UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[ ] Soliciting Material Pursuant to ss.240.14a-12
INTERPHARM HOLDINGS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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INTERPHARM HOLDINGS, INC.
69 MALL DRIVE
COMMACK, NEW YORK 11725
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 2004
To the Stockholders of Interpharm Holdings, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Interpharm Holdings, Inc., a Delaware corporation, to be held at the American
Stock Exchange, 86 Trinity Place, New York, New York 10006, on Thursday,
November 18, 2004, at 10:00 a.m. local time, for the following purposes:
1. To elect six members to the Board of Directors of the Company to serve
until their respective successors are elected and qualified;
2. To ratify and approve Marcum & Kliegman, LLP, as our independent public
accountants, to audit our financial statements for the fiscal year ending
June 30, 2005;
3. To ratify and approve stock option grants; and
4. To transact such other matters as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on October 14, 2004
(the "Record Date") are entitled to notice of, and to vote at the meeting.
A proxy statement and proxy are enclosed herewith. If you are unable to
attend the meeting in person you are urged to sign, date and return the enclosed
proxy promptly in the enclosed addressed envelope, which requires no postage if
mailed within the United States. If you attend the meeting in person, you may
withdraw your proxy and vote your shares. Also enclosed herewith is our 2004
Annual Report.
By Order of the Board
of Directors
Maganlal K. Sutaria, Chairman
Commack, New York
October 20, 2004
PROXY STATEMENT
INTERPHARM HOLDINGS, INC.
69 MALL DRIVE
COMMACK, NEW YORK 11725
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 18, 2004
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The Board of Directors of Interpharm Holdings, Inc., a Delaware
corporation (the "Company," "we" or "us"), is soliciting the enclosed proxy for
the annual meeting of stockholders to be held at 10:00 a.m. local time at the
American Stock Exchange, 86 Trinity Place, New York, New York 10006, or any
continuation or adjournment thereof. At the meeting, the stockholders will be
asked to vote on proposals, which are listed in the notice of annual meeting of
stockholders and described in more detail below.
This proxy statement and the enclosed proxy card are being mailed on or
about October 20, 2004, to all stockholders entitled to vote at the meeting. Our
2004 Annual Report is also being mailed to all stockholders entitled to vote at
the annual meeting. The Annual Report does not constitute a part of the proxy
solicitation material, except to the extent incorporated herein by reference.
At the meeting, our stockholders will be asked:
1. To elect six members to the Board of Directors to serve until their
respective successors are elected and qualified;
2. To ratify and approve Marcum & Kliegman, LLP, as our independent public
accountants, to audit our financial statements for the fiscal year ending
June 30, 2005;
3. To ratify and approve stock option grants; and
4. To approve such other matters as may properly come before the meeting
or any adjournment thereof.
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on October 14, 2004
(the "Record Date") are entitled to receive notice of, and vote at our annual
meeting. As of the Record Date, the classes of stock entitled to vote at the
meeting, and the number of shares of each class outstanding and entitled to vote
consisted of:
o 24,967,166 shares of $.01 par value per share common stock;
o 7,631 shares of series A convertible preferred stock, par value $.01
per share
o 1,458 shares of series B convertible preferred stock, par value $.01
per share
o 281,005 shares of series C convertible preferred stock, par value
$.01 per share
o 1,757,480 shares of Series K convertible preferred stock, par value
$.01 per share
Each share of our common and preferred stock is entitled to one vote on
all matters. As of the Record Date, we had 27,014,740 shares of our common and
voting preferred stock outstanding with each share entitled to one vote. The
Series A-1 preferred stock (of which there were 4,855,386 shares outstanding as
of the Record Date) is not entitled to vote. We do not have any other voting
securities.
EXPENSES OF SOLICITING PROXIES
We will pay the expenses of soliciting proxies to be voted at the annual
meeting. Following the original mailing of the proxies and other proxy
materials, we or our agents may supplement the solicitation of proxies by mail,
telephone, internet, telegraph or in person. Following the original mailing of
the proxies and other proxy materials, we will request that brokers, custodians,
nominees and other record holders of our common stock forward copies of the
proxy and other annual meeting materials to persons for whom they hold shares of
common stock and request authority for the exercise of proxies. In these cases,
we will reimburse such record holders for their reasonable expenses if requested
to do so.
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REVOCABILITY OF PROXIES
If you attend the meeting, you may vote in person, regardless of whether
you have submitted a proxy. Any person giving a proxy in the form accompanying
this proxy statement may revoke it at any time before it is voted. A proxy may
be revoked by (i) written notice of revocation or submission of a new proxy sent
to our Corporate Secretary at 69 Mall Drive, Commack, New York 11725, or (ii)
attending the meeting and voting in person.
VOTING AND VOTES REQUIRED FOR APPROVAL
Every stockholder of record is entitled to one vote, for each share held,
on each proposal or item that comes before the meeting. There are no cumulative
voting rights. By submitting your proxy, you authorize Bhupatlal K. Sutaria, or
any person designated as his substitute, to represent you and vote your shares
at the meeting in accordance with your instructions. If the meeting is
adjourned, Mr. Sutaria or his substitute will be authorized to vote your shares
at any adjournment or postponement of the meeting.
To vote by mail, please sign, date and complete the enclosed proxy and
return it in the enclosed self-addressed envelope, to North American Transfer
Agent, PO Box 311, Freeport, New York 11520-0311. If you hold your shares
through a bank, broker or other nominee, it will give you separate instructions
for voting your shares.
In addition to solicitations by mail, we may solicit proxies in person, by
telephone, facsimile or e-mail. In the event that additional solicitation
material is used, it will be filed with the SEC prior to its use.
Proposal 1: Election of Directors. Directors are elected by a plurality
vote and the six nominees who receive the most votes will be elected. In the
election of Directors, votes may be cast in favor of or withheld with respect to
each nominee.
Proposal 2: Ratification of Selection of Auditors. The affirmative vote of
stockholders owning at least a majority of our shares of common and preferred
stock entitled to vote, and voting together as a single class, present in person
or represented by proxy at our annual meeting at which a quorum is present is
necessary for ratification of the selection of our auditors.
Proposal 3: Ratification and Approval of Stock Option Grants. The
affirmative vote of stockholders owning at least a majority of our shares of
common and preferred stock entitled to vote, and voting together as a single
class, present in person or represented by proxy at our annual meeting at which
a quorum is present is necessary to ratify and approve the stock option grants
to our management and employees described below.
TABULATION OF VOTES
The votes received by proxy will be tabulated and certified by our
transfer agent, North American Transfer. All other votes will be tabulated by an
inspector of election at the meeting.
VOTING BY STREET NAME HOLDERS
If you are the beneficial owner of shares held in "street name" by a
broker, the broker, as the record holder of the shares, is required to vote
those shares in accordance with your instructions. If you do not give
instructions to the broker, the broker will nevertheless be entitled to vote the
shares with respect to "discretionary" items but will not be permitted to vote
the shares with respect to "non-discretionary" items (in which case, the shares
will be treated as "broker non-votes").
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the annual meeting
is one-third of the issued and outstanding shares of common and Series A, B, C
and K preferred stock, collectively, at the annual meeting, in person or by
proxy. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares represented and voting the votes cast at the
annual meeting with respect to such matter.
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While there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, we believe that abstentions should be
counted for purposes of determining both: (i) the presence or absence of a
quorum for the transaction of business; and (ii) the total number of votes cast
with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, we intend to treat abstentions
in this manner. Accordingly, abstentions will have the same effect as a vote
against the proposal.
Under current Delaware case law, while broker non-votes (i.e. the votes of
shares held of record by brokers as to which the underlying beneficial owners
have given no voting instructions) should be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of votes
cast with respect to the particular proposal on which the broker has expressly
not voted. We intend to treat broker non-votes in this manner. Thus, a broker
non-vote will make a quorum more readily obtainable, but the broker non-vote
will not otherwise affect the outcome of the voting on a proposal.
INCORPORATION BY REFERENCE
We are mailing a copy of our 2004 Annual Report with this Proxy Statement.
The 2004 Annual Report is hereby incorporated by reference into this Proxy
Statement.
