SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary ProxyStatement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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: N/A
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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
--------------------------------------------------------------------------------
(5) Total fee paid: not required
--------------------------------------------------------------------------------
<PAGE>
[ ] 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.:
--------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
FLEMINGTON PHARMACEUTICAL CORPORATION
31 State Highway 12
Flemington, New Jersey 08822
908-782-3431
December 1, 2000
Dear Fellow Shareholder:
The 2000 Annual Meeting of Shareholders (the "Annual Meeting") of
Flemington Pharmaceutical Corporation (the "Company") will be held at 10:00 a.m.
on January 11, 2001 at 31 State Highway 12, 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 and voting
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, 2000
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 four persons listed as candidates for a position on the
Board of Directors, (b) as to Proposal 2, the Proxy confers authority to vote
"FOR" the ratification of Wiss & Company, LLP as the Company's independent
certified public accountants for the fiscal year ending July 31, 2001, 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
<PAGE>
FLEMINGTON PHARMACEUTICAL CORPORATION
31 State Highway 12
Flemington, New Jersey 08822
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD January 11, 2001
---------------------
To our Shareholders:
Notice is hereby given that the 2000 Annual Meeting of Shareholders (the
"Annual Meeting") of Flemington Pharmaceutical Corporation, a New Jersey
corporation (the "Company"), will be held at the Company's principal office at
31 State Highway 12, Flemington, New Jersey, on Thursday, January 11, 2001 at
10:00 a.m., Eastern Standard Time, for the following purposes:
1. To elect four (4) Directors to the Board of Directors to serve
until the 2000 Annual Meeting of Shareholders or until their
successors have been duly elected or appointed and qualified;
2. To ratify the appointment of Wiss & Company, LLP as the Company's
independent certified public accountants for the fiscal year ending
July 31, 2001; and
3. 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 November 16,
2000, as the record date for determining the shareholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournment(s) thereof.
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
<PAGE>
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
December 1, 2000
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.
<PAGE>
FLEMINGTON PHARMACEUTICAL CORPORATION
31 State Highway 12
Flemington, New Jersey 08822
PROXY STATEMENT
2000 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 2000 Annual Meeting of Shareholders (the "Annual Meeting") to
be held at 10:00 a.m., Eastern Standard Time, on Thursday, January 11, 2001 at
the principal office of the Company at 31 State Highway 12, 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 December 1, 2000.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended July 31, 2000 is enclosed with these materials, but should not be
considered proxy solicitation material.
The Company has fixed the close of business on November 16, 2000 as the
record date (the "Record Date") for determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof. As of
the Record Date, there were 5,881,237 outstanding shares of common stock, $.001
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
proxy 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.
<PAGE>
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 Company
shall not use specially engaged employees or paid solicitors to identify
shareholders or to conduct the solicitation.
THE BOARD OF DIRECTORS
During the fiscal year ended July 31, 2000 ("fiscal 2000"), the Board of
Directors held 6 (six) meetings, attended by all of the Company's Directors.
There were no Special Meetings of the Board during fiscal 2000. During fiscal
2000, the Board of Directors did not act by written consent. The Company has a
compensation committee, which did not meet in fiscal 2000.
Harry A. Dugger, III and John J. Moroney serve on the compensation
committee, which determines the cash (and with respect to the 1997 Plan as
defined hereinafter, and the non-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 October 27, 2000, there were 5,881,237 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 October 27, 2000, 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 Named Executive Officers, as such term is
defined under Item 402(a)(3) of Securities and Exchange Commission ("SEC")
Regulation S-K, 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
2
<PAGE>
more than one person (such as where persons share 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.
