricted Stock shall become fully vested and
the restrictions included in any Restricted Stock granted or
awarded hereunder shall be deemed rescinded, terminated and all
of such Restricted Stock shall be immediately released without
restriction, except as to applicable payment therefor,
simultaneously with the consummation of such Change in Control
notwithstanding anything to the contrary in Article VI.
However, any Award granted to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the
Exchange Act) that are requirements for the application of such
exemptive Rule. To the extent permitted by applicable law, an Award
granted hereunder shall be deemed amended to the extent necessary to
conform to such applicable exemptive Rule.
SECTION 8.4. APPROVAL OF PLAN BY STOCKHOLDERS
This Plan will be submitted for the approval of the Company's stockholders
within twelve months after the date of the Board's initial adoption of this
Plan. Awards may be granted prior to such stockholder approval, provided that
such Awards shall not vest or be exercisable prior to the time when this Plan is
approved by the stockholders, and provided further that if such approval has not
been obtained at the end of said twelve-month period all Awards previously
granted under this Plan shall thereupon be canceled and become null and void.
SECTION 8.5. TAX WITHHOLDING
The Company shall be entitled to require payment in cash or deduction from
other compensation payable to each Participant of any sums required by federal,
state or local tax law to be withheld with respect to the issuance, vesting,
exercise or payment of any Award. The Committee (or the Board, in the case of
Options granted to Non-Employee Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Participant to elect to
have the Company withhold shares of Common Stock otherwise issuable under such
Award (or allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld.
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SECTION 8.6. LOANS
The Committee may, in its discretion, extend one or more loans to Employees
in connection with the exercise or receipt of an Award granted under this Plan.
The terms and conditions of any such loan shall be set by the Committee.
SECTION 8.7. FORFEITURE PROVISIONS
Pursuant to its general authority to determine the terms and conditions
applicable to awards under the Plan, the Committee (or the Board, in the case of
Options granted to Non-Employee Directors) shall have the right (to the extent
consistent with the applicable exemptive conditions of Rule 16b-3) to provide,
in the terms of Options or other awards made under the Plan, or to require the
recipient to agree by separate written instrument, that (i) any proceeds, gains
or other economic benefit actually or constructively received by the recipient
upon any receipt or exercise of the award, or upon the receipt or resale of any
Common Stock underlying such award, must be paid to the Company, and (ii) the
award shall terminate and any unexercised portion of such award (whether or not
vested) shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs at any time, prior to a
specified date, or within a specified time period following receipt or exercise
of the award, or (b) the recipient at any time, or during a specified time
period, engages in any activity in competition with the Company, or which is
inimical, contrary or harmful to the interests of the Company, as further
defined by the Committee (or the Board, as applicable).
SECTION 8.8. LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION
Notwithstanding any other provision of this Plan (other than Section
8.3(e)), to the extent necessary or deemed advisable by the Committee, this Plan
and any Award granted to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Awards granted hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule. Furthermore,
notwithstanding any other provision of this Plan (other than Section 8.3(e)), to
the extent deemed necessary or advisable by the Committee, any Option or
Restricted Stock which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
SECTION 8.9. EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS.
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in this
Plan shall be construed to limit the right of the Company (i) to establish any
other forms of incentives or compensation for Employees, Directors or
Consultants of the Company or any Subsidiary or (ii) to grant or assume Options
or other rights or awards otherwise than under this Plan in connection with any
proper corporate purpose including but not by way of limitation, the grant or
assumption of Options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
SECTION 8.10. COMPLIANCE WITH LAWS
This Plan, the granting and vesting of Awards under this Plan and the
issuance and delivery of shares of Common Stock and the payment of money under
this Plan or under Awards granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including but not
limited to state
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and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan, or
Awards granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
SECTION 8.11 TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Plan.
SECTION 8.12. GOVERNING LAW
This Plan and any agreements hereunder shall be administered, interpreted
and enforced under the internal laws of the State of Michigan without regard to
conflicts of laws thereof.
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CARACO PHARMACEUTICAL LABORATORIES, LTD.
The undersigned shareholder hereby appoints Jennifer Evans and Robert
Kurkiewicz, and each of them, with full power of substitution, as true and
lawful attorneys and proxies of the undersigned to represent and vote the shares
of Common Stock owned by the undersigned in Caraco Pharmaceutical Laboratories,
Ltd. at the Annual Meeting of Shareholders to be held on June 2, 1999 at 10:00
a.m., local time, at the Hotel St. Regis, 3071 W. Grand Blvd., Detroit, MI
48202, and at any adjournment thereof, with like effect and as if the
undersigned was personally present and voting, upon all business that may
properly come before the meeting, including the business identified (and in the
manner indicated) on this proxy and described in the Notice of Meeting and Proxy
Statement furnished herewith (the receipt of which is hereby acknowledged).
The undersigned hereby revokes any proxy or proxies heretofore given by
the undersigned to any person or persons with respect to such Common Shares and
ratifies any and all actions taken by the above-named proxies hereunder.
Set forth on the reverse side are the number of Common Shares held of
record by the undersigned as of April 19, 1999. You are asked to vote on the
business identified on the reverse.
(TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE> 38
Please date, sign and mail your
proxy card back as soon as possible
Annual Meeting of Stockholders
CARACO PHARMACEUTICAL LABORATORIES, LTD.
June 2, 1999
<TABLE>
<CAPTION>
<S><C>
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
- ------------------------------------------------------------------------------------------------------------------------------------
/X/ Indicate your
vote by marking
an (X) in the
appropriate
boxes below.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR
EACH OF THE FOLLOWING PROPOSALS.
FOR all nominees listed WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below) nominees FOR WITHHOLD ABSTAIN
1. ELECTION OF NOMINEES: DAVID W. ADAMANY 2. APPROVE AND ADOPT THE 1999 / / / / / /
DIRECTORS / / / / DAVID A. HAGELSTEIN EQUITY PARTICIPATION PLAN
AND RESERVE FOR ISSUANCE
3 MILLION SHARES OF CARACO
(INSTRUCTION: To withhold COMMON STOCK.
authority to vote for any
individual, write the
nominee's name in the space THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED.
- ----------------------------------- provided below.) IF YOU DO IF NO SPECIFICATION IS MADE, THE SHARES SHALL BE VOTED FOR
NOT WITHHOLD AUTHORITY TO VOTE EACH OF THE PROPOSALS, AND FOR OR AGAINST ANY OTHER MATTERS
FOR THE ELECTION OF ANY THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
NOMINEE, YOUR PROXIES WILL THEREOF.
VOTE FOR ALL NOMINEES ABOVE.
PLEASE RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
_______________________________________DATE________________, 1999 _______________________________________DATE________________, 1999
SIGNATURE OF SHAREHOLDER SIGNATURE(S) OF JOINT OWNER(S)
Please sign EXACTLY as your name(s) is imprinted on this proxy. If your shares are held in a joint account, each joint owner should
sign. If you are signing for a corporation or partnership or as agent, attorney, executor, administrator, trustee, guardian or
other fiduciary, indicate the capacity in which you are signing.
</TABLE>