PROPOSALS TO STOCKHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board of Directors presently consists of five members. A Board of
Directors consisting of six directors is to be elected at the Annual Meeting.
James Charles and Surinder Rametra resigned from their directorships on October
18, 2004. The Board of Directors has determined to nominate the existing five
directors as well as Kennith Johnson to replace one of the two directors who
recently resigned. Unless otherwise instructed, the proxy holder will vote the
proxies received by him for the nominees named below. In the event that any
nominee is unable or declines to serve as a director at the time of the annual
meeting, the proxies will be voted for any nominee who shall be designated by
the current Board of Directors to fill the vacancy. The term of office of each
person elected as a director will continue until the next annual meeting of
stockholders or until a successor has been duly elected and qualified or until
his or her earlier resignation, removal from office, death or incapacity.
Article III of our By-laws gives power to our Board of Directors to change
the number of directors of the Company by resolution and to fill any vacancies
created by an increase in the number of directors by a vote of the directors
without the necessity of a vote by stockholders on such matter. Certain members
of the Board have expressed a desire to enlarge our Board of Directors and elect
candidates who have significant and relevant business experience. Accordingly,
the Board of Directors may do so from time to time between annual meetings of
stockholders.
The following table sets forth the names and ages of all current
directors and all persons nominated or chosen to become directors along with
their current positions, offices and term:
Name of Nominee Age Position with Interpharm Director Since
Dr. Maganlal K. Sutaria 68 CEO and Chairman May 2003
David Reback (1)(2)(3)(4) 61 Director November 1997
Stewart Benjamin (1)(4) 39 Director May 2001
Cameron Reid 50 Director May 2004
Dr. Mark Goodman (1)(2)(4) 62 Director March 2004
Kennith Johnson 51 None Nominee
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Sole member of stock option committee
(4) Member of the nominating committee
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The Board of Directors has determined that David Reback, Stewart Benjamin
and Dr. Mark Goodman are independent (as independence is defined in Section 121A
of the listing standards of the American Stock Exchange). The Board has also
determined that Kennith Johnson will be independent as so defined.
The following information with respect to the principal occupation or
employment of the nominees, the name and principal business of the corporation
or other organization in which such occupation or employment is carried on and
other affiliations and business experience during the past five years has been
furnished to us by the respective nominees:
DR. MAGANLAL K. SUTARIA is a cardiovascular surgeon who received his
medical degree from the Medical College, Ahmedabad, Gujarat University in 1961
and since 1991 served as the Chairman of Interpharm, Inc. Dr. Sutaria has been a
Director and Chairman of our Board of Directors since May 29, 2003.
DAVID C. REBACK has served as a director since in November 1997. Since
1969, Mr. Reback has been a partner with Reback & Potash, LLP, a law firm
specializing in litigation, appellate matters and real estate. Mr. Reback
received a B.A. from Syracuse University, and in 1965 he received a Juris
Doctor's degree from Syracuse University College of Law.
STEWART BENJAMIN has served as a Director since May 2001. Mr. Benjamin is
a certified public accountant in the State of New York. From January 1996 to the
present, Mr. Benjamin has been self-employed as a sole practitioner under the
name of Stewart H. Benjamin, CPA, P.C. From 1985 through December 1995, Mr.
Benjamin was employed as a staff accountant in both private industry and local
public accounting firms. Mr. Benjamin received a Bachelor of Business
Administration degree from Pace University in 1985.
DR. MARK GOODMAN has been a cardiologist for more than 30 years and is
currently in private practice and is affiliated with Winthrop University
Hospital in Mineola, New York and North Shore University Hospital in Manhasset,
New York. Dr. Goodman has participated in a number of drug trials as a primary
investigator for a number of drug companies, including, Pfizer, Ciba
Pharmaceuticals and Kos Pharmaceuticals. Dr. Goodman has also served on advisory
panels to Medtronic Pacemaker Corporation and Bristol-Myers Squibb Company. Dr.
Goodman is a graduate of Brooklyn College and has served as a Director since
March 25, 2004.
CAMERON REID has served as a Director since May 6, 2004. From 1992 through
March 2004, Mr. Reid was the President of Dr. Reddy's Laboratories, Inc. Prior
to joining Dr. Reddy's, Mr. Reid was an Executive Vice President of, and headed
Roussel Corp., a division of Roussel UCLAF, a pharmaceutical company based in
Montvale, New Jersey. Mr. Reid holds a Bachelor of Science degree in chemistry
and geology from the University of Calgary. He is also a graduate of the
executive management program at INSEAD in France.
KENNITH JOHNSON is a nominee for election to our Board of Directors. We
intend to appoint Mr. Johnson to be the Chairman of our Audit Committee if he is
elected. Since January 2004 he has been a director and Chairman of the Audit
Committee of Tengtu International Corp., a public company with headquarters in
Toronto, Canada which, through a subsidiary, focuses on e-education in China.
Since November 2001, Mr. Johnson has been a financial and strategy consultant
with Johnson & Scanlon Associates. From January 2001 to November 2001, Mr.
Johnson was Senior Vice President and Chief Financial Officer of Movado Group,
Inc., a manufacturer and distributor of Swiss watches, fine jewelry and
tableware products. Prior thereto he was Vice President, Chief Financial Officer
and Chief Administrative Officer of Precise International/Weger N.A., a
privately held manufacturer, distributor and importer of Swiss made sports
watches, fine jewelry and other products.
Directors are elected by a plurality vote and the six nominees who receive
the most votes of our Series A, B,C and K preferred stock and common stock,
voting together as a class, will be elected. In the election of directors, votes
may be cast in favor of or withheld with respect to each nominee.
FAMILY RELATIONSHIPS
The following are the family relationships among our nominees for director
and officers: Surinder Rametra is the father of Munish K. Rametra. Munish K.
Rametra, our Executive Vice President, General Counsel and Secretary, is married
to the daughter of Maganlal K. Sutaria. Raj Sutaria, an officer of Interpharm,
Inc., is the son of Maganlal K. Sutaria and the nephew of Bhupatlal K. Sutaria,
our President. Maganlal K. Sutaria and Bhupatlal K. Sutaria are brothers.
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In order to approve this proposal, the affirmative vote of a majority of
the votes cast at the meeting, in person or by proxy, must be received in favor
of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION
AS A DIRECTOR OF EACH OF THE NOMINEES SET FORTH ABOVE. PROXIES SOLICITED HEREBY
WILL BE VOTED "FOR" EACH DIRECTOR NAMED ABOVE UNLESS A VOTE AGAINST A NOMINEE OR
AN ABSTENTION IS SPECIFICALLY INDICATED.
MANAGEMENT
The following table sets forth the names and ages of all current
Interpharm officers along with their current positions. Officers are appointed
to serve until the meeting of the board of directors following the next annual
meeting of stockholders and until their successors have been duly elected and
qualified.
Name Age Position
---- --- --------
Dr. Maganlal K. Sutaria 68 Chief Executive Officer
Bhupatlal K. Sutaria 58 President
Surinder Rametra 64 Director of Business Development
George Aronson 55 Chief Financial Officer
Munish K. Rametra 34 Executive Vice President, General
Counsel, Secretary
BHUPATLAL K. SUTARIA. Mr. Sutaria has served as the President of
Interpharm Inc. since 1990. Prior to joining Interpharm, Inc., Mr. Sutaria was
an entrepreneur involved in several of his own businesses, including a
motorcycle dealership and a franchised restaurant. Mr. Sutaria received a
Bachelor's degree in Chemistry from Saurashpra University in India in 1972 and a
Masters of Business Administration degree from the University of Palm Beach in
1974. Mr. Sutaria is the brother of Dr. Maganlal K. Sutaria.
SURINDER RAMETRA was appointed the Chief Executive Officer and Chairman of
the Board of Directors of ATEC Group, Inc. in June 1994 and served in those
roles until 2002. He resigned as a director of the Company in October 2004.
Prior to June 1994, Mr. Rametra was president of one of our former subsidiaries.
