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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
General Form For Registration of Securities of
Small Business Issuer
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
PD-Rx PHARMACEUTICALS, INC.
(Name of registrant as specified in its charter)
OKLAHOMA 73-1288261
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
727 NORTH ANN ARBOR
OKLAHOMA CITY, OKLAHOMA 73127
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 405/942-3040
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PER SHARE
(Title of class)
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PD-Rx PHARMACEUTICALS, INC.
TABLE OF CONTENTS
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PART I. PAGE
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Item 1. Description of Business 1
Item 2. Management Discussion and Analysis or Plan of Operation 10
Item 3. Description of Property 13
Item 4. Security Ownership of Certain Beneficial Owners and Management 13
Item 5. Directors, Executive Officers, Promoters and Control Persons 14
Item 6. Executive Compensation 16
Item 7. Certain Relationships and Related Transactions 17
Item 8. Description of Securities 17
PART II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters 19
Item 2. Legal Proceedings 20
Item 3. Changes in and Disagreements with Accountants 21
Item 4. Recent Sales of Unregistered Securities 21
Item 5. Indemnification of Directors and Officers 21
PART F/S.
Financial Statements 22
PART III.
Item 1. Index to Exhibits 22
Item 2. Description of Exhibits 22
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements under the captions in this Registration Statement
constitute "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. Certain, but not necessarily
all, of such forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or other variations thereon, or by discussions of
strategies that involve risks and uncertainties. The actual results of
Registrant or industry results may be materially different from any future
results expressed or implied by such forward-looking statements.
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL.
We offer and sell pharmaceuticals and medications, as well as
surgical and medical supplies. In connection with our pharmaceutical sales,
we offer pharmaceutical management strategies to physicians, patients,
managed care organizations and pharmaceutical manufacturers and others
involved in the pharmaceutical healthcare industry. Our management strategies
focus on the point of care, beginning with the physician's writing of the
prescription and are designed to provide physicians with valuable
pharmaceutical information at the point-of-prescribing, resulting in more
informed, cost-effective prescribing decisions. We believe our strategies
when incorporated into their office work flow provide physicians with higher
rates of adherence to payer formularies, improved management of patient
information, lower costs and improved quality of patient care. Also, our
pharmaceutical management strategies enable physicians to capture the
revenues associated with dispensing of pharmaceuticals, which traditionally
have been received by pharmacies.
Our products and services are designed to streamline the
pharmaceutical healthcare delivery system. We currently offer products and
services in six categories: point of care electronic medication triage,
Internet services, patient education products, medical and surgical supplies,
injectable pharmaceuticals and prepackaged medication. Our PD-Rx Net System
is a software/hardware communication network that provides physicians the
capabilities to interact and network with traditional and non-traditional
pharmacy delivery systems. It allows electronic prescribing, routing of
prescription information and capturing of prescription data at the point of
patient care. We also sell our prepackaged medications to physicians so they
can offer their patients the convenience and confidentiality of receiving
prescription medications in the privacy of the physician's office.
INDUSTRY BACKGROUND
Healthcare expenditures in the United States totaled approximately
$1.0 trillion in 1996, which represented 14% of the U.S. gross domestic
product, making it the largest single sector of the economy, according to the
Health Care Financing Administration. Pharmaceutical costs is one of the
fastest growing components of healthcare expenditures, which last year
totaled approximately $100 billion, according to IMS HEALTH, a leading
provider of pharmaceutical information. According to the Health Care
Financing Administration, pharmaceutical expenditures are expected to
increase at an annual rate of approximately 10% through 2007. This expected
increase is attributable to an aging population, the accelerating
introduction of new drugs, direct-to-consumer advertising by pharmaceutical
manufacturers, and cost advantages over alternate forms of care, most notably
inpatient hospital care. It is anticipated that this expected increase will
create pressure on managed care organizations to control pharmacy costs and
improve the process of managing medication treatments.
All participants in the healthcare industry, as well as the
patients, have been affected by managed healthcare, which increasingly
transfers the burden of pharmaceutical costs from traditional third-party
payers to physicians. This transfer has often had an adverse financial impact
on physicians. Moreover, as healthcare becomes increasingly consumer driven,
patients are seeking more information, control and convenience, placing
additional time and financial pressures on physicians. These changes have
caused many physicians to focus on methods and solutions that provide
improved practice efficiency and increased revenue, compliance with managed
care guidelines, while continuing to address patient needs.
Currently, the process for prescribing and delivering medications is
inefficient and prone to error. Virtually all prescriptions are written by
hand, leading to errors and requiring pharmacies to contact physicians for
clarification and correction. Also, when writing prescriptions, physicians in
many cases do not have ready access to pharmaceutical information that, if
available, would help ensure that the prescribed medication is clinically
appropriate, least expensive and compliant with managed care organizations'
pharmacy guidelines. Historically, physicians' medication management efforts
were limited to general physician education on the use of a drug, incentives
for physicians to use a particular drug, and the application of discounted
fee schedules for pharmacy
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networks and managed healthcare organizations that use a particular drug. The
inability of managed care organizations to communicate with physicians at the
time of prescribing has made it difficult to manage pharmaceutical costs. The
existing process further inconveniences the patient, who must travel from the
physician's office to a pharmacy and must often wait for the prescription to
be filled. In addition, physicians have a difficult time staying current on
the rapidly expanding body of pharmaceutical products and knowledge.
THE PD-Rx STRATEGY
The Internet is becoming an increasingly important medium in
healthcare, providing the opportunity for unprecedented communication and
access to information for all participants in the healthcare delivery
process. We believe that an increasing number of physicians regularly access
the Internet, which indicates their willingness to utilize Internet
technology in conjunction with a medication management system. Consumer usage
of the Internet continues to grow rapidly, and health and medical information
was the second most popular subject of Web-based information retrieval
searches in 1997 according to Media Metrix, an independent Internet research
firm. In addition, Simba Information, Inc., a media and information industry
market research firm, estimates that electronic commerce will grow from $28
billion in 1998 to over $100 billion by 2002.
In conjunction with our pharmaceutical repackaging sales and
services, we have developed an in-office, pharmaceutical management system
that significantly streamlines the process of prescribing and delivering
medications. Our PD-Rx Net System enables physicians to improve their
prescribing at the point-of-patient care by providing ready access to
pharmaceutical information including potential adverse drug interactions,
patient drug history including allergies and adverse reactions. The PD-Rx Net
System reduces the possibility of error and the need for expensive and
time-consuming intervention by pharmacists and pharmacy benefit managers.
Utilizing our PD-Rx Net System physicians may purchase our medications and
supplies via the Internet.
We believe our strategy redesigns the pharmaceutical healthcare
delivery process to benefit each participant and thereby will allow us to
maintain and increase our market share and sales. By providing ready access
to information during the prescribing process, our PD-Rx Net System:
- - benefits physicians by reducing the amount of time spent clarifying and
changing prescriptions;
- - enables physicians to better manage the burden of pharmaceutical costs and
to increase practice revenue through dispensing medications;
- - provides patients with the convenience, immediacy and confidentiality of
receiving prescription medications in the physician's office;
- - provides patients access to valuable information that enables them to play
a more active role in managing their healthcare; and
- - benefits managed healthcare organizations by obtaining higher physician
compliance with pharmacy guidelines, resulting in lower overall costs.
We believe that the best way to improve the medication management
process is by motivating physicians to write prescriptions electronically. By
combining electronic prescribing and dispensing, innovative product design,
our proprietary software and with readily available hardware, we believe we
offer an attractive opportunity for physicians. Key advantages of our
strategy include:
- - EASE OF USE -- Our PD-Rx Net System is easy to use, enabling a physician to
complete a prescription in minutes;
- - ACCESSIBILITY -- Our PD-Rx Net System enables physicians to prescribe
electronically from a variety of locations on several different platforms,
including personal computers utilizing electronic transmissions and
hand-held computer devices;
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- - INFORMATION -- Our PD-Rx Net System provides valuable, objective
information prior to and during the prescribing process, enabling
physicians to improve the quality and accuracy of their prescriptions;
- - FINANCIAL OPPORTUNITY -- Our PD-Rx Net System offers physicians a
significant financial opportunity through better management of pharmacy
risk and additional practice revenue from dispensing medications.
We believe this strategy will not only maintain our market share and current
level of sales, but will also increase and broaden our market share and
result in increased sales revenues. However, there is no assurance that this
strategy will achieve the anticipated results.
SERVICES AND PRODUCTS
Our principal products and services are built around the dispensing
of prescribed medications by physicians at the point-of-patient care, rather
than in the traditional manner. Our services and products include the
following:
PD-Rx NET SYSTEM
Our PD-Rx Net System is offered in connection with the sales and
marketing of our pharmaceuticals and surgical and medical supplies and serves
as an additional channel of distribution. Our PD-Rx Net System software is
provided without cost to our customers for operation on the customer's
personal computer. The PD-Rx Net System is a medication management system
that assists physicians in the providing of the improved and more
cost-effective patient care. This System, utilizing personal computer
hardware, provides physicians with pharmaceutical information at the
point-of-prescribing, leading to more informed and cost-effective prescribing
decisions. The result is a higher rate of adherence to managed healthcare
organization formularies, improved patient information management, and lower
costs. Also our PD-Rx Net System enables physicians to become the
pharmaceutical dispenser and receive the associated revenue stream. For
patients, our System achieves improved healthcare and provides patient
convenience, choice, and confidentiality.
Our PD-Rx Net System is user-friendly and allows physicians to
prescribe a medication in minutes. The physician enters the patient's name,
drug name, and drug directions. The prescribed drug is then selected from the
physician's inventory and scanned to ensure that it is indeed the correct
medication. On-line claims adjudication and patient eligibility checks
complete the fulfillment process. Complete patient counseling sheets
containing directions for use and information on possible side effects and
precautions are printed for each drug and given to patients along with their
medication.
Once the prescribing process is completed, PD-Rx Net System offers a
variety of fulfillment options for the patient: electronic routing to a
retail or mail order pharmacy, printing a legible hard copy or receiving the
medication in the physician's office. If the patient chooses to receive the
medication in the physician's office and is carrying a pharmacy benefit card,
the system can submit the pharmacy claim electronically for immediate
approval and reimbursement by the managed care organization.