<TABLE>
<CAPTION>
Title of Name and Address or Amount and Nature of Percentage of
Class Number in Group (1) Beneficial Ownership (2) Class
------------ --------------------------------- ------------------------ -------------
<S> <C> <C> <C>
Common Stock Harry A. Dugger, III, Ph.D. 1,824,003(3) 27.9
Common Stock John J. Moroney 1,018,080(4) 15.6
Common Stock Donald Deitman 0 0
Common Stock Donald P. Cox, Ph.D. 200,000(5) 3.3
Common Stock Kenneth E. Cleaver, Ph.D. 100,000(6) 1.7
Common Stock Robert F. Schaul, Esq. 189,286(7) 3.0
Common Stock Jack J. Kornreich 169,310(7) 2.6
Common Stock Watson Pharmaceutical Corporation 389,350 6.5
311 Bonnie Circle
Corona, California 91720
Common Stock Saggi Capital Corp. 340,000(8) 5.5
575 Lexington Avenue
New York, New York 10022
Common Stock All Executive Officers and Directors 3,480,679 44.79
as a group (9 persons) (3)(4)(5)(6)(7)
</TABLE>
(1) With the exception of Watson Pharmaceutical Corporation and Saggi
Capital Corp. the address of all holders listed herein is c/o Flemington
Pharmaceutical Corporation, 31 State Highway 12, 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
<PAGE>
(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 95,000 shares of Common
Stock issued under the 1998 Stock Option Plan, options to purchase 300,000
shares of Common Stock issued outside of the Plans; 108,000 shares owned by his
daughter Christina Dugger Sommers; and 108,000 shares 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 95,000 shares of Common
Stock issued under the 1998 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) Includes non-plan options to purchase 100,000 shares of Common Stock
issued in May 1998 pursuant to an employment agreement and 100,000 options
issued under the 1998 Stock Option Plan for services to be provided in
connection with future services.
(6) Includes 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, options to purchase 105,000
shares of Common Stock issued under the 1998 Stock Option Plan.
(8) Includes options to purchase an aggregate of 320,000 shares issued under
the 1992 and 1997 Stock Option Plans.
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 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
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 August 1, 1999 to
October 31, 2000 all Section 16(a) filing requirements applicable to its
Reporting Persons were complied with.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary for the fiscal years ended July
31, 2000, 1999 and 1998, respectively, of the cash and non-cash compensation
awarded, paid or accrued by the Company to the Company's Chief Executive Officer
("CEO") and its four most highly compensated officers other than the CEO, who
served in such capacities at the end of fiscal 1999 (collectively, the "Named
Executive Officers"). No other executive officer of the Company earned in excess
of $100,000 in total annual salary and bonus for, 1998, 1999 and 2000 in all
capacities in which such person served the Company. There were no restricted
stock awards, long-term incentive plan payouts or other compensation paid during
fiscal 1998, 1999 and 2000 to the Named Executive Officers, except as set forth
below:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
--------------------------------- ------------------------ -------
Securities
Other Under-
Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Name and Fiscal Salary Bonus sation Award(s) SAR (1) Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 226,000 0 0 0 95,000 0 0
--------------------------------------------------------------------------------------------------------------------------------
Harry A. Dugger, III, Ph.D. 1999 210,000 0 0 0 0 0 0
President and CEO --------------------------------------------------------------------------------------------------
1998 183,333 0 0 0 50,000 0 0
--------------------------------------------------------------------------------------------------------------------------------
2000 169,000 95,000
--------------------------------------------------------------------------------------------------------------------------------
John J. Moroney 1999 157,500 0 0 0 0 0 0
Chairman --------------------------------------------------------------------------------------------------
1998 100,000 0 0 0 50,000 0 0
--------------------------------------------------------------------------------------------------------------------------------
2000 68,000
--------------------------------------------------------------------------------------------------------------------------------
Donald Deitman (2) 1999 67,500 0 0 0 0 0 0
Chief Financial Officer --------------------------------------------------------------------------------------------------
1998 30,000 0 0 0 0 0 0
--------------------------------------------------------------------------------------------------------------------------------
2000 137,000
--------------------------------------------------------------------------------------------------------------------------------
Donald P. Cox, Ph.D. (2) 1999 128,900 0 0 0 0 0 0
Vice President, Product --------------------------------------------------------------------------------------------------
Development 1998 31,000 0 0 0 200,000 0 0
--------------------------------------------------------------------------------------------------------------------------------
2000 110,000
--------------------------------------------------------------------------------------------------------------------------------
Kenneth E. Cleaver, Ph.D.(2) 1999 101,900 0 0 0 0 0 0
Vice President, Regulatory --------------------------------------------------------------------------------------------------
Affairs 1998 25,000 0 0 0 100,000 0 0
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights have been issued.