Mr. Rametra received a Bachelor's degree in Mechanical Engineering from the
Punjab Engineering College, India and a Master's degree in Industrial
Engineering from the Indian Institute of Technology in 1965 and 1969,
respectively. In 1976, Mr. Rametra received a Masters of Business Administration
Degree in Finance from New York University. Mr. Rametra also serves as a
principal, director, officer and trustee of several privately-held entities and
a religious organization and is the owner of 25% of a hospital in India.
GEORGE ARONSON became our Chief Financial Officer in January 2004. Prior
to joining Interpharm, from 1995 through 2003, Mr. Aronson served as the Chief
Financial Officer of Direct Insite Corporation, an application service provider
(ASP) for large enterprise customers. Prior to 1995, he served as Chief
Financial Officer of Hayim & Co., an importer/distribution organization from
1988 through 1994. Mr. Aronson holds a Bachelor of Science degree from Long
Island University and is a Certified Public Accountant in the State of New York,
is a member of the American Institute of Certified Public Accountants and the
Financial Executives Institute.
MUNISH K. RAMETRA has been our general counsel and Secretary since May 29,
2003. Prior to joining us, from 1999 to 2003, Mr. Rametra acted as a financial
and legal consultant to several private and public companies. Mr. Rametra was an
associate for the law firm of Sullivan and Cromwell from 1995 to 1999. Mr.
Rametra attended the Stern School of Business at New York University and New
York University School of Law. Mr. Rametra is the son of Surinder Rametra and
the son-in-law of Maganlal K. Sutaria.
For information concerning Dr. Maganlal Sutaria see "ELECTION OF
DIRECTORS."
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Our full Board of Directors held a total of two meetings during the fiscal
year ended June 30, 2004. In addition, the Board of Directors acted two times by
unanimous written consent during the same period and two of the current three
independent directors met one time during the fiscal year without the presence
of non-independent directors and management. During the fiscal year ended June
30, 2004, each of our directors attended at least 75% of the aggregate number of
all meetings of the Board of Directors and of the committees, if any, on which
such director served. The Board of Directors has standing Audit, Stock Option,
Nominating and Compensation Committees.
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Audit Committee and Audit Committee Report
The Board of Directors created the audit committee in 1994. The audit
committee is responsible for reviewing reports of financial results, audits,
internal controls, and adherence to its Business Conduct Guidelines in
compliance with federal procurement laws and regulations. The committee
recommends to the Board of Directors the selection of Interpharm's outside
auditors and reviews their procedures for ensuring their independence with
respect to the services performed for Interpharm.
The audit committee is comprised of three directors: Stewart Benjamin,
David Reback and Dr. Mark Goodman. In the opinion of the Board of Directors,
Messrs. Benjamin, Reback and Goodman are independent of management and free of
any relationship that would interfere with their exercise of independent
judgment as members of this committee and they are independent as defined in
Section 121(A) of the AMEX listing standards. The Board of Directors has adopted
a written charter for the audit committee. A copy of the Audit Committee Charter
is attached to this proxy statement as Appendix A. The Audit Committee met four
times and acted by unanimous written consent two times during the fiscal year
ended June 30, 2004.
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Committee is comprised of three Directors
and operates under a written charter adopted by the Board of Directors. All of
the audit committee members are independent within the meaning of Rule 121(A) of
the AMEX listing standards, and are "independent," as that term is defined in
Section 10A of the Securities Act of 1934, as amended. Management has the
primary responsibility for the financial statements and the reporting process,
including the Company's systems of internal control. In fulfilling its
responsibilities, the Committee reviewed the audited financial statements in the
Annual Report with management, including discussing with management the quality
and acceptability of the Company's financial reporting and controls.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting standards, their judgments as to
the quality and acceptability of the Company's financial reporting and such
other matters as are required to be discussed with the Committee under generally
accepted auditing standards, including the matters required to be discussed by
SAS 61 (Communication with Audit Committees). In addition, the Committee has
discussed with the independent auditors the auditors' independence from
management and the Company, including the matters in the auditors' written
disclosures required by Independent Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). Furthermore, the Audit Committee has
considered whether the provision of non-audit services by the independent
auditors for the fiscal year ended June 30, 2004 is compatible with maintaining
their independence.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements for the fiscal year ended June 30, 2004 be included in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2004, for filing
with the SEC.
Management is responsible for the Company's financial reporting process
including its systems of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. The Company's independent auditors are responsible for
auditing those financial statements. Our responsibility is to monitor and review
these processes. It is not the Committee's duty or responsibility to conduct
auditing or accounting reviews or procedures. The Committee has relied, without
independent verification, on management's representation that the financial
statements have been prepared with integrity and objectivity and in conformity
with accounting principles generally accepted in the United States of America
and on the independent auditors' report on the Company's financial statements.
The Committee's oversight does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Committee's considerations and
discussions with management and the independent auditors do not assure that the
Company's financial statements are presented in accordance with generally
accepted accounting principles, that the audit of the Company's financial
statements has been carried out in accordance with generally accepted auditing
standards or that the Company's independent accountants are in fact
"independent."
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The Audit Committee is pleased to submit this report to the stockholders
with regard to the above matters.
/s/ Stewart Benjamin
/s/ David Reback
/s/ Dr. Mark Goodman.
The Company believes that Stewart Benjamin qualifies as a "financial
expert" as defined in Rule 401(k) of Regulation S-K.
Stock Option Committee
The Board of Directors created the Stock Option Committee in July 1994.
The Stock Option Committee currently has only one member, David Reback. During
the fiscal year ended June 30, 2004, the Stock Option Committee did not meet.
The stock option committee is responsible for setting forth, and recommending
stock option grants under our stock option plans as the stock option committee
deems is desirable and necessary, while mindful of, and guided by industry
standards. In the opinion of the Board of Directors, Mr. Reback is independent
of management and free of any relationship which would interfere with his
exercise of independent judgment as a member of the Stock Option Committee.
Compensation Committee
In August 1994, the Board of Directors established a Compensation
Committee, which is responsible for decisions regarding salaries, stock option
grants and other matters regarding executive officers and key employees. David
C. Reback and Dr. Mark Goodman currently serve on the Compensation Committee.
During the fiscal year ended June 30, 2004, the compensation committee did not
meet, but acted one time by unanimous written consent.
Nominating Committee
In March 2004 the Board of Directors established a Nominating Committee,
which is responsible for determination of the appropriate size, functioning and
needs of the Board, including, recruitment and retention of high quality Board
members, committee composition and structure, Board assessment of director
performance and related party and conflicts oversight. Stewart Benjamin, David
C. Reback and Dr. Mark Goodman currently serve on the Nominating Committee. All
of the Nominating Committee members are independent within the meaning of Rule
121(A) of the AMEX listing standards, and are "independent," as that term is
defined in Section 10A of the Securities Act of 1934, as amended. During the
fiscal year ended June 30, 2004 the Nominating Committee did not meet. Between
June 30, 2004 and the mailing of this proxy statement, the Nominating Committee
met on two occasions.
The Nominating Committee considers nominees recommended by any stockholder
entitled to vote in the election of directors. Any stockholder wishing to
nominate an individual for election to the Board must comply with the advance
notice procedures described in the "Stockholders' Proposals" section at the end
of this proxy statement. The nomination must contain the following information
about the nominee: name, age, business and residence addresses, principal
occupation or employment, the number of shares of common stock held by the
nominee, the information that would be required under SEC rules in a proxy
statement soliciting proxies for the election of such nominee as a director, and
a signed consent of the nominee to serve as a director of the Company, if
elected. The Nominating Committee has not specified any minimum qualifications
for serving on the Board. However, in its assessment of potential candidates,
the Nominating Committee will review the candidate's character, business
experience and understanding of the Company's business environment, and ability
to devote the time and effort necessary to fulfill his or her responsibilities,
all in the context of the perceived needs of the Board at that time.
The sole nominee for Director that is not standing for re-election,
Kennith Johnson, was recommended by our management and approved as a nominee by
the Nominating Committee and our full Board of Directors.
A copy of our Nominating Committee Charter is available on our website at
www.interpharminc.com.
