PROPOSAL 3
PROPOSAL TO EFFECT A MERGER TO CHANGE THE STATE OF
INCORPORATION OF THE COMPANY TO DELAWARE AND INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK
Principal Reasons for the Reincorporation Proposal
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the Company's state of
incorporation from New Jersey to Delaware. At the time of the Company's
incorporation in New Jersey in 1982, the New Jersey Business Corporation Act
(the "New Jersey Law") was deemed to be adequate for the conduct of the
Company's business, in part because of the limited business and basic
organizational features of the Company at that time. Over the years, the
expansion of the Company's business has increased its need for a more
sophisticated corporate structure and a more flexible and current regulatory
foundation.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and adaptable corporation laws which are periodically
updated and revised to meet changing business needs. Delaware courts have
developed considerable expertise in dealing with corporate legal issues and a
substantial body of case law has developed construing Delaware law and
establishing public policy with respect to Delaware corporations. The relative
clarity and predictability of Delaware corporate law presented in the numerous
precedents decided by the Delaware courts should be of great advantage to the
Company by allowing it to make corporate decisions and take actions with
increased confidence of what the outcome and consequences of those decisions and
actions will be under the General Corporation Law of the State of Delaware (the
"Delaware Law"). Further, the Delaware Secretary of State's office is staffed
with experienced regulators recognized for their efficient and
business-sensitive approach to administering the state's business laws and
regulations. As a result of these and other factors, many major corporations
have chosen Delaware for their initial domicile or have subsequently
reincorporated in Delaware in a manner similar to that proposed by the Company.
For the foregoing reasons, the Board of Directors believes that the
activities of the Company, both present and contemplated, can be better managed
if the Company were governed by the Delaware Law. It should be noted, however,
that shareholders in some instances have fewer rights and hence less protection
under the Delaware Law than under the New Jersey Law. See the discussion under
the heading "Comparison of Shareholders' Rights under New Jersey Law and
Delaware Law," below.
On September 29, 1998 the Company's Board of Directors approved,
subject to shareholder approval, a proposal (the "Reincorporation Proposal") to
change the Company's state of incorporation from New Jersey to Delaware by means
of a merger (the "Merger") of the Company with and into Flemington
Pharmaceutical Corporation ("Flemington Delaware"), a newly formed, wholly-owned
subsidiary of the Company that has been incorporated under the Delaware Law to
effect the Reincorporation Proposal. The principal office of Flemington Delaware
is 43 Emery Avenue, Flemington, New Jersey 08822, telephone (908) 782-3431. If
the shareholders approve the Reincorporation Proposal, Flemington Delaware will
be the successor corporation of the Merger. A consequence of this Merger will be
a change in the law applicable to the Company's corporate affairs, from the New
Jersey Law to the Delaware Law, which will also result in certain differences in
shareholders' rights. See "Comparison of Shareholders' Rights under New Jersey
Law and Delaware Law," below.
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F 888.329.6696