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:
[x] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
FLEMINGTON PHARMACEUTICAL CORPORATION
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(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(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: N/A
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(5) Total fee paid: not required
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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FLEMINGTON PHARMACEUTICAL CORPORATION
43 Emery Avenue
Flemington, New Jersey 08822
908-782-3431
October 30, 1998
Dear Fellow Shareholder:
The 1998 Annual Meeting of Shareholders (the "Annual Meeting") of
Flemington Pharmaceutical Corporation (the "Company") will be held at [10:00
a.m.] on November 23, 1998 at 43 Emery Avenue, Flemington, New Jersey 08822.
Enclosed you will find a formal Notice of Annual Meeting, Proxy Card and Proxy
Statement, detailing the matters which will be acted upon. Directors and
Officers of the Company will be present to help host the meeting and to respond
to any questions from our shareholders. I hope you will be able to attend.
Please sign, date and return the enclosed Proxy without delay in the
enclosed envelope. If you attend the Annual Meeting, you may vote in person even
if you have previously mailed a Proxy by withdrawing your Proxy vote at the
meeting. Any shareholder giving a proxy may revoke the same at any time prior to
the voting of such proxy by giving written notice of revocation to the
Secretary, by submitting a later dated proxy or by attending the Annual Meeting
and voting in person. The Company's Annual Report on Form 10-KSB (including
audited financial statements) for the fiscal year ended July 31, 1998
accompanies this Proxy Statement. The Annual Report is not a part of the proxy
soliciting material. All shares represented by proxies will be voted at the
Annual Meeting in accordance with the specifications marked thereon, or if no
specifications are made, (a) as to Proposal 1, the Proxy confers authority to
vote for all of the six persons listed as candidates for a position on the Board
of Directors, (b) as to Proposals 2, 3 and 4 the Proxy confers authority to vote
"FOR", and (c) as to any other business which comes before the Annual Meeting,
the Proxy confers authority to vote in the proxy holder's discretion.
The Company's Board of Directors believes that a favorable vote for
each candidate for a position on the Board of Directors and for all other
matters described in the attached Notice of Annual Meeting and Proxy Statement
is in the best interest of the Company and its shareholders and unanimously
recommends a vote "FOR" all candidates and all other matters. Accordingly, we
urge you to review the accompanying material carefully and to return the
enclosed Proxy promptly.
Thank you for your investment and continued interest in Flemington
Pharmaceutical Corporation.
Sincerely,
/s/Harry A. Dugger, III, Ph.D.
Harry A. Dugger, III, Ph.D.
President and Chief Executive Officer
2
FLEMINGTON PHARMACEUTICAL CORPORATION
43 Emery Avenue
Flemington, New Jersey 08822
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 23, 1998
---------------------
To our Shareholders:
Notice is hereby given that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Flemington Pharmaceutical Corporation, a New Jersey
corporation (the "Company"), will be held at the Company's offices at 43 Emery
Avenue, Flemington, New Jersey, on Monday, November 23, l998 at 10:00 a.m.
Eastern Standard Time for the following purposes:
1. To elect six (6) Directors to the Board of Directors to serve
until the 1999 Annual Meeting of Shareholders or until their
successors have been duly elected or appointed and qualified;
2. To vote upon the adoption of the Company's 1998 Stock Option
Plan;
3. To vote on a proposal to (i) merge the Company into a
newly-formed, wholly-owned Delaware subsidiary, with the
subsidiary as the surviving entity of such merger, in order to
change the state of incorporation of the Company from New
Jersey to Delaware, and (ii) ratify and approve an increase in
the Company's authorized shares of Common Stock from
10,000,000 to 50,000,000 shares; and
4. To ratify the appointment of Wiss & Company, LLP as the
Company's independent certified public accountants for the
fiscal year ending July 31, 1999;
5. To consider and take action upon such other business as may
properly come before the Annual Meeting or any adjournment(s)
thereof.
The Board of Directors has fixed the close of business on September 30,
1998, as the record date for determining the shareholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournment(s) thereof. The transfer
books of the Company will be closed.
For a period of ten (10) days prior to the Annual Meeting, a
shareholders list will be kept at the Company's office and shall be available
for inspection by shareholders during usual business hours. A shareholders list
shall also be present at, and available for inspection during, the Annual
Meeting.
Your attention is directed to the accompanying Proxy Statement for
further information regarding each proposal to be made.
SHAREHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND MAIL IT IN THE ENCLOSED
STAMPED, SELF-ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU SIGN AND RETURN
YOUR PROXY WITHOUT SPECIFYING YOUR CHOICES IT WILL BE UNDERSTOOD THAT YOU WISH
TO HAVE YOUR SHARES VOTED IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU DESIRE, REVOKE YOUR PROXY AND
VOTE IN PERSON IF YOU WISH.
By Order of the Board of Directors
Robert F. Schaul
Secretary
October 30, 1998
IMPORTANT
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A POSTAGE PAID, SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO ADDITIONAL POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED STATES.
2
FLEMINGTON PHARMACEUTICAL CORPORATION
43 Emery Avenue
Flemington, New Jersey 08822
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation
by and on behalf of the Board of Directors (the "Board of Directors") of
Flemington Pharmaceutical Corporation (the "Company") of proxies in the
accompanying form to be voted at the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") to be held at 10:00 a.m. Eastern Standard Time on Monday,
November 23,1998 at the office of the Company at 43 Emery Avenue, Flemington,
New Jersey 08822 and at any adjournments thereof for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders. The approximate date
on which this Proxy Statement and the accompanying form of proxy are first being
sent or given to shareholders is October 30, 1998.
A copy of the Company's Annual Report on Form 10-KSB (including audited
financial statements) for the fiscal year ended July 31, 1998, is enclosed with
these materials, but should not be considered proxy solicitation material.
The Company has fixed the close of business on September 30, 1998 as
the record date (the "Record Date") for determination of shareholders entitled
to notice of and to vote at the meeting or any adjournments thereof. As of the
Record Date, there were 3,877,300 outstanding shares of common stock, $.01 par
value per share ("Common Stock"), each share entitled to one vote on each matter
to be voted on at the Annual Meeting. The holders of a majority of shares
entitled to vote and represented in person or by proxy at the Annual Meeting
will constitute a quorum for the transaction of business at the Annual Meeting.
In general, Common Stock represented by a properly signed and returned proxy
card will be counted as Common Stock present and entitled to vote at the Annual
Meeting for purposes of determining a quorum, without regard to whether the card
reflects abstentions (or is left blank) or reflects a "broker non-vote" on a
matter (i.e., a card returned by a broker because voting instructions have not
been received and the broker has no discretionary authority to vote). Holders of
Common Stock are not entitled to cumulative voting rights.
The election of a nominee for director requires approval of such
nominee by a plurality of the Common Stock present and entitled to vote in
person or by proxy; and the approval of each of the other proposals described in
the Proxy Statement requires the approval of a majority of the Common Stock
present and entitled to vote in person or by proxy on that matter.
SOLICITATION OF PROXIES
The cost of the proxy solicitations will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation, by
personal interview, telephone, telegram or otherwise. Arrangements may also be
made with brokerage firms or other custodians, nominees or fiduciaries for the
forwarding of soliciting material to the beneficial owners of Common Stock of
the Company held of record by such persons, and the Company will reimburse such
respective brokers, custodians, nominees and fiduciaries for the reasonable
out-of-pocket expenses incurred by them in connection therewith.
THE BOARD OF DIRECTORS
During the fiscal year ended July 31, 1998 ("fiscal 1998"), the Board
of Directors held four (4) meetings, attended by all of the Company's Directors.
One (1) such meeting was a Special Meeting of the Board. During fiscal 1998, the
Board of Directors acted by written consent three (3) times. The Company has a
compensation committee, which did not meet in fiscal 1998. The Company does not
have an audit committee, stock option committee, shareholder relations
committee, or a nominating committee.
Harry A. Dugger, III and John J. Moroney serve on the compensation
committee, which determines the cash compensation amounts to be paid to
directors, officers and employees of the Company. Because the Board of Directors
does not have a standing nominating committee, nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
entitled to vote for the election of directors. Nominations made by shareholders
must be made by written notice received by the Secretary of the Company within
ten (10) days of the date on which notice of a special meeting for the election
of directors is first given to shareholders.
Special meetings are held from time to time to consider matters for
which approval of the Board of Directors is desirable or is required by law.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
As of the Record Date, there were 3,877,300 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting. Each share is entitled
to one vote on each of the matters to be voted on at the Annual Meeting. The
following table sets forth, as of September 1, 1998, certain information
regarding the ownership of the Common Stock by (i) each person known by the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each of the Company's directors, and (iii) all of the Company's executive
officers and directors as a group. Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Under Rule 13d-3, certain shares may be deemed to be
beneficially owned by more than one person (such as where persons share
2
voting power or investment power). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the shares
(for example, upon the exercise of an option) within sixty (60) days of the date
as of which the information is provided; in computing the ownership percentage
of any person, the amount of shares outstanding is deemed to include the amount
of shares beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding shares of
any person as shown in the following table does not necessarily reflect the
person's actual ownership or voting power at any particular date.
Name and Address or Amount and Nature of Percentage of
Number in Group(1) Beneficial Ownership (2) Class
------------------ ------------------------ -----
Harry A. Dugger, III, Ph.D. 1,729,003(3) 39.1%
John J. Moroney 923,080(4) 20.8%
Donald P. Cox, Ph.D. 200,000(5) 4.9%
Kenneth E. Cleaver, Ph.D. 100,000(6) 2.5%
Robert F. Schaul, Esq. 84,286(7) 2.1%
Jean-Marc Maurette, Ph.D. 65,476(7) 1.7%
John R. Toedtman 45,000(7) 1.1%
Jack R. Kornreich 64,310(7) 1.6%
Watson Pharmaceutical Corporation 389,350 10.0%
311 Bonnie Circle
Corona, CA 91720
Estate of William D. Swift, Jr., 192,870 5.0%
Columbus, Georgia
All Officers and Directors as a group (8 persons) 3,211,155 58.8%
(3)(4)(5)(6)(7)
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(1) With the exception of Watson Pharmaceutical Corporation and the Estate of
William D. Swift, Jr., the address of all holders in the table is c/o Flemington
Pharmaceutical Corporation, 43 Emery Avenue, Flemington, New Jersey 08822.
(2) Except as otherwise indicated, each named holder has, to the Company's
knowledge, sole voting and investment power with respect to the shares
indicated.
3
(3) Includes options to purchase 200,000 shares of Common Stock issued under the
1992 Stock Option Plan; options to purchase 50,000 shares of Common Stock under
the 1997 Stock Option Plan; options to purchase 300,000 shares of Common Stock
issued outside of the Plans; 70,000 shares beneficially owned by his daughter
Christina Dugger Sommers; and 70,000 shares beneficially owned by his son Andrew
Dugger. Dr. Dugger may be deemed to be a "parent" of the Company as such term is
defined under the Federal securities laws.
(4) Includes options to purchase 200,000 shares of Common Stock issued under the
1992 Stock Option Plan; options to purchase 50,000 shares of Common Stock under
the 1997 Stock Option Plan; options to purchase 300,000 shares of Common Stock
issued outside of the Plans; 208,080 shares owned jointly with his wife, and
55,000 shares owned by each of his three sons, Matthew, Timothy and Sean
Moroney.
(5) Non-plan options to purchase 200,000 shares of Common Stock, 100,000 of
which were issued pursuant to an employment agreement and 100,000 of which were
issued as an incentive for services to be provided in connection with certain
acquisition transactions.
(6) Non-plan options to purchase 100,000 shares of Common Stock issued pursuant
to an employment agreement.
(7) Includes options to purchase 20,000 shares of Common Stock issued under the
1992 Stock Option Plan and options to purchase 25,000 shares of Commons Stock
issued under the 1997 Stock Option Plan.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires officers, directors and
persons who own more than ten (10) percent of a class of equity securities
registered pursuant to Section 12 of the Exchange Act to file reports of
ownership and changes in ownership with both the Securities and Exchange
Commission (the "SEC") and the principal exchange upon which such securities are
traded or quoted. Officers, directors and persons holding greater than ten (10)
percent of the outstanding shares of a class of Section 12-registered equity
securities ("Reporting Persons") are also required by SEC regulation to furnish
copies of any such reports filed pursuant to Section 16(a) of the Exchange Act
with the Company. Based solely on a review of the copies of such forms furnished
to the Company, the Company believes that from November 1997 to October 30, 1998
all Section 16(a) filing requirements applicable to its Reporting Persons were
complied with; however, that two reports covering an aggregate of two (2)
transactions were filed late by Messrs. Cox and Cleaver.
EXECUTIVE COMPENSATION
The following table sets forth a summary for the fiscal years ended
July 31, 1998, 1997, and 1996, respectively, of the cash and non-cash
compensation awarded, paid or accrued by the Company to the Company's Chief
Executive Officer and its four most highly compensated officers other than the
CEO, who served in such capacities at the end of fiscal 1998 (collectively, the
4
"Named Executive Officers"). No other executive officer of the Company earned in
excess of $100,000 in total annual salary and bonus for 1996, 1997 and 1998 in
all capacities in which such person served the Company. There were no restricted
stock awards, long-term incentive plan payouts or other compensation paid during
fiscal 1998 to the Named Executive Officers except as set forth below:
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------
Annual Compensation
-------------------------
Name and Fiscal Long-Term Compensation
Principal Position Year Salary Bonus by No. of Shares All Other Compensation
- -----------------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 1998 183,333 0 50,000 0
President and CEO ------------------------------------------------------------------------------------------
1997 150,000 0 300,000 0
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1996 43,334 0 200,000 0
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John J. Moroney 1998 100,000 0 50,000 0
Chairman ------------------------------------------------------------------------------------------
1997 0 0 300,000 0
------------------------------------------------------------------------------------------
1996 0 0 200,000 0
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Robert F. Schaul, Esq. 1998 0 0 25,000 0(1)
General Counsel and Secretary -------------------------------------------------------------------------------------------
1997 0 0 - 0
------------------------------------------------------------------------------------------
1996 10,500 0 20,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Donald P. Cox, Ph.D. 1998 31,000 0 200,000 0
Vice President, Product
Development
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Kenneth E. Cleaver, Ph.D. 1998 25,000 0 100,000 0
Vice President, Regulatory
Affairs
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(1) Mr. Schaul has been paid legal fees. See "CERTAIN TRANSACTIONS - Legal
Fees", below.
5
OPTION GRANTS IN LAST FISCAL YEAR
(individual grants)
The following table sets forth information with respect to individual
grants of stock options to the Named Executive Officers during fiscal 1998.
Percent of Total Options Exercise or
Number of Securities Granted to Employees in Base Price Expiration
Name of Officer Underlying Options Granted Fiscal Year ($/Share) Date
- -----------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 50,000 4.9% 1.10 03/24/08
----------------------------------------------------------------------------------------
300,000(1) 29.3% 1.84 11/24/07
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John J. Moroney 50,000 4.9% 1.10 03/24/08
----------------------------------------------------------------------------------------
300,000(1) 29.3% 1.84 11/24/07
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Robert F. Schaul, Esq. 25,000 2.4% 1.00 03/24/08
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Kenneth E. Cleaver, Ph.D. 100,000 9.7% 1.00 05/01/08
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Donald P. Cox, Ph.D. 200,000 19.5% 1.00 05/01/08
- -----------------------------------------------------------------------------------------------------------------------
(1) As provided under the terms of this officer's employment agreement (entered
into during fiscal 1997) these options were granted upon the completion of the
Company's initial public offering, which occurred during fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercises of options during fiscal 1998 and
the number and value of unexercised options held as of the end of fiscal 1998.
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Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year End; at Fiscal Year End;
Name of Executive Number of Shares (Exercisable/ (Exercisable/
Officer Acquired on Exercise Value Realized Unexercisable) Unexercisable)
- -----------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 0 - 550,000/0 1,014,062.50/0
- -----------------------------------------------------------------------------------------------------------------------
John J. Moroney 0 - 550,000/0 1,014,062.50/0
- -----------------------------------------------------------------------------------------------------------------------
Robert F. Schaul, Esq. 0 - 45,000/0 82,968.75/0
- -----------------------------------------------------------------------------------------------------------------------
Kenneth E. Cleaver, Ph.D. 0 - 0/100,000 0/184,375
- -----------------------------------------------------------------------------------------------------------------------
Donald P. Cox, Ph.D. 0 - 0/200,000 0/368,750
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6
Compensation of Directors
The Directors of the Company are elected annually and serve until the
next annual meeting of stockholders and until a successor shall have been duly
elected and qualified. Effective January 1998, Directors of the Company who are
not employees or consultants receive for each meeting attended directors fees of
$500 for their services as members of the Board of Directors and are also
reimbursed for expenses incurred in connection with their attendance at meetings
of the Board of Directors. Directors may be removed with or without cause by a
vote of the majority of the stockholders then entitled to vote.
Compensation Committee
Harry A. Dugger, III and John J. Moroney are members of the
Compensation Committee, which reviews and makes recommendations with respect to
compensation of officers, employees and consultants, including the granting of
options under the Company's 1997 Stock Option Plan. The 1992 and 1998 Stock
Option Plans are administered by the entire Board.
Compensation Policies and Procedures Applicable to Executives for Fiscal 1998
Compensation of the Company's executives is intended to attract, retain
and award persons who are essential to the enterprise. The fundamental policy of
the Company's executive compensation program is to offer competitive
compensation to executives that appropriately rewards the individual executive's
contribution to corporate performance. The Board of Directors utilizes
subjective criteria for evaluation of individual performance. The Board focuses
on two primary components of the Company's executive compensation program, each
of which is intended to reflect individual and corporate performance: base
salary compensation and long-term incentive compensation. The Company has not
paid cash incentive bonuses during fiscal 1998.
The Company does not have any annuity, retirement, pension, deferred or
incentive compensation plan or arrangement under which any executive officer is
entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executive officers who qualify will be permitted to participate in the Company's
1992, 1997 and 1998 Stock Option Plans which were adopted in May 1992, February
1997 and June 1998, respectively. Executive officers may participate in group
life, health and hospitalization plans, if and when such plans are available
generally to all employees.