Drug inventory management is fully automated, and all medication
orders and receipts can be handled via the Internet using a proprietary
program. In addition, PD-Rx Net System's underlying relational database
enables users to generate a variety of clinical, financial and operational
reports.
We designed PD-Rx Net System to be faster and easier for a physician
to use than a prescription pad. We currently offer PD-Rx Net System with a
touch-screen interface option and remote wireless electronic hand-held device
running on Microsoft(R) CE operating system.
Furthermore, the PD-Rx Net System also offers patients the
alternative of receiving their medications through the traditional pharmacy
method. In addition to in-office dispensing, the Systems prints clean,
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easy-to-read prescriptions for the patient, or, if the patient prefers, will
electronically transmit new or refill prescriptions to a local retail
pharmacy or mail-order prescription service.
To meet the needs of just about any size practice, our PD-Rx Net
System is scalable from single, stand-alone prescribing and dispensing
stations to multiple stations. Our PD-Rx Net System is ideal for those
practices at risk for pharmacy benefits. In summary our PD-Rx Net System
offers:
- - increase the utilization of generic drugs, which are four times less
expensive than their name-brand equivalents,
- - achieve greater compliance with managed health care plan formularies, and
- - more efficiently coordinate the treatment process, reducing the frequency,
intensity, and duration of patient care, as well as the over-utilization of
drugs and other resources.
As of the date of this registration statement, approximately 12 of our
accounts (approximately 20 physicians) are using the PD-Rx Net System. During
the year ended June 30, 1999 and the six months ended December 31, 1999, we
received sales revenues of $201,490 and $155,736, respectively, from accounts
utilizing the PD-Rx Net System.
INTERNET PRODUCTS AND SERVICES
As an extension of our pharmaceutical management strategies, we
offer transaction-based electronic-commerce services that enhance our
business relationships with physicians. Through our Web site, www.PDRx.com,
we currently sell pharmaceuticals to physicians, enabling them to provide
patients with medications in the office, and we plan to facilitate the
delivery of pharmaceutical products directly to patients in the future. We
also enable healthcare professionals to purchase medical and surgical supply
products online.
PATIENT EDUCATION PRODUCTS
Parson Technology Inc. and PD-Rx Pharmaceuticals, Inc. co-market a
program that will provide our physician customers with critical information
on more than 11,000 prescription and non-prescription drugs.
The Parson's software, known as "Medical Drug Reference", has been
integrated into the PD-Rx Net software system. The Windows based platform
allows the physicians to check for drug interactions, side affects and
warnings. The information in Medical Drug Reference is compiled from First
Data Bank a leading supplier of electronic drug information for hospitals and
pharmacies.
The PD-Rx Net system provides a patient education leaflet with the
printing of each prescription, this information will provide the patient with
how-to information on each medication that is dispensed using the PD-Rx Net
System.
PREPACKAGED MEDICATIONS
We repackage pharmaceuticals and fulfill orders for our traditional
and electronic-commerce customers from our repackaging facility in Oklahoma
City, Oklahoma. We are licensed by the Food and Drug Administration for
repackaging of pharmaceuticals. We purchase more than 2,000 bulk quantities
of brand name and generic acute care pharmaceutical products as tablets
capsules, suspensions, creams, ointments and liquids.
UNIT-OF-USE REPACKAGING. Approximately 63% of the drugs we purchase
are repackaged into the therapeutically correct quantity and strength of a
specific medication normally used in patient care to treat a particular
illness. Purchasing pharmaceuticals in unit-of-use sizes is an attractive
option due to its ease of use, convenience, quality control aspect, and lower
cost of packaging (versus a pharmacist filling the prescription by hand).
Therapeutically correct dosages are determined by our management team of
physicians and pharmacists based upon common prescribing practices and
manufacturers' recommended dosages.
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BULK DISTRIBUTION. Approximately 23% of the drugs we purchase are
distributed on a direct basis. These quantities are sold to large volume
accounts such as chain pharmacies, hospitals, wholesalers, and institutions.
CONTRACT PHARMACEUTICAL REPACKAGING AND PRIVATE LABELING SERVICES.
Contract repackaging services are provided on a cost-plus basis to customers
who purchase bulk pharmaceuticals from pharmaceutical manufacturers and have
the products shipped to PD-Rx for repackaging into unit-of-use quantities.
These accounts include state and federal agencies (including prisons and
Veteran Administration hospitals), pharmacy chains, and other large volume
institutions. Private labeling is also an option offered to accounts who want
to build brand recognition. Generally, customers in this category do not have
the equipment to repackage into smaller sizes, but prefer unit-of-use
quantities because of the potential for cost savings by purchasing from PD-Rx
versus having pharmacists fill each prescription. We believe that contract
repackaging services provide organizations time savings and convenience for
their pharmacists, which ultimately result in cost containment measures
through economies of scale.
MEDICAL SUPPLIES AND INJECTABLE PRODUCTS
In conjunction with pharmaceuticals, we offer medical
supplies (including rubber gloves, paper gowns and sheets, gauze, tape,
needles, and syringes) and injectable products. We have developed a catalog
describing, illustrating and promoting these products. These products
represented approximately 16% of our sales during the year ended June 30,
1999.
MEDICAL EMERGENCY KITS
Our medical emergency kits include drugs and intervenes
solutions that are used for the immediate treatment of life threatening
emergencies such as allergic reaction and cardiac arrest. The shelf life of
these products is between nine to 12 months. We offer a systematic updating
of the kits prior to the shelf life expiration dates. We monitor product
expiration dates, and prior to these dates, we invoice and mail replacement
products to the physician's office.
CONSULTATION
Our customers have direct access to our professional staff
of pharmacists, physicians, and technicians to enhance their product line. We
assist in compliance with Food and Drug Administration regulations and
complete the proper documentation required for private label registration. We
also assist managed healthcare organizations design therapeutic or cost
containment formularies that keep them competitive in the ever changing
pharmaceutical marketplace.
SALES AND MARKETING
We market and sell our products and services to the
customer. Due to the nature of the business, there are no distributors or
wholesalers involved in our marketing and sales. There are, however, various
ways in which we market our products and services depending upon the targeted
market segment. More than one product can be marketed to a particular market
segment.
The main target market for our repackaged pharmaceutical
products and PD-Rx Net System is the physician dispensing market segment.
Direct sales efforts to primary care physicians are conducted by our staff of
eight full-time and four part-time salespersons along with in-house sales
activities. We have also used telemarketing as a means for marketing and
sales to physician offices, clinics and pharmacies across the United States
promoting our prepackaged pharmaceutical products and dispensing system.
Direct marketing and sales efforts to managed healthcare organizations are
handled by our management.
After the initial sale is made to a customer for physician
dispensing, reorders are made either via the Internet, mail using order
forms, facsimile transmission using order forms, verbally utilizing a WATTS
line, or
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by telephone to one of the salespersons or management member. Orders are
typically shipped within three working days of order receipt. In the event a
back order is necessary, we notify the purchaser of the status of the order
within two days. Overnight delivery companies are used for shipping products
to customers.
Our management is primarily responsible for direct sales
efforts of the contract repackaging and private label products and services
to large volume accounts, state and federal agencies, and institutional
accounts. Due to the low profit margins involved, these products are not
marketed through independent commissioned salespersons. Most of the sales
activity is conducted by telephone, however, management visits customers in
person when necessary to maintain good business relations with larger
accounts.
Sales literature and brochures are used to convey important
and specific information to prospective customers to achieve broad-spectrum
product acceptance and sales growth. This literature is an inexpensive, yet
effective, promotional tool that conveys our concept and products.
GROWTH STRATEGY
Our objective is to become the leading provider of
pharmaceutical management strategies. Our plan to achieve this objective
includes the following:
- - Accelerating sales of our pharmaceutical management strategies through
expansion of marketing efforts, conversion of traditional dispensing-only
customers to PD-Rx Net System and development of strategic alliances with
physician practice management system vendors, physician-oriented Internet
portals and managed healthcare organizations.
- - Increasing customer utilization of our medication management products to
enhance the financial opportunity for physicians through a combination of
quality customer service and expansion of the number of managed care
organizations that reimburse physicians for prescription medications
dispensed in their offices.
- - Enhancing our product line by developing additional Internet-based products
for physicians and their patients.
- - Developing and marketing information products that use the data collected
during the electronic prescribing process.
However, there is no assurance that we will successfully penetrate these
markets or develop products or if penetrated and developed that additional
revenues and increased profitability will be achieved.
PRODUCT DEVELOPMENT AND TECHNOLOGY
As of December 31, 1999, our software development department
consisted of two technology professionals. These individuals, with expertise
in application development, documentation and quality assurance, are
responsible for our point-of-care and Internet strategies.
Our internal systems/networks operate on Linux, SCO, Solaris,
Microsoft's NT and Windows operating systems. All software products are
developed using CORBA (ORBs) & COM/DCOM-objects, HTML/DHTML/XML, (ASP) Active
Server Pages and C++/JAVA2/Perl/VB/SQL programming languages. This allows
maximum code reuse and extensibility with minimal maintenance. Our Internet
applications are browser-independent and are protected by a state-of-the-art
firewall system, which is a network interconnection element that polices
traffic flowing between our PD-Rx Net System and internal networks and the
Internet. We also employ proxy servers and monitoring systems that provide
layered security and monitor against unauthorized access. We use secure
socket layers and the industry standard 128-bit encryption system to provide
secure transfer of information over the Internet when needed. All of our
systems and network components have both individual and systemwide battery
back up and spike/lighting protection as well as our voice/data telephones
and ISDN/T1
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connections to the Internet.
The PD-Rx Net System operates on Microsoft's NT and Windows
operating systems. All software products are developed using com-objects,
Active Server Pages and C++ programming language. Our Internet applications
are browser-independent and are protected by a state-of-the-art firewall,
which is a network interconnection element that polices traffic flowing
between the PD-Rx Net System internal network and the Internet, and proxy
servers that provide layered security defenses against unauthorized access.
We employ industry standard 128-bit encryption, known as secure socket
layers, to provide secure transfer of information over the Internet.