BOARD OF DIRECTORS COMPENSATION
Compensation of Directors
All directors are entitled to reimbursement of reasonable travel and
lodging expenses related to attending meetings of the Board of Directors and any
committee on which they serve. On January 9, 2001, our stockholders approved the
receipt by our non-employee directors of up to $5,000 for attendance at each
quarterly meeting of the Board of Directors, plus up to $1,000 for attendance at
each committee meeting. Non-employee directors are also eligible to participate
in and receive stock options under our 2000 Plan. Directors who are employees
receive no fees for attending meetings of the Board of Directors or any
committee on which they serve.
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During the fiscal year ended June 30, 2004 no director received any fees
for attending meetings.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of Interpharm
Holdings, Inc. (the "Company") is charged with developing and administering a
compensation policy for senior management that contains appropriate performance
incentives and equity-linked components, and reviewing annually the performance
of the executive officers of the Company.
The Compensation Committee also administers the stock option and stock
incentive plans and approves grants of stock options and other incentives under
those plans.
Compensation programs for executive officers are designed to attract,
retain and motivate employees who will contribute to the achievement of
corporate goals and objectives. Elements of executive compensation include
salaries, bonuses and awards of stock options, with the last two being variable.
The Committee's current policy is to try to limit cash compensation and to
replace it with option based compensation in order to make more cash available
for Company operations and further incentivize management.
In making its decisions or recommendations, the Committee takes into
account factors it deems relevant to the specific compensation component being
considered, including: compensation paid by other business organizations of
comparable size in the same industry and related industries; profitability; the
attainment of annual individual and business objectives; an assessment of
individual contributions relative to others; and historic compensation awards.
The Committee considered the factors described above in determining Dr.
Sutaria's total compensation under his agreement entered into on May 30, 2003.
Specifically, the Committee and the Board recognized that Dr. Sutaria's
contributions in the past growth of Interpharm, Inc. and his continued
importance going forward. While Dr. Sutaria's cash compensation is the highest
of any employee of the Company, at $150,000, it is significantly less than that
earned by CEO's of comparable companies. In consideration of this, the Committee
awarded Dr. Sutaria 1,200,000 options to purchase common stock which it believes
to be fair compensation and adequate incentive to meet the Company's long-term
goals.
THE COMPENSATION COMMITTEE
/s/ David Reback
David Reback
/s/ Dr. Mark Goodman
Dr. Mark Goodman
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
In August 1994, the Board of Directors established a Compensation
Committee, which is responsible for decisions regarding salaries, stock option
grants and other matters regarding executive officers and key employees. During
the fiscal year ended June 30, 2004, Stewart Benjamin, David C. Reback, Praveen
Bhutani, Dr. Mark Goodman and James J. Charles were members of the Compensation
Committee. The current members of the Compensation Committee are Dr. Mark
Goodman and David Reback. In the opinion of the Board of Directors, each of such
persons is independent of management and free of any relationship which would
interfere with his exercise of independent judgment as a member of our
Compensation Committee.
PERFORMANCE GRAPH
Prior to May 30, 2003, we were in the computer/systems integration
business as Atec Group, Inc. On May 30, 2003, that business was sold,
Interpharm, Inc. was acquired and we changed our name to Interpharm Holdings,
Inc. SEC disclosure rules require that registrants provide a line graph
comparing the yearly percentage change in the registrant's cumulative total
stockholder return on a class of common stock registered under Section 12 of the
Exchange Act with the cumulative total return of a broad equity market index. We
believe that historical stock prices prior to May 30, 2003 are not
representative of our current business and a comparison of our stock price
between May 30, 2003 and June 30, 2003 to an index would not be meaningful and
could be misleading. Accordingly, we have omitted this information prior to May
30, 2003.
9
The following chart compares for the period from May 30, 2003 to June 30,
2004, the cumulative total stockholder return on the Common Stock with (i) the
S&P SmallCap 600 Index and (ii) the RDG Microcap Pharmaceutical Index (the "RDG
Industry Index"), and assumes an investment of $100 on May 30, 2003 in each of
the Common Stock, the stocks comprising the S&P SmallCap 600 Index and the
stocks comprising the RDG Industry Index. The total return for each of the
Company's Common Stock, the S&P SmallCap 600 Index and the RDG Industry Index
assumes the reinvestment of all dividends (although no dividends were declared
on the Company's Common Stock during such period). Each index is adjusted for
additions and deletions of securities from the index.
COMPARE CUMULATIVE TOTAL RETURN
AMONG INTERPHARM HOLDINGS, INC.,
S&P SMALLCAP 600 INDEX AND RDG GROUP INDEX
5/30/03 6/30/03 9/30/03 12/31/03 3/31/04 6/30/04
INTERPHARM HOLDINGS, INC. 100.00 325.56 451.11 521.11 513.33 441.11
S&P SMALLCAP 600 INDEX 100.00 102.60 109.86 126.10 133.94 138.77
RDG INDUSTRY INDEX 100.00 118.17 128.52 119.16 121.32 101.72
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain compensation information for the
years ended June 30, 2004, 2003 and 2002 concerning our Chief Executive Officer
and other officers who earned in excess of $100,000 during the year ended June
30, 2004.
10
SUMMARY COMPENSATION TABLE
FOR THE YEARS ENDED JUNE 30, 2004, 2003 AND 2002
ANNUAL COMPENSATION AWARDS PAYOUTS
ANNUAL COMPENSATION LONG TERM COMPENSATION
Awards Payouts
Name Other Restricted Securities
And Annual Stock Underlying All
Principal Year Compen- Awards Options/ LTIP Other
Position Position Ended Salary($) Bonus($) sation($) $ SARS Payouts Compensation
-------- --------- ----- --------- -------- --------- - ---- ------- ------------
Surinder Former 6/30/2004 $158,345 $10,000 $19,546 (1)
Rametra (8) Chairman*; 6/30/2003 $150,000 14,157 (2) 0 700,000 0 0
Director of
Business
Development
6/30/2002 $159,615 14,367 (3) 0 750,000 0 0
Maganlal K. Chairman/ CEO 6/30/2004 $151,385 $15,000 $16,938 (4)
Sutaria (8) 6/30/2003 $150,000 1,300 (9) 0 1,200,000 0 0
Bhupatlal President 6/30/2004 $155,231 $34,000 $21,319 (5)
K. Sutaria 6/30/2003 $150,000 1,100 (9) 0 800,000 0 0
(8)
Raj Sutaria Vice 6/30/2004 $145,307 $34,000 $15,314 (6)
(8) President of 6/30/2003 $140,000 1,000 (9) 0 750,000 0 0
Interpharm,
Inc.
Munish K. General 6/30/2004 $113,766 $10,000 $28,022 (7)
Rametra (8) Counsel/ 6/30/2003 $100,000 1,000 (9) 0 450,000 0 0
Secretary
* Surinder Rametra was the Chief Executive Officer of Atec Group, Inc.
during the fiscal year ended June 30, 2001 and until January, 2002. Dr.
Maganlal Sutaria became Chief Executive Officer of the Company on May 29,
2003.
(1) Major Medical $7,546, Leased Auto $12,000
(2) Major Medical $6,357, Leased Auto $7,800
(3) Major Medical $6,567, Leased Auto $7,800
(4) Major Medical $1,338, Leased Auto $15,600
(5) Major Medical $8,119, Leased Auto $13,200
(6) Major Medical $3,314, Leased Auto $12,000
(7) Includes Major Medical $11,222, Leased Auto $12,000
(8) Annual compensation based on employment agreements effective June 1, 2003
following the acquisition of Interpharm, Inc. on May 30, 2003.
(9) Leased auto.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
During the fiscal year ended June 30, 2004 we did not grant any stock
options to any of the individuals named in the above Summary Compensation Table.
YEAR END OPTION TABLE
The following table sets forth certain information regarding the stock
options exercised during the fiscal year ended June 30, 2004 and the stock
options held as of June 30, 2004, by the individuals named in the above Summary
Compensation Table.