Employment Agreements
Messrs. Dugger and Moroney. Effective as of November 19, 1997, the
Company entered into employment agreements with each of Harry A. Dugger, III,
for his services as President, and John J. Moroney, for his services as Chairman
(the "Dugger and Moroney Agreements"). Each agreement is for a base term of
three (3) years and is thereafter renewable for additional periods
7
of one (1) year, unless the Company gives notice to the contrary. The Dugger and
Moroney Agreements provide for a base salary of $200,000 and $150,000,
respectively, and annual cost of living adjustments equal to the greater of the
increase in the Consumer Price Index or 7.5%, with additional increases and
bonuses as shall be approved by the Board. Dr. Dugger will also receive an
additional cash bonus of $10,000 for each New Drug Application relating to the
Company's products that is accepted for filing by the U.S. Food and Drug
Administration, as well as the use of a Company-owned or leased and insured
automobile chosen by the Company. The Dugger and Moroney Agreements also
provide, respectively, for the payment of certain additional severance
compensation in the event that, at any time during the term thereof, the
agreement is terminated by the executive (i) with "good reason" (as defined
therein); or (ii) due to a "change in control" (as defined therein). In the
event of such termination, the executive is entitled to the payment of 2.99
times his base salary at the time of the change in control as well as the
balance of the value remaining in his contract, payable over the remaining term
of the contract. The Company believes that the "change in control" provisions in
the Dugger and Moroney Agreements may tend to discourage attempts to acquire a
controlling interest in the Company and may also tend to make the removal of
management more difficult; however, the Company believes such provisions also
provide security and decision-making independence for its executive officers.
The Dugger and Moroney Agreements provide for the granting, upon the
completion of the Company's initial public offering, of stock options (outside
of the Plans) to Dr. Dugger and Mr. Moroney to purchase 300,000 shares of Common
Stock, respectively, at an exercise price of $1.84 per share exercisable at any
time during the ten (10) years following the date of grant.
Messrs. Cox and Cleaver. Effective May 1, 1998, the Company entered
into employment agreements with each of Donald P. Cox, Ph.D., for his services
as Vice President, Regulatory Affairs, and Kenneth E. Cleaver, Ph.D., for his
services as Vice President, Product Development (the "Cox and Cleaver
Agreements"). Each agreement is for a base term of three (3) years. The Cox and
Cleaver Agreements provide for base salaries of $125,000 and $100,000,
respectively, and annual cost of living adjustments not less than the increase
of the Consumer Price Index. In connection with the Cox and Cleaver Agreements,
the Company granted to each of Drs. Cox and Cleaver ten-year options to purchase
100,000 shares of Common Stock at an exercise price of $1.00 per share.
One-third of such options shall vest in each of the first three (3) years of the
agreement. The Cox and Cleaver Agreements provide each of Drs. Cox and Cleaver
with the use of a Company-owned or leased and insured automobile chosen by the
Company. Dr. Cox's agreement provides for the payment of one month's severance
compensation for each full year of service under the agreement, in the event
that, at any time during the term thereof, the agreement is terminated by the
executive with good reason (as defined).
Each of the foregoing agreements also provides for certain
non-competition and non-disclosure covenants on the part of the executive.
However, with respect to the non-competition covenants, a court may determine
not to enforce such provisions or only partially enforce such provisions.
Additionally, each of the foregoing agreements provides for certain Company-paid
fringe benefits, such as disability insurance and inclusion in pension, profit
sharing, stock option, savings, hospitalization and other benefit plans at such
times as the Company shall adopt them.
8
CERTAIN TRANSACTIONS
Consulting Agreement
On May 1, 1997, the Company entered into a consulting agreement with
Saggi Capital Corp., a public relations consultant (the "Consultant") pursuant
to which the Consultant received a Nonqualified Stock Option under the 1997
Stock Option Plan to purchase an aggregate of 200,000 shares of Common Stock. On
March 25, 1998, the Company amended its consulting agreement pursuant to which
the Consultant agreed to expand the scope and duration of the services provided.
As a consequence, the Nonqualified Stock Option was restated and amended and the
consultant surrendered 200,000 unexercised stock options having an exercise
price of $5.00 per share in exchange for receiving 200,000 stock options having
an exercise price of $1.00 per share plus 120,000 stock options having an
exercise price of $2.00 per share. These options are exercisable for a period of
5 years following the date of the grant.
Legal Fees
During fiscal 1998 and 1997 respectively, the Company paid Mr. Schaul
approximately $75,000 and $53,000, for legal services rendered to the Company.
Stockholder Loans
In fiscal 1998, the Company loaned the principal amount of $60,000 to
Dr. Dugger in exchange for a 7% demand promissory note. In addition, Dr. Dugger
and Mr. Moroney made so-called "bridge" loans to the Company during fiscal 1997
which are discussed immediately below.
Bridge Financing
In July 1997, the Company borrowed an aggregate of $300,000 from
Messrs. Moroney and Dugger, who financed the loan with proceeds realized upon a
private sale of a portion of their Common Stock; 450,000 and 150,000 shares were
sold, respectively. This loan was evidenced by two convertible notes each
payable to Messrs. Moroney and Dugger, respectively. Immediately after the
Company's initial public offering, these notes were converted into Common Stock
at a conversion price of $.50 per share, the same price at which Messrs. Dugger
and Moroney sold their shares.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from
November 20, 1997 through the fiscal year ended July 31, 1998, with the
cumulative total return on (i) the Total Return Index for the Nasdaq Stock
market (U.S. Companies) (the "Nasdaq Composite Index"), and (ii) the American
Stock Exchange, Inc. ("AMEX") Pharmaceutical Index (assuming the investment of
$100 in the Company's Common Stock, the Nasdaq Composite Index and the AMEX
Pharmaceutical Index on November 20, 1997 and reinvestment of all dividends).
Measurement points are on the first full trading day after the Company's
registration statement was declared effective by the SEC and the last trading
day of the Company's fiscal year ended July 31, 1998. The Company cautions
9
that the stock price performance shown in the graph below should not be
considered indicative of potential future stock performance. Companies included
in the Nasdaq Composite Index and the AMEX Pharmacutical Index are generally
larger and have greater capitalization than the Company.
--------------------------------------
11/20/97 7/31/98
- ---------------------------------------------------------------------------------------------------
Flemington Pharmaceutical Corporation (FLEM) $100.00 $ 24.00
- ---------------------------------------------------------------------------------------------------
Nasdaq Composite Index $100.00 $ 118.75
- ---------------------------------------------------------------------------------------------------
AMEX Pharmaceutical Index (DRG) $100.00 $ 135.00
- ---------------------------------------------------------------------------------------------------
10
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, six (6) individuals will be elected to serve as
directors until the next annual meeting and until their successors are duly
elected, appointed and qualified. During the fiscal year ended July 31, 1998,
the Company's Board of Directors consisted of six (6) persons. Unless a
shareholder WITHHOLDS AUTHORITY, a properly signed and dated proxy will be voted
"FOR" the election of the persons named below, unless the proxy contains
contrary instructions. Management has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve as a Director.
However, in the event any nominee is not a candidate or is unable or unwilling
to serve as a Director at the time of the election, unless the shareholder
withholds authority from voting, the proxies will be voted "FOR" any nominee who
shall be designated by the present Board of Directors to fill such vacancy.
The name and age of each of the six (6) nominees, his or her position
with the Company, his principal occupation, and the period during which such
person has served as a director are set out below.
- ---------------------------------------------------------------------------------------------------------------------
Director
Name of Nominee Age Position with the Company Principal Occupation Since
- ---------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 62 President and Chief Executive President and Chief 1991
Officer Executive Officer of
the Company
- ---------------------------------------------------------------------------------------------------------------------
John J. Moroney 44 Chairman President, Landmark 1991
Financial Corp.
- ---------------------------------------------------------------------------------------------------------------------
Robert F. Schaul, Esq. Secretary and Director Attorney 1991
- ---------------------------------------------------------------------------------------------------------------------
Jean-Marc Maurette, Ph.D. 52 Director Director of R&D, 1992
Laboratoires Oenobiol
- ---------------------------------------------------------------------------------------------------------------------
John R. Toedtman 51 Director Chief Operating Officer, 1992
Translation Group Ltd.
- ---------------------------------------------------------------------------------------------------------------------
Jack J. Kornreich 58 Director Retired 1996
- ---------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D., President and Director. Dr. Dugger is a founder of
the Company and has been President and a director of the Company since its
inception in May 1982. Prior to founding the Company, from June 1980 to November
1982, Dr. Dugger was employed as Vice President of Research and Development by
Bauers-Kray Associates, a company engaged in the
11
development of pharmaceutical products. From 1964 to 1980, Dr. Dugger was
Associate Section Head for Research and Development at Sandoz Pharmaceuticals
Corporation. Dr. Dugger received an MS in Chemistry from the University of
Michigan in 1960 and received a Ph.D. in Chemistry from the University of
Michigan in 1962.
John J. Moroney, Chairman of the Board. Mr. Moroney has been Chairman of the
Company since May 1992. From May 1992 to November 1994, Mr. Moroney was also the
Company's Chief Executive Officer. Mr. Moroney currently is President of
Landmark Financial Corp., Harrington Park, New Jersey, a private financial
consulting company. From 1985 to 1992, Mr. Moroney was a Managing Director of
Corporate Finance for the investment banking firm of Ladenburg, Thalmann & Co.,
Inc., specializing in the pharmaceutical and health care industries. Mr. Moroney
received a BS in 1975 and an MBA in 1997, both from Fordham University.
Robert F. Schaul, Esq., Secretary and Director. Mr. Schaul has been a Director
of the Company since November 1991 and was Vice President, Secretary and General
Counsel of the Company from November 1991 to February 1995. He has advised the
Company since its formation. Since 1995, Mr. Schaul has been Vice President and
General Counsel of Landmark Financial Corp. From 1989 to 1991, Mr. Schaul was a
partner with the law firm of Glynn, Byrnes and Schaul, and for twenty years
prior thereto was an attorney and partner with the law firm Kerby, Cooper,
English, Schaul & Garvin, specializing in business law and business related
litigation. Mr. Schaul received a BA from New York University in 1961 and a JD
from Harvard University in 1964.
Jean-Marc Maurette, Ph.D., Director. Dr. Maurette has been a director of the
Company since June 1992 and from August 1986 to August 1996 was the Company's
European Representative, with his office in Paris, France. Dr. Maurette is
currently a Director of Research and Development for Laboratoires Oenobiol, in
France. Before he became European Representative to the Company, Dr. Maurette
was a consultant in the European biotechnology and pharmaceutical industry. From
1994 to August 1996, Dr. Maurette was Chief Operating Officer of Centre Europeen
de Bioprospective, Cedex, France, a technological development authority of the
Normandy region of France. From 1991 to 1994, Dr. Maurette was Licensing Manager
for Laboratoires Pharmascience, a French manufacturer of nutritional food
supplements. From 1981 through August 1991, Dr. Maurette was President of L.A.B.
Sarl, a French subsidiary of L.A.B. GmbH & Co., a clinical pharmacology
contractor.
John R. Toedtman, Director. Mr. Toedtman has been a director since August 1992.
Mr. Toedtman has been a director of Vital Signs, Inc., a medical device
manufacturer, since 1988, and a director of Noxso Corporation, an air pollution
control process developer, since 1986. Since September, 1998, Mr. Toedtman has
been Chief Operating Officer with Translation Group, Ltd. a public company
engaged in language translation services. From March 1977 to September 1998, Mr.
Toedtman was a Managing Director, Healthcare, for BlueStone Capital Partners,
LP, an investment banking firm. From May 1990 to May 1996, Mr. Toedtman was
Chairman and Chief Executive Officer of GenRx, Inc. (formerly American
Veterinary Products, Inc.), a veterinary generic pharmaceutical manufacturer.
Since 1986, Mr. Toedtman has been a consultant in the area of financial
planning, management and strategic planning.
12
Jack J. Kornreich, Director. Mr. Kornreich has been a director of the Company
since 1996. He presently acts as an independent consultant. Before retirement,
from 1989 to 1993, Mr. Kornreich was Executive Vice President and General
Counsel of Bolar (renamed Circa Pharmaceuticals Corp. and now named Watson
Pharmaceutical Corp.). From 1984 to 1989, Mr. Kornreich practiced law as a
partner in the firm of Baum & Kornreich (from 1980 to 1984 the firm was named
Baum, Skigen & Kornreich). From 1975 to 1984, Mr. Kornreich was in private
practice. Mr. Kornreich received a JD from Brooklyn Law School in 1963 and an
LLM in Corporate Law from New York University in 1975.
Board members are elected annually by the shareholders and the officers
are appointed annually by the Board of Directors.
Vote Required
Provided that a quorum of shareholders is present at the meeting in
person, or is represented by proxy, and is entitled to vote thereon, Directors
will be elected by a plurality of the votes cast at the meeting.
Recommendation of the Board of Directors
The Board of Directors recommends that each of the above nominees be
elected as a Director.
PROPOSAL 2
RATIFICATION OF APPOINTMENT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Also submitted for consideration and voting at the Annual Meeting is
the ratification of the appointment by the Company's Board of Directors of Wiss
& Company, LLP ("Wiss") as independent certified public accountants for the
purpose of auditing and reporting upon the financial statements of the Company
for the fiscal year ending July 31, 1999. The Board of Directors of the Company
selected and approved Wiss as independent certified public accountants to audit
and report upon the Company's financial statements for the last several fiscal
years. Wiss has no direct or indirect financial interest in the Company.
Representatives of Wiss are expected to be present at the Annual
Meeting, and they will be afforded an opportunity to make a statement at the
Annual Meeting if they desire to do so. It is also expected that such
representatives will be available at the Annual Meeting to respond to
appropriate questions by shareholders.
13
Vote Required
The affirmative vote of holders of a majority of the issued and
outstanding shares of Common Stock of the Company present, or represented by
proxy, and entitled to vote thereon at the Annual Meeting, is required for the
ratification of the selection of Wiss as the Company's independent certified
public accountants for the fiscal year ending July 31, 1999.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Wiss & Company, LLP as the Company's independent certified public
accountants for the fiscal year ending July 31, 1999.
PROPOSAL 3
ADOPTION OF 1998 STOCK OPTION PLAN
Submitted for consideration and voting at the Annual Meeting will be
the adoption of the Company's 1998 Stock Option Plan (the "1998 Plan"). The 1998
Plan shall provide for the grant of both Nonqualified Stock Options and
Incentive Stock Options, as the latter is defined in Section 422 of the Internal
Revenue Code of 1986, as amended, (the "Code"), as well as providing for the
granting of Restricted Stock and Deferred Stock Awards covering, in the
aggregate, 500,000 shares of the Company's Common Stock. The purpose of the 1998
Plan is to advance the interests of the Company and its shareholders by
providing additional incentives to the Company's management, including members
of the Company's Board of Directors, and to reward achievement of corporate
goals.
A copy of the 1998 Plan shall be available for inspection at the
Company's headquarters during normal business hours or can be obtained by making
a written request for same upon the Company. A copy of the 1998 Plan will be
present at, and available for inspection during, the Annual Meeting.
Vote Required
The affirmative vote of holders of a majority of the issued and
outstanding shares of Common Stock of the Company present or represented by
proxy, and entitled to vote thereon at the Annual Meeting, is required for the
adoption of the 1998 Plan.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the adoption of the 1998
Stock Option Plan.
14
PROPOSAL 4
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 FPC Merger Corp.
("Merger Corp."), a newly formed, wholly-owned subsidiary of the Company that
has been incorporated under the Delaware Law to effect
15
the Reincorporation Proposal. The principal office of Merger Corp. is 43 Emery
Avenue, Flemington, New Jersey 08822, telephone (908) 782-3431. If the
shareholders approve the Reincorporation Proposal, Merger Corp. 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. Immediately following the Merger, the name of
Merger Corp. will be changed to "Flemington Pharmaceutical Corporation."
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences between the New
Jersey Law and the Delaware Law. This summary does not purport to be a complete
description of the Reincorporation Proposal or the differences between
shareholders' rights under the New Jersey Law and the Delaware Law and is
qualified in its entirety by reference to (i) the Agreement of Merger dated as
of October ___, 1998 between the Company and Merger Corp. (the "Merger
Agreement") attached hereto as Annex I, (ii) the Certificate of Incorporation of
Merger Corp. (the "New Certificate") attached hereto as Annex II, and (iii) the
Bylaws of Merger Corp. (the "New Bylaws") attached hereto as Annex III. Copies
of the Company's Articles of Incorporation, as amended (the "Company Articles"),
and Bylaws (the "Company Bylaws") are available for inspection at the Company's
principal office, and copies will be sent to shareholders on request, without
charge.
Approval of the Reincorporation Proposal by the Company's shareholders
will also constitute approval of the Merger and the Merger Agreement, as well as
other matters included in the Reincorporation Proposal described in this Proxy
Statement. Pursuant to the terms of the Merger Agreement, the New Certificate
and New Bylaws will replace the Company Articles and Company Bylaws as the
charter documents affecting corporate governance and shareholders' rights. For a
description of the differences between the Company Articles and Company Bylaws
and the New Certificate and New Bylaws, see "Comparison of
Certain Charter Document Provisions," below.
The approval of the Reincorporation Proposal will affect certain rights
of the Company's shareholders. Accordingly, shareholders are urged to carefully
read this Proxy Statement and the Annexes hereto. Shareholders of the Company
whose shares are not voted in favor of the Reincorporation Proposal will have
statutory dissenter's rights. See "Rights of Dissenting Shareholders," below.
Principal Features of the Reincorporation Proposal
At the Effective Time of the Merger (as defined in the Merger
Agreement), the separate existence of the Company will cease and Merger Corp.,
to the extent permitted by law, will succeed to all business, properties, assets
and liabilities of the Company. Each Common Share of the Company issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger, be converted into one share of Common Stock, $.01 par value, of Merger
Corp. ("Merger Corp. Common Stock"). At the Effective Time, certificates which
immediately prior to the Effective Time represented Common Stock of the Company,
including Common Stock held in the treasury of the Company, will be deemed for
16
all purposes to represent the same number of shares of Merger Corp. Common
Stock. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF MERGER CORP.
Approval of the Reincorporation Proposal will not result in any change
in the ultimate name, business, management, assets or liabilities of the
Company. The Directors and Officers of the Company, including those Directors
elected at the Annual Meeting, will be the Directors of Merger Corp. following
the Merger. Following the consummation of the Merger, Merger Corp. Common Stock
will be listed on the NASD Over-The-Counter Bulletin Board ("OTCBB"), where the
Common Stock of the Company is currently listed. The OTCBB will consider the
delivery of existing stock certificates representing Common Stock of the Company
as constituting "good delivery" of shares of Merger Corp. Common Stock in
transactions subsequent to the Merger.