During the years ended June 30, 1999 and 1998, and the six months
ended December 31, 1999, we incurred and expensed $33,747, $43,840 and
$40,091 of enhancement and maintenance costs relating to our PD-Rx Net
System. None of our customers paid or bore any of these costs on our behalf.
COMPETITION
Our industry is intensely competitive, rapidly evolving and subject
to rapid technological change. Many companies that offer products or services
that compete with one or more of our products or services have greater
financial, technical, product development, marketing and other resources than
we have. These organizations may be better known and may have more customers
than we have. We may be unable to compete successfully against these
organizations. We believe that we must gain significant market share with our
products and services before our competitors introduce alternative products
and services with features similar to ours.
We believe that there are no competitors in pharmaceutical
management that offer comprehensive strategies with ease of use,
accessibility, information content and financial opportunity for physicians
comparable to ours. However, several organizations offer components that
overlap with certain components of our strategies and may become increasingly
competitive with us in the future.
We face competition from several types of organizations, including
the following:
- - physician practice management systems suppliers;
- - electronic medical records providers;
- - healthcare electronic data interchange providers;
- - point-of-care dispensing providers;
- - Internet pharmacies; and
- - Internet information providers.
While many of these types of organizations are potential
competitors, we believe that there are opportunities to establish strategic
relationships, alliances or distribution agreements with some of them.
Although we do not have any existing agreements with these types of
organizations, we intend to pursue these opportunities selectively. In
addition, we expect that major software information systems companies and
others specializing in the healthcare industry may offer products or services
that are competitive with our products and services.
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SOURCES AND AVAILABILITY OF PRODUCTS
Our major suppliers are Wyeth Laboratories, Inc., Teva
Pharmaceuticals, Inc., Zenith/Goldline Pharmaceuticals, Inc., Mylan
Pharmaceuticals, Barr Labs, Inc., McKesson, and Bergen Brunswig. In our
opinion these companies represent the largest and most reputable U.S.
pharmaceutical manufacturers. We have experienced in few instances in our
history the inability to secure a pharmaceutical product to meet customer
needs due to manufacturers shortages. In general we believe the inability to
obtain particular pharmaceutical products will not have a material adverse
effect on the results of our operations.
DEPENDENCE ON MAJOR CUSTOMERS
At June 30, 1998 and 1999 and December 31, 1999, we had a customer
base of 704 accounts (approximately 2,100 physicians), 800 accounts
(approximately 2400 physicians) and 1155 accounts (approximately 3,460
physicians), respectively. None of our customers accounted for 10% or more of
our annual sales during the years ended June 30, 1999 and 1998 or the six
months ended December31, 1999.
TRADEMARK
PD-Rx Net System is under continual update and enhancement
internally. We rely on proprietary know-how to protect our software source
codes, ideas, concepts and documentation of its proprietary software. Such
methods include restrictions on disclosure and transferability contained in
its software licensing agreements with its customers.
GOVERNMENTAL REGULATION
As a participant in the healthcare industry, our operations and
relationships are regulated by a number of federal, state and local
governmental entities.
The use of our PD-Rx Net System by physicians to perform electronic
prescribing, electronic routing of prescriptions to pharmacies and dispensing
is governed by state and federal laws. States have differing prescription
format requirements, which we have programmed into PD-Rx Net System. Many
existing laws and regulations, when enacted, did not anticipate methods of
electronic commerce now being developed. Federal law and the laws of several
states neither specifically permit nor specifically prohibit electronic
transmission of prescription orders. Given the rapid growth of electronic
commerce in healthcare, and particularly the growth of the Internet, we
expect many states, as well as the federal government, to directly address
these areas with regulation in the near future.
Physician dispensing of medications for profit is allowed in all
states except Massachusetts and Utah and is prohibited, subject to extremely
limited exceptions, in Montana and Texas. Two states, New York and New
Jersey, allow physician dispensing of medications for profit, but limit the
number of days' supply that a physician can dispense. Many of the states
allowing physician dispensing for profit have regulations relating to
licensure, storage, labeling, record keeping and the degree of supervision
required by the physician over support personnel who assist in the
non-judgmental tasks associated with physician dispensing, like retrieving
medication bottles and affixing labels. We regularly monitor these laws and
regulations, in consultation with the governing agencies, to assist our
customers in understanding and complying with these laws and regulations.
Congress enacted significant prohibitions against physician
self-referrals in the Omnibus Budget Reconciliation Act of 1993. This law,
commonly referred to as "Stark II," applies to physician dispensing of
outpatient prescription drugs that are reimbursable by Medicare or Medicaid.
Stark II, however, includes an exception for the provision of in-office
ancillary services, including a physician's dispensing of outpatient
prescription drugs, provided that the physician meets the requirements of the
exception. We believe that the physicians who use our PD-Rx Net System or
dispense drugs distributed by us are doing so in material compliance with
Stark II, either pursuant to the in-office ancillary services exception or
another applicable exception.
As a repackager and distributor of drugs, we are subject to
regulation by and licensure with the Food and
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Drug Administration, the Drug Enforcement Administration and various state
agencies that regulate wholesalers or distributors. Among the regulations
applicable to our repackaging operation are the Food and Drug
Administration's "good manufacturing practices." We are subject to periodic
inspections by regulatory authorities of our facilities, policies and
procedures for compliance with applicable legal requirements. Because the
Food and Drug Administration's good manufacturing practices were designed to
govern the manufacture, rather than the repackaging, of drugs, we face legal
and financial uncertainty concerning the application of some aspects of these
regulations and of the standards that the Food and Drug Administration will
enforce. If the healthcare environment becomes more restrictive, or we do not
comply with healthcare regulations, our existing and future operations may be
curtailed, and we could be subject to liability.
As a distributor of prescription drugs to physicians, we and our
customers are also subject to the federal anti-kickback statute, which
applies to Medicare, Medicaid and other state and federal programs. The
statute prohibits the solicitation, offer, payment or receipt of remuneration
in return for referrals or the purchase of goods, including drugs, covered by
the programs. The anti-kickback law provides a number of exceptions or "safe
harbors" for particular types of transactions. We believe that our
arrangements with our customers are in material compliance with the
anti-kickback statute and relevant safe harbors. Many states have similar
fraud and abuse laws, and we believe that we are in material compliance with
those laws.
As part of our services provided to physicians, our system will
electronically transmit claims for prescription medications dispensed by a
physician to many patients' payers for immediate approval and reimbursement.
Federal law provides that it is both a civil and a criminal violation for any
person to submit a claim to any payer, including, for example, Medicare,
Medicaid and all private health plans and managed care plans, seeking payment
for any services or products that overbills or bills for items that have not
been provided to the patient. We believe that we have in place policies and
procedures to assure that all claims that are transmitted by our system are
accurate and complete, provided that the information given to us by our
customers is also accurate and complete.
Both federal and state laws regulate the disclosure of confidential
medical information, including information regarding conditions like AIDS,
substance abuse and mental illness. As part of the operation of our business,
our customers may provide to us patient-specific information related to the
prescription drugs that our customers prescribe to their patients. We believe
that we have policies and procedures to assure that any confidential medical
information we receive is handled in a manner that complies with all federal
and state confidentiality requirements.
We incur certain costs associated with compliance with Drug
Enforcement Administration and Food and Drug Administration environment
regulations. These include $442 per year for maintaining a separate "clean
room" for repackaging penicillin. Future regulations will require that the
repackaging of cephalexin will require a "clean room" as well. We incur
approximately $100 per year for properly disposing of outdated
pharmaceuticals.
EMPLOYEES
As of December 31, 1999, we employed 28 full-time employees. All
potential new employees are required to undergo drug testing and background
checks. We are a non-union company, and, in our opinion, our employee
relations are good.
HISTORY
We were organized in 1986 as an Oklahoma corporation under the name
Physicians Dispensing Rx Systems, Inc. In December 1986, our name was changed
to Physicians Dispensing Rx, Inc. In 1988, we merged into Buckingham Venture
Corporation, a Colorado corporation. This merger was accounted for as though
we acquired Buckingham Venture Corporation, although Buckingham Venture
Corporation was the surviving corporation. Pursuant to this merger,
- - the shareholders of Physicians Dispensing Rx, Inc. acquired 85% of the
outstanding shares of
9
<PAGE>
Buckingham Venture Corporation;
- - the officers and directors of Physicians Dispensing Rx, Inc. assumed
management of Buckingham Venture Corporation; and
- - the name of Buckingham Venture Corporation, the surviving corporation, was
changed to Physicians Dispensing Rx, Inc.
In 1990, our name was changed to PD-Rx Pharmaceuticals, Inc. In 1995 our
state of incorporation was changed to Oklahoma pursuant to merger of PD-Rx
Pharmaceuticals, Inc., a Colorado corporation, and our former parent, with
and into PD-Rx Pharmaceuticals, Inc., an Oklahoma corporation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with our
financial statements and notes thereto appearing elsewhere in this
Registration Statement.
As of December 31, 1999, we operated in one segment - the
repackaging and distribution of prepackaged pharmaceutical products,
including medical supplies. We believe that all current products are similar
in nature, are sold to similar customers, and are sold through similar
distribution methods. Currently, our PD-Rx Net System and our Internet
Products are provided to our customers to facilitate sales of our
pharmaceutical products and supplies. Nevertheless, our PD-Rx Net System and
our Internet Products are central to our future operating strategy. We
anticipate that if these product and service categories begin to develop
beyond facilitating sales of our current products and into separate markets,
the way our business is organized will change to reflect the increasing
importance of each of these products and services. If this occurs, we may
determine that we operate in multiple segments.