11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money-Options
Fiscal Year End (#) At Fiscal Year End ($)(3)
Shares
Acquired on Value
Name exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
-----------------------------------------------------------------------------------------------------
Surinder 736,403 3,032,709 1,953,455(1) 700,000(2) 3,466,999 2,301,600
Rametra
Maganlal K. 0 0 0 1,200,000(2) 0 3,945,600
Sutaria
Bhupatlal 0 0 0 800,000(2) 0 2,630,400
Sutaria
Raj Sutaria 0 0 0 750,000(2) 0 2,466,000
Munish K. 0 0 0 450,000(2) 0 1,479,600
Rametra
(1) Represents options to acquire: (i) 7,000 shares at $3.44 per share
exercisable through August 8, 2007; (ii) 500,000 shares at $5.50 per share
exercisable through March 28, 2008; (iii) 250,000 shares at $4.67 per
share exercisable through September 27, 2008; (iv) 140,000 shares at $4.26
per share exercisable through June 29, 2009; (v) 99,825 shares at $1.993
per share exercisable through November 7, 2009; (vi) 892,858 shares at
$.56 per share exercisable through April 23, 2011 and 63,772 shares at
$.50 per share exercisable through November 16, 2011 and 700,000 shares at
$0.682 per share exercisable through May 30, 2113.
(2) Options are exercisable at $0.682 per share. These options have the
following vesting provisions: 25% of the options are to vest at the later
of January 1, 2005 or the date on which Interpharm's Series K Convertible
Preferred Stock becomes convertible into common stock (the "Conversion")
and an additional 25% will vest on each following December 31 beginning in
the same year as the first 25% vests; provided, however, that if the
conversion does not occur before December 31, 2007, all options shall vest
on that date. The option grants are subject to ratification by our
shareholders at the next annual meeting for which management has already
received sufficient proxies to carry the ratification. The options are
subject to forfeiture in the event of a termination of employment. The
term of the options is 10 years from the date they are granted.
(3) Computation based on $3.97, which was the June 30, 2004 closing price for
our common stock.
EMPLOYMENT CONTRACTS
Following the acquisition of Interpharm, Inc. on May 30, 2003, we entered
into employment contracts with the executive officers named in the tables above.
The following table lists the terms of the agreements.
Salary
Cell Phone Auto Upon Termination
Salary Reimbursement Allowance Vacation Disability Date
Dr. Maganlal Sutaria $150,000 full $1,300 6 weeks 50% for December 31, 2007
3 mo.
Bhupatlal Sutaria $150,000 full $1,100 4 weeks 50% for December 31, 2007
3 mo.
Raj Sutaria* $140,000 full $1,000 4 weeks 50% for December 31, 2007
3 mo.
Surinder Rametra $150,000 full $1,000 6 weeks 50% for December 31, 2007
3 mo.
Munish K. Rametra $100,000 full $1,000 4 weeks 50% for December 31, 2007
3 mo.
* Employee of Interpharm, Inc. only.
Each of the above agreements also provides for the following:
- termination with or without cause and, upon termination, the
employee is entitled to receive only any accrued salary and vacation
pay;
- confidentiality and non-competition clauses which remain effective
following the termination of employment;
- salary increases and bonus payments at the sole discretion of the
Board of Directors.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about our common stock that may be
issued upon the exercise of options, warrants and rights under all of our equity
compensation plans as of June 30, 2004. The table includes the following plans:
1997 Stock Option Plan and 2000 Flexible Stock Plan.
12
Plan category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding options, future issuance
outstanding options, warrants and rights
warrants and rights
Equity compensation plans approved by 0 0 0
security holders
Equity compensation plans not approved
by security holders
1,436,370 $2.30 0
1997 Stock Option Plan
9,023,630 $1.51 2,208,563
2000 Flexible Stock Plan(1)
Total 10,460,000 $1.62 2,208,563
(1) Securities available for future issue increase each year by 10% of
our outstanding common stock at the beginning of each year. The
total amount of common stock available under the plan cannot exceed
20 million shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth as of October 5, 2004, certain information
with respect to the beneficial ownership of our voting securities by (i) any
person known by Interpharm to be the beneficial owner of more than 5% of our
voting securities, (ii) each director and nominee, (iii) each executive officer
named in the Summary Compensation table appearing herein and (iv) all directors
and executive officers as a group.
Amount and
Name and Nature of
Address of Title of Beneficial Percent of
Beneficial Owner Class Ownership Class(1)
Maganlal K. Sutaria(2) Common Stock 43,500 *
69 Mall Drive
Commack, NY 11725
Raj Sutaria(3) Common Stock 4,380,028 17.54%
75 Adams Avenue
Hauppauge, NY 11788 Series K Preferred 615,117 35.00%
Common and Series K
Combined 4,995,145 19.53%
Voting Power
Bhupatlal K. Sutaria(4) Common Stock 4,000 *
75 Adams Avenue
Hauppauge, NY 11788
Munish K. Rametra and Mona Rametra (5) Common Stock 2,508,015 10.05%
69 Mall Drive
Commack, NY 11725 Series K Preferred 351,496 20.00%
Common and Series K
Combined 2,859,511 10.70%
Voting Power
Surinder Rametra (6) Common Stock 3,443,915 12.79%
69 Mall Drive
Commack, NY 11725
Dr. Mark Goodman (7) Common Stock 47,500 *
69 Mall Drive
Commack, NY 11725
David Reback (8) Common Stock 26,000 *
69 Mall Drive
Commack, NY 11725
13
Stewart Benjamin(9) Common Stock 12,000 *
69 Mall Drive
Commack, NY 11725
Ravi Sutaria Common Stock 3,106,487 12.44%
69 Mall Drive
Commack, NY 11725 Series K Preferred 439,370 25.00%
Common and Series K
Combined 3,545,857 13.27%
Voting Power
Perry Sutaria(10) Common Stock 2,504,358 10.03%
69 Mall Drive
Commack, NY 11725 Series K Preferred 351,496 20.00%
Common and Series K
Combined 2,855,854 10.69%
Voting Power
Ashok Rametra(11) Common Stock 2,044,825 7.67%
1762 Central Avenue
Albany, NY 12205
Kennith Johnson Common Stock 0 *
69 Mall Drive
Commack, NY 11725
Cameron Reid (12) Common Stock 0 *
69 Mall Drive
Commack, NY 11725
George Aronson (13) Common Stock 0 *
69 Mall Drive
Commack, NY 11725
All Directors and Total Voting Power 11,431,571 39.84%
Officers as a
Group (9 persons)
(1) Computed based upon a total of 24,967,166 shares of common stock and
1,757,480 shares of Series K Preferred Stock outstanding as of October 5,
2004 and 7,438 shares of common stock into which the Series, A, B and C
Preferred Stock are convertible.
(2) The foregoing figure reflects the ownership of 43,500 shares of common
stock and does not include non-vested options to acquire 1,200,000 shares
of common stock, 350,000 non-vested options held by his spouse and
1,873,900 shares of Series A-1 Preferred Stock held by an annuity he
controls.
(3) The foregoing figure does not include non-vested options to acquire
750,000 shares of common stock or his beneficial interest in Series A-1
Preferred Stock held by a trust of which he is a beneficiary.
(4) The foregoing figure does not include non-vested options to acquire
800,000 shares of common stock and 400,000 non-vested options held by his
spouse.
(5) The foregoing does not include non-vested options held by Munish K.
Rametra to acquire 450,000 shares of common stock or Mona Rametra's
beneficial interest in Series A-1 Preferred Stock held by her and by a
trust of which she is a beneficiary.
14
(6) The foregoing figure reflects the ownership of 1,288,960 shares of common
stock by Mr. Rametra, including 201,500 shares held by Mr. Rametra and his
spouse. In addition, the foregoing figure includes 1,953,455 shares of
common stock which may be acquired by Mr. Rametra upon the exercise of
currently exerciseable options. Mr. Rametra disclaims beneficial ownership
of the shares of the Company's stock owned by members of the Rametra
family, other than Mr. Rametra's spouse, including independent children.
Excludes non-vested options to purchase 700,000 shares of common stock.
(7) The foregoing figure includes 47,500 shares owned by Dr. Goodman's wife.
Dr. Goodman has been granted a power of attorney to sell such shares.
(8) The foregoing figure excludes non-vested options to acquire 10,000 shares
of common stock.