Pursuant to the terms of the Merger Agreement, each option and warrant
to purchase Common Stock of the Company outstanding immediately prior to the
Effective Time of the Merger (including, without limitation each option granted
under the Company's 1992 Stock Option Plan and 1997 Stock Option Plan, each
option granted under an informal, non-qualified plan, and each other outstanding
option and each warrant to purchase Common Stock of the Company) will become an
option or warrant to purchase Merger Corp. Common Stock, subject to the same
terms and conditions as set forth in the 1992 Stock Plan, 1997 Stock Option Plan
or other agreement pursuant to which such option or warrant was granted. All
employee benefit plans and other agreements and arrangements of the Company will
be continued by Merger Corp. upon the same terms and subject to the same
conditions as currently in effect. Upon approval by the Company's shareholders
of the 1998 Stock Option Plan, its terms and conditions will apply to Merger
Corp.
In accordance with generally accepted accounting principles, the
Company expects that the Merger will be accounted for as a reorganization of
entities under common control at historical cost in a manner similar to a
pooling of interests. Under this method, the assets and liabilities of the
combining entities will be carried forward at their recorded historical book
values.
It is anticipated that, if approved by the shareholders, the Merger
will become effective as soon as practicable after the Annual Meeting. However,
the Merger Agreement provides that the Merger may be abandoned by the Board of
Directors of either the Company or Merger Corp. prior to the Effective Time,
either before or after shareholder approval. In addition, the Merger Agreement
may be amended prior to the Effective Time, either before or after shareholder
approval; provided, however, that the Merger Agreement may not be amended after
shareholder approval if such amendment would (1) alter or change the amount or
kind of shares to be received by shareholders in the Merger, (2) alter or change
any term of the New Certificate, (3) alter or change any of the terms and
conditions of the Merger Agreement if such alteration or change would adversely
affect the shareholders, or (4) violate applicable law.
17
Comparison of Certain Charter Document Provisions
The New Certificate and New Bylaws are similar to the Company Articles
and Company Bylaws with respect to most material provisions. Differences between
the New Certificate and New Bylaws and the Company Articles and Company Bylaws
are primarily the result of differences between the Delaware Law and the New
Jersey Law. See "Comparison of Shareholders' Rights under the New Jersey Law and
the Delaware Law," below. Significant provisions of the New Certificate and New
Bylaws, and certain important similarities and differences between them and the
Company Articles and the Company Bylaws of the Company, are discussed below.
Capital Stock. The authorized capital stock of the Company currently
consists of 10,000,000 shares of Common Stock, $.01 par value per share, and
1,000,000 shares of Preferred Stock, $.01 par value ("Preferred Shares"). No
Preferred Shares have been issued. As of the effective date of the Merger
Agreement, 3,877,300 shares of Common Stock were issued and outstanding and, as
of the effective date of the Merger Agreement, a total of 3,316,000 shares of
Common Stock have been reserved for issuance.
Of the reserved shares of Common Stock, a total of 1,500,000 shares
have been reserved and evenly divided among each of the Company's 1992, 1997 and
1998 Stock Option Plans. Options to purchase 500,000 shares of Common Stock are
currently outstanding, but have not yet been granted under the 1998 Stock Option
Plan.
The November 1997 initial public offering ("IPO") of the Company
resulted in the reservation for issuance of sufficient Common Stock to cover
680,000 Class A Warrants. Each Class A Warrant entitles the holder, commencing
November 19, 1998 and ending November 19, 2002, to purchase one share of the
Company's Common Stock at an exercise price of $5.80 per share. The Underwriters
of the IPO were also given the option to purchase an aggregate of 68,000 Units
(each Unit consisting of one share of Common Stock and one Class A Warrant).
These Underwriters' Options are exercisable for the four-year period commencing
November 19, 1998 at a per Unit exercise price of $9.375.
Another 600,000 shares of Common Stock are reserved for issuance and
available for the options granted pursuant to the terms of the employment
agreements of Messrs. Dugger and Moroney. An additional 200,000 shares of Common
Stock are reserved for issuance pursuant to the options granted to Messrs.
Cleaver and Cox under their employment agreements, and another 100,000 shares of
Common Stock are reserved for issuance in connection with Mr. Cox's non-plan
stock options for additional services to assist the Company in certain proposed
acquisitions.
Further shares of Common Stock are reserved for issuance to cover
warrants to purchase an aggregate of 100,000 shares of Common Stock at an
exercise price of $2.50 per share were issued to Creative Technologies, Inc. in
December, 1996.
The capitalization of Merger Corp. will consist of 50,000,000 shares of
Common Stock, par value $.01 per share ("Merger Corp. Common Stock"), and
1,000,000 shares of Preferred Stock, par value $.01 ("Merger Corp. Preferred
18
Stock"). Other than the change in the number of authorized shares of Merger
Corp. Common Stock, the provisions of the New Certificate setting the terms of
Merger Corp. Common Stock are unchanged from the provisions of the Company
Articles with regard to the Common Stock of the Company.
The availability of the additional authorized shares of Merger Corp.
Common Stock and Merger Corp. Preferred Stock will give the Board of Directors
of Merger Corp. flexibility in negotiating and establishing the terms of
possible future acquisitions and financings. Other purposes for which the
additional authorized shares could be used include stock dividends or stock
splits, conversions of future issues of convertible securities, exchanges for
outstanding debt, contributions to employee benefit plans, acquisitions of other
entities, or other corporate purposes not now anticipated.
The Board of Directors of Merger Corp. will be able to authorize the
issuance of additional shares of Merger Corp. Common Stock and Merger Corp.
Preferred Stock for the foregoing purposes without further shareholder approval,
unless required by a particular transaction, by applicable law, or by the rules
of the OTCBB. Shareholders of Merger Corp. will have no preemptive rights to
purchase any shares of Merger Corp. Common Stock or Merger Corp. Preferred Stock
issued in the future. Depending upon the terms thereof, the issuance of
additional shares of Merger Corp. Common Stock or Merger Corp. Preferred Stock
may or may not have a dilutive effect of the present equity ownership position
of Merger Corp.'s then existing holders of Merger Corp. Common Stock or Merger
Corp. Preferred Stock, as the case may be.
The Board of Directors of the Company (which will be the Board of
Directors of Merger Corp. after completion of the Merger) believes it is
advisable for Merger Corp. to have at its disposal additional authorized shares
of Merger Corp. Common Stock in order to enable Merger Corp., as the need may
arise, to take prompt advantage of market conditions and the availability of
favorable business opportunities without the delay and expense incident to
holding a special meeting of Merger Corp. shareholders.
The New Jersey Law and the Delaware Law are similar with respect to the
manner in which directors may fix the terms of a series of preferred stock and
the terms which may be so fixed. In Delaware or New Jersey, the certificate of
incorporation may authorize the directors to fix the terms of a series of
preferred stock and/or provide for different voting rights between series of
preferred stock. Both the Company Articles and the New Certificate permit the
Board of Directors to exercise broad discretion in fixing the terms and/or
voting rights of a series of preferred stock.
Preemptive Rights. Under the New Jersey Law and the Delaware Law,
shareholders have preemptive rights to purchase shares only if the certificate
of incorporation so provides. The Company Articles and the New Certificate do
not provide shareholders with preemptive rights.
Compromises with Creditors and Shareholders. The Delaware Law provides
that a certificate of incorporation may contain a provision allowing for a
compromise or arrangement between a corporation and its creditors or
shareholders. Under such a provision, whenever such a compromise or arrangement
is proposed, a Delaware court may order a meeting for the purpose
19
of eliciting an agreement to the compromise or the arrangement which would be
binding on all such creditors and/or shareholders and the corporation. The New
Certificate contains such a provision.
Board of Directors; Committees. Under the Company Bylaws, the number of
directors which shall constitute the Board of Directors is determined by a
resolution of the Directors, provided that such number of Directors shall be not
less than one. This is unchanged under the New Bylaws.
Under the Company Bylaws, a majority of the directors in office
constitutes a quorum for the transaction of business by the Board of Directors,
and an act by a majority of the quorum of Directors constitutes an act of the
Board of Directors. The New Bylaws will provide equivalent provisions.
The Delaware Law provides that a transaction between a corporation and
one or more of its directors or officers or an entity in which one or more of
its directors or officers has an interest may not be voided if: (1) the material
facts of the relationship or interest is disclosed or known to the board or
committee so deciding and the contract or transaction is authorized in good
faith by a majority vote of the disinterested shareholders, even if the number
of disinterested directors is less than a quorum; (2) the material facts of the
relationship or interest is disclosed to the shareholders and a majority of the
shareholders approve of the transaction; or (3) the contract or transaction is
fair and reasonable to the corporation. A similar provision under the New Jersey
Law permits a transaction to be declared void if it is between a corporation and
one or more directors or entities in which a director has an interest.
Under both the Company Bylaws and New Bylaws, special meetings of the
Board of Directors of the Company may be called by the Chairman of the Board,
the President, or any two directors. Under the New Bylaws, special meetings of
the Board of Directors may be called by certain officers or at the request of
directors constituting one-third of the directors then in office, but not less
than two directors.
The New Jersey Law allows the Board of Directors, by resolution adopted
by a majority of the entire Board, to designate an Executive Committee or other
committee or committees, each consisting of one or more members, with the power
and authority (to the extent permitted by law) to act on behalf of the entire
Board if the certificate or bylaws so provides. The Company Articles provide for
this. The Delaware Law allows this designation without the need to so provide in
the certificate or the bylaws. The New Bylaws will provide that, in the absence
or disqualification of a member of the Executive Committee, the member or
members present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
Board member to act at the meeting in the place of such absent or disqualified
member.
Cumulative Voting. The Company Articles and Company Bylaws do not
provide for cumulative voting in the election of directors, nor do the New
Certificate and New ByLaws.
20
Therefore the holders of a majority of the voting power of the Company will be
entitled to elect all of the directors of Merger Corp.
Director Liability and Indemnification of Officers and Directors. Both
the New Jersey Law and the Delaware Law contain provisions and limitations
regarding directors' liability and regarding indemnification by a corporation of
its officers, directors and employees.
The New Jersey Law permits a New Jersey corporation to include a
provision in its certificate of incorporation which eliminates or limits the
personal liability of a director or officer to the corporation or its
shareholders for monetary damages for breach of fiduciary duties as a director
or officer. However, no such provision may eliminate or limit the liability of a
director or officer for any breach of duty based upon an act or omission (i) in
breach of the director's or officer's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit. Under
the New Jersey Law, corporations are also permitted to indemnify directors in
certain circumstances and required to indemnify directors under certain
circumstances. Under the New Jersey Law, a director, officer, employee or agent
may, in general, be indemnified by the corporation if he has acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. In
addition, under the New Jersey Law, corporations must indemnify a director to
the extent the director has been successful on the merits or otherwise. The
Company Articles include such a provision. The Company Articles do not have any
effect on the availability of equitable remedies (such as an injunction or
rescissions) for breach of fiduciary duty. However, as a practical matter,
equitable remedies may not be available in particular circumstances.
The Delaware Law permits a corporation to include a provision in its
certificate of incorporation which eliminates or limits the personal liability
of a director to the corporation or its shareholders for monetary damages in the
case of a breach of fiduciary duties by a director, including conduct which
could be characterized as negligence or gross negligence. However, no such
provision may eliminate or limit the liability of a director (i) in the case of
a breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for the unlawful
payment of dividends or unlawful stock purchase or redemption or other
violations of Section 174 of the Delaware Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision may be extended to persons other than directors if such persons
exercise or perform any of the powers or duties otherwise conferred or imposed
upon the board of directors. The Delaware Law further provides that no such
provision can eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provision becomes effective.
Under the Delaware Law, a corporation has the power to indemnify a director
against judgments, settlements and expenses in any litigation or other
proceeding other than a derivative suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to a criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. The indemnification provisions of the
Delaware Law make mandatory the indemnification of a
21
director to the extent that the director has been successful on the merits or
otherwise, thus possibly requiring indemnification of settlements in certain
instances. The Delaware Law also provides that a director may be indemnified by
the corporation for expenses of a derivative suit even if he is not successful
on the merits, provided he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
subject, in the case of an adverse judgment, to court approval. The New
Certificate includes such a provision.
Amendments to Bylaws. The New Jersey Law provides that a Board of
Directors has the power to make, alter and repeal a corporation's bylaws, unless
such power is reserved to the corporation's shareholders in the corporation's
certificate of incorporation. The Company Bylaws do not reserve such power to
the shareholders. Under the Delaware Law, the shareholders of a Delaware
corporation and, if the certificate of incorporation so provides, the Board of
Directors, have the power to adopt, amend or repeal a corporation's bylaws. The
New Certificate grants the Board of Directors the power to amend the New Bylaws,
except with respect to any provisions relating to the classification of
directors as Classes A and B or the election of directors.
Board of Directors. Under the New Jersey Law, a Board of Directors may
consist of one or more members as provided in the bylaws and subject to any
provision contained in the certificate of incorporation. Under the Delaware Law,
a Board of Directors of a corporation may consist of one or more members as
provided in the bylaws, unless the certificate of incorporation fixes the number
of directors. The New Certificate does not fix the number of directors.
Under the New Jersey Law, only the shareholders have the power to
adopt, amend or repeal regulations; such power may not be conferred upon the
directors. A Delaware corporation may, in its certificate of incorporation,
confer the power to adopt, amend or repeal bylaws upon the directors. Under the
New Certificate, the directors of Merger Corp. are granted such power, although
such power does not preempt or otherwise affect the power of shareholders also
to amend the New Bylaws.
Dividends. The New Jersey Law prohibits a corporation from making a
distribution to its shareholders if, after giving effect to such distribution,
the corporation would be unable to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than its
total liabilities. The Delaware Law permits a corporation to pay dividends out
of any surplus. If it does not have a surplus, a dividend may be paid out of any
net profits for the fiscal year in which the dividend is paid or for the
preceding fiscal year (provided that such payment will not reduce capital below
the amount of capital represented by all classes of shares having a preference
upon the distribution of assets).
Comparison of Shareholders' Rights under New Jersey Law and Delaware Law
Although it is impracticable to compare all of the aspects in which the
New Jersey Law and the Delaware Law differ with respect to shareholders' rights,
the following is a summary of certain significant differences. See also "Certain
Charter Document Provisions," above.
22
Amendment of Articles/Certificate of Incorporation. To amend a
corporation's articles of incorporation, the New Jersey Law calls for the
approval of shareholders holding a majority of the voting stock entitled to vote
thereon (and, if applicable, a majority of the outstanding stock of each class
entitled to vote thereon) unless the corporation's articles of incorporation
require a greater percentage. The Company Articles do not require such a
percentage. The Delaware Law requires the approval of shareholders holding a
majority of the voting power of the outstanding stock of the corporation (and,
if applicable, a majority of the outstanding stock of each class entitled to
vote thereon) in order to amend the corporation's certificate of incorporation,
unless a greater number or proportion is specified in the certificate of
incorporation. The New Certificate does not specify such greater number or other
proportion of holders of securities having power to vote.
Right to Call a Special Meeting of Shareholders. The New Jersey Law
provides that a special meeting of shareholders may be called by the president,
the board of directors, any shareholder, director, officer or other person as
may be provided in the bylaws. Upon application of the holder or holders of not
less than ten (10) percent of all the shares entitled to vote at a meeting, the
Superior Court of New Jersey, for good cause shown, may order that a special
meeting be called. The Delaware Law provides that only the board of directors or
such person or persons as may be authorized by the certificate of incorporation
or bylaws may call special meetings of the shareholders. The New Bylaws provide
that special meetings of shareholders may be called by the Chairman or President
or the Secretary upon the written request of a majority of the Board of
Directors, provided that such request must state the purpose(s) of the proposed
meeting.
Anti-Takeover Provisions. The New Jersey Law provides, among other
things, that any person making an offer to purchase in excess of ten (10)
percent (or such amount which, when aggregated with such person's present
holdings, exceeds ten (10) percent of any class of equity securities) of any
corporation or other issuer of securities organized under the laws of New Jersey
must, 20 days before the offer is made, file a disclosure statement with the
target company and with the Bureau of Securities of the Division of Consumer
Affairs of the New Jersey Department of Law and Public Safety (the "Bureau").
Such a takeover bid may not proceed until after the receipt by the
filing party of the Bureau's permission. Such permission may not be denied
unless the Bureau, after a public hearing, finds that (i) the financial
condition of the offeror is such as to jeopardize the financial stability of the
target company or prejudice the interests of any employees or security holders
who are unaffiliated with the offeror, (ii) the terms of the offer are unfair or
inequitable to the security holders of the target company, (iii) the plans and
proposals which the offeror has to make any material change in the target
company's, business, corporate structure, or management are not in the interest
of the target company's remaining security holders or employees, (iv) the
competence, experience and integrity of those persons who would control the
operation of the target company are such that it would not be in the interest of
the target company's remaining security holders or employees to permit the
takeover, or (v) the terms of the takeover bid do not comply with the provisions
of Chapter 10A of the New Jersey Law.
23
Chapter 10(A) was added to the New Jersey law in 1986 to protect
shareholders and other corporate "constituents." It generally provides that no
resident domestic corporation shall engage in any business combination with any
interested stockholder for a period of 5 years following that interested
stockholder's stock acquisition date unless the business combination is approved
by the Board of Directors prior to that stock acquisition date. An "interested
stockholder" is any person (other than the resident domestic corporation or its
subsidiary) that (i) is the beneficial owner directly or indirectly, of ten (10)
percent or more of the voting power of the outstanding voting stock of the
resident domestic corporation, or (ii) is an affiliate or associate of that
resident domestic corporation who, at any time within the five year period
immediately prior to the date in question, was a beneficial owner. A "beneficial
owner" of stock is a person that, individually or with or through any of its
affiliates or associates(i) beneficially owns that stock directly or indirectly,
(ii) has the right to acquire or vote that stock, or (iii) has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of that stock with any other beneficial owner thereof. An "affiliate"
of a beneficial owner is a person that directly or indirectly through one or
more intermediaries controls, or is controlled by or under common control with,
the beneficial owner.
Accordingly, the New Jersey law gives the Company's Board of Directors
a veto power over any business combination proposed by one who directly or
indirectly acquires 10% or more of the Company's voting stock that lasts for
five years. The "business combinations" at which these provisions are directed
include any merger or consolidation.