RESULTS OF OPERATIONS
The following table sets forth selected results of operations for
our fiscal years ended June 30, 1999 and 1998 and the six months ended
December 31, 1999 and 1998. The results of operations for the fiscal years
ended June 30, 1999 and 1998 are derived from our audited financial
statements appearing elsewhere in this registration statement. The results of
operations for the six months ended December 31, 1999 and 1998 are derived
from our unaudited financial statements appearing elsewhere in this
registration statement.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, SIX MONTHS ENDED DECEMBER 31,
----------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ------- ----------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES $6,715,089 100.0% $5,872,858 100.0% $3,192,126 100.0% $3,273,714 100.0%
----------- ------ ----------- ------- ---------- ------- ---------- ------
COST OF SALES 4,984,884 74.2% 4,376,165 74.5% 2,335,973 73.2% 2,472,171 75.5%
----------- ------ ----------- ------- ---------- ------- ---------- ------
Gross profit 1,730,205 25.8% 1,496,693 25.5% 856,153 26.8% 801,543 24.5%
Selling, general, and 1,481,750 22.1% 1,446,530 24.6% 786,523 24.6% 733,867 22.4%
administrative expenses ----------- ------ ----------- ------- ---------- ------- ---------- ------
Operating income 248,455 3.7% 50,163 .9% 69,630 2.2% 67,676 2.1%
----------- ------ ----------- ------- ---------- ------- ---------- ------
Other income (expense)
Rental and interest 57,766 0.9% 51,198 0.9% 28,797 .9% 31,346 1.0%
Interest (42,679) 0.6% (38,903) 0.7% (17,063) 0.5% (21,576) .7%
----------- ------ ----------- ------- ---------- ------- ---------- ------
Total other income
(expense) 15,087 .2% 12,295 0.2% 11,734 .4% 9,770 .3%
----------- ------ ----------- ------- ---------- ------- ---------- ------
Net earnings before income tax 263,542 3.9% 62,458 1.1% 81,364 2.6% 77,446 2.4%
Income tax expense 79,709 1.2% 39,400 0.7% 30,918 1.0% 30,115 .9%
----------- ------ ----------- ------- ---------- ------- ---------- ------
Net earnings $ 183,833 2.7% $ 23,058 0.4% 50,446 1.6% $ 47,331 1.5%
=========== ====== =========== ======= ========== ======= ========== ======
</TABLE>
10
<PAGE>
COMPARISON OF THE SIX-MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
During the six months ended December 31, 1999 (the "1999 period")
our net sales decreased $81,588 (a 2.5% decrease) to $3,192,126 from
$3,273,714 during the six months ended December 31, 1998 (the "1998 period").
This decrease was primarily due to the loss of one large multi-center
account. This was partially offset, however, by 401 new individual accounts.
Total cost of sales for the 1999 period decreased $136,198 (a 5.5%
decrease) to $2,335,973 from $2,472,171 during the 1998 period. This decrease
was primarily attributable to a decrease of $126,772 (a 5.1% decrease) in
pharmaceutical supplies and drug costs associated with decreased net sales.
Total cost of sales as a percentage of total sales for the 1999 period
decreased to 73.2% from 75.5% in the 1998 period primarily because of the
loss of a large multi-center account with a lower than average gross profit
margin. As a result, our gross profit increased $54,610 (a 6.8% increase) to
$856,153 in the 1999 period from $801,543 in the 1998 period. The gross
profit increased as a percentage of total net sales to 26.8% in the 1999
period from 24.5% in the 1998 period.
Selling, general and administrative expenses for the 1999 period
increased $52,656 (a 7.2% increase) to $786,523 from $733,867 during the 1998
period. Sales related payroll increased in the 1999 period by $23,886 (a
12.3% increase) to $217,849 from $193,963 during the 1998 period. The
increase in sales related payroll was primarily due to increased commissioned
sales volume and the addition of new sales representatives. General payroll
increased $47,864 (a 37.2% increase) to $176,339 in the 1999 period from
$128,475 during the 1998 period. These increases were partially offset by a
$14,736 decrease (a 65.2% decrease) in promotion and advertising expense to
$7,861 in the 1999 period from $22,597 in the 1998 period and a decrease of
$14,018 (a 82.4% decrease) in equipment rental expense to $2,999 in the 1999
period from $17,017 in the 1998 period. Overall, selling, general and
administrative expenses increased as a percentage of total sales to 24.6% in
the 1999 period from 22.4% in the 1998 period.
For the 1999 period operating income increased by $1,954 (a 2.9%
increase) to $69,630 from $67,676 during the 1998 period. Operating income as
a percentage of total sales increased to 2.2% in the 1999 period from 2.1% in
the 1998 period. The increased operating income was primarily attributed to
the decreased cost of sales as a percentage of net sales in the 1999 period
as compared to the 1998 period, as noted above.
Rental and interest income for the 1999 period decreased $2,549 (a
8.1% decrease) to $28,797 from $31,346 during the 1998 period. Interest
expense decreased $4,513 (a 20.9% decrease) to $17,063 from $21,576 during
the 1998 period. Net earnings before income taxes increased $3,918 (a 5.1%
increase) to $81,364 from $77,446 during the 1998 period, and as a result,
income tax expense increased to $30,918 for the 1999 period from $30,115 for
the 1998 period.
Net earnings increased $3,115 (a 6.6% increase) to $50,446 during the
1999 period from $47,331 during the 1998 period. Net earnings as a percentage
of net sales increased to 1.6% during the 1999 period from 1.5% percent
during the 1998 period. This increase was primarily the result of increased
revenues in selective niche markets coupled with increased sales of new
product lines that include injectable medications and medical and surgical
supplies.
COMPARISON OF FISCAL 1999 AND 1998
During our 1999 fiscal year ended June 30, 1999, net sales increased
$842,231 (a 14.3 % increase) to $6,715,089 from $5,872,858 during our 1998
fiscal ended June 30, 1998. The increase was primarily due to the addition of
504 new customer accounts during fiscal 1999. These new accounts included
private physician practices, physician group clinics, or physicians in
managed care clinics operated by managed healthcare organizations (health
maintenance organizations or HMOs and preferred provider organizations or
PPOs).
Total cost of sales for fiscal 1999 increased $608,719 (a 13.9%
increase) to $4,984,884 from $4,376,165 during the fiscal 1998. This increase
was primarily attributable to an increase of $671,615 (a 16.7% increase) in
11
<PAGE>
pharmaceutical supplies and drug costs associated with increased net sales,
this increase was partially offset by a decrease in other associated cost of
sales categories. Total cost of sales as a percentage of total sales for
fiscal 1999 was 74.2% compared to 74.5% in fiscal 1998, and remained
relatively constant.
Our gross profit increased $233,512 (a 15.6% increase) to $1,730,205
in fiscal 1999 from $1,496,693 in fiscal 1998. The gross profit as a
percentage of total net sales which was 25.8% in fiscal 1999 and 25.5% in
fiscal 1998, remained relatively constant.
Selling, general and administrative expenses for fiscal
1999 increased $35,220 (a 2.4% increase) to $1,481,750 from $1,446,530 during
the fiscal 1998. Sales related payroll increased in fiscal 1999 by $57,758 (a
20.4% increase) to $341,463 from $283,705 during fiscal 1998. The increase in
sales related payroll was primarily due to increased commissioned sales
volume. Overall, selling, general and administrative expenses decreased as a
percentage of total sales to 22.1% in fiscal 1999 from 24.6% in fiscal 1998.
For the fiscal year 1999 operating income increased by
$198,292 (a 395% increase) to $248,455 from $50,163 during fiscal 1998.
Operating income as a percentage of total sales increased to 3.7% in fiscal
1999 from 0.9% in fiscal 1998. The increased operating income was primarily
attributed to the decreased cost of sales as a percentage of net sales in
fiscal 1999 as compared to fiscal 1998.
Rental and interest income for fiscal 1999 increased $6,568
(a 12.8% increase) to $57,766 from $51,198 during fiscal 1998. Interest
expense increased $3,776 (a 9.7% increase) to $42,679 from $38,903 during
fiscal 1998. Net earnings before income taxes increased $201,084 (a 322%
increase) to $263,542 from $62,458 during fiscal 1998.
Net earnings increased $160,775 (a 697% increase) to
$183,833 during fiscal 1999 from $23,058 during fiscal 1998. Net earnings as
a percentage of net sales increased to 2.7% during fiscal 1999 from 0.4%
percent during fiscal 1998. This increase was primarily the result of
increased revenues in the niche market of dermatology coupled with increased
sales of injectable medications.
INCOME TAXES
The provisions for income taxes on pretax income were based on the
effective combined federal and state graduated corporate income tax rates of
approximately 40% after giving effect to certain adjustments. The provisions
for income taxes were $79,709 and $39,400 for the fiscal years ended June 30,
1999 and 1998, respectively. Footnote E to the June 30, 1999 and 1998
financial statements provides a reconciliation of income tax expense to the
federal income tax rate.
YEAR 2000 COMPUTER SYSTEM COMPLIANCE
We have two primary computer systems. We have completed the
implementation of a program to comply with year 2000 requirements on a
system-by-system basis including information technology ("IT") and non-IT
systems (E.G., micro controllers).
Our vendor-supported IT system has been updated and
certified year 2000 compliant by the vendor. Non-IT systems including all
personal computers were evaluated by a third party contractor and have been
updated and certified year 2000 compliant. Our risks associated with the year
2000 are mainly our ability to communicate with our distributors, take orders
for and ship products and pay our employees, distributors and vendors.
Although our evaluation is complete and vendor certifications have been
obtained, a failure of our computer systems or other support systems to
function adequately with respect to year 2000 issues could have a material
adverse effect on our operations. Based on progress to date and the limited
instances of date sensitive calculations, we have concluded that there is no
need for a contingency plan therefore such plan has not been developed. We
estimate that the total cost of our program to make our computer systems year
2000 compliant was less than $25,000.
12
<PAGE>
We have contacted our major suppliers and have received
their assurances that their computer systems are year 2000 compliant. In the
event we experience product unavailability or supply interruptions due to
year 2000 non-compliance by our suppliers, we believe that we will be able to
obtain alternative sources of our products. A significant delay or reduction
in availability of products, however, could also have a material adverse
effect on our operations. As of the date of this registration statement, we
have not experienced any computer system malfunctions or delays or reductions
in the availability of products attributable to computer systems year 2000
non-compliance.