(2) Messrs. Cox, Cleaver and Deitman were not employed prior to fiscal
1998.
5
<PAGE>
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 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options Granted to Exercise or
Underlying Options Employees in Fiscal Base Price Expiration
Name of Officer Granted Year ($/Share) Date
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harry A. Dugger, III, Ph.D. -95,000 50% -0.9625 1/11/2010
-------------------------------------------------------------------------------------------------------------------
John J. Moroney -95,000 50% -0.9625 1/11/2010
-------------------------------------------------------------------------------------------------------------------
Donald Deitman - - - -
-------------------------------------------------------------------------------------------------------------------
Kenneth E. Cleaver, Ph.D. - - - -
-------------------------------------------------------------------------------------------------------------------
Donald P. Cox, Ph.D. - - - -
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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 1999 and
the number and value of unexercised options held as of the end of fiscal 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Number of Options at Fiscal Money Options at
Shares Year End; Fiscal Year End (S)
Name of Executive Acquired on Value Realized (Exercisable/ (Exercisable/
Officer Exercise ($) (Unexercisable) (Unexercisable)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harry A. Dugger, III, Ph.D. 0 - 645,000 / 0 4,750 / 0
-------------------------------------------------------------------------------------------------------------------
John J. Moroney 0 - 645,000 / 0 4,750 / 0
-------------------------------------------------------------------------------------------------------------------
Donald Deitman 0 - - -
-------------------------------------------------------------------------------------------------------------------
Kenneth E. Cleaver, Ph.D. 0 - 66,000 / 34,000 0 / 0
-------------------------------------------------------------------------------------------------------------------
Donald P. Cox, Ph.D. 0 - 166,000 / 34,000 0 / 0
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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 1999, 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. Such Directors 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. There
6
<PAGE>
were no other arrangements pursuant to which any Director was compensated during
fiscal 2000 for any services provided as a Director.
STOCK OPTION PLANS
The Company has three stock option plans, adopted in 1992, 1997 and
1998, respectively (collectively referred to as the "Plans"). Each Plan provides
for the issuance of options to purchase 500,000 shares of Common Stock, for a
total of 1,500,000 shares. The 1997 Stock Option Plan is administered by Harry
A. Dugger, III, Ph.D. and John J. Moroney, who constitute the Compensation
Committee of the Board of Directors ("Committee"), and the 1992 Stock Option
Plan and 1998 Stock Option Plan are administered by the entire Board of
Directors. For purposes of the following discussion, the term "Committee" will
be used to reference the Committee with respect to the 1997 Stock Option Plan
and the entire Board of Directors with respect to the 1992 Stock Option Plan and
1998 Stock Option Plan, as applicable. The Committee has sole discretion and
authority, consistent with the provisions of the Plans, to select the Eligible
Participants to whom options will be granted under the Plans, the number of
shares which will be covered by each option and the form and terms of the
agreement to be used. All employees and officers of the Company (except for
members of the Committee) are eligible to participate in the 1997 Plan.
At September 30, 2000, eight (8) persons were eligible to receive
Incentive Stock Options ("ISOs") under the 1992 and 1998 Plans.