Unless it falls under certain excluded categories of transactions, a
business combination is prohibited unless any one of the following three
conditions are satisfied: (1) the Board of Directors must approve the business
combination prior to the stock acquisition date of the interested stockholder;
(2) the holders of two-thirds of the voting stock of the resident domestic
corporation not beneficially owned by the interested stockholder must approve
the combination by affirmative vote at a meeting called for that purpose; or (3)
(a) the shareholders of the resident domestic corporation must receive the
higher of the maximum price paid by the interested stockholder during the five
years preceding the announcement date or the date the interested stockholder
became such, whichever is higher, or the market value of the corporation's
common stock on the announcement date or the interested stockholder's stock
acquisition date, whichever yields a higher price, (b) the holder of stock other
than Common Stock receives a similarly determined price, taking into account the
highest preferential amount per share to which the holders of such shares are
entitled in the event of any liquidation, dissolution or winding up of the
resident domestic corporation, plus any preferential dividends to which they
would be entitled that is not included in the preferential amount, (c) the
consideration to the stockholders is paid in cash or in the same form that the
interested stockholder used to acquire the largest block of stock that he
acquired, (d) the holders of all outstanding stock not owned by the interested
stockholder received the consideration required by the preceding paragraphs in
the business combination, and (e) the interested stockholder did not become the
beneficial owner of any additional shares of stock of the resident domestic
corporation between his stock acquisition date and the date of consummation of
the business combination, except as part of the transaction that resulted in his
becoming an interested stockholder by virtue of proportionate stock splits,
dividends or
24
distributions not themselves constituting a business combination, to a business
combination meeting the conditions of paragraph (c) bought to purchase at a
price that would have satisfied the requirements of paragraphs (a), (b) and (c).
Delaware's anti-takeover provision, embodied in Section 203 of the
Delaware Law, provides that if a person acquires fifteen (15) percent or more of
a corporation's voting stock (thereby becoming an "interested stockholder") that
person may not engage in a wide range of transactions ("business combinations")
with the corporation for a period of three (3) years following the date the
person became an interested stockholder unless (i) the board of directors
approved either the business combination or the transaction which resulted in
the person acquiring such voting stock prior to that acquisition date, (ii) upon
consummation of the transaction which resulted in the person becoming an
interested stockholder, that person owned at least 85 percent of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding shares owned by officers and directors and shares owned by employee
stock plans in which participants do not have the right to confidentially
determine whether shares will be tendered in a tender or exchange offer), or
(iii) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 66-2/3 percent of the outstanding voting stock not
owned by the interested stockholder.
For the purpose of determining whether a stockholder is the "owner" of
fifteen (15) percent or more of a corporation's voting stock for purposes of
Section 203, ownership is defined broadly to include beneficial ownership and
other indicia of control. A "business combination" is also defined broadly as
including (i) mergers and sales or other dispositions of ten (10) percent or
more of the assets of a corporation with or to an interested stockholder, (ii)
certain transactions resulting in the issuance or transfer to the interested
stockholder of any stock of the corporation or its subsidiaries, (iii) certain
transactions which would result in increasing the proportionate share of the
stock of the corporation or its subsidiaries owned by the interested
stockholder, and (iv) receipt in certain instances by the interested stockholder
of the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits.
The restrictions placed on interested stockholders under the Delaware
Law do not apply under certain circumstances, including, but not limited to, the
following: (i) if the corporation's original certificate of incorporation
contains a provision by which it expressly elects not to be governed by the
statute, (ii) if the corporation, by action of its shareholders, adopts an
amendment to its bylaws or certificate of incorporation expressly electing not
to be governed by Section 203, provided that such an amendment is approved by
the affirmative vote of not less than a majority of the outstanding shares
entitled to vote and that such an amendment will not be effective until twelve
(12) months after its adoption and will not apply to any business combination
with a person who became an interested stockholder at or prior to such adoption,
or (iii) if the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or the
required notice of the proposed transaction which (a) constitutes one of the
transactions described hereafter; (b) is with or by a person who either was not
an interested stockholder during the previous three years or who became an
interested
25
stockholder with the approval of the corporation's board of directors; and (c)
is approved or not opposed by a majority of the members of the board of
directors then in office (but not less than one) who were directors prior to any
person becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.
The proposed transactions referred to above are limited to (i) a merger
or consolidation of the corporation (except for a merger in which a vote of the
stockholders of the corporation is not required); (ii) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions), whether as part of a dissolution or otherwise, of assets of
the corporation or of any direct or indirect majority-owned subsidiary of the
corporation (other than to any direct or indirect wholly-owned subsidiary or to
the corporation) having an aggregate market value equal to 50 percent or more of
either the aggregate market value of all of the assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation; or (iii) a proposed tender or exchange
offer for 50 percent or more of the outstanding voting stock of the corporation.
The corporation is required to give not less than twenty (20) days notice to all
interested stockholders prior to the consummation of any of the transactions
described above.
The New Certificate does not contain a provision electing not to be
governed by the statute. The Board of Directors of the Company believes that the
provisions of Section 203 will help assure that a change in control of the
Company does not occur without the consent of the Board of Directors and/or
stockholders of the Company and will encourage any person who seeks to acquire
control of the Company to do so by a negotiated transaction rather than through
a hostile takeover attempt.
Management of the Company is not aware of any attempt to acquire the
Company by a third party and does not have any plans to propose any other
changes to the charter documents or corporate structure of the Company which
would have an anti-takeover purpose or effect.
Mergers, Acquisitions and Other Transactions. In addition to the
anti-takeover provisions discussed above, the New Jersey Law provides that the
sale of substantially all of a corporation's assets, mergers, consolidations,
and any acquisitions which involve the issuance of additional voting shares,
such that the number of additional voting shares issued exceeds 40 percent of
the voting shares outstanding prior to the transaction, must be approved by a
majority of the shares (or, if applicable, a majority of each class or series of
shares) entitled to vote thereon.
Under the Delaware Law, mergers and consolidations require the approval
of a majority of the shares entitled to vote thereon. A sale of substantially
all of a Delaware corporation's assets must be approved by a majority of the
shares outstanding. However, Delaware Law does not require shareholder approval
for acquisitions, whether or not additional shares are issued to effectuate the
transaction. The Delaware Law allows a board of directors to issue additional
shares of stock, up to the amount authorized in a corporation's certificate of
incorporation, if the articles so provide. The articles of the New Certificate
gives the Board of Directors this power.
26
Dissolution. The New Jersey Law and the Delaware Law each provide that
a corporation may be voluntarily dissolved by (i) the written consent of all its
shareholders or (ii) the adoption by the corporation's board of directors of a
resolution recommending that the corporation be dissolved and submission of the
resolution to a meeting of shareholders, at which meeting the resolution is
adopted. The New Jersey Law requires the affirmative vote of the majority of
votes cast (assuming that the number of votes cast constitutes a quorum), while
the Delaware Law requires the affirmative vote of at least a majority of the
outstanding stock.
Action Without a Meeting. Under the New Jersey Law any action which may
be taken by shareholders at a meeting my be taken without a meeting upon the
unanimous written consent of the shareholders, whether or not they are entitled
to vote thereon. However, if shareholder approval is required to effectuate a
merger, consolidation, acquisition or sale of assets, the transaction may also
be effectuated if all of the shares entitled to vote thereon provide written
consent and all other shareholders are provided with appropriate notice. The
Delaware Law provides that, unless limited by the certificate of incorporation,
any action which may be taken at a meeting of stockholders may be taken without
a meeting, without prior notice and without a vote, if the holders of stock
having not less than the minimum number of votes otherwise required to approve
such action consent in writing. The New Articles contain no such limitation.
Loans to Directors/Officers/Employees. The New Jersey Law allows a
corporation to lend money to, or guaranty an obligation of, any director,
officer or employee of the corporation or any subsidiary whenever the directors
determine that such an action may reasonably be expected to benefit the
corporation. However, a director who votes for such an action may be held
jointly and severally liable if the loan or guaranty is made contrary to the
provisions of the New Jersey Law. The Delaware Law permits a corporation to lend
money to, or to guarantee an obligation of, an officer or other employee of the
corporation or any subsidiary thereof, including an officer or employee who is
also a director of the corporation or of its subsidiaries, whenever such loan or
guarantee may, in the judgment of the directors, reasonably be expected to
benefit the corporation. In contrast to the New Jersey Law, the Delaware Law
generally does not impose liability on the directors who vote for or assent to
the making of a loan to, or guaranteeing an obligation of an officer, director
or shareholder.
Appraisal Rights. Under the New Jersey Law, dissenting shareholders who
comply with certain procedures are entitled to appraisal rights in connection
with the merger, consolidation or sale, lease exchange or other disposition of
all or substantially all of the assets of a corporation not in the usual or
regular course of business, unless the certificate of incorporation otherwise
provides. However, appraisal rights are not provided when (i) the shares to vote
on such transaction are listed on a national securities exchange or held of
record by not less than 1,000 holders (or shareholders receive in such
transaction cash and/or securities which are listed on a national securities
exchange or held of record by not less than 1,000 shareholders) or (ii) no vote
of the corporation's shareholders is required for the proposed transaction. See
"Rights of Dissenting Shareholders," below.
27
Under the Delaware Law, dissenting stockholders who follow prescribed
statutory procedures are entitled to appraisal rights in connection with certain
mergers or consolidations, unless otherwise provided in the corporation's
certificate of incorporation. Such appraisal rights are not provided when (i)
the shares of the corporation are listed on a national securities exchange or
designated as a national market system security by the NASD or held of record by
more than 2,000 shareholders and stockholders receive in the merger shares of
the surviving corporation or of any other corporation the shares of which are
listed on a national securities exchange or designated as a national market
system security by the NASD, or held of record by more than 2,000 shareholders
or (ii) the corporation is the surviving corporation and no vote of its
stockholders is required for the merger.
Repurchases of Stock. The New Jersey Law prohibits a corporation from
repurchasing or redeeming its shares if (i) after giving effect to such
repurchase or redemption, the corporation would be unable to pay its debts as
they become due in the usual course of business or the corporation's total
assets would be less than its total liabilities, (ii) after giving effect to
such repurchase or redemption, the corporation would have no equity outstanding,
(iii) the redemption or repurchase price exceeded that specified in the
securities acquired, or (iv) such repurchase or redemption is contrary to any
restrictions contained in the corporation's certificate of incorporation. Under
the Delaware Law, a corporation may repurchase or redeem its shares only out of
surplus and only if such purchase does not impair its capital. However, a
corporation may redeem preferred stock out of capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with the Delaware Law.
Federal Income Tax Consequences of the Merger
The Company will not request a ruling from the United States Internal
Revenue Service regarding the federal income tax consequences of the Merger.
However, the Company believes the Merger will constitute a reorganization under
Section 368 of the Code. Consequently, holders of Common Stock will not
recognize any gain or loss for federal income tax purposes as a result of the
conversion of their Common Stock into shares of Merger Corp. Common Stock. For
federal income tax purposes, a holder's aggregate basis in the shares of Merger
Corp. Stock received in the Merger will equal such holder's aggregate basis in
the Common Stock converted therefor and such holder's holding period for Merger
Corp. Common Stock received in the Merger will include his holding period in the
Common Stock converted therefor.
Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to Merger Corp. pursuant
to the Merger. In addition, Merger Corp. will succeed to and take into account
the earnings and profits, accounting methods, and other tax attributes of the
Company specified in Section 381(c) of the Code.
Holders of Common Stock should consult their own tax advisors as to the
application and effect of state, local and foreign income and other tax laws to
the conversion of their Common Stock into shares of Common Stock of Merger Corp.
pursuant to the Merger.
28
Rights of Dissenting Shareholders
Chapter 11 of the New Jersey Law sets forth the rights of shareholders
of the Company who object to the Plan of Merger and the adoption of the Merger
Agreement. Any shareholder of the Company who does NOT vote in favor of the
Reincorporation Proposal or who duly revokes his vote in favor of such
transaction may be paid, in cash, the fair market value of his shares, provided
each and every one of the following actions is strictly complied with, within
the time provided therefor:
1. Prior to the taking of the vote of the shareholders of the Company,
a dissenting shareholder must file with the Company, addressed to the attention
of Robert F. Schaul, Esq., the Secretary of the Corporation, a written Notice of
Dissent therefrom, stating that the shareholder intends to demand payment for
his shares if the Merger occurs.
2. Within ten (10) days after the reincorporation has taken effect,
Merger Corp. must give written notice of the effective date of such action, by
certified mail, to each shareholder who filed a written Notice of Dissent.
3. Within twenty (20) days after the mailing of the notice of the
effective date of the reincorporation, any shareholder to whom Merger Corp. was
required to give such notice and who has filed a written Notice of Dissent, may
make written demand on Merger Corp. for the payment of the fair value of his
shares.
4. Not later than twenty (20) days after making such written demand for
payment, the dissenting shareholder must submit the certificate or certificates
representing his or her shares to Merger Corp., addressed to the attention of
Robert F. Schaul, Esq., for notation thereon that such demand has been made,
whereupon such certificate or certificates will be returned to the shareholder.
5. Not later than ten (10) days following such twenty (20) day written
demand period, if the dissenting shareholder has made such written demand,
Merger Corp. must mail the dissenting shareholder the balance sheet and the
surplus statement of Merger Corp. as of the last available date (which shall not
be earlier than twelve (12) months prior to the date of the Merger and a profit
and loss statement or statements for not less than a twelve (12) month period
ending on the date of such balance sheet. This mailing may be accompanied by a
written offer from Merger Corp. to pay each dissenting shareholder his shares at
a specified price deemed by Merger Corp. to be the fair value thereof.
6. If the fair value of the shares is not agreed upon between the
dissenting shareholder and Merger Corp. within thirty (30) days following the
ten (10) day mailing period, the shareholder is entitled to serve upon Merger
Corp., not later than thirty (30) days after the expiration of the thirty (30)
day period available (after the ten (10) day mailing period) for reaching
agreement on the fair value a demand that Merger Corp. commence an action in the
Superior Court of New Jersey for the determination of the fair value of the
shareholder's Merger Corp. shares.
29
7. If Merger Corp. fails to commence such action within 30 days
following receipt of the dissenting shareholder's demand that it do so, the
shareholder will be entitled to commence such an action in the name of Merger
Corp. not later than 90 days following his or her demand that Merger Corp.
commence such action. The Merger Corp. intends to commence such a proceeding in
the event of such a disagreement.
A negative vote on the Reincorporation Proposal does not constitute a
"written objection" required to be filed by an objecting stockholder. Failure by
a stockholder to vote against the Reincorporation Proposal will not, however,
constitute a waiver of rights under Chapter 11 of the New Jersey Law provided
that a written objection is properly filed and such stockholder has not voted in
favor of the Reincorporation Proposal.
The foregoing does not purport to be a complete statement of the
provisions of Chapter 11 of the New Jersey Law and is qualified in its entirety
by reference to the Section, a copy of which is reproduced in full as Annex IV.
Each stockholder intending to exercise dissenters' rights should review Annex
IV carefully and consult his counsel for a more complete and definitive
statement of the rights of dissenting stockholders and the proper procedure in
order to exercise such rights.
Under the Merger Agreement, the Board of Directors may abandon the
Reincorporation Proposal, even after stockholder approval, if for any reason the
Board determines that it is inadvisable to proceed, including considering the
number of shares for which appraisal rights have been exercised and the cost to
the Company thereof.
Vote Required
The affirmative vote of the holders of a majority of the votes cast at
the meeting is required for approval of the Reincorporation Proposal. A vote for
the Reincorporation Proposal will constitute specific stockholder approval for
the adoption of the Merger Agreement and all other transactions related to the
Reincorporation Proposal.
The affirmative vote of the holders of a majority of the votes entitled
to be cast is required for approval of the Reincorporation Proposal. A vote
"FOR" the Reincorporation Proposal also will constitute approval of the Merger,
the Merger Agreement, and the New Certificate, as well as the related matters
described in this Proxy Statement.
Amendment To the Company's Articles Of Incorporation To Increase the Company's
Authorized Capital Stock
Under the provisions of Article Fourth of the Company Articles, the
Company's current authorized capital consists of 10,000,000 shares of Common
Stock, par value of $.01 per share and 1,000,000 shares of Preferred Stock, par
value $.01 per share. There are presently 3,877,300 shares of the Company's
Common Stock issued and outstanding. There are 3,316,000 shares of stock
reserved for issuance, including shares of Common Stock
30
reserved for issuance under the Company's l992, 1997 and 1998 Stock
Option Plans and reserved for outstanding nonplan options and warrants,
including warrants issued in the company's initial public offering.
At a meeting held by the Board of Directors on September 4, 1998 a
resolution was unanimously adopted by the Board of Directors of the Company
approving for submission to a vote of the shareholders a proposal to amend
Article Fourth of the Company Articles to provide for total authorized capital
stock of the Company of 51,000,000 shares, which 50,000,000 shares will consist
of Common Stock and 1,000,000 shares will be Preferred Stock. In all other
respects the Company Articles would remain unchanged.
The Board of Directors believes that the authorization of an additional
40,000,000 shares of Common Stock will provide increased flexibility for future
growth of the Company and provide the opportunity for enhanced marketability of
the Company's Common Stock.
If approved, the increased number of authorized shares of Common Stock
would be available for issuance from time to time for such purposes and
consideration as the Board of Directors may approve and no further vote of
shareholders of the Company will be required, except as provided under the
applicable state corporation law or the rules of any national securities
exchange or interdealer quotation system on which shares of Common Stock are
listed or designated for quotation. The availability of additional shares for
issue, without the delay and the expense of obtaining the approval of
shareholders at a special meeting, will afford the Company greater flexibility
in acting upon proposed transactions. The additional shares of Common Stock for
which authorization is sought would be identical to the shares of Common Stock
of the Company now authorized. Current holders of Common Stock do not have
preemptive rights to subscribe for additional securities which may be issued by
the Company.
The Company has had, and may in the future have, discussions with
various parties regarding the issuance of additional shares of Common Stock. The
increase in the authorized number of shares of Common Stock of the Company would
permit the Board of Directors to consider such issuances or entertain the
possibility of declaring a stock dividend to its existing shareholders or to
provide for additional shares to be reserved for issuance under existing or
future stock option plans as a means of retaining qualified management personnel
and attracting additional qualified personnel to the Company. In addition to the
foregoing reasons for the increase in the authorized number of shares of capital
stock, the availability of the additional shares could also be utilized by the
Company as part of a defensive strategy against an unfriendly takeover attempt,
although no such action is presently known to exist nor presently anticipated.