LIQUIDITY AND CAPITAL RESOURCES
We have relied on a combination of sources, including the consistent
generation of cash flows from operations, to provide liquidity and working
capital. At December 31, 1999, we had working capital of $971,403, compared
to working capital of $963,662 at June 30, 1999. During the six months ended
December 31, 1999, cash flows used in operating activities was $50,040, cash
flows used in investing activities was $88,238, and net cash flows used in
financing activities was $25,743. During the year ended June 30, 1999, net
cash provided by operating activities was $202,773, cash flows used in
investing activities was $142,714, and net cash used in financing activities
was $46,836. As of December 31 and June 30, 1999, we did not have any capital
commitments, other than related to repayment of outstanding indebtedness.
In connection with the purchase of our office-warehouse facilities,
we obtained a five-year installment loan from Bank of Oklahoma N.A., secured
by the office-warehouse facilities. This loan requires monthly installments
of $4,960, including interest at the Chase Manhattan prime rate (effective
rate of 7.75% and 7.75% at December 31, 1999 and June 30, 1999, respectively).
This loan matures in April 2003 and requires a principal payment of $415,876
at maturity. At December 31 and June 30, 1999, the outstanding the principal
balance of this loan was $466,840 and $477,636, respectively.
Our primary sources of liquidity are net cash provided by operating
activities and a revolving line of credit. We have a revolving line of credit
with Bank of Oklahoma N.A. in the principal amount of $750,000. The line of
credit is payable in monthly installments of interest only at the Chase
Manhattan prime rate (effective rate of 7.75% and 7.75% at December 31 and
June 30, 1999, respectively) and is collateralized by inventories, property
and equipment, and accounts receivable. Borrowings under this line of credit
are limited to established ratios of accounts receivable and inventories as
specified by the terms of the agreement. The related loan agreement requires
us, among other things, to maintain a minimum current ratio of 1.4-to-1 and a
minimum net worth of $1,000,000. At December 31, and June 30, 1999 and June
30, 1998, no advances were outstanding under this line of credit.
ITEM 3. DESCRIPTION OF PROPERTY
Our corporate offices, warehousing, and production operations are
located in 27,600 square feet at 727 North Ann Arbor, Oklahoma City, Oklahoma
73127. We own the office-warehouse facilities and lease approximately 10,720
square feet to an unrelated third party under a month-to-month lease
requiring monthly rent of $2,680. Our executive, marketing and administrative
offices occupy approximately 5,000 square feet at the front of the facility.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information as to the
beneficial ownership of our common stock as of the date of February 15, 2000,
and the beneficial ownership of the common stock of (i) each person who is
known to us to be the beneficial owner of more than 5% thereof, (ii) each of
our directors and executive officers, and (iii) all of our executive officers
and directors as a group, together with their percentage holdings of the
outstanding shares, and, as adjusted to give effect to the offering. All
persons listed have sole voting and investment power with respect to their
shares unless otherwise indicated, and there are no family relationships
amongst our executive officers and directors. For purposes of the following
table, the number of shares and percent of ownership of our outstanding
common stock that the named person beneficially owns includes shares of
13
<PAGE>
our common stock that such person has the right to acquire within 60 days of
February 15, 2000, pursuant to exercise of stock options and are deemed to be
outstanding, but are not deemed to be outstanding for the purposes of
computing the number of shares beneficially owned and percent of outstanding
common stock of any other named person.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME (AND ADDRESS) OF BENEFICIAL OWNER OWNED(1) SHARES(1)(2)
- -------------------------------------- ------- ------------
<S> <C> <C>
Christanna C. Holsey
Route 1, Box 145
Gracemont, OK 73042 331,642 19.5%
Ronald R. Tutor(3)
3920 SE 104th
Moore, OK 73156 419,906 23.4%
Diana K. Jones
12401 Rivendell Drive
Oklahoma City, OK 73170 148,418 8.8%
Robert D. Holsey, D.O., R.Ph.(4)
Rt. 1 Box 145
Gracemont, OK 73042 331,642 19.5%
David W. Dare, R.Ph. 22,307 1.3%
Jack L. McCall, Jr.
2601 Bob White Trail
Edmond, OK 73003 165,000 9.7%
Robert L. Baker - - %
Executive Officer and Directors as a group (four persons)(4) 518,949 30.6%
</TABLE>
- ------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them within 60 days of the date of this
registration statement are treated as outstanding for determining the
amount and percentage of our common stock owned by such person. To our
knowledge, each named person has sole voting and sole investment power
with respect to the shares shown except as noted, subject to community
property laws, where applicable.
(2) The percentages shown was rounded to the nearest one-tenth of 1%, based
upon 1,694,804 common shares of common stock being outstanding.
(3) The shares beneficially owned and percent of outstanding shares
includes 100,000 of common stock issuable upon conversion of Class A
13.25% Cumulative Convertible Preferred Stock.
(4) The shares beneficially owned and percent of outstanding shares are
based upon the shares of common stock owned by Christanna C. Holsey,
the wife of Dr. Holsey.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors are elected annually by the shareholders and hold office
until the annual meeting of shareholders and until their successors are elected
and qualified or until retirement, removal or disqualification. Our officers are
elected by, and serve at the pleasure of, the Board of Directors. The members of
our board of directors and executive officers are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert D. Holsey, D.O., R.Ph. 47 President, Chief Executive Officer, and Chairman
Jack L. McCall, Jr. 40 Executive Vice President of Marketing and Sales, Director, and
Secretary
David W. Dare, R.Ph. 47 Director and Treasurer
Robert L. Baker 51 Director
</TABLE>
14
<PAGE>
The following is a brief description of the business background of
our executive officers and directors:
ROBERT D. HOLSEY, D.O., R.PH., is our President, Chief Executive
Officer, and Chairman of the Board and a practicing physician. He has served
as a Director since our inception in 1986. He was awarded a pharmacy degree
in 1977 from the University of Oklahoma, School of Pharmacy. As a Registered
Pharmacist, he owned and operated a pharmacy in Binger, Oklahoma, prior to
entering medical school in 1978. Dr. Holsey attended the Oklahoma State
University College of Osteopathic Medicine and Surgery in Tulsa, Oklahoma. He
was awarded a Doctor of Osteopathy degree in 1981 and completed his post-
graduate training at Fort Worth Osteopathic Medical Center. He is board
certified in family practice by the American College of Osteopathic Family
Practitioners. Dr. Holsey devotes approximately 20 hours weekly to his
private medical practice in Binger, Oklahoma. Dr. Holsey devotes 30 to 40
hours weekly of his time and attention to our business and affairs. In
September 1998, Dr. Holsey filed an uncontested petition under the federal
bankruptcy laws.
JACK L. MCCALL, JR., has served as our Executive Vice President
since December 29, 1993, Secretary and one of our Directors since September
18, 1996. His previous work experience with Parmed, provides valuable insight
as we expand our marketing efforts into the pharmaceutical distribution area.
While at Parmed, he was involved in the sales and telemarketing departments
and as a bid representative for large accounts such as chain stores,
repackagers, and federal, state and local governments. Mr. McCall was
graduated in 1983 from Southern Connecticut State University with a Bachelor
of Science in Environmental and Marine Biology.
DAVID W. DARE, R.PH., is our Treasurer and has served as one of our
Directors since our inception. He is a registered pharmacist and currently
the owner and operator of a retail pharmacy and drug store in Binger,
Oklahoma. Mr. Dare attended Oklahoma State University and Central State
University prior to receiving his pharmacy degree in 1977 from the University
of Oklahoma. From 1977 to 1978, he was employed in Springfield, Missouri, at
a community pharmacy. Mr. Dare was employed by Baptist Medical Center in
Oklahoma City, Oklahoma, from 1978 to 1982, as a staff pharmacist.
ROBERT L. BAKER has served as one of our Directors since
August, 1996. Since 1987 Mr. Baker has served us in a financial consulting
capacity and has been involved in the preparation of various business plans
as well as our accounting system setup and organization for the repackaging
operation. He has provided assistance since our inception in the areas of
finance, tax, and cash management. Mr. Baker is a Certified Public Accountant
and currently serves as Controller and Chief Financial Officer of Jay
Petroleum, Inc. He has previously served as Controller for Fremont Energy
Corporation, which was formed in 1987 and sold in 1996. Mr. Baker has an
accounting degree from Northwestern Oklahoma State University in Alva,
Oklahoma. Prior to 1987, Mr. Baker was in practice as an independent
consultant and also served in various management positions in the oil and gas
industry.
15
<PAGE>
OFFICER AND DIRECTOR LIABILITY
As permitted by the provisions of the Oklahoma General
Corporation Act, our Certificate of Incorporation eliminates in certain
circumstances the monetary liability of our directors for a breach of their
fiduciary duty as directors. These provisions and applicable laws do not
eliminate the liability of one of our directors for
- - a breach of the director's duty of loyalty to us or our shareholders,
- - acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law,
- - liability arising under the Oklahoma General Corporation Act relating to
the declaration of dividends and purchase or redemption of shares of our
common stock in violation of the Oklahoma General Corporation Act, o any
transaction from which the director derived an improper personal benefit,
- - violations of federal securities laws.
Our Certificate of Incorporation and bylaws provide that we
indemnify our directors and officers to the fullest extent permitted by the
Oklahoma General Corporation Act. Under such provisions, any director or
officer, who in his capacity as such, is made or threatened to be made, a
party to any suit or proceeding, may be indemnified if our board of directors
determines such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to our best interests.
Our Certificate of Incorporation and bylaws and the Oklahoma General
Corporation Act further provide that such indemnification is not exclusive of
any other rights to which such individuals may be entitled under our
Certificate, our bylaws, an agreement, vote of shareholders or disinterested
directors or otherwise. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to our directors and
officers pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE OFFICER COMPENSATION
The following Summary Compensation Table sets forth certain
information with respect to the total cash compensation, paid or accrued, of
our President and Chief Executive Officer. None of our executive officers
received compensation in excess of $100,000 during the last three years ended
June 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3)
- --------------------------- ---- --------- --------
<S> <C> <C> <C>
Robert D. Holsey, D.O., R.Ph. 1999 $53,519 $5,000
President and Chief Executive Officer 1998 $57,934 $5,000
1997 $53,000 $5,000
</TABLE>
- ------------------------
(1) The named executive officer received additional non-cash compensation,
perquisites and other personal benefits; however, the aggregate amount and
value thereof did not exceed 10% of the total annual salary
16
<PAGE>
and bonus paid to and accrued for the named executive officer during the
year.