OPTIONS. The Committee is empowered to determine the exercise price of
options granted under the Plans, but the exercise price of ISOs must be equal to
or greater than the fair market value of a share of Common Stock on the date the
option is granted (110% with respect to optionees who own at least 10% of the
outstanding Common Stock). The Committee has the authority to determine the time
or times at which options granted under the Plans become exercisable, but
options expire no later than ten years from the date of grant (five years with
respect to Optionees who own at least 10% of the outstanding Common Stock of the
Company). Options are nontransferable, other than by will and the laws of
descent, and generally may be exercised only by an employee while employed by
the Company or within 90 days after termination of employment (one year from
termination resulting from death or disability).
No ISO may be granted to an employee if, as the result of such grant,
the aggregate fair market value (determined at the time each option was granted)
of the shares with respect to which ISOs are exercisable for the first time by
such Employee during any calendar year (under all such plans of the Company and
any parent and subsidiary) exceeds $100,000. The Plans do not confer upon any
employee any right with respect to the continuation of employment by the
Company, nor do the Plans interfere in any way with the employee's right or the
Company's right to terminate the employee's employment at any time.
7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harry A. Dugger, III and John J. Moroney serve as the members of the
Company's 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.
Mr. Moroney is also a Director and President of Landmark Financial Corp.
("Landmark"), serving as a member of Landmark's compensation committee. Robert
F. Schaul, a Director and Secretary of the Company, earned legal fees from the
Company during fiscal 2000 in the approximate amount of $66,000. See "Certain
Transactions--Legal Fees," below.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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 1999.
Except as set forth herein, 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. In
September 1998 the Board of Directors adopted an investment retirement account
plan in which all employees of the Company are eligible to participate.
Executive officers may participate in group life, health and hospitalization
plans, if and when such plans are available generally to all employees. The
Compensation Committee is satisfied that the compensation and stock option plans
provided to the officers of the Company are structured and operated to create
strong alignment with the long-term best interests of the Company and its
stockholders.
The compensation of the Company's Chief Executive Officer, Dr. Dugger,
for fiscal 2000 consisted of base salary of $226,000. No bonuses or stock grants
were awarded to Dr. Dugger during fiscal 2000. An option grant of 95,000 was
awarded in fiscal 2000. The determination by the Compensation Committee of Dr.
Dugger's remuneration is based upon methods consistent with those used for other
senior executives. The committee considers certain quantitative factors,
including the Company's financial, strategic and operating performance for the
year. The qualitative criteria include Dr. Dugger's leadership qualities and
management skills, as exhibited by his innovations, time and effort devoted to
8
<PAGE>
the Company, and other general considerations. The Compensation Committee also
takes note of comparable remuneration of other CEOs at similar companies. Based
on the performance of the Company, the Compensation Committee believes that Mr.
Dugger's compensation was appropriate.
COMPENSATION COMMITTEE:
Harry A. Dugger, III, Ph.D
John J. Moroney
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
DR. DUGGER AND MR. 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 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). The "change in control" provisions in the Dugger and
Moroney Agreements were deleted in April 2000.
Pursuant to the Dugger and Moroney Agreements, upon the completion of
the Company's IPO, Dr. Dugger and Mr. Moroney were each granted stock options
(outside of the Plans) to purchase 300,000 shares of Common Stock, at an
exercise price of $1.84 per share exercisable until November 2007.
DRS. 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 non-plan options to
purchase 100,000 shares of Common Stock at an exercise price of $1.75 per share.
One-third of such options vest in each of the first three (3) years of the
9
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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.
STOCKHOLDER LOANS
In fiscal 1998, the Company lent the principal amount of $60,000 to Dr.
Dugger in exchange for a 7% promissory note. The note is due on demand, with
interest due quarterly. Interest approximated $4,200 for fiscal 2000, all of
which was paid timely by Dr. Dugger. This note remains outstanding.
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 $5.80 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
five (5) years following the date of the grant. Effective January 1, 2000 the
Company entered into a new consulting agreement with Saggi Capital Corp., a
public relations consultant (the "Consultant") pursuant to which the Consultant
received Warrants to purchase an aggregate of 200,000 shares of Common Stock at
an exercise price of $1.00 per share.