(9) The foregoing figure includes 10,000 shares of common stock which may be
acquired upon exercise of currently exerciseable options and excludes
non-vested options to acquire an additional 10,000 shares of common stock.
(10) The foregoing figure does not include his beneficial interest in Series
A-1 Preferred Stock held by a trust of which he is a beneficiary.
(11) The foregoing figure reflects the ownership of 355,239 shares of common
stock by Mr. Rametra. The foregoing amount also includes the exercise by
Mr. Rametra of options to acquire 1,689,586 shares of the common stock
which may be acquired by Mr. Rametra upon the exercise of currently
exercisable options. Mr. Rametra disclaims beneficial ownership of shares
of the Company owned by other members of his family.
(12) The foregoing figure does not include 1,000,000 non-vested options to
purchase common stock. Mr. Reid's options have an exercise price of $3.97
per share and will not vest until out common stock trades at $15 per share
for six months.
(13) The foregoing figure does not include 250,000 non-vested options to
purchase common stock. Mr. Aronson's options have an exercise price of
$4.41 per share and will vest at the rate of 20% per year beginning
December 31, 2004.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our 100,000 square foot facility at 75 Adams Avenue in Hauppauge, New York
is owned by Sutaria Family Realty, LLC which is owned by Perry Sutaria, Raj
Sutaria and Mona Rametra.
No third party assessment or appraisal of the lease was made at the time
it was entered into or at any subsequent time. Interpharm, Inc. is obligated to
pay minimum annual rent of $480,000, plus property taxes, insurance, maintenance
and other expenses related to the leased facility. Upon a change in ownership of
the Company, and every three years thereafter, the annual rent will be adjusted
to fair market value, as determined by an independent third party.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
To our knowledge, except as set forth below, based solely on a review of
such materials as are required by the Securities and Exchange Commission, none
of our officers, directors or beneficial holders of more than ten percent of our
issued and outstanding shares of Common Stock has failed to timely file with the
Securities and Exchange Commission any form or report required to be so filed
pursuant to Section 16(a) of the Securities Exchange Act of 1934 during the
fiscal year ended June 30, 2004: Ashok Rametra - Form 4 dated July 11, 2003;
Praveen Bhutani - Form 4 dated July 11, 2003; Ashok Rametra - Form 4 dated
August 21, 2003; Ashok Rametra- Form 4 dated November 24, 2003; Surinder
Rametra- Form 4 dated January 8, 2004; Praveen Bhutani - Form 4 dated January 6,
2004; Praveen Bhutani - Form 4 dated January 16, 2004; James Charles - Form 4
dated January 22, 2004; Surinder Rametra - Form 4 dated January 22, 2004; Ashok
Rametra - Form 4 dated January 23, 2004; Ashok Rametra - Form 4 dated January
13, 2004; Surinder Rametra - Form 4 dated March 22, 2004; Surinder Rametra -
Form 4 dated March 26, 2004; Surinder Rametra - Form 4 dated April 15, 2004;
Ravi Sutaria - Form 4 dated June 14, 2004; Mona Rametra - Form 4 dated June 14,
2004; Munish K. Rametra - Form 4 dated June 14, 2004; Perry Sutaria - Form 4
dated June 14, 2004; and Raj Sutaria - Form 4 dated June 14, 2004.
15
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
Our Audit Committee has recommended the appointment of Marcum & Kliegman,
LLP as our independent auditor for the fiscal year ending June 30, 2005. Acting
on that recommendation, the Board of Directors appointed Marcum & Kliegman, LLP
as our auditor for the fiscal year ending June 30, 2005. Marcum & Kliegman, LLP
served as our independent auditor for the fiscal year ended June 30, 2004 and
the six month period ended June 30, 2003, and provided services to us with
respect to those periods that included, but were not limited to, consultations
on various tax and information services matters, as well as consultation with
respect to the acquisition of Interpharm, Inc.
Audit and Non-Audit Fees
The following table sets forth the fees billed to us for the fiscal year
ended June 30, 2004 and the six month period ended June 30, 2003 by Marcum &
Kliegman, LLP:
Fiscal Year Six-Months
Ended Ended
June 30, 2004 June 30, 2003
------------- -------------
Audit Fees $102,250 $103,580
Audit Related Fees (1) 29,532 91,506
Tax Fees (2) 46,445 1,250
All Other Fees (3) 12,368 0
(1) Consists of fees for services relating to accounting consultation
and review of documents filed with the SEC.
(2) Consists of tax filing and tax related compliance and other advisory
services.
(3) Consists primarily of consultation with respect to government grant
applications.
The Audit Committee of our Board of Directors determined that the
provision of the above non-audit services is compatible with Marcum & Kliegman,
LLP maintaining its independence.
Pre-Approval of Services by the Independent Auditor
The Audit Committee has adopted a policy for approval of audit and
permitted non-audit services by our independent auditor. The Audit Committee
will consider annually and approve the provision of audit services by its
external auditor and consider and, if appropriate, approve the provision of
certain defined audit and non-audit services. Our Management, may, however,
approve de minimus amounts for non-audit services without the approval of the
Audit Committee.
The Audit Committee also will consider on a case-by- case basis and, if
appropriate, approve specific engagements in excess of $15,000. Any proposed
specific engagement may be presented to the Audit Committee for consideration at
its next regular meeting or, if earlier consideration is required, to the Audit
Committee or one or more of its members. The member or members to whom such
authority is delegated shall report any specific approval of services at its
next regular meeting. The Audit Committee will regularly review summary reports
detailing all services being provided to us by our external auditor. During the
fiscal year ended June 30, 2004, 100% of the Audit Related Fees and all other
fees were approved by the Audit Committee.
A representative of Marcum & Kliegman, LLP is expected to be present at
the Annual Meeting, either in person, or via teleconference, to respond to
appropriate questions and to make such statements as may be appropriate. In the
event stockholders do not ratify the appointment of Marcum & Kliegman, LLP as
our independent auditor for the fiscal year ending June 30, 2005, such
appointment will be reconsidered by the Board of Directors.
In order to approve this proposal, the affirmative vote of a majority of
the votes cast at the meeting, in person or by proxy, must be received in favor
of this proposal. Unless a contrary choice is specified, proxies solicited by
the Board of Directors will be voted "FOR" ratification the selection of Marcum
& Kliegman, LLP as our auditor.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF MARCUM & KLIEGMAN, LLP AS OUR INDEPENDENT AUDITOR FOR
FISCAL 2005.
16
PROPOSAL NO. 3
RATIFICATION OF STOCK OPTION GRANTS
Under our 2000 Flexible Stock Plan approved by our stockholders, options
to acquire a total of 5,075,000 shares of our common stock at the five day
average trading price prior to that date ($0.682) were granted by our full Board
of Directors on May 29, 2003 to certain of our directors, officers employees and
service providers as incentive compensation. While no further stockholder
approval is required for the issuance of the options under the Plan, the Board
of Directors made it a condition of each grant that they be ratified by our
stockholders at our next annual meeting. We have already received proxies from a
majority of our outstanding shares in favor of approval of this proposal.
A total of 4,720,000 of the options were granted to ten executive officers
and senior level employees with the following vesting schedule: 25% of the
options are to vest at the later of January 1, 2005 or the date on which the
Company's Series K Convertible Preferred Stock became convertible into common
stock, which was June 4, 2004 ("the Conversion"), and an additional 25% will
vest on each following December 31 beginning in the same year as the first 25%
vests; provided, however, that if the Conversion does not occur before December
31, 2007, all options shall vest on that date. Of these options, our CEO was
granted 1,200,000, our President was granted 800,000, the Vice President of
Interpharm, Inc. was granted 750,000, our Director of Business Development was
granted 700,000 and our General Counsel was granted 450,000.
A total of 50,000 options were granted to our then Chief Financial Officer
with the following vesting schedule: 50% of the options shall vest on December
31, 2003 and 50% of the options shall vest on December 31, 2004.
A total of 30,000 options were granted to our three then independent
directors with the following vesting schedule: 50% of the options are to vest at
the later of January 1, 2005 or the date of Conversion, and the additional 50%
will vest one year from the date of Conversion; provided, however, that if the
Conversion does not occur before December 31, 2007, all Options shall vest on
that date.