(2) Dollar value of base salary (both cash and non-cash) earned during the
year.
(3) Dollar value of bonus (both cash and non-cash) earned during the year.
COMPENSATION OF DIRECTORS
Directors who are not our employees receive $500 for each board
meeting attended. Directors who are also our employees receive no additional
compensation for serving as directors. We reimburse our directors for travel
and out-of-pocket expenses in connection with their attendance at meetings of
our board of directors. Our bylaws provide for mandatory indemnification of
directors and officers to the fullest extent permitted by Oklahoma law. In
addition, our non-employee directors have the option to receive health
insurance benefits for their families. Of our two non-employee directors,
David W. Dare has elected to receive these health insurance benefits, the
cost of which is $455 per month, and Robert L. Baker is currently receiving
consulting fees in the amount of $455 per month.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1998, we granted a one-year stock option to Jack L. McCall,
Jr., one of our executive officers and director. The stock option provided
for the purchase of 150,000 shares of our common stock at $.14 per share.
This option was exercised in September 1998. The exercise price was paid by
delivery of a $21,000 non-interest-bearing promissory note, payable in three
equal annual installments beginning one year from the date of exercise. Past
due installments bear interest at the rate of 18% per annum and the note is
collateralized by the related common stock. This note is reflected as a
reduction of stockholders' equity in our financial statements.
This option was accounted for under Accounting Principles Board
Opinion 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. The quoted market price of the stock at date of grant
exceeded the exercise price of the option; accordingly, compensation cost of
$30,000 was recognized for this option in 1998.
ITEM 8. DESCRIPTION OF SECURITIES
Pursuant to our Certificate of Incorporation, we are authorized to
issue up to 3,000,000 shares of common stock, $.01 par value per share, and
10,000,000 shares of preferred stock, $.10 par value per share. As of
December 31, 1999, our outstanding capital stock consisted of 1,694,804
shares of our common stock, 270,000 shares of Class A 13.25% Cumulative
Convertible Preferred Stock, and 81,200 shares of Class C 13.25% Cumulative
Preferred Stock.
The following description of certain matters relating to our capital
stock is a summary. This summary is qualified in its entirety by, the
provisions of our Certificate of Incorporation, bylaws, Designations of the
Rights and Privileges of our outstanding Class A 13.25% Cumulative
Convertible Preferred Stock and Class C 13.25% Cumulative Preferred Stock,
all of which are filed as exhibits to or are incorporated by reference in
this Registration Statement.
COMMON STOCK
Our authorized and outstanding shares of common stock, in general,
have the rights, privileges, disabilities and restrictions as follows:
- - the right to receive ratably such dividends, if any, as may be declared
from time to time by the board of
17
<PAGE>
directors out of assets legally available therefor, subject to the payment
of preferential dividends with respect to our then outstanding preferred
stock;
- - the right to share ratably in all assets available for distribution to our
common stock shareholders after payment of our liabilities in the event of
our liquidation, dissolution and winding-up, subject to the prior
distribution rights of the holders of our then outstanding preferred stock;
- - the right to one vote per share on matters submitted to a vote by our
common stock shareholders and, if applicable our preferred stock
shareholders;
- - no preferential or preemptive right and no subscription, redemption or
conversion privilege with respect to the issuance of additional shares of
our common stock or preferred stock; and
- - no cumulative voting rights, which means that the holders of a majority of
shares voting for the election of directors can elect all members of our
board of directors then subject to election.
In general, a majority vote of shares represented at a meeting of our
shareholders at which a quorum (a majority of the outstanding shares of stock
entitled to vote) is present, is sufficient for all actions that require the
vote or concurrence of shareholders.
PREFERRED STOCK
Our 10,000,000 shares of authorized preferred stock may be issued
from time to time in one or more series. Our board of directors, without
further approval of our common stock shareholders, is authorized to fix the
relative rights, preferences, privileges and restrictions applicable to each
series of our preferred stock. We believe that having such a class of
preferred stock provides greater flexibility in financing, acquisitions and
other corporate activities. While there are no current plans, commitments or
understandings, written or oral, to issue any of our preferred stock, in the
event of any issuance, our common stock shareholders will not have any
preemptive or similar rights to acquire any of such preferred stock. Issuance
of preferred stock could adversely affect
- - the voting power of the holders of our then outstanding common stock,
- - the likelihood that such holders will receive dividend payments and
payments upon liquidation, and
- - could have the effect of delaying or preventing a change in shareholder and
management control.
There are 270,000 shares of Class A 13.25% Cumulative Convertible
Preferred Stock and 81,200 shares of Class C 13.25% Cumulative Preferred
Stock issued and outstanding. Until January 6, 2000, we had 500,000 shares of
Class B 13.25% Cumulative Convertible Preferred Stock authorized, none of
which were ever issued.
CLASS A 13.25% CUMULATIVE CONVERTIBLE PREFERRED STOCK
Our board of directors has authorized 500,000 shares, par value $.10
per share, of Class A 13.25% cumulative convertible preferred stock ("Class A
Preferred Stock") of which 270,000 shares are issued and outstanding.
CONVERSION PRIVILEGES. Class A Preferred Stock is convertible into
common stock at the option of the preferred stockholders. Each share of
preferred stock can be converted into common stock at a conversion rate of
one share of common stock for one and one-half shares of preferred stock.
There are no common shares reserved for potential conversion.
VOTING RIGHTS. Class A Preferred Stock is non-voting.
DIVIDENDS. Cash dividends are payable, when declared by our board of
directors. The annual dividend is
18
<PAGE>
computed at the stated rate as a percentage of the liquidation preference of
the shares ($1.00 per share). Dividends accumulate on a daily basis without
regard to the occurrence of a dividend payment date or the declaration of any
dividend. At December 31, 1999, we had approximately $401,300 in cumulative
undeclared dividends in arrears on the Class A Preferred Stock.
REDEMPTION. In the event we liquidate, dissolve or wind up our
affairs, all accumulated and unpaid dividends will become due the holders of
the Class A Preferred Stock. We have the right to redeem the Class A
Preferred Stock by paying the holders $1.05 per share plus accumulated
dividends.
LIQUIDATION. Class A Preferred Stock has a $1.00 preference (plus
cumulative undeclared dividends in arrears) over the common stock and is
equivalent in rank to the Class C Preferred Stock in case of our liquidation
or dissolution.
CLASS C 13.25% CUMULATIVE PREFERRED STOCK
Our board of directors has authorized 500,000 shares, par value $.10
per share, of Class C 13.25% Cumulative Preferred Stock ("Class C Preferred
Stock") of which 81,200 shares are issued and outstanding.
CONVERSION PRIVILEGES. Prior to January 25, 1995, Class C Preferred
Stock was convertible into common stock. However, this convertible right was
not exercised and Class C Preferred Stock is no longer convertible into
Common Stock.
VOTING RIGHTS. Class C Preferred Stock is non-voting.
REDEMPTION. We have the right to redeem Class C Preferred Stock by
paying the holders $1.25 per share plus accumulated dividends.
DIVIDENDS. Dividends are payable monthly and if not paid within 90
days of the required payment date, become liabilities and the holders become
our creditors to the extent of the unpaid dividends. In the case of a
default, the holders of not less than 51% of the Class C preferred Stock may
declare dividends immediately due payable and institute proceedings for
collection. At September 30, 1999, we had approximately $2,700 in cumulative
undeclared dividends in arrears Class C Preferred Stock.
LIQUIDATION. Class C Preferred Stock has a $1.00 preference (plus
cumulative undeclared dividends in arrears) over the common stock , and is
equivalent to Class A Preferred Stock in case of our liquidation or
dissolution.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
Our common stock is traded in the over-the-counter market and is
quoted on the Nasdaq Bulletin Board. Our outstanding preferred stock is not
traded on a market. The following table sets forth information obtained from
the Trading and Market Services Division of The Nasdaq Stock Market, Inc.,
and reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
COMMON STOCK
CLOSING BID PRICES
------------------
HIGH LOW
---- ---
<S> <C> <C>
1999 --CALENDAR QUARTER ENDED:
------------------------------
March 31 $0.34 $0.31
June 30 0.53 0.31
September 30 0.53 0.38
December 31 0.23 0.375
19
<PAGE>
1998 --CALENDAR QUARTER ENDED:
------------------------------
March 31 0.50 0.31
June 30 0.38 0.31
September 30 0.41 0.34
December 31 0.34 0.30
1997--CALENDAR QUARTER ENDED:
-----------------------------
March 31 0.50 0.25
June 30 0.50 0.38
</TABLE>
As of December 31, 1999, we had approximately 170 holders of record
of our common stock. No dividends have been paid on our common stock since
our formation.
The holders of our outstanding Class A Preferred Stock and Class C
Preferred Stock are entitled to annual dividends of $46,534. At December 31,
1999, the cumulative unpaid dividends on our outstanding Class A Preferred
Stock were $401,300. The holders of the Class A Preferred Stock and Class C
Preferred Stock are entitled to receive accrued and unpaid dividends prior to
the holders of the Common Stock are entitled to receive dividends.
ITEM 2. LEGAL PROCEEDINGS
In October, 1995, Ronald Tutor, one of the holders of our
outstanding Class A Preferred Stock, filed a an action against us in the
District Court of Oklahoma County, State of Oklahoma (CJ 95 6969-67) in which
Mr. Tutor alleges that we have refused to allow his inspection and coping and
extraction of corporate records. Mr. Tutor is seeking an order directing us
to comply with his request and to recover attorney's fees and costs related
to the action. It is our opinion that this action is without merit.
In August 1998, Ronald Tutor, one of the holders of our outstanding
Class A Preferred Stock, filed an action against us in the District Court of
Oklahoma County, State of Oklahoma ( CJ 98 436-62) in which Mr. Tutor seeks
payment in liquidation of his Class A Preferred Stock ($150,000) and related
dividends in arrears (approximately $223,000 as of December 31, 1999). During
February 2000, our motion for summary judgment was sustained, and Mr. Tutor's
claims were dismissed. Although Mr. Tutor indicated that he will appeal the
court's dismissal of his claims, formal appeal proceedings have not begun.