Although the Company anticipates issuing the newly-authorized shares of Common
Stock at some time in the future for any one of the foregoing reasons, there are
no present intentions of doing so for any particular purpose.
31
Vote Required
The affirmative vote of holders of a majority of the issued and
outstanding shares of Common Stock of the Company present, or represented by
proxy, and entitled to vote thereon at the Meeting, is required for amendment of
the Company's Articles of Incorporation.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the approval of the
Reincorporation Proposal and the following amendment to Article Fourth of the
Articles, as approved by the Board of Directors:
"FOURTH: The total authorized capital stock of the Corporation shall
consist of 51,000,000 shares, which shall be divided into two classes
as follows:
50,000,000 shares of Common Stock, par value $.01 per share; and
1,000,000 shares of Preferred Stock, par value $.01 per share."
GENERAL
The Management of the Company does not know of any matters, other than
those stated in this Proxy Statement, that are to be presented for action at the
Meeting. If any other matters should properly come before the Meeting, proxies
will be voted on those other matters in accordance with the judgment of the
persons voting the proxies. Discretionary authority to vote on such matters is
conferred by such proxies upon the persons voting them.
The Company will bear the cost of preparing, printing, assembling and
mailing all proxy materials that may be sent to shareholders in connection with
this solicitation. Arrangements will also be made with brokerage houses, other
custodians, nominees and fiduciaries, to forward soliciting material to the
beneficial owners of the Common Stock of the Company held by such persons. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them. In addition to the solicitation of proxies by use of the
mails, officers and regular employees of the Company may solicit proxies without
additional compensation, by telephone or telegraph. The Company does not expect
to pay any compensation for the solicitation of proxies.
A copy of the Company's Form 10-KSB for the fiscal year ended July 31,
1998 as filed with the Securities and Exchange Commission, accompanies this
Proxy Statement. Upon written request, the Company will provide each shareholder
being solicited by this Proxy Statement with a free copy of any exhibits and
schedules thereto. All such requests should be directed to Flemington
Pharmaceutical Corporation, 43 Emery Avenue, Flemington, New Jersey 08822, Attn:
Robert F. Schaul, Secretary.
32
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. In voting by proxy in regard to items to be voted upon,
shareholders may (i) vote in favor of, or FOR, the item, (ii) vote AGAINST the
item or, (iii) ABSTAIN from voting on one or more items. Shareholders should
specify their choices on the enclosed proxy. If no specific instructions are
given with respect to the matters to be acted upon, the shares represented by
the proxy will be voted FOR the election of all directors, FOR approval of the
Reincorporation proposal and the amendment of the Company's Articles of
Incorporation to increase the Company's authorized capital, FOR the adoption of
the 1988 Stock Option Plan, and FOR the ratification the appointment of Wiss &
Company, LLP as the Company's independent certified public accountants for the
fiscal year ending July 31, 1999.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's
1999 Annual Meeting of Shareholders must be received by the Company at its
office in Flemington, New Jersey on or before _____________, 1999 in order to be
considered for inclusion in the Company's proxy statement and proxy relating to
such meeting. The Company has received no shareholders nominations or proposals
for the annual meeting.
VOTING OF PROXIES
Proxies may be revoked by shareholders at any time prior to the voting
thereof by giving notice of revocation in writing to the Secretary of the
Company or by voting in person at the Annual Meeting. If the enclosed proxy is
properly signed, dated and returned, the Common Stock represented thereby will
be voted in accordance with the instructions thereon. If no instructions are
indicated, the Common Stock represented thereby will be voted FOR the election
of Directors, FOR the Reincorporation Proposal and the amendment of the
Company's Articles of Incorporation, FOR the adoption of the 1998 Stock Option
Plan, and FOR the appointment of Wiss & Company, LLP as the Company's
independent certified public accounts for the fiscal year ended July 31, 1999.
REVOCABILITY OF PROXY
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, in
accordance with the Board of Directors' recommendations. Any person signing and
mailing the enclosed proxy may, nevertheless, revoke the proxy at any time prior
to the actual voting thereof by attending the Annual Meeting and voting in
person, by providing written notice of revocation of the proxy or by submitting
a signed proxy bearing a later date. Any written notice of revocation should be
sent to the attention of the Secretary of the Company at the address above. Any
shareholder of the Company has the unconditional right to revoke his or her
proxy at any time prior to the voting thereof by any action inconsistent with
the proxy, including notifying the Secretary of the Company in writing,
executing a subsequent proxy, or personally appearing at the Annual Meeting and
casting a contrary vote. However, no such revocation will be effective unless
and
33
until such notice of revocation has been received by the Company at or prior to
the Annual Meeting.
METHOD OF COUNTING VOTES
Unless a contrary choice is indicated, all duly executed proxies will
be voted in accordance with the instructions set forth on the proxy card. A
broker non-vote occurs when a broker holding shares registered in street name is
permitted to vote, in the broker's discretion, on routine matters without
receiving instructions from the client, but is not permitted to vote without
instructions on non-routine matters, and the broker returns a proxy card with no
vote (the "non-vote") on the non-routine matter. Under the rules and regulation
of the primary trading markets applicable to most brokers, both the election of
directors or the ratification of the appointment of accountants are routine
matters on which a broker has the discretion to vote if instructions are not
received from the client in a timely manner. Abstentions will be counted as
present for purposes of determining a quorum but will not be counted for or
against the election of directors or the ratification of independent auditors.
As to Item 1, the Proxy confers authority to vote for all of the six (6) persons
listed as candidates for a position on the Board of Directors even though the
block in Item 1 is not marked unless the names of one or more candidates are
lined out. The Proxy will be voted "For" Items 2, 3, and 4 unless "Against" or
"Abstain" is indicated. If any other business is presented at the meeting, the
Proxy shall be voted in accordance with the recommendations of Management.
By order of the Board of Directors
/s/ Harry A. Dugger, III
---------------------------------------
Harry A. Dugger, III
President and Chief Executive Officer
October 30, 1998
34
ANNEX 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October ____, 1998, by and
between Flemington Pharmaceuticals Corporation, a Delaware corporation
("Flemington-Del.") and Flemington Pharmaceutical Corporation, a New Jersey
corporation and the sole shareholder of Flemington-Del. ("Flemington-NJ").
WHEREAS, the Board of Directors and the shareholders of each of
Flemington-Del. and Flemington-NJ have each approved the merger of
Flemington-Del. with and into Flemington-NJ in accordance with the General
Corporation Law of the State of Delaware (the "GCL") and the New Jersey Business
Corporation Act (the "NJBCA") upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Flemington-Del. and Flemington-NJ hereby agree as follows:
1. The Merger. Upon the terms and conditions hereof, and in
accordance with the GCL and the NJBCA, at the Effective Time (as defined below),
Flemington-NJ shall be merged (the "Merger") with and into Flemington-Del.
2. Effective Time. As soon as practicable following the
execution hereof Flemington-NJ and Flemington-Del. shall file with the Secretary
of State of the State of Delaware a certificate of ownership and merger executed
in accordance with the relevant provisions of the GCL, and Flemington-Del. and
Flemington-NJ shall file with the Secretary of State of the State of New Jersey
a certificate of merger executed in accordance with the relevant provisions of
the NJBCA. The Merger shall become effective at the time each such filing is
completed (the "Effective Time").
3. Effects of the Merger. The Merger shall have the effects
set forth in the GCL and the NJBCA. Without limiting the generality of the
foregoing, at the Effective Time: (a) the separate existence of Flemington-NJ
shall cease; (b) Flemington-Del as the surviving corporation (the "Surviving
Corporation") shall possess all of the rights, privileges, powers, immunities,
purposes and franchises, both public and private, of each of Flemington-NJ and
Flemington-Del.; (c) all real and personal property, tangible and intangible of
every kind and description belonging to Flemington-NJ and Flemington-Del. shall
be vested in the Surviving Corporation without further act or deed, and the
title to any real estate or any interest therein vested in either Flemington-NJ
or Flemington-Del. shall not revert or in any way be impaired by reason of the
Merger; and (d) the Surviving Corporation shall assume all the obligations of
Flemington-NJ.
4. Certificate of Incorporation and Bylaws. The Certificate
of Incorporation and Bylaws of Flemington-Del. shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
5. Directors. The directors of Flemington-NJ at the Effective
Time shall be the initial directors of the Surviving Corporation, until their
successors shall have been duly elected or appointed and qualified.
6. Officers. The officers of Flemington-NJ at the Effective
Time shall be the initial officers of the Surviving Corporation, until their
successors shall have been duly appointed.
7. Conversion of Stock of Flemington-Del. and Flemington-NJ.
(a) At the Effective Time, each share of common stock, $.01
par value per share, of Flemington-NJ (the "Flemington-NJ Common
Stock") issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share, of
Flemington-Del. (the "Flemington-Del. Common Stock"). Upon the
surrender to Flemington-Del. of any certificates evidencing shares of
Flemington-NJ Common Stock by any holder thereof, Flemington-Del.
agrees to issue to such holder certificates evidencing an equal number
of shares of Flemington-Del. Common Stock or Flemington-Del.
(b) Each share of capital stock of Flemington-Del. issued and
outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
cancelled and retired and cease to exist.
8. Warrants and Options. At the Effective Time, any warrants
or options to purchase shares of Flemington-NJ Common Stock (the "Rights")
issued by Flemington-NJ and outstanding at the Effective Time shall, by virtue
of the Merger and without any action on the part of the holders of the Rights,
be converted into and become warrants or options, as the case may be (the "New
Rights") to purchase an equal number of shares of Flemington-Del. Common Stock
upon substantially the same terms and conditions as the Rights and any other
rights and obligations contained in the certificates evidencing the Rights shall
be deemed to be and shall become the rights and obligations of Flemington-Del.
At the Effective Time, by its signature below, Flemington-Del. assumes
absolutely, unconditionally and irrevocably the obligations of Flemington-NJ
under the certificates evidencing the Rights. At the Effective Time,
Flemington-Del. agrees to reserve for issuance shares of Flemington-Del. Common
Stock and Flemington-Del. equal in number to the number of shares of
Flemington-NJ Common Stock for which the New Rights may be exercised. Upon the
surrender to Flemington-Del. of any certificate evidencing Rights by any holder
of Rights, Flemington-Del. agrees to issue to any such holder a certificate
evidencing New Rights to purchase that number of shares of Flemington-Del.
Common Stock equal to the number of shares of Flemington-NJ Common Stock for
which the Rights so surrendered were exercisable.
9. Other Actions. From and after the Effective Time, the
parties hereto shall take such other and further actions, in addition to the
filings described in paragraph 1, as may be required by law to make the Merger
effective.
10. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws; provided, however, that the consummation and effectiveness
of the Merger shall be governed by and construed in accordance with the laws of
the State of Delaware and the laws of the State of New Jersey.
11. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
12. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement except for Sections 4, 7, and 8 (which are intended to
be for the benefit of the persons referred to therein, and may be enforced by
such persons).
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
FLEMINGTON PHARMACEUTICAL CORPORATION,
a New Jersey Corporation
By:____________________________________
Harry A. Dugger, III, President
FLEMINGTON PHARMACEUTICAL CORPORATION,
a Delaware corporation
By:____________________________________
Harry A. Dugger, III, President
ANNEX 2
CERTIFICATE OF INCORPORATION
OF
------------------
FLEMINGTON PHARMACEUTICAL CORPORATION
------------------
(Under Section 101 of the General Corporation Law of the State of Delaware)
* * * * * * * * * * * *
The undersigned, in order to form a corporation for the purposes
hereinafter stated pursuant to the provisions of the General Corporation Law of
the State of Delaware, does HEREBY CERTIFY AS FOLLOWS:
ARTICLE FIRST
NAME
1.1 The name of the corporation (hereinafter called the "Corporation")
is FLEMINGTON PHARMACEUTICAL CORPORATION.
ARTICLE SECOND
NAME AND ADDRESS OF REGISTERED AGENT
2.1 The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle,
zip code 19805. The name of the Corporation's registered agent at such address
is Corporation Service Company.
ARTICLE THIRD
NATURE OF BUSINESS
3.1 The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE FOURTH
CAPITAL STOCK
4.1 Authorized Stock. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is fifty-one million
(51,000,000) shares, which are to be divided into two classes as follows:
50,000,000 shares of Common Stock, par value $.001 per share;
and
1,000,000 shares of Preferred Stock, par value $.001 per
share.
4.2 Designation of Relative Rights, Prefrences and Qualifications of
Preferred Stock. The Board of Directors of the Corporation is authorized,
subject to limitations prescribed by law and the provisions of this Article, to
provide for the issuance from time to time in one or more series of any number
of the shares of Preferred Stock, and, by filing a certificate pursuant to the
Delaware General Corporation Law, to establish the number of shares to be
included in each such series, and to fix the designation, relative rights,
preferences, qualifications and limitations of the shares of each such series.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and whether
they shall be payable in preference to, or in another relation to, the dividends
payable on any other class or classes or series of stock;
(c) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;
(d) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or exchange,
including provision for adjustment of the conversion or exchange rate in such
events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the manner of selecting shares for redemption if less than all shares are to be
redeemed, the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(f) Whether that series shall be entitled to the benefit of a
sinking fund to be applied to the purchase or redemption of shares of that
series, and, if so, the terms and amounts of such sinking fund;
2
(g) The right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on, and the purchase or redemption or other
acquisition by the Corporation or any subsidiary of any outstanding stock of the
Corporation;
(h) The rights of the shares of that series in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and whether such rights shall be in preference to, or in another
relation to, the comparable rights of any other class or classes or series of
stock; and
(i) Any other relative, participating, optional or other
special rights, qualifications, limitations or restrictions of that series.
4.3 Status of Redeemed Shares of Preferred Stock. Shares of any series
of Preferred Stock which have been redeemed (whether through the operation of a
sinking fund or otherwise) or which, if convertible or exchangeable, have been
converted into or exchanged for shares of stock of any other class or classes
shall have the status of authorized and unissued shares of Preferred Stock of
the same series and may be reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of Preferred Stock, all subject to the
conditions and the restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issue of any
series of Preferred Stock.
4.4 Common Stock Voting Rights. Subject to the provisions of any
applicable law, or except as otherwise provided by the resolution or resolutions
providing for the issue of any series of Preferred Stock, the holders of
outstanding shares of Common Stock shall exclusively possess voting power for
the election of directors and for all other purposes, each holder of record of
shares of Common Stock being entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation.
4.5 Common Stock Dividends. Except as otherwise provided by the
resolution or resolutions providing for the issue of any series of Preferred
Stock, after payment shall have been made to the holders of Preferred Stock of
the full amount of dividends to which they shall be entitled pursuant to the
resolution or resolutions providing for the issue of any series of Preferred
Stock, the holders of Common Stock shall be entitled, to the exclusion of the
holders of preferred stock of any and all series, to receive such dividends as
from time to time may be declared by the Board of Directors.
4.6 Rights of Common Stock Upon Liquidation, Etc. Except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of Preferred Stock, in the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after payment shall have
been made to the holders of Preferred Stock of the full amount to which they
3
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any series of Preferred Stock, the holders of Common Stock shall be
entitled, to the exclusion of the holders of Preferred Stock of any and all
series, to share, ratably according to the number of shares of Common Stock held
by them, in all remaining assets of the Corporation available for distribution
to its stockholders.
4.7 Changes in Authorized Stock. The number of authorized shares of any
class may be increased or decreased by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote.
ARTICLE FIFTH
MANAGEMENT
5.1 The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The Board of
Directors of the Corporation shall have at all times at least one (1) director.
The number of directors shall be determined in the manner provided in the
By-Laws.
ARTICLE SIXTH
DURATION OF EXISTENCE
6.1 The Corporation is to have perpetual existence.
ARTICLE SEVENTH
POWERS OF THE BOARD OF DIRECTORS
7.1 In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation without the assent or vote of the
stockholders.
ARTICLE EIGHTH
ELECTION OF DIRECTORS
8.1 Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
8.2 Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
ARTICLE NINTH
LIABILITY OF DIRECTORS
9.1 A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
4
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation or the law,
(iii) under Section 174 of the General Corporation Law of
Delaware, or
(iv) for any transaction from which the director derived an
improper personal benefit.
9.2 If the General Corporation Law of Delaware is amended, changed or
modified to authorize corporate action further eliminating or limiting the
personal liability of directors to the Corporation, its stockholders or third
parties, then the liability of the directors of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of Delaware, as so amended, changed or modified. Any repeal, amendment or
modification of the provisions of this Article Ninth by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation relating to claims arising in connection with events which took
place prior to the date of such repeal, amendment or modification.
ARTICLE TENTH
INDEMNIFICATION
10.1 The Corporation shall indemnify any person who was or is a party
or witness, or is threatened to be made a party or witness, to any threatened,
pending or completed action, suit or proceeding (including, without limitation,
an action, suit or proceeding by or in the right of the Corporation), whether
civil, criminal, administrative or investigative (including a grand jury
proceeding), by reason of the fact that he or she (i) is or was a director or
officer of the Corporation or, (ii) as a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
employee, agent, partner or trustee (or in any similar position) of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, to the fullest extent permitted by the General Corporation Law of
Delaware and any other applicable law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding, or in connection with any appeal thereof;
provided, however, that, except as provided in Section 10.2 of this Article with
respect to proceedings to enforce rights to indemnification, the Corporation
shall indemnify any such person in connection with an action, suit or proceeding
(or part thereof) initiated by such person only if the initiation of such
action, suit or proceeding (or part thereof) was authorized by the Board of
Directors. Such right to indemnification shall include the right to payment by
the Corporation of expenses incurred in connection with any such action, suit or
proceeding in advance of its final disposition; provided, however, that the
5
payment of such expenses incurred by a director or officer in advance of the
final disposition of such action, suit or proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article or otherwise.