LEGAL FEES
During fiscal 2000 the Company paid Mr. Schaul approximately $66,000 for
legal services rendered to the Company.
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<PAGE>
In fiscal 1998, the Company lent the principal amount of $60,000 to Dr.
Dugger in exchange for a 7% promissory note. The note is due on demand, with
interest due quarterly. Interest approximated $4,200 for fiscal 2000, all of
which was paid timely by Dr. Dugger. This note remains outstanding.
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, 2000, 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. The Company cautions 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 AMEX Pharmaceutical Index are generally larger and
have greater capitalization than the Company.
[GRAPHIC OMITTED]
$200.00
$150.00
$100.00
$50.00
$0.00
11/20/97 07/31/98 07/31/99 07/31/00
AMEX Pharmaceutical
Flemington Pharmaceutical Corporation (FLEM)
NASDAQ
<TABLE>
<CAPTION>
------------------------------------------------
11/20/97 7/31/98 7/31/99 7/31/00
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Flemington Pharmaceutical $100.00 $ 24.00 $ 15.57 13.25
Corporation (FLEM)
-------------------------------------------------------------------------------------------
Nasdaq Composite Index $100.00 $118.75 $162.25 231.59
-------------------------------------------------------------------------------------------
AMEX Pharmaceutical Index (DRG) $100.00 $135.00 $136.58 153.78
-------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, four (4) 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, 2000,
the Company's Board of Directors consisted of five (5) persons until October 17,
1999 when Jean Marc Maurette resigned from the Board of Directors after which
time the Board fixed the number of seats on the Board of Directors at four (4).
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 four (4) nominees, his position with the
Company, his principal occupation, and the period during which such person has
served as a Director are set out below.
<TABLE>
<CAPTION>
POSITION WITH THE DIRECTOR
NAME OF NOMINEE AGE COMPANY PRINCIPAL OCCUPATION SINCE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Harry A. Dugger, III, Ph.D. 64 President and Chief President and Chief 1991
Executive Officer Executive Officer of the
Company
--------------------------------------------------------------------------------------------------
John J. Moroney 46 Chairman President, Landmark 1991
Financial Corp.
--------------------------------------------------------------------------------------------------
Robert F. Schaul, Esq. 61 Secretary and Attorney 1991
Director
--------------------------------------------------------------------------------------------------
Jack J. Kornreich 61 Director Retired 1996
--------------------------------------------------------------------------------------------------
</TABLE>
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 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
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<PAGE>
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. From 1995 to 1998, Mr. Schaul was 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.
JACK J. KORNREICH, Director. Mr. Kornreich has been a director of the Company
since 1996. He presently acts as an independent consultant. From 1989 to 1993,
Mr. Kornreich was Executive Vice President and General Counsel of Bolar
(formerly Circa Pharmaceuticals Corp. and now known as 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.
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<PAGE>
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, 2001. 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.
VOTE REQUIRED
The affirmative vote of holders of a majority of the 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, 2001.
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, 2001.
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
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<PAGE>
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,
2000 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, 31 State Highway 12, Flemington, New Jersey 08822,
Attn: Robert F. Schaul, Secretary.
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, 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, 2001.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 2001
Annual Meeting of Shareholders must be received by the Company at its office in
Flemington, New Jersey on or before June 30, 2001 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 and FOR the ratification of the appointment of Wiss & Company, LLP
as the Company's independent certified public accounts for the fiscal year
ending July 31, 2001.
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
15
<PAGE>
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 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 regulations
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 four (4)
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" Item 2 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 the Board of
Directors.
By order of the Board of Directors
/s/ HARRY A. DUGGER, III, PH.D.
-------------------------------------
Harry A. Dugger, III
President and Chief Executive Officer
December 1, 2000
16