The court's decision will not become final until Mr. Tutor's appeal rights
expire or are exhausted. It is our opinion that this action will not have a
material impact on our financial condition.
We are involved in litigation incidental to our business from time
to time. We are not currently involved in any litigation in which we believe
an adverse outcome would have a material adverse effect on our business,
financial condition, results of operations or prospects. However, we have
been involved in litigation and are subject to certain claims as described
below.
We are a defendant in numerous multi-defendant lawsuits involving
the manufacture and sale of dexfenfluramine, fenfluramine and phentermine.
The plaintiffs in these cases claim injury as a result of ingesting a
combination of these weight-loss drugs. These suits have been filed in
various jurisdictions throughout the United States and in each of these suits
we are one of many defendants, including manufacturers and other distributors
of these drugs. We believe that we do not have any significant liability
incident to the distribution or repackaging of these drugs, and we have
tendered defense of these lawsuits to our insurance carrier for handling. The
lawsuits are in various stages of litigation, and it is too early to
determine what, if any, liability we will have with respect to the claims
made in these lawsuits. If our insurance coverage in the amount of $1,000,000
per occurrence and $5,000,000 per year in the aggregate is inadequate to
satisfy any resulting liability, we will be required to undertake defense of
these lawsuits and be responsible for the costs and damages, if any, that we
suffer as a result of these lawsuits. We do not believe that the outcome of
these lawsuits will have a material adverse effect on our business, financial
condition, results of operations or prospects.
20
<PAGE>
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have not had any changes in or disagreements with our accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
We have sold and issued the securities described below pursuant to
and in accordance with Regulation D under the Securities Act of 1933, as
amended (the "Act") within the past three years which were not registered
under the Securities Act of 1933, as amended:
<TABLE>
<CAPTION>
NUMBER OF
PURCHASE COMMON
DATE OF PRICE PER SHARES NET
NAME PURCHASE SHARE PURCHASED PROCEEDS
- ---- -------- ----- --------- --------
<S> <C> <C> <C> <C>
Jack L. McCall, Jr. September 1998 $.14 150,000 $21,000 Note
</TABLE>
We relied on Section 4(6) of the Securities Act 1933, as amended,
for exemption from the registration requirements of the Act. Mr. McCall is an
executive officer and director and was furnished and had access to
information concerning our operations, and had the opportunity to verify the
information supplied. Additionally, we obtained a signed representation from
Mr. McCall in connection with the offer of our common stock of his intent to
acquire such stock for the purpose of investment only, and not with a view
toward the subsequent distribution thereof; each of the certificates
representing our common stock was stamped with a legend restricting transfer
of the securities represented thereby, and registrant issued stop transfer
instructions to its transfer agent and registrar of our common stock, with
respect to all certificates representing the common stock held by Mr. McCall.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1031 of the Oklahoma General Corporation Act permits (and
Registrant's Certificate of Incorporation and Bylaws, which are incorporated
by reference herein, authorize) indemnification of directors and officers of
Registrant and officers and directors of another corporation, partnership,
joint venture, trust or other enterprise who serve at the request of
Registrant, against expenses, including attorneys fees, judgments, fines and
amount paid in settlement actually and reasonably incurred by such person in
connection with any action, suit or proceeding in which such person is a
party by reason of such person being or having been a director or officer of
Registrant or at the request of Registrant, if he conducted himself in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Registrant, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Registrant may not indemnify an officer or a director with respect to any
claim, issue or matter as to which such officer or director shall have been
adjudged to be liable to Registrant, unless and only to the extent that the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which the court shall deem proper. To the
extent that an officer or director is successful on the merits or otherwise
in defense on the merits or otherwise in defense of any action, suit or
proceeding with respect to which such person is entitled to indemnification,
or in defense of any claim, issue or matter therein, such person is entitled
to be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection therewith.
The circumstances under which indemnification is granted with an
action brought on behalf of Registrant are generally the same as those set
forth above; however, expenses incurred by an officer or a director in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of final disposition upon receipt of an undertaking by
or on behalf of such officer or director to repay such amount if it is
ultimately determined that such officer or director is not entitled to
indemnification by Registrant.
These provisions may be sufficiently broad to indemnify such persons
for liabilities arising under the Securities Act of 1933, as amended, in
which case such provision is against public policy as expressed in the 1933
Act and is therefore unenforceable.
21
<PAGE>
PART F/S.
Audited financial statements as of and for the fiscal years ended
June 30, 1999 and 1998 appear on pages F-3 through F-13. Unaudited financial
statements for the six months ended December 31, 1999 appear on pages F-14
through F-17.
PART III.
ITEMS 1 AND 2. INDEX AND DESCRIPTION OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
2.1 Agreement of Merger between Physicians Dispensing Rx Systems,
Inc. and Buckingham Venture Corporation, a Colorado corporation,
dated February 5, 1988.
2.2 Agreement and Plan of Merger between PD-Rx Pharmaceuticals, Inc.,
a Colorado corporation and the Registrant dated January 20, 1995.
3.1 Registrant's Certificate of Incorporation and Amended Certificate
of Incorporation.
3.2 Registrant's Bylaws.
4.1 Certificate of Designations of Class A 13.25% Cumulative
Convertible Preferred Stock.
4.2 Certificate of Designations of Class C 13.25% Cumulative
Convertible Preferred Stock.
4.3 Form of Certificate of Common Stock.
27.1 Financial Data Schedule.
</TABLE>
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
PD-Rx Pharmaceuticals, Inc.
(Registrant)
By: /s/ ROBERT D. HOLSEY
---------------------------
Date: February 29, 2000 Robert D. Holsey
--- President and Chief Executive
Officer
22
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PD-Rx PHARMACEUTICALS, INC.
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.............................F-2
Balance Sheets - June 30, 1999 and 1998........................................F-3
Statements of Earnings - Years ended June 30, 1999 and 1998....................F-4
Statement of Stockholders' Equity - Years ended June 30, 1999 and 1998.........F-5
Statements of Cash Flows - Years ended June 30, 1999 and 1998..................F-6
Notes to Financial Statements - June 30, 1999 and 1998.........................F-7
Interim Balance Sheets - December 31, 1999 (unaudited) and June 30, 1999......F-15
Interim Statements of Earnings - Six months ended December 31, 1999
and 1998 (unaudited)......................................................F-16
Interim Statements of Cash Flows - Six months ended December 31, 1999
and 1998 (unaudited)......................................................F-17
Notes to Interim Financial Statements - December 31, 1999 and 1998............F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
PD-Rx Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of PD-Rx Pharmaceuticals,
Inc., as of June 30, 1999 and 1998, and the related statements of earnings,
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PD-Rx Pharmaceuticals, Inc.,
as of June 30, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 6, 1999
F-2
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
BALANCE SHEETS
June 30,
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 168,493 $ 155,270
Accounts receivable (net of allowance for doubtful accounts of
$11,514 in 1999 and $14,264 in 1998) 620,735 519,160
Inventories 531,860 548,303
Other 4,103 -
---------- ----------
Total current assets 1,325,191 1,222,733
PROPERTY AND EQUIPMENT, net 941,994 949,070
DEFERRED INCOME TAXES - 23,600
---------- ----------
$2,267,185 $2,195,403
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 226,859 $ 345,935
Accrued liabilities 50,870 53,118
Current portion of notes payable 18,775 17,334
Current portion of obligations under capital leases 9,567 17,812
Income taxes payable 55,458 -
---------- ----------
Total current liabilities 361,529 434,199
LONG-TERM DEBT
Notes payable, less current portion 458,861 478,566
Obligations under capital leases, less current portion - 9,567
Deferred income taxes 651 -
---------- ----------
459,512 488,133
---------- ----------
Total liabilities 821,041 922,332
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par value; authorized, 10,000,000 shares; issued and
outstanding, 351,200 shares (aggregate liquidation
preference of $351,200) 35,120 35,120
Common stock - $.01 par value; authorized, 3,000,000 shares;
issued and outstanding, 1,694,804 shares in 1999 and 1,544,804
shares in 1998 16,948 15,448
Additional paid-in capital 1,552,541 1,533,041
Accumulated deficit (137,465) (310,538)
Stockholder note receivable (21,000) -
---------- ----------
1,446,144 1,273,071
---------- ----------
$2,267,185 $2,195,403
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
STATEMENTS OF EARNINGS
Year ended June 30,
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Net sales $6,715,089 $5,872,858
Cost of sales 4,984,884 4,376,165
---------- ----------
Gross profit 1,730,205 1,496,693
Selling, general, and administrative expenses 1,481,750 1,446,530
---------- ----------
Operating income 248,455 50,163
Other income (expense)
Rental and interest 57,766 51,198
Interest (42,679) (38,903)
---------- ----------
Total other income (expense) 15,087 12,295
---------- ----------
Net earnings before income taxes 263,542 62,458
Income tax expense 79,709 39,400
---------- ----------
NET EARNINGS 183,833 23,058
Cumulative preferred stock dividends
Class A undeclared 35,775 35,775
Class C paid 10,760 10,760
---------- ----------
Total cumulative preferred stock dividends 46,535 46,535
---------- ----------
NET EARNINGS (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 137,298 $ (23,477)
========== ==========
Earnings (loss) per common share - basic $ .08 $ (.02)
========== ==========
Earnings (loss) per common share - diluted $ .08 $ (.02)
========== ==========
Weighted average number of common shares outstanding - basic 1,669,804 1,544,804
========== ==========
Weighted average number of common shares outstanding - diluted 1,688,176 1,544,804
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Preferred Stock
-----------------------
13.25%
Cumulative 13.25% Common stock Additional Stockholder Total
convertible Cumulative ------------ paid-in Accumulated note stockholders
Class A Class C Shares Amount capital deficit receivable equity
----------- ---------- --------- --------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1997 $ 27,000 $ 8,120 1,544,804 $ 15,448 $1,503,041 $(322,836) $ - $1,230,773
Compensation expense related to stock
option issued - - - - 30,000 - - 30,000
Class C preferred stock dividend paid - - - - - (10,760) - (10,760)
Net earnings - - - - - 23,058 - 23,058
--------- ------- --------- --------- ---------- --------- ------- ----------
Balance at June 30, 1998 27,000 8,120 1,544,804 15,448 1,533,041 (310,538) - 1,273,071
Exercise of stock options in exchange
for note receivable - - 150,000 1,500 19,500 - (21,000) -
Class C preferred stock dividend paid - - - - - (10,760) - (10,760)
Net earnings - - - - - 183,833 - 183,833
--------- ------- --------- --------- ---------- --------- ------- ----------
Balance at June 30, 1999 $ 27,000 $ 8,120 1,694,804 $ 16,948 $1,552,541 $(137,465) $ (21,000) $1,446,144
========= ======= ========= ========= ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
Year ended June 30,
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities
Net earnings $ 183,833 $ 23,058
Adjustments to reconcile net earnings to net cash provided by
operating activities
Provision for deferred income taxes 24,251 39,400
Depreciation and amortization 148,853 136,236
Loss on sale of property and equipment 937 -
Compensation expense related to stock option issued - 30,000
Changes in assets and liabilities
Accounts receivable (101,575) 36,054
Inventories 16,443 55,028
Other assets (4,103) 7,741
Accounts payable (119,076) 189,764
Accrued liabilities (2,248) 10,726
Income taxes payable 55,458 -
--------- -----------
Net cash provided by operating activities 202,773 528,007
Cash flows from investing activities
Purchases of property and equipment (142,714) (753,208)
Cash flows from financing activities
Proceeds from notes payable - 500,000
Utilization of credit line 100,000 1,705,630
Principal payments on credit line (100,000) (1,855,630)
Principal payments on notes payable (18,264) (4,100)
Principal payments on obligations under capital leases (17,812) (24,559)
Class C preferred stock dividend paid (10,760) (10,760)
--------- -----------
Net cash provided by (used in) financing activities (46,836) 310,581
--------- -----------
NET INCREASE IN CASH 13,223 85,380
Cash at beginning of year 155,270 69,890
--------- -----------
Cash at end of year $ 168,493 $ 155,270
========= ===========
Cash paid during the year for interest $ 42,679 $ 38,903
========= ===========
Cash paid during the year for income taxes $ - $ -
========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
PD-Rx Pharmaceuticals, Inc. (the Company) is involved principally in the
repackaging and distribution of prepackaged pharmaceutical products. The
Company's customers consist primarily of physicians and medical clinics
located in the south-central, southeastern, and western United States.