10.2 Any indemnification or advancement of expenses required under this
Article shall be made promptly, and in any event within sixty (60) days, upon
the written request of the person entitled thereto. If a determination by the
Corporation that the person is entitled to indemnification pursuant to this
Article is required, and the Corporation fails to respond within sixty (60) days
to a written request for indemnity, the Corporation shall be deemed to have
approved such request. If the Corporation denies a written request for indemnity
or advancement of expenses, in whole or in part, of if payment in full pursuant
to such request is not made within sixty (60) days, the right to indemnification
and advancement of expenses as granted by this Article shall be enforceable by
the person in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his or her right
to indemnification, in whole or in part, in any such action or proceeding shall
also be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for advancement of expenses
pursuant to this Article where the required undertaking has been received by the
Corporation) that the claimant has not met the standard of conduct set forth in
the General Corporation Law of Delaware, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
the Board of Directors, independent legal counsel or the stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of Delaware, nor the fact that there has been an actual determination by the
Corporation (including the Board of Directors, independent legal counsel or the
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
10.3 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to person who has ceased to be a director, officer, employee or agent, and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Any repeal or modification of the provisions of this Article Tenth shall
not affect any obligations of the Corporation or any rights regarding
indemnification and advancement of expenses of a director, officer, employee or
agent with respect to any threatened, pending or completed action, suit or
proceeding for which indemnification or the advancement of expenses is
requested, in which the alleged cause of action accrued at any time prior to
such repeal or modification.
10.4 The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
6
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article, the General Corporation Law of
Delaware or otherwise.
10.5 If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer of the Corporation as to
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including, without limitation, a
grand jury proceeding and an action, suit or proceeding by or in the right of
the Corporation, to the fullest extent permitted by any applicable portion of
this Article that shall not have been invalidated, by the General Corporation
Law of Delaware or by any other applicable law.
ARTICLE ELEVENTH
COMPROMISE WITH CREDITORS
11.1 Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, in a summary fashion, upon the
application of the Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the Delaware General Corporation Law or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of Section 279 of the Delaware General
Corporation Law, order a meeting of the creditors or class of creditors, and/or
of the stockholders or a class of stockholders of the Corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on this Corporation.
7
ARTICLE TWELFTH
CERTAIN BUSINESS COMBINATIONS
12.1 The Corporation expressly elects not to be governed by Section 203
of the General Corporation Law of the State of Delaware, as amended from time to
time, relating to business combinations with interested stockholders.
IN WITNESS WHEREOF, I have hereunto signed my name and affirm that the
statements made herein are true under penalties of perjury, this ____ day of
November, 1998.
__________________________________
Gerard S. DiFiore, Incorporator
REED SMITH SHAW & McCLAY LLP
One Riverfront Plaza
Newark, New Jersey 07102
8
ANNEX 3
BY-LAWS
OF
---------------------
FLEMINGTON PHARMACEUTICAL CORPORATION
(a Delaware corporation)
---------------------
ARTICLE I
OFFICES
The registered office of Flemington Pharmaceutical Corporation
(the "Corporation") shall be located in Wilmington, Delaware. The principal
office of the Corporation shall be in the City of Flemington, County of
Hunterdon, State of New Jersey. The Corporation may also have offices at such
other places within or without the State of Delaware as the Board may from time
to time determine or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
1. Place of Meetings.
Meetings of shareholders shall be held at the principal office
of the Corporation or at such place within or without the State of Delaware as
the Board shall authorize.
2. Annual Meeting.
The annual meeting of the shareholders shall be held on the
first Tuesday of the fifth month following the close of the Corporation's fiscal
year at 10:00 a.m. in each year if not a legal holiday, and if a legal holiday,
then on the next business day following at the same hour, or at such other date
and time as may be fixed by the Board of Directors, when the shareholders shall
elect a Board and transact such other business as may properly come before the
meeting.
3. Special Meetings.
Special meetings of the shareholders may be called by the
Board or by the President and shall be called by the President or the Secretary
at the request in writing of a majority of the Board or at the request in
writing by shareholders owning a majority in amount of the shares issued and
outstanding. Such request shall state the purpose or purposes of the proposed
meeting. Business transacted at s special meeting shall be confined to the
purposes stated in the notice.
4. Fixing Record Date.
For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or for
the purpose of determining shareholders entitled to receive payment of any
dividend or the allotment of any rights, or for the purpose of any other action,
the Board shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action. If no record date is fixed, it shall be determined in
accordance with the provisions of law.
5. Notice of Meetings of Shareholders.
Written notice of each meeting of shareholders shall state the
purpose or purposes for which the meeting is called, the place, date, and hour
of the meeting and, unless it is the annual meeting, shall indicate that it is
being issued by or at the direction of the person or persons calling the
meeting. Notice shall be given either personally or by mail to each shareholder
entitled to vote at such meeting, not less than ten nor more than sixty days
before the date of the meeting. If action is proposed to be taken that might
entitle the shareholders to payment for their shares, the notice shall include a
statement of that purpose and to that effect. If mailed, the notice is given
when deposited in the United States mail, with postage thereon prepaid, directed
to the shareholder at his address as it appears on the record of shareholders,
or, if he shall have filed with the Secretary & written request that notices to
him be mailed to some other address, then directed to him at such other address.
Unless the Board shall fix after the adjournment a new record date for an
adjourned meeting, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment was taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each shareholder of record entitled
to vote at the meeting.
6. Waivers.
Notice of meeting need not be given to any shareholder who
signs a waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by him.
7. Quorum of Shareholders.
Unless the Certificate of Incorporation provides otherwise,
the holders of a majority of the shares entitled to vote thereat shall
constitute a quorum at a meeting of shareholders for the transaction of any
business, provided that when a specified item of business is required to be
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voted on by a class or classes, the holders of a majority of the shares of such
class or classes shall constitute a quorum for the transaction of such specified
item of business.
When a quorum is once present to organize a meeting, it is not
broken by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the
absence of a quorum.
8. Proxies.
Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his
attorney-in-fact. No proxy shall be valid after expiration of eleven months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the shareholder executing it, except as otherwise
provided by law.
9. Qualification of Voters.
Every shareholder of record shall be entitled at every meeting
of shareholders to one vote for every share standing in his name on the record
of shareholders, unless otherwise provided in the Certificate of Incorporation.
10. Vote of Shareholders.
Except as otherwise required by statute or by the Certificate
of Incorporation:
(a) directors shall be elected by a plurality of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote in
the election;
(b) all other corporate action shall be authorized by a
majority of the votes cast.
11. List of Shareholders.
The officer who has charge of the stock ledger of the
Corporation, or the transfer agent of the Corporation's stock, if there be one
then acting, shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten days prior to the meeting, either at a place within the city where the
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meeting is to be held, at the place where the meeting is to be held, or at the
office of the transfer agent. A list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected by
any shareholder who is present.
12. Inspectors.
The Board of Directors may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed, or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any shareholder entitled to vote thereat, shall appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to faithfully execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the chairman of the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as inspector at an election of directors. Inspectors need
not be shareholders.
13. Written Consent of Shareholders.
Any action that may be taken by vote may be taken without a
meeting or written consent, setting forth the action so taken, signed by the
holders of all the outstanding shares entitled to vote thereon or signed by such
lesser number of holders as may be provided for in the Certificate of
Incorporation or Delaware General Corporation Law, and shall be filed with the
Secretary as part of the corporate records.
ARTICLE III
DIRECTORS
1. Board of Directors.
Subject to any provision in the Certificate of Incorporation
the business of the Corporation shall be managed by its Board of Directors, each
of whom shall be at least eighteen years of age and need not be shareholders.
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2. Number of Directors.
The number of directors shall be not less than three (3) nor
more than nine (9). However, when all of the shares are owned by less than three
shareholders, the number of directors may be less than three but not less than
the number of shareholders. The number of directors shall be fixed by the Board
from time to time.
3. Election and Term of Directors.
At each annual meeting of shareholders, the shareholders shall
elect directors to hold office until the next annual meeting. Each director
shall hold office until the expiration of the term for which he is elected and
until his successor has been elected and qualified, or until his prior
resignation or removal.
4. Newly Created Directorships and Vacancies.
(a) Newly created directorships resulting from an increase in
the authorized number of directors and vacancies occurring in the Board for any
reason, except the removal of directors without cause, may be filled by the
affirmative vote of a majority of the directors then in office, although less
than a quorum exists. Vacancies occurring by reason of the removal of directors
without cause shall be filled by vote of the shareholders. A director elected to
fill a vacancy caused by resignation, death, or removal shall be elected to hold
office for the unexpired term of his predecessor.
(b) If at any time, by reason of death or resignation or other
cause, the Corporation should have no directors in office, then any officer or
any shareholder or an executor, administrator, trustee or guardian of a
shareholder may call a special meeting of shareholders in accordance with the
provisions of these By-Laws. Each director elected to fill a vacancy shall hold
office until the next succeeding annual meeting of shareholders and until his
successor is elected and has qualified or until his earlier displacement from
office by resignation, removal, replacement or otherwise.
5. Removal of Directors.
Any or all of the directors may be removed for cause by vote
of the shareholders or by action of the Board. Directors may be removed without
cause only by vote of the shareholders.
6. Resignation.
A director may resign at any time by giving written notice to
the Board, the President, or the Secretary of the Corporation. Unless otherwise
specified by the notice, the resignation shall take effect upon receipt thereof
by the Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
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7. Quorum of Directors.
Unless otherwise provided in the Certificate of Incorporation,
a majority of the entire Board shall constitute a quorum for the transaction of
business or of any specified item of business. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat,
or if no director be present, the Secretary may adjourn such meeting to another
time and place, or such meeting, unless it be the annual meeting of the Board of
Directors need not be held. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called. Except as provided in Section 11 of this Article
III of these By-Laws, the directors shall act only as a Board and the individual
directors shall have no power as such.
8. Action of the Board.
(a) Unless otherwise required by law, the vote of a majority
of the directors present at the time of the vote, if a quorum is present at such
time, shall be the act of the Board. Each director present shall have one vote
regardless of the number of shares, if any, which he may hold.
(b) Whenever any action is required or permitted to be taken
by the Board or any committee thereof, such action may be taken without a
meeting if all members of the Board or the committee consent in writing to the
adoption of a resolution authorizing the action. The resolution and the written
consent thereto by members of the Board or committee shall be filed with the
minutes of the proceedings of the Board or committee. Meetings may also be held
by conference telephone.
9. Place and Time of Board Meetings; Notice; Adjournment.
(a) The Board may hold its meetings at the office of the
corporation or at such other places, either within or without the State of
Delaware, as it may, from time to time, determine.
(b) A regular annual meeting of the Board shall be held
immediately following the annual meeting of shareholders at the place of such
annual meeting of shareholders.
(c) Regular meetings of the Board may be held without notice
at such time and place as it from time to time shall determine.
(d) Special meetings of the Board shall be held upon notice to
the directors and may be called by the President upon three days' prior notice
given to each director either personally or by mail; or upon 24 hours' prior
notice to each director, if given by telephone, fax, cable, or wireless. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid. Special meetings shall be called by the President
or by the Secretary in a like manner on written request of two directors. Notice
of a meeting need not be given to any director who submits a waiver of notice
whether before or after the meeting or who attends the meeting without
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protesting prior thereto or at its commencement, the lack of notice to him.
Except as otherwise specifically required by these By-Laws, a notice or waiver
of notice of any regular or special meeting need not state the purposes of such
meeting.
(e) A majority of the Directors present, whether or not a
quorum is present, may adjourn any meeting to another time and place. Notice of
the adjournment shall be given to all Directors who were absent at the time of
the adjournment and, unless such time and place are announced at the meeting, to
the other Directors.
10. Chairman and Secretary of Meeting.
At all meetings of the Board, the chairman or, in his absence,
the President or, in his absence, Vice President or, in his absence, a chairman
chosen by the Board shall preside. The Secretary, or in his absence or inability
to act, any person appointed by the chairman, shall act as secretary of the
meeting and keep the minutes thereof.
11. Executive and Other Committees.
(a) The Board, by resolution adopted by a majority of the
entire Board, may designate from among its members an executive committee and
other committees, each consisting of one or more directors. Each such committee
shall serve at the pleasure of the Board.
(b) Any such committee, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors and
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
provided, however, that in the absence or disqualification of any member of such
committee or committees, the member of members thereof present at any meeting,
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Each committee
shall keep minutes of its proceedings and shall report such minutes to the Board
of Directors when required. All such proceedings shall be subject to revision or
alteration by the Board of Directors, provided, however, third parties shall not
be prejudiced by such revision or alteration.
(c) A majority of any committee may determine its action and
fix the time and place of its meetings, unless the Board of Directors shall
otherwise provide. Notice of such meetings shall be given to each member of the
committee in the manner provided for in Section 9 of this Article III. The Board
of Directors shall have the power at any time to fill vacancies in, to change
the membership of, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board of Directors from appointing one or more committees
consisting in whole or in part of persons who are directors of the Corporation;
provided, however, that no such committee shall have or may exercise any
authority of the Board of Directors.
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12. Compensation.
No compensation shall be paid to directors, as such, for their
services, but by resolution of the Board a fixed sum and expenses for actual
attendance at each regular or special meeting of the Board may be authorized.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
13. Liability of Directors in Certain Cases.
In case of any willful or negligent violation of the
provisions of Section 160 or 173 of the Delaware General Corporation Law, the
directors under whose administration the same may happen may be jointly and
severally liable to the Corporation, and to its creditors in the event of its
dissolution or insolvency, for the full amount of the dividend unlawfully paid,
or for the full amount unlawfully paid for the purchase or redemption of the
Corporation's stock, with interest from the time such liability accrued. Any
director who may have been absent when the same was done, or who may have
dissented from the act or resolution by which the same was done, may exonerate
himself from such liability by causing his dissent to be entered on the books
containing the minutes of the proceedings of the directors at the time the same
was done, or immediately after he has notice of the same.
14. Access to Books and Records.
Any director shall have a right to examine the Corporation's
stock ledger, a list of its stockholders and its other books and records for a
purpose reasonably related to his position as a director. A director shall, in
the performance of his duties be fully protected in relying in good faith upon
the books of account or reports made to the Corporation by any of its officers,
or by an independent certified accountant, or by an appraiser selected with
reasonable care by the Board of Directors, or in relying in good faith upon
other records of the Corporation.
ARTICLE IV
OFFICERS
1. Offices, Election, Term.
(a) The Board may elect or appoint a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, and a Treasurer, and such
other officers as it may determine, who shall have such duties, powers, and
functions as hereinafter provided.
(b) All officers shall be elected or appointed to hold office
until the meeting of the Board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he
is elected or appointed and until his successor has been elected or appointed
and qualified.
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2. Removal, Resignation, Salary.
(a) Any officer elected or appointed by the Board may be
removed by the Board with or without cause.
(b) In the event of the death, resignation, or removal of an
officer, the Board in its discretion may elect or appoint a successor to fill
the unexpired term.
(c) Any two or more offices may be held by the same person,
except the offices of President and Secretary.
(d) The salaries of all officers shall be fixed by the Board.
(e) The directors may require any officer to give security for
the faithful performance of his duties.
3. Chairman of the Board.
The Chairman of the Board shall be the chief executive officer
of the Corporation; he shall preside at all meetings of the shareholders and of
the Board; he shall have the management of the business of the Corporation and
shall see that all orders and resolutions of the Board are carried into effect.
4. President.
The President shall be the chief operating officer of the
Corporation and shall have the management of the operations of the Corporation.
If there be no Chairman of the Board, the President shall perform the duties of
the Chairman of the Board.
5. Vice-Presidents.
During the absence or disability of the President, the Vice
President or, if there are more than one, the Executive Vice President, shall
have all the powers and functions of the President. Each Vice President shall
perform such other duties as the Board shall prescribe.
6. Secretary.
The Secretary shall;
(a) attend all meetings of the Board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book
to be kept for that purpose;
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(c) give or cause to be given notice of all meetings of
shareholders and of special meetings of the Board;
(d) keep in safe custody the seal of the Corporation and affix
it to any instrument when authorized by the Board;
(e) when required, prepare or cause to be prepared and
available at each meeting of shareholders a certified list in alphabetical order
of the names of the shareholders entitled to vote thereat, indicating the number
of shares of each respective class held by each;
(f) keep all the documents and records of the Corporation as
required by law or otherwise in a proper and safe manner;
(g) perform such other duties as may be prescribed by the
Board.
7. Assistant Secretaries.
During the absence or disability of the Secretary, the
Assistant Secretary or, if there are more than one, the one so designated by the
Secretary or the Board, shall have all the powers and functions of the
Secretary.
8. Treasurer.
The Treasurer shall;
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and
disbursements in the corporate books;
(c) deposit all money and other valuables in the name and to
the credit of the Corporation in such depositories as may be designated by the
Board;
(d) disburse the funds of the Corporation as may be ordered or
authorized by the Board and preserve proper vouchers for such disbursements;
(e) render to the President and Board at the regular meetings
of the Board, or whenever they require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation;
(f) render a full financial report at the annual meeting of
the shareholders if so requested;
(g) be furnished by all corporate officers and agents, at his
request, with such reports and statements as he may require as to all financial
transactions of the Corporation;
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(h) perform such other duties as are given to him by these
by-laws or as from time to time are assigned to him by the Board or the
President.
9. Assistant Treasurer.
During the absence or disability of the Treasurer, the
Assistant Treasurer or, if there are more than one, the one so designated by the
Treasurer or by the Board, shall have all the powers and functions of the
Treasurer.
10. Sureties and Bonds.
In case the Board shall so require, any officer or agent of
the Corporation shall execute to the Corporation a bond in such sum and with
such surety or sureties as the Board may direct, conditioned upon the faithful
performance of his duties to the Corporation and including responsibility for
negligence and for the accounting for all property, funds, or securities of the
Corporation which may come into his hands.
ARTICLE V
CERTIFICATES FOR SHARES
1. Certificates.
The shares of the Corporation shall be represented by
certificates. They shall be numbered and entered in the books of the Corporation
as they are issued. They shall exhibit the holder's name and the number of
shares and shall be signed by the President or a Vice President and the
Treasurer or the Secretary, and shall bear the corporate seal. The signatures of
the officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or its employee, or if the shares are listed on a registered
national securities exchange or interdealer quotation system. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
A certificate representing shares shall not be issued until
the full amount of consideration therefor has been paid or received in
accordance with law except as Sections 152 and 153 of the Delaware General
Corporation Law may otherwise permit.
2. Books and Account and Record of Shareholders.
The books and records of the Corporation may be kept at such
places within or without the state of incorporation as the Board of Directors
may from time to time determine. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other officer or
agent designated by the Board of Directors.
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3. Lost or Destroyed Certificates.
The Board may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation, alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the Corporation a bond in such sum and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed. Anything herein to the contrary notwithstanding, the
Board of Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the State of
Delaware.