A total of 50,000 options were granted to our legal counsel with the
following vesting schedule: the options are to vest at the later of January 1,
2005 or the date of Conversion; provided, however, that if the Conversion does
not occur before December 31, 2007, all options shall vest on that date.
A total of 200,000 options were granted to an employee with the following
vesting schedule: the first 100,000 of the Options shall vest as follows: 25,000
are to vest at the later of January 1, 2005 or the date of Conversion, and an
additional 25,000 will vest on each following December 31 beginning in the same
year as the first 25,000 vests; provided, however, that if the Conversion does
not occur before December 31, 2007, all 100,000 Options shall vest on that date.
The second 100,000 of the Options shall vest on December 31, 2011.
A total of 25,000 options were granted to an employee with the following
vesting schedule: the first 10,000 of the options shall vest as follows: 2,500
are to vest at the later of January 1, 2005 or the date of Conversion, and an
additional 2,500 will vest on each following December 31 beginning in the same
year as the first 2,500 vests; provided, however, that if the Conversion does
not occur before December 31, 2007, all 10,000 options shall vest on that date.
The remaining 15,000 of the Options shall vest on December 31, 2010.
The closing price of the Company's Common Stock on October 5, 2004 was
$3.42 per share.
NEW PLAN BENEFIT TABLE
The following table sets forth the number of options referred to above
which were granted to each of the following persons or groups.
Name and Position Number of Options
Dr. Maganlal K. Sutaria 1,200,000
Bhupatlal K. Sutaria 800,000
Raj Sutaria 750,000
Surinder Rametra 700,000
Munish K. Rametra 450,000
---------
All executive officers as a group 3,950,000
All directors who are not
executive officers 30,000
All employees who are not
executive officers 995,000
17
The dollar amount of benefits attributable the grant of the above options
is not determinable.
In order to approve this proposal, the affirmative vote of a majority of
the votes cast at the meeting, in person or by proxy, must be received in favor
of this proposal. Unless a contrary choice is specified, proxies solicited by
the Board of Directors will be voted FOR ratification of options granted.
THE BOARD OF DIRECTORS RECOMMENDS AVOTE "FOR" RATIFICATION OF OPTIONS GRANTED
UNDER OUR PLAN.
STOCKHOLDER COMMUNICATIONS
We encourage stockholder communications to the Board of Directors and/or
individual Directors. Stockholders who wish to communicate with the Board of
Directors or an individual Director should send their communications to the care
of Munish K. Rametra, Corporate Secretary, Interpharm Holdings, Inc., 69 Mall
Drive, Commack, New York 11725. Communications regarding financial or accounting
policies should be sent to the attention of the Chairman of the Audit Committee.
All other communications should be sent to the attention of the Chairman of the
Nominating Committee.
STOCKHOLDERS' PROPOSALS
A stockholder of record may present a proposal for action at the 2005
Annual Meeting of Stockholders provided that we receive such proposal at our
executive office no later than June 22, 2005. We anticipate that the 2005 Annual
Meeting will be held in December 2005. The proponent may submit a maximum of one
(1) proposal of not more than five hundred (500) words for inclusion in our
proxy materials for a meeting of security holders. At the 2005 Annual Meeting,
management proxies will have discretionary authority, under Rule 14a-4 of the
Securities Exchange Act of 1934, to vote on stockholder proposals that are not
submitted for inclusion in our proxy statement unless received by us before
September 6, 2005.
GENERAL
Unless contrary instructions are indicated on the proxy, all shares of
Series A, B, C and K preferred stock and common stock represented by valid
proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted FOR Proposal Nos. 1, 2 and 3.
OTHER BUSINESS
The Board of Directors knows of no business other than that set forth
above to be transacted at the meeting, but if other matters requiring a vote of
the stockholders arise, the persons designated as proxies will vote the shares
of common stock represented by the proxies in accordance with their judgment on
such matters. If a stockholder specifies a different choice on the proxy, his or
her shares of common stock will be voted in accordance with the specification so
made.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN, SIGN
AND RETURN THE FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED, NO MATTER HOW
LARGE OR SMALL YOUR HOLDINGS MAY BE.
By Order of the Board of Directors,
Maganlal K. Sutaria, Chairman
Commack, New York
October 20, 2004
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APPENDIX A
INTERPHARM HOLDINGS, INC.
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
PURPOSE
To assist the Board of Directors of Interpharm Holdings, Inc. (the "Company") in
fulfilling its oversight responsibilities for (1) the integrity of the Company's
financial statements, (2) the Company's compliance with legal and regulatory
requirements, (3) the independent auditors' qualifications and independence, and
(4) the performance of the Company's internal audit function and independent
auditors. The audit committee shall also prepare the report that SEC rules
require be included in the Company's proxy statement for its annual meeting of
stockholders.
AUTHORITY
The audit committee has authority to conduct or authorize investigations into
any matters within its scope of responsibility. It is empowered to:
o Appoint, compensate, and oversee the work of the public accounting
firm retained by the Company to conduct the audit of the Company's
annual financial statements (the "external auditor"). This firm will
report directly to the audit committee.
o Resolve any disagreements between management and the external
auditor regarding financial reporting.
o Pre-approve all auditing and permitted non-audit services performed
by the external auditor and the terms and conditions for such
services, including the fees therefor.
o Retain independent counsel, accountants, or others to advise the
committee or assist in the conduct of an investigation.
o Seek any information it requires from employees--all of whom are
directed to cooperate with the committee's requests--or external
parties.
o Meet with Company officers, external auditors, other advisors,
including accounting firms, or outside counsel, as necessary.
o The committee may delegate authority to subcommittees, including the
authority to preapprove all auditing and permitted non-audit
services, providing that such decisions are presented to, and are
subject to approval by, the full committee at its next scheduled
meeting.
COMPOSITION
The audit committee will consist of at least three and no more than six
members of the Board of Directors. The Board nominating committee will appoint
committee members and the committee chair.
Each committee member shall be both an independent director as defined
under rules and regulations of the American Stock Exchange and the Securities
Exchange Act of 1934 and the rules and regulations thereunder and be financially
literate. At least one member shall be designated as the "financial expert," as
defined by applicable legislation and regulation.
No committee member shall simultaneously serve on the audit committees of
more than two other public companies.
MEETINGS
The committee will meet on at least a quarterly basis, with authority to
convene additional meetings, as circumstances require. All committee members are
expected to attend each meeting, in person or via tele- or video-conference. The
committee shall invite members of management, auditors or others to attend
meetings and provide pertinent information, as necessary. It shall meet
separately, periodically, with management, with internal auditors and with the
external auditors It shall also meet periodically in executive session. Meeting
agendas shall be prepared and provided in advance to members, along with
appropriate briefing materials. Minutes of all meetings shall be prepared.
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RESPONSIBILITIES
The committee will carry out the following responsibilities:
FINANCIAL STATEMENTS AND SEC REPORTS
o Review significant accounting and reporting issues and understand
their impact on the financial statements. These issues include:
o Complex or unusual transactions and highly judgmental areas
o Major issues regarding accounting principles and financial
statement presentations, including any significant changes in
the Company's selection or application of accounting
principles
o The effect of regulatory and accounting initiatives, as well
as off-balance sheet structures, on the financial statements
of the Company
o Review analyses prepared by management and/or the external auditor
setting forth significant financial reporting issues and judgments
made in connection with the preparation of the financial statements,
including analyses of the effects of alternative GAAP methods on the
financial statements.
o Discuss the annual audited financial statements and quarterly
financial statements with management and the external auditor,
including the Company's disclosures under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
matters required to be reviewed under applicable legal, regulatory
and American Stock Exchange requirements.
o Prior to the filing of the Company's Form 10-K:
Review and discuss the Company's annual consolidated financial
statements and related footnotes
Review and discuss the external auditor's audit of the
consolidated financial statements and its report
Review and discuss any significant changes required in the
external auditor's examination plan
Discuss with management, the internal auditing staff and the
independent auditor any problems, difficulties or disputes
encountered during the course of the audit, including any
restrictions on the scope of the external auditor's activities
or access to requested information, any accounting adjustments
that were noted or proposed by the external auditor but that
were not adopted, any communications between the external
auditor's team assigned to the Company's audit and the
auditor's national office, and any "management" or "internal
control" letter issued, or proposed to be issued, by the
external auditor to the Company
Review and discuss other matters related to the conduct of the
audit which are to be communicated to the committee under
general accepted auditing standards, including discussions
relating to the external auditor's judgments about such
matters as the quality, not just the acceptability, of the
Company's accounting practices and other items set forth in
Statement of Auditing Standards Statement No. 61 ("SAS 61")
(Communication with Audit Committees) or other such auditing
standards that may in time modify, supplement or replace SAS
61 Recommend to the Board of Directors, based on the review
and discussions referred to above, that the Company's
consolidated financial statements be included in the Form 10-K
for the last fiscal year for filing with the Securities and
Exchange Commission.
o Review disclosures made by CEO and CFO during the Forms 10-K and
10-Q certification process about significant deficiencies in the
design or operation of internal controls or any fraud that involves
management or other employees who have a significant role in the
Company's internal controls.