4. Transfers of Shares.
(a) Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the Corporation which shall be kept at its principal
office. No transfer shall be made within ten days next preceding the annual
meeting of shareholders.
(b) The Corporation shall be entitled to treat the holder of
record of any share as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person, whether or not it shall have express or other
notice thereof, except as expressly provided by the laws of the State of
Delaware.
5. Regulations.
The Board of Directors may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
6. Closing Transfer Books.
The Board shall have the power to close the share transfer
books of the Corporation for a period of not more than ten days during the
thirty day period immediately preceding (i) any shareholders' meeting, or (ii)
any date upon which shareholders shall be called upon to or have a right to take
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action without a meeting, or (iii) any date fixed for the payment of a dividend
or any other form of distribution, and only those shareholders of record at the
time the transfer books are closed shall be recognized as such for the purpose
of (A) receiving notice of or voting at such meeting, or (B) allowing them to
take appropriate action, or (C) entitling them to receive any dividend or other
form of distribution.
7. Fixing of Record Date.
In order that the Corporation may determine the shareholders
entitled to notice of, or to vote at, any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of shareholders of record entitled to notice of, or to vote at, a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
ARTICLE VI
DIVIDENDS
Subject to the provisions of the Certificate of Incorporation and to
applicable law, dividends on the outstanding shares of the Corporation may be
declared in such amounts and at such time or times as the Board may determine.
Before payment of any dividend, there may be set aside out of the net profits of
the Corporation available for dividends such sum or sums as the Board, from time
to time, in its absolute discretion deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board shall think
conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve.
ARTICLE VII
CORPORATE SEAL
The seal of the Corporation shall be circular in form and bear
the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Delaware." The seal may be used by causing it to be impressed
directly on the instrument or writing to be sealed, or upon adhesive substance
affixed thereto. The seal on the certificate for shares or upon any corporate
obligation for the payment of money may be a facsimile, engraved or printed.
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ARTICLE VIII
EXECUTION OF INSTRUMENTS
1. Execution of Contracts.
Except as otherwise required by statute, the Certificate of
Incorporation or these By-Laws, any contracts or other instruments may be
executed and delivered in the name and on behalf of the Corporation by such
officer or officers (including any assistant officer) of the Corporation as the
Board of Directors may from time to time direct. Such authority may be general
or confined to specific instances as the Board of Directors may determine.
Unless authorized by the Board of Directors or expressly permitted by these
By-Laws, an officer or agent or employee shall not have the power or authority
to bind the Corporation by any contract or engagement or to pledge its credit or
to render it pecuniarily liable for any purpose or in any amount.
2. Loans.
Unless the Board of Directors shall otherwise determine,
either (a) the Chairman of the Board or the President, singly, or (b) a Vice
President, together with the Treasurer, may effect loans and advances at any
time for the Corporation or guarantee any loans and advances to any subsidiary
of the Corporation, from any bank, trust company or other institution, or from
any firm, corporation or individual, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation, or guarantee of indebtedness of subsidiaries
of the Corporation, but no officer or officers shall mortgage, pledge,
hypothecate or transfer any securities or other property of the Corporation,
except when authorized by the Board of Directors.
3. Checks, Drafts, etc.
All checks, drafts, bills of exchange or other orders for the
payment of money out of the funds of the Corporation, and all notes or other
evidences of indebtedness of the Corporation, shall be signed in the name and on
behalf of the Corporation by such persons and in such manner as shall from time
to time be authorized by the Board of Directors.
4. Deposits.
All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may from time to
time designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board of Directors. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, checks, drafts and other orders
for the payment of money which are payable to the order of the Corporation may
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be endorsed, assigned and delivered by any officer or agent of the Corporation,
or in such manner as the Board of Directors may determine by resolution.
5. General and Special Bank Accounts.
The Board of Directors may from time to time authorize the
opening and keeping of general and special bank accounts with such banks, trust
companies or other depositories as the Board of Directors may designate or as
may be designated by any officer or officers of the Corporation to whom such
power of designation may from time to time be delegated by the Board of
Directors. The Board of Directors may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the provisions of
these By-Laws, as it may deem expedient.
6. Proxies in Respect of Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board
of Directors, the Chairman of the Board, the President, or a Vice President may
from time to time appoint an attorney or attorneys or agent or agents, of the
Corporation, in the name and on behalf of the Corporation to cast the votes
which the Corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, any of whose stock or other securities may
be held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing, in the name of
the Corporation as such holder, to any action by such other corporation, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal, or
otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE IX
FISCAL YEAR
The fiscal year shall begin on the first day of January in
each year or at such other time as may be designated by the Board of Directors.
ARTICLE X
REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the Certificate of Incorporation in these by-laws
shall include all amendments thereto or changes thereof unless specifically
excepted.
15
ARTICLE XI
MISCELLANEOUS
1. Interested Directors.
No contract or other transaction between the Corporation and
any other corporation shall be affected and invalidated by the fact that any one
or more of the Directors of the Corporation is or are interested in or is a
director or officer or are directors or officers of such other corporation, and
any director or directors, individually or jointly, may be a party or parties to
or may be interested in any contract or transaction of the Corporation or in
which the Corporation is interested; and no contract, act or transaction of the
Corporation with any person or persons, firm or corporation shall be affected or
invalidated by the fact that any director or directors of the Corporation is a
party or are parties to or interested in such contract, act or transaction, or
in any way connected with such person or persons, firms or associations, and
each and every person who may become a director of the Corporation is hereby
relieved from any liability that might otherwise exist from contracting with the
Corporation for the benefit of himself, any firm, association or corporation in
which he may be in any way interested.
2. Ratification.
Any transaction questioned in any shareholders' derivative
suit on the grounds of lack of authority, defective or irregular execution,
adverse interest of a director, officer or shareholder, nondisclosure,
miscomputation, or the application of improper principles or practices of
accounting, may be ratified before or after judgment, by the Board of Directors
or by the shareholders in case less than a quorum of Directors are qualified,
and, if so ratified, shall have the same force and effect as if the questioned
transaction had been originally duly authorized, and said ratification shall be
binding upon the Corporation and its shareholders and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE XII
INDEMNIFICATION
The Corporation shall, to the fullest extent permitted by the
laws of the State of Delaware, indemnify any and all persons whom it shall have
power to indemnify against any and all of the costs, expenses, liabilities or
other matters incurred by them by reason of having been officers, directors,
employees, or other agents of the Corporation, any subsidiary of the Corporation
or of any other corporation for which he acted in such capacity at the request
of the Corporation.
16
ARTICLE XIII
BY-LAW CHANGES
AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS
(a) Except as otherwise provided in the Certificate of
Incorporation, the by-laws may be amended, repealed, or adopted by vote of the
holders of the shares at the time entitled to vote in the election of any
directors. By-laws may also be amended, repealed, or adopted by the Board; but
any by-law adopted by the Board may be amended by the shareholders entitled to
vote thereon as hereinabove provided.
(b) If any by-law regulating an impending election of
directors is adopted, amended, or repealed by the Board, there shall be set
forth in the notice of the next meeting of shareholders for the election of
directors the by-law so adopted, amended, or repealed, together with a concise
statement of the changes made.
Adopted by the Board of Directors, this ______ day of November
1998.
FLEMINGTON PHARMACEUTICAL CORPORATION
____________________________________
Robert F. Schaul, Secretary
17
ANNEX 4
NEW JERSEY PERMANENT STATUTES
TITLE 14A. CORPORATIONS, GENERAL
14A:11-1.Right of shareholders to dissent
(1) Any shareholder of a domestic corporation shall have the right to dissent
from any of the following corporate actions
(a) Any plan of merger or consolidation to which the corporation is a party,
provided that, unless the certificate of incorporation otherwise provides
(i) a shareholder shall not have the right to dissent from any plan of merger or
consolidation with respect to shares
(A) of a class or series which is listed on a national securities exchange
or is held of record by not less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan of merger or
consolidation; or
(B) for which, pursuant to the plan of merger or consolidation, he will
receive (x) cash, (y) shares, obligations or other securities which, upon
consummation of the merger or consolidation, will either be listed on a national
securities exchange or held of record by not less than 1,000 holders, or (z)
cash and such securities;
(ii) a shareholder of a surviving corporation shall not have the right to
dissent from a plan of merger, if the merger did not require for its approval
the vote of such shareholders as provided in section 14A:10-5.1 or in
subsection 14A:10-3(4), 14A:10-7(2) or 14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business as conducted by such corporation, other than a transfer pursuant to
subsection (4) of N.J.S.14A:10-11, provided that, unless the certificate of
incorporation otherwise provides, the shareholder shall not have the right to
dissent
(i) with respect to shares of a class or series which, at the record date
fixed to determine the shareholders entitled to vote upon such transaction, is
listed on a national securities exchange or is held of record by not less than
1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of its net
assets to shareholders in accordance with their respective interests within one
year after the date of such transaction, where such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which, upon consummation of the
plan of dissolution will either be listed on a national securities exchange or
held of record by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
Amended 1973,c.366,s.60; 1988,c.94,s.64; 1995,c.279,s.21.
14A:11-2. Notice of dissent; demand for payment; endorsement of certificates
(1) Whenever a vote is to be taken, either at a meeting of shareholders or
upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon a
proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraph 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
Amended 1973,c.366,s.61; 1988,c.94,s.65.
14A:11-3. "Dissenting shareholder" defined; date for determination of
fair value
(1) A shareholder who has made demand for the payment of his shares in the
manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders at which
the proposed action was approved or as of the day prior to the day specified by
the corporation for the tabulation of consents to such action if no meeting of
shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or subsection
14A:10-7(4) in which shareholder approval is not required, as of the day prior
to the day on which the board of directors approved the plan of merger; or
(c) In the case of an acquisition of all the shares or all the shares of a
class or series by another corporation pursuant to section 14A:10-9, as of the
day prior to the day on which the board of directors of the acquiring
corporation authorized the acquisition, or, if a shareholder vote was taken
pursuant to section 14A:10-12, as of the day provided in paragraph
14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or depreciation
resulting from the proposed action.
Amended 1973,c.366,s.62; 1988,c.94,s.66.
14A:11-4. Termination of right of shareholder to be paid the fair value
of his shares
(1) The right of a dissenting shareholder to be paid the fair value of his
shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as provided by
subsection 14A:11-2(6), unless a court having jurisdiction, for good and
sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written consent of the
corporation;
(c) the fair value of the shares is not agreed upon as provided in this
Chapter and no action for the determination of fair value by the Superior Court
is commenced within the time provided in this Chapter;
(d) the Superior Court determines that the shareholder is not entitled to
payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets aside the
corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsections 14A:11-2(3),
14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action which has
taken place during the interim period. In such event, he shall be entitled to
any intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5. Rights of dissenting shareholder
(1) A dissenting shareholder may not withdraw his demand for payment of the
fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. Determination of fair value by agreement
(1) Not later than 10 days after the expiration of the period within which
shareholders may make written demand to be paid the fair value of their shares,
the corporation upon which such demand has been made pursuant to subsections
14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) shall mail to each dissenting
shareholder the balance sheet and the surplus statement of the corporation whose
shares he holds, as of the latest available date which shall not be earlier than
12 months prior to the making of such offer and a profit and loss statement or
statements for not less than a 12-month period ended on the date of such balance
sheet or, if the corporation was not in existence for such 12-month period, for
the portion thereof during which it was in existence. The corporation may
accompany such mailing with a written offer to pay each dissenting shareholder
for his shares at a specified price deemed by such corporation to be the fair
value thereof. Such offer shall be made at the same price per share to all
dissenting shareholders of the same class, or, if divided into series, of the
same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares.
Amended by L.1973, c. 366, s. 63, eff. May 1, 1974.
14A:11-7. Procedure on failure to agree upon fair value; commencement
of action to determine fair value
(1) If the fair value of the shares is not agreed upon within the 30-day
period limited by subsection 14A:11-6(2), the dissenting shareholder may serve
upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. Action to determine fair value; jurisdiction of court;
appointment of appraiser
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may proceed in the
action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those who have
agreed with the corporation upon the price to be paid for their shares, shall be
made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive
evidence and report to the court on the question of fair value, who shall have
such power and authority as shall be specified in the order of his appointment;
and
(d) The court shall render judgment against the corporation and in favor of
each shareholder who is a party to the action for the amount of the fair value
of his shares.
14A:11-9. Judgment in action to determine fair value
(1) A judgment for the payment of the fair value of shares shall be payable
upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
14A:11-10. Costs and expenses of action
The costs and expenses of bringing an action pursuant to section 14A:11-8
shall be determined by the court and shall be apportioned and assessed as the
court may find equitable upon the parties or any of them. Such expenses shall
include reasonable compensation for and reasonable expenses of the appraiser, if
any, but shall exclude the fees and expenses of counsel for and experts employed
by any party; but if the court finds that the offer of payment made by the
corporation under section 14A:11-6 was not made in good faith, or if no such
offer was made, the court in its discretion may award to any dissenting
shareholder who is a party to the action reasonable fees and expenses of his
counsel and of any experts employed by the dissenting shareholder.
14A:11-11.Disposition of shares acquired by corporation
14A:11-11. Disposition of shares acquired by corporation.
(1) The shares of a dissenting shareholder in a transaction described in
subsection 14A:11-1(1) shall become reacquired by the corporation which issued
them or by the surviving corporation, as the case may be, upon the payment of
the fair value of shares.
(2) (Deleted by amendment, P.L.1995, c.279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled.
Amended 1995,c.279,s.17.
EXHIBIT 1
FLEMINGTON PHARMACEUTICAL CORPORATION
1998 Stock Option Plan
(Adopted as of June 15, 1998)
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of the Flemington Pharmaceutical Corporation
(the " Company") 1998 Stock Option Plan (the "Plan") is to enable the Company to
offer to its key employees, officers, directors and consultants whose past,
present and/or potential contributions to the Company and its Subsidiaries have
been, are or will be important to the success of the Company, an opportunity to
acquire a proprietary interest in the Company. The various types of long-term
incentive awards which may be provided under the Plan will enable the Company to
respond to changes in compensation practices, tax laws, accounting regulations
and the size and diversity of its businesses.
1.2 Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Agreement" means the agreement between the Company and
the Holder setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto and the regulations promulgated
thereunder.
(d) "Committee" means the Compensation Committee of the Board
or any other committee of the Board, which the Board may designate to administer
the Plan or any portion thereof. If no Committee is so designated, then all
references in this Plan to "Committee" shall mean the Board.
(e) "Common Stock" means the Common Stock of the Company, par
value $.01 per share.
(f) "Company" means Flemington Pharmaceutical Corporation, a
corporation organized under the laws of the State of New Jersey.
(g) "Continuous Status as an Employee" means the absence of
any interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board.
(h) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company
and for whom a withholding obligation exists under Section 3401 of the Code by
the employing corporation, as applicable. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(i) "Deferred Stock" means Stock to be received, under an
award made pursuant to Section 8 below, at the end of a specified deferral
period.
(j) "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan.
(k) "Effective Date" means the date set forth in Section 11.
(l) "Fair Market Value", unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, means, as
of any given date: (i) if the Common Stock is listed on a national securities
exchange or quoted on the NASDAQ National Market or NASDAQ SmallCap Market, the
last sale price of the Common Stock in the principal trading market for the
Common Stock on the last trading day preceding the date of grant of an award
hereunder, as reported by the exchange or NASDAQ, as the case may be; (ii) if
the Common Stock is not listed on a national securities exchange or quoted on
the NASDAQ National Market or NASDAQ SmallCap Market, but is traded in the
over-the-counter market, the closing bid price for the Common Stock on the last
trading day preceding the date of grant of an award hereunder for which such
quotations are reported by the National Quotation Bureau, Incorporated or
similar publisher of such quotations; and (iii) if the fair market value of the
Common Stock cannot be determined pursuant to clause (i) or (ii) above, such
price as the Committee shall determine, in good faith.
(m) "Holder" means a person who has received an award under
the Plan.
(n) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(o) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(p) "Normal Retirement" means retirement from active
employment with the Company or any Subsidiary on or after
age 65.
(q) "Other Stock-Based Award" means an award under Section 9
below that is valued in whole or in part by
reference to, or is otherwise based upon, Stock.
(r) "Parent" means any present or future parent corporation of
the Company, as such term is defined in Section 424(e) of the Code.
(s) "Plan" means the Flemington Pharmaceutical Corporation
1997 Stock Option Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means Stock, received under an award
made pursuant to Section 7 below, that is subject to restrictions under said
Section 7.
(u) "SAR Value" [Intentionally omitted.]
(v) "Stock" means the Common Stock of the Company, par value
$.01 per share.
(w) "Stock Appreciation Right" [Intentionally omitted.]
(x) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(y) "Stock Reload Option" means any option granted under
Section 5.3 as a result of the payment of the exercise price of a Stock Option
and/or the withholding tax related thereto in the form of Stock owned by the
Holder or the withholding of Stock by the Company.
(z) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the Board
or a Committee. Committee members shall serve for such term as the Board may in
each case determine, and shall be subject to removal at any time by the Board.
2.2 Powers of Committee. The Committee shall have full authority,
subject to Section 4.2 hereof, to award, pursuant to the terms of the Plan: (i)
Stock Options, (ii) Restricted Stock; (iii) Deferred Stock; (iv) Stock Reload
Options; and/or (v) Other Stock-Based Awards. For purposes of illustration and
not of limitation, the Committee shall have the authority (subject to the
express provisions of this Plan):
(a) to select the officers, key employees, directors and
consultants of the Company or any Subsidiary to whom Stock Options, Restricted
Stock, Deferred Stock, Stock Reload Options and/or Other Stock-Based Awards may
from time to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, number of shares, share price, any restrictions or limitations, and
any vesting, exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions, as the Committee shall determine);
(c) to determine any specified performance goals or such other
factors or criteria which need to be attained for the vesting of an award
granted hereunder;
(d) to determine the terms and conditions under which awards
granted hereunder are to operate on a tandem basis and/or in conjunction with or
apart from other equity awarded under this Plan and cash awards made by the
Company or any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a payment under the
Plan under such rules and procedures as the Committee may establish, including
the crediting of interest on deferred amounts denominated in cash and of
dividend equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award hereunder shall be
deferred which may be either automatic or at the election of the Holder; and
(g) to substitute (i) new Stock Options for previously granted
Stock Options, which previously granted Stock Options have higher option
exercise prices and/or contain other less favorable terms, and (ii) new awards
of any other type for previously granted awards of the same type, which
previously granted awards are upon less favorable terms.