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o Discuss earnings press releases (particularly use of "pro forma," or
"adjusted" non-GAAP, information), as well as financial information
and earnings guidance provided to analysts and rating agencies. This
review may be general (i.e., the types of information to be
disclosed and the type of presentations to be made). The audit
committee does not need to discuss each release in advance.
INTERNAL CONTROL
o Consider the effectiveness of the Company's internal control system,
including information technology security and control.
o Understand the scope of the internal and external auditors' reviews
of internal control over financial reporting, and obtain reports on
significant findings and recommendations, together with management's
responses.
INTERNAL AUDIT
o Review with management and the Company's chief audit executive the
charter, plans, activities, staffing, and organizational structure
of the internal audit function.
o Ensure there are no unjustified restrictions or limitations upon the
authority and scope of duties of the Company's chief audit
executive, and review and concur in the appointment, replacement, or
dismissal of, the Company's chief audit executive.
o Review the effectiveness of the internal audit function, including
compliance with The Institute of Internal Auditors' Standards for
the Professional Practice of Internal Auditing.
o On a regular basis, meet separately with the Company's chief audit
executive to discuss any matters that the committee or internal
audit believes should be discussed privately.
EXTERNAL AUDIT
o Review the external auditor's proposed audit scope and approach,
including coordination of audit effort with the Company's internal
audit staff.
o Review the performance of the external auditor, and exercise final
approval on the appointment or discharge of the external auditor. In
performing this review, the committee will:
o At least annually, obtain and review a report by the external
auditor describing: the firm's internal quality-control
procedures; any material issues raised by the most recent
internal quality-control review, or peer review, of the firm,
or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues; and
(to assess the external auditor's independence) all
relationships between the external auditor and the Company and
review with the external auditor any other written disclosures
required under Independence Standards Board Standard No. 1
regarding any relationships between the external auditor and
the Company or any other relationships that reasonably may be
thought to bear on the external auditor's independence and
discuss with the external auditor any disclosed relationships
or services that may impact the objectivity and independence
of the external auditor
o Take into account the opinions of management and internal
audit staff
o Review and evaluate the lead partner of the external auditor
o Present its conclusions with respect to the external auditor
to the Board
o Ensure the rotation of the lead audit partner of the external
auditor every five years and other audit partners every seven years,
and consider whether there should be regular rotation of the
external auditor firm itself.
o Present its conclusions with respect to the external auditor to the
full Board.
o Set clear hiring policies for employees or former employees of the
external auditor
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o On a regular basis, meet separately with the external auditor to
discuss any matters that the committee or external auditor believe
should be discussed privately.
COMPLIANCE
o Review the effectiveness of the system for monitoring compliance
with laws and regulations and the results of management's
investigation and follow-up (including disciplinary action) of any
instances of noncompliance.
o Receive and address (i) complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters; and
(ii) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing
matters.
o Review the findings of any examinations by regulatory agencies, and
any internal or external auditor observations.
o Review the process for communicating the code of conduct to Company
personnel, and for monitoring compliance therewith.
o Obtain regular updates from management and Company legal counsel
regarding compliance matters.
REPORTING RESPONSIBILITIES
o Regularly report to the Board of Directors about committee
activities and issues that arise with respect to the quality or
integrity of the Company's financial statements, the Company's
compliance with legal or regulatory requirements, the performance
and independence of the Company's external auditor, and the
performance of the internal audit function.
o Provide an open avenue of communication between internal audit
staff, the external auditor, and the Board of Directors.
o Report annually to the stockholders, describing the committee's
composition, responsibilities and how they were discharged, and any
other information required by applicable statutes and rules,
including approval of non-audit services.
o Review any other reports the Company issues that relate to committee
responsibilities.
OTHER RESPONSIBILITIES
o Discuss with management the Company's major policies with respect to
risk assessment and risk management
o Review and approve all "related party transactions" as defined in
applicable SEC rules
o Perform other activities related to this charter as requested by the
Board of Directors.
o Institute and oversee special investigations as needed.
o Review and assess the adequacy of the committee charter annually,
requesting Board approval for proposed changes, and ensure
appropriate disclosure as may be required by statutes, rules or
regulations.
o Confirm annually that all responsibilities outlined in this charter
have been carried out.
o Evaluate the committee's and individual members' performance at
least annually.
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INTERPHARM HOLDINGS, INC.
69 Mall Drive, Commack, New York 11725
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting and 2004 Proxy Statement and hereby appoints Bhupatlal K. Sutaria,
attorney and proxy, with full power of substitution and resubstitution, to vote
all shares of the Common Stock, par value $0.01 per share, and all shares of
Series A, B, C and K Preferred Stock, of Interpharm Holdings, Inc., a Delaware
corporation (the "Company"), held of record by the undersigned at the close of
business on October 14, 2004 at the annual meeting of stockholders of the
Company to be held on November 18, 2004 at 10:00 a.m., local time, at The
American Stock Exchange, and at any postponement or adjournment thereof, as
indicated in this Proxy:
IF THIS PROXY IS PROPERLY DATED AND EXECUTED, THE SHARES REPRESENTED HEREBY WILL
BE VOTED IN THE MANNER DIRECTED AND, IN THE ABSENCE OF DIRECTION AS TO THE
MANNER OF VOTING, WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE SLATE OF
NOMINEES TO BE VOTED UPON BY THE HOLDERS OF COMMON STOCK AND PREFERRED STOCK SET
FORTH IN THE PROXY STATEMENT, FOR RATIFICATION OF THE APPOINTMENT OF MARCUM &
KLIEGMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING
JUNE 30, 2005 AND FOR THE RATIFICATION OF THE GRANTS OF STOCK OPTIONS SET FORTH
IN THE PROXY STATEMENT.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY Please mark vote in oval in the
following manner using dark ink only.
1. Election of Directors:
WITH AUTHORITY TO VOTE FOR WITHHOLD AUTHORITY
ALL NOMINEES LISTED BELOW ____ TO VOTE FOR ALL NOMINEES LISTED BELOW ___
(except as marked to the contrary below)
Nominees: Dr. Maganlal K. Sutaria, Cameron Reid, Dr. Mark Goodman, Stewart
Benjamin, David C. Reback and Kennith Johnson.
_____________________________________________________________________
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided above.)
(Continued and to be signed on the reverse side)
2. Ratification of the appointment of Marcum & Kliegman, LLP as the Company's
independent auditor for the fiscal year ending June 30, 2005.
____ FOR ____ AGAINST ____ ABSTAIN
3. Ratification of stock option grants to management, employees and service
providers.
____ FOR ____ AGAINST ____ ABSTAIN
4. As recommended by the Board of Directors, or in the absence of such
recommendation in their own discretion, to vote upon such other business as may
properly come before said meeting or any postponement or adjournment thereof.
Dated:
---------------------------
(Signature)
---------------------------
Please Print Name
---------------------------
Signature if held jointly
---------------------------
Please Print Name
Please date this Proxy and sign exactly as the name(s) appears on the enclosed
envelope and return the signed Proxy in the enclosed envelope. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give the full title. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in the partnership name by an
authorized person.
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