2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 10 hereof, the
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and to determine the form and
substance of all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 10 hereof, all decisions made by
the Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to Incentive
Stock Options (including but limited to Stock Reload Options rights granted in
conjunction with an Incentive Stock Option) or any Agreement providing for
Incentive Stock Options shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without the consent of
the Holder(s) affected, to disqualify any Incentive Stock Option under such
Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 500,000 shares.
Shares of Stock under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. If any shares of Stock that have been
optioned cease to be subject to a Stock Option, or of any shares of Stock that
are subject to any Restricted Stock, Deferred Stock award, Stock Reload Option
or Other Stock-Based Award granted hereunder are forfeited or any such award
otherwise terminates without a payment being made to the Holder in the form of
Stock, such shares shall again be available for distribution in connection with
future grants and awards under the Plan. Only net shares issued upon a
stock-for-stock exercise (including stock used for withholding taxes) shall be
counted against the number of shares available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of any
merger, reorganization, consolidation, recapitalization, dividend (other than a
cash dividend), stock split, reverse stock split, or other change in corporate
structure affecting the Stock, such substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan, in the
number and exercise price of shares subject to outstanding Options, in the
number of shares and in the number of shares subject to, and in the related
terms of, other outstanding awards (including but not limited to awards of
Restricted Stock, Deferred Stock, Stock Reload Options and Other Stock-Based
Awards) granted under the Plan as may be determined to be appropriate by the
Committee in order to prevent dilution or enlargement of rights, provided that
any fractional shares resulting from such adjustment shall be eliminated by
rounding to the next lower whole number of shares.
Section 4. Eligibility.
4.1 General. Awards may be made or granted to key employees, officers,
directors and consultants who are deemed to have rendered or to be able to
render significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute to the success
of the Company. No Incentive Stock Option shall be granted to any person who is
not an employee of the Company or a Subsidiary at the time of grant.
4.2 Directors' Awards. [Intentionally Omitted]
Section 5. Stock Options.
5.1 Grant and Exercise. Stock Options granted under the Plan may be of
two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, or with respect to Incentive Stock Options, the Code, as the
Committee may from time to time approve. The Committee shall have the authority
to grant Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options and may be granted alone or in addition to other awards granted
under the Plan. To the extent that any Stock Option intended to qualify as an
Incentive Stock Option does not so qualify, it shall constitute a separate
Non-Qualified Stock Option. An Incentive Stock Option may only be granted within
the ten year period commencing from the Effective Date and may only be exercised
within ten years of the date of grant (or five years in the case of an Incentive
Stock Option granted to optionee ("10% Stockholder") who, at the time of grant,
owns Stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a Parent or Subsidiary.
5.2 Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and may be less than 100% of the Fair Market Value of the Stock as
defined above; provided, however, that (i) the exercise price of an Incentive
Stock Option shall not be less than 100% of the Fair Market Value of the Stock
(110%, in the case of 10% Stockholder); and (ii) the exercise price of a
Non-Qualified Stock Option shall not be less than 85% of the Fair Market Value
of the Stock as defined above.
(b) Option Term. Subject to the limitations in Section
5.1, the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee. If the Committee provides, in its discretion, that any Stock
Option is exercisable only in installments, i.e., that it vests over time, the
Committee may waive such installment exercise provisions at any time at or after
the time of grant in whole or in part, based upon such factors as the Committee
shall determine.
(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of shares of Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash or, unless
otherwise provided in the Agreement, in shares of Stock (including Restricted
Stock and other contingent awards under this Plan) or, partly in cash and partly
in such Stock, or such other means which the Committee determines are consistent
with the Plan's purpose and applicable law. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not be required
to deliver certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of Stock
shall be valued at the Fair Market Value of a share of Stock on the date prior
to the date of exercise. Such payments shall be made by delivery of stock
certificates in negotiable form which are effective to transfer good and valid
title thereto to the Company, free of any liens or encumbrances. Subject to the
terms of the Agreement, the Committee may, in its sole discretion, at the
request of the Holder, deliver upon the exercise of a Non-Qualified Stock Option
a combination of shares of Deferred Stock and Common Stock; provided that,
notwithstanding the provisions of Section 8 of the Plan, such Deferred Stock
shall be fully vested and not subject to forfeiture. A Holder shall have none of
the rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of the
Option.
(e) Transferability. No Stock Option shall be transferable by
the Holder otherwise than by will or by the laws of descent and distribution,
and all Stock Options shall be exercisable, during the Holder's lifetime, only
by the Holder.
(f) Termination by Reason of Death. If a Holder's employment
by the Company or a Subsidiary terminates by reason of death, any Stock Option
held by such Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall be fully vested and may thereafter
be exercised by the legal representative of the estate or by the legatee of the
Holder under the will of the Holder, for a period of one year (or such other
greater or lesser period as the Committee may specify at grant) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of Disability,
any Stock Option held by such Holder, unless otherwise determined by the
Committee at the time of grant and set forth in the Agreement, shall be fully
vested and may thereafter be exercised by the Holder for a period of one year
(or such other greater or lesser period as the Committee may specify at the time
of grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(h) Other Termination. Subject to the provisions of Section
12.3 below and unless otherwise determined by the Committee at the time of grant
and set forth in the Agreement, if a Holder is an employee of the Company or a
Subsidiary at the time of grant and if such Holder's employment by the Company
or any Subsidiary terminates for any reason other than death or Disability, the
Stock Option shall thereupon automatically terminate, except that if the
Holder's employment is terminated by the Company or a Subsidiary without cause
or due to Normal Retirement, then the portion of such Stock Option which has
vested on the date of termination of employment may be exercised for the lesser
of three months after termination of employment or the balance of such Stock
Option's term.
(i) Additional Incentive Stock Option Limitation. In the case
of an Incentive Stock Option, the amount of aggregate Fair Market Value of Stock
(determined at the time of grant of the Option) with respect to which Incentive
Stock Options are exercisable for the first time by a Holder during any calendar
year (under all such plans of the Company and its Parent and any Subsidiary)
shall not exceed $100,000.
(j) Buyout and Settlement Provisions. The Committee may at any
time offer to buy out a Stock Option previously granted, based upon such terms
and conditions as the Committee shall establish and communicate to the Holder at
the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option shall
be confirmed by, and shall be subject to the terms of, the Agreement executed by
the Company and the Holder.
5.3 Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Non-Incentive Stock Option) a Stock Reload Option
up to the amount of shares of Stock held by the Holder for at least six months
and used to pay all or part of the exercise price of an Option and, if any,
withheld by the Company as payment for withholding taxes. Such Stock Reload
Option shall have an exercise price of the Fair Market Value as of the date of
the Stock Reload Option grant. Unless the Committee determines otherwise, a
Stock Reload Option may be exercised commencing one year after it is granted and
shall expire on the date of expiration of the Option to which the Reload Option
is related.
Section 6. Stock Appreciation Rights. [Intentionally omitted.]
Section 7. Restricted Stock.
7.1 Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded the number of shares to be awarded, the price
(if any) to be paid by the Holder, the time or times within which such awards
may be subject to forfeiture (the "Restriction Period"), the vesting schedule
and rights to acceleration thereof, and all other terms and conditions of the
awards.
7.2 Terms and Conditions. Each Restricted Stock award shall be subject
to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name of the
Holder to whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted Stock and any
securities constituting Retained Distributions (as defined below) shall bear a
legend to the effect that ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with the Company,
together with stock powers or other instruments of assignment, each endorsed in
blank, which will permit transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained Distributions that
shall be forfeited or that shall not become vested in accordance with the Plan
and the Agreement.
(b) Rights of Holder. Restricted Stock shall constitute issued
and outstanding shares of Common Stock for all corporate purposes. The Holder
will have the right to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent distributions as the Board may
in its sole discretion designate, pay or distribute on such Restricted Stock and
to exercise all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exceptions that (i) the Holder
will not be entitled to delivery of the stock certificate or certificates
representing such Restricted Stock until the Restriction Period shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled; (ii) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock during the
Restriction Period; (iii) other than regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion designate, pay
or distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and such
Retained Distributions will be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock) until such time, if ever,
as the Restricted Stock with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested and with respect to
which the Restriction Period shall have expired; (iv) a breach of any of the
restrictions, terms or conditions contained in this Plan or the Agreement or
otherwise established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the
Restriction Period with respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms and conditions (i) all
or part of such Restricted Stock shall become vested in accordance with the
terms of the Agreement, and (ii) any Retained Distributions with respect to such
Restricted Stock shall become vested to the extent that the Restricted Stock
related thereto shall have become vested. Any such Restricted Stock and Retained
Distributions that do not vest shall be forfeited to the Company and the Holder
shall not thereafter have any rights with respect to such Restricted Stock and
Retained Distributions that shall have been so forfeited.
Section 8. Deferred Stock.
8.1 Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock shall be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period (the "Deferral Period") during which, and
the conditions under which receipt of the shares will be deferred, and all other
terms and conditions of the awards.
8.2 Terms and Conditions. Each Deferred Stock award shall be subject to
the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period (or
the Additional Deferral Period referred to in Section 8.2(c) below, where
applicable), share certificates shall be delivered to the Holder, or his legal
representative, representing the number equal to the shares covered by the
Deferred Stock award.
(b) Vesting; Forfeiture. Upon the expiration of the Deferral
Period (or the Additional Deferral Period, where applicable) with respect to
each award of Deferred Stock and the satisfaction of any other applicable
limitations, terms or conditions, such Deferred Stock shall become vested in
accordance with the terms of the Agreement. Any Deferred Stock that does not
vest shall be forfeited to the Company and the Holder shall not thereafter have
any rights with respect to such Deferred Stock that has been so forfeited.
(c) Additional Deferral Period. A Holder may request to, and
the Committee may at any time, defer the receipt of an award (or an installment
of an award) for an additional specified period or until a specified event (the
"Additional Deferral Period"). Subject to any exceptions adopted by the
Committee, such request must generally be made at least one year prior to
expiration of the Deferral Period for such Deferred Stock award (or such
installment).
Section 9. Other Stock-Based Awards.
9.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Plan including, without limitation, purchase rights, shares of
Common Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into shares
of Common Stock and awards valued by reference to the value of securities of or
the performance of specified Subsidiaries. Other Stock-Based Awards may be
awarded either alone or in addition to or in tandem with any other awards under
this Plan or any other plan of the Company.
9.2 Eligibility. The Committee shall determine the eligible persons to
whom and the time or times at which grants of such awards shall be made, the
number of shares of Common Stock to be awarded pursuant to such awards, and all
other terms and conditions of the awards.
9.3 Terms and Conditions. Each Other Stock-Based Award shall be subject
to such terms and conditions as may be determined by the Committee.
Section 10. Amendment and Termination.
The Board may at any time, and from time to time, amend, alter, suspend
or discontinue any of the provisions of the Plan, but no amendment, alteration,
suspension or discontinuance shall be made which would impair the rights of a
Holder under any Agreement theretofore entered into hereunder, without his
consent.
Section 11. Term of Plan.
11.1 Effective Date. The Plan shall be effective as of January 1, 1997
("Effective Date"). Any awards granted under the Plan prior to such approval
shall be effective when made (unless otherwise specified by the Committee at the
time of grant), but shall be conditioned upon, and subject to, such approval of
the Plan by the Company's stockholders and no awards shall vest or otherwise
become free of restrictions prior to such approval.
11.2 Termination Date. Unless terminated by the Board, this Plan shall
continue to remain effective until such time no further awards may be granted
and all awards granted under the Plan are no longer outstanding. Notwithstanding
the foregoing, grants of Incentive Stock Options may only be made during the ten
year period following the Effective Date.
Section 12. General Provisions.
12.1 Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed by the
Company and the Holder. The Committee may terminate any award made under the
Plan if the Agreement relating thereto is not executed and returned to the
Company within sixty (60) days after the Agreement has been delivered to the
Holder for his or her execution.
12.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a general
creditor of the Company.
12.3 Employees.
(a) Engaging in Competition With the Company. In the event an
employee Holder terminates his employment with the Company or a Subsidiary for
any reason whatsoever, and within one year after the date thereof accepts
employment with any competitor of, or otherwise engages in competition with, the
Company, the Committee, in its sole discretion may require such Holder to return
to the Company the economic value of any award which was realized or obtained
(measured at the date of exercise, vesting or payment) by such Holder at any
time during the period beginning on that date which is six months prior to the
date of such Holder's termination of employment with the Company.
(b) Termination for Cause. The Committee may, in the event an
employee is terminated for cause, annul any award granted under this Plan to
such employee and, in such event, the Committee, in its sole discretion, may
require such Holder to return to the Company the economic value of any award
which was realized or obtained (measured at the date of exercise, vesting or
payment) by such Holder at any time during the period beginning on that date
which is six months prior to the date of such Holder's termination of employment
with the Company.
(c) No Right of Employment. Nothing contained in the Plan or
in any award hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary any right to continued employment with the Company or
any Subsidiary, nor shall it interfere in any way with the right of the Company
or any Subsidiary to terminate the employment of any of its employees at any
time.
12.4 Investment Representations. The Committee may require each person
acquiring shares of Stock pursuant to a Stock Option or other award under the
Plan to represent to and agree with the Company in writing that the Holder is
acquiring the shares for investment without a view to distribution thereof.
12.5 Additional Incentive Arrangements. Nothing contained in the Plan
shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
12.6 Withholding Taxes. Not later than the date as of which an amount
first becomes includable in the gross income of the Holder for Federal income
tax purposes with respect to any Option or other award under the Plan, the
Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such amount. If
permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the Company under
the Plan shall be conditional upon such payment or arrangements satisfactory to
the Company and the Company or the Holder's employer (if not the Company) shall,
to the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Holder from the Company or any
Subsidiary.
12.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of New Jersey (without regard to choice of law provisions).
12.8 Other Benefit Plans. Any award granted under the Plan shall not be
deemed compensation for purposes of computing benefits under any retirement plan
of the Company or any Subsidiary and shall not affect any benefits under any
other benefit plan no or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation (unless required by
specific reference in any such other plan to awards under this Plan).
12.9 Non-Transferability. Except as otherwise expressly provided in the
Plan, no right or benefit under the Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any
attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void.
12.10 Applicable Laws. The obligations of the Company with respect to
all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the effectiveness of
a registration statement under the Securities Act of 1933, as amended, and (ii)
the rules and regulations of any securities exchange on which the Stock may be
listed.
12.11 Conflicts. If any of the terms or provisions of the Plan conflict
with the requirements of (with respect to Incentive Stock Options), Section 422
of the Code, then such terms or provisions shall be deemed inoperative to the
extent they so conflict with the requirements of said Section 422 of the Code.
Additionally, if this Plan does not contain any provision required to be
included herein under Section 422 of the Code, such provision shall be deemed to
be incorporated herein with the same force and effect as if such provision had
been set out at length herein.
12.12 Non-Registered Stock. The shares of Stock being distributed under
this Plan have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or any applicable state or foreign securities laws and the
Company has no obligation to any Holder to register the Stock or to assist
Holder in obtaining an exemption from the various registration requirements, or
to list the Stock on a national securities exchange or inter-dealer quotation
system.
Accepted by the Board FLEMINGTON PHARMACEUTICAL CORPORATION
of Directors:
June 15, 1998
By: /S/ Robert F. Schaul
------------------------------
Robert F. Shaul, Secretary
EXHIBIT 2
FLEMINGTON PHARMACEUTICAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proxy - Annual Meeting of Shareholders - November 23, 1998.
The undersigned, a shareholder of Flemington Pharmaceutical Corporation, a New
Jersey corporation (the "Company"), hereby appoints Harry A. Dugger, III and
John J. Moroney, and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 1998 Annual
Meeting of Shareholders of the Company, to be held at the Company's offices
located at 43 Emery Avenue, Flemington, New Jersey 08822 on Monday, November 23,
1998 at 10:00 a.m. local time, or at any adjournment or adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS:
[ ] VOTE FOR the election of Harry A. Dugger, III, John J. Moroney,
Robert F. Schaul, Jean-Marc Maurette, Jack J. Kornreich, and John R.
Toedtman as Directors (except as indicated to the contrary below):
[ ] WITHHOLD AUTHORITY to vote for ALL nominees
[ ] WITHHOLD AUTHORITY to vote for ONE OR MORE nominees
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee(s), write that nominee(s) name(s) on the line provided below.)
_____________________________________________________________
2. ADOPTION OF THE 1998 STOCK OPTION PLAN:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
1
3. APPROVAL OF THE CHANGE OF THE COMPANY'S STATE OF INCORPORATION: To (i)
merge the Company into a newly-formed, wholly-owned Delaware
subsidiary, with the subsidiary as the surviving entity of such merger;
and (ii) increase the Company's authorized shares of Common Stock from
10,000,000 to 50,000,000 shares:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. RATIFICATION of the appointment of Wiss & Company, LLP as the Company's
independent certified public accountants for the fiscal year ending
July 31, 1999.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
5. DISCRETIONARY AUTHORITY: To vote in their discretion, on such other
business as may properly come before the Meeting or any adjournments
thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE GIVEN.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT DIRECTORS, TO
CHANGE THE COMPANY'S STATE OF INCORPORATION, TO ADOPT THE 1998 STOCK OPTION PLAN
AND TO RATIFY THE APPOINTMENT OF WISS & COMPANY, LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED JULY 31,
1999.
The undersigned hereby revokes any proxy or proxies heretofore given, and
ratifies and confirms all that the proxies appointed hereby, or any of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
thereof. The undersigned hereby acknowledges receipt of a copy
2
of the Notice of Annual Meeting and Proxy Statement, both dated October ___ 1998
and, the Company's Annual Report to Shareholders for the fiscal year ended July
31, 1998.
Dated: _______________, 1998
____________________________________
Print Name of Registered Holder(s)
____________________________________
Signature(s) of Registered Holder(s)
NOTE: Your signature should appear exactly the same as your name appears hereon.
If signing as partner, attorney, executor, administrator, trustee or guardian,
please indicate the capacity in which signing. When signing as joint tenants,
all parties in the joint tenancy must sign. When a proxy is given by a
corporation, it should be signed by an authorized officer and the corporate seal
affixed. No postage is necessary if mailed within the United States of America.
3
F 888.329.6696