A summary of significant accounting policies consistently applied in the
preparation of the accom-panying financial statements follows.
1. CASH
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit
risk on such accounts.
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the average cost method.
3. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives used in computing depreciation are:
<TABLE>
<S> <C>
Building and components 7 to 39 years
Equipment 5 to 8 years
Computer software costs 3 years
Furniture and fixtures 7 years
Automobiles 5 years
</TABLE>
Equipment under capital lease is recorded at the present value of future
minimum lease payments and amortized over the initial term of the lease.
Accumulated amortization related to equipment under capital lease is $74,246
and $73,386 as of June 30, 1999 and 1998, respectively.
4. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share are computed based upon net earnings, after
deducting the dividend requirements of preferred stock, divided by the
weighted average number of common shares outstanding during each period. The
cumulative convertible preferred stock (see Note D) is antidilutive for 1999
and 1998 and the stock option (see Note H) was antidilutive for 1998.
F-7
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED
4. EARNINGS (LOSS) PER SHARE - CONTINUED
The following is a summary of the weighted average number of common shares
outstanding for the years ended June 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Weighted average number of common shares outstanding - basic 1,669,804 1,544,804
Effect of dilutive stock option 18,372 -
--------- ---------
Weighted average number of common shares outstanding - diluted 1,688,176 1,544,804
========= =========
</TABLE>
5. REVENUE RECOGNITION
Revenue is recognized on sales of products at the time of shipment. Sales
are recorded net of sales returns. The Company's policy on returned products
is to accept returns without charge within fifteen days of shipment.
Products returned between fifteen and thirty days are assessed a 25%
restocking charge. Returned products are not accepted after thirty days.
6. INCOME TAXES
The Company utilizes an asset and liability approach for accounting for
income taxes. Deferred income taxes are recognized for the tax consequences
of temporary differences and carryforwards by applying enacted tax rates
applicable to future years to differences between the financial statement
amounts and the tax bases of existing assets and liabilities. A valuation
allowance is established if it is more likely than not that some portion of
the deferred tax asset will not be realized.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash approximates fair value because of the highly
liquid nature of this instrument.
The carrying amounts of notes payable approximate fair value because of the
floating interest rates relating to these obligations.
8. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect certain reported amounts and disclosures;
accordingly, actual results could differ from those estimates.
F-8
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Building and components $ 497,684 $ 490,899
Equipment 433,131 396,265
Computer software costs 175,429 174,254
Equipment under capital lease 80,986 96,446
Furniture and fixtures 54,776 48,765
Automobiles 56,554 48,155
----------- -----------
1,298,560 1,254,784
Less accumulated depreciation and amortization 512,326 461,474
---------- ----------
786,234 793,310
Land 155,760 155,760
---------- ----------
$ 941,994 $ 949,070
=========== ===========
</TABLE>
Unamortized computer software costs totaled $44,000 and $68,000 at June 30,
1999 and 1998, respectively. Amortization of such costs totaled $24,000 and
$23,000 for 1999 and 1998, respectively.
NOTE C - NOTES PAYABLE
Notes payable consist of the following at June 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Note payable to a bank, maturing April 2003, payable in monthly
installments of $4,960, including interest at Chase Manhattan prime rate
(effective rate of 7.75% at June 30, 1999), collateralized by real estate $477,636 $495,900
Less current portion 18,775 17,334
-------- --------
$458,861 $478,566
======== ========
</TABLE>
Future minimum debt payments at June 30, 1999 are as follows:
<TABLE>
<S> <C>
Year ending June 30
2000 $ 18,775
2001 20,572
2002 22,413
2003 415,876
-------
$477,636
========
</TABLE>
F-9
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE C - NOTES PAYABLE - CONTINUED
The Company also has a $750,000 revolving line of credit with a bank,
maturing February 2000. The line of credit is payable in monthly
installments of interest only at the Chase Manhattan prime rate (effective
rate of 7.75% at June 30, 1999), and is collateralized by inventories,
property and equipment, and accounts receivable. Borrowings under the line
are limited to established ratios of accounts receivable and inventories as
specified by the terms of the agreement. The related loan agreement requires
the Company, among other things, to maintain a minimum current ratio of
1.4-to-1 and a minimum net worth of $1,000,000. At June 30, 1999 and 1998,
no advances were outstanding under this line of credit.
NOTE D - STOCKHOLDERS' EQUITY
There are 270,000 shares of Class A 13.25% cumulative convertible preferred
stock and 81,200 shares of Class C 13.25% cumulative preferred stock issued
and outstanding, of which 250,000 shares of Class A were issued to certain
of the Company's principal common stockholders.
Class A 13.25% cumulative convertible preferred stock is convertible into
common stock at the option of the preferred stockholders. Each share of
preferred stock can be converted into common stock at a conversion rate of
one share of common stock for one and one-half shares of preferred stock.
There are no common stock shares reserved for potential conversion. The
preferred shares are nonvoting and are equivalent in rank to the Class C
stock but have preference over the common stock in the event of any
liquidation or dissolution. Cash dividends shall be payable when, as, and if
declared by the Board of Directors. The annual dividend is computed at the
stated rate as a percentage of the liquidation preference of the shares
($1.00 per share). Dividends accumulate on a daily basis without regard to
the occurrence of a dividend payment date or the declaration of any
dividend. At June 30, 1999, the Company had approximately $383,400 in
cumulative undeclared dividends in arrears on the Class A preferred stock
($347,625 at June 30, 1998). In the event of any liquidation, dissolution,
or winding up of the affairs of the Company, as defined, the sum of all
accumulated and unpaid dividends would be due the stockholders. The Company
may, at its sole option, redeem for cash the Class A preferred stock by
paying the preferred stockholders $1.05 per share plus all accumulated and
unpaid dividends.
The Company has authorized 500,000 shares of Class B 13.25% cumulative
convertible preferred stock. No shares of this stock have been issued.
Class C 13.25% cumulative preferred stock is nonvoting and has preference
over the common stock in case of liquidation or dissolution. The Company
may, at its sole option, redeem for cash the Class C preferred stock by
paying the preferred stockholders $1.25 per share plus all accumulated and
unpaid dividends. The preferred stock dividend shall be payable monthly and,
if not paid within ninety days of the required payment date, the dividends
become liabilities of the Company, and the stockholders become creditors of
the Company to the extent of the unpaid dividends. In the case of a default,
as defined, the dividends due on each share of the stock may be declared due
and payable immediately by the holders of not less than 51% of the stock and
such holders shall be empowered to institute proceedings for collection. As
of June 30, 1999, the Company has paid all dividends due to that date on the
Class C preferred stock. In the event of any liquidation, dissolution, or
winding up of the affairs of the Company, as defined, the sum of all
accumulated and unpaid dividends would be due the stockholders.
F-10
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE E - INCOME TAXES
The provision for income taxes consists of the following for the years ended
June 30:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Current $ 55,458 $ -
Deferred 24,251 39,400
-------- --------
$ 79,709 $ 39,400
======== ========
</TABLE>
The income tax expense reflected in the accompanying statements of earnings
for the years ended June 30, 1999 and 1998 differs from the expected federal
income tax rates for the following reasons:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Computed at 34% $ 90,000 $ 21,000
Increase (decrease) in income taxes
Adjustment of prior year estimates (13,600) 5,400
State income tax expense 12,300 3,000
Graduated rates (8,800) -
Nondeductible expenses - 10,000
Other (191) -
-------- --------
$ 79,709 $ 39,400
======== ========
</TABLE>
The temporary differences that give rise to the net deferred tax asset
(liability) at June 30 include the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net operating loss carryforwards $ - $ 45,400
Allowance for doubtful accounts 4,345 5,400
Charitable contributions carryforward 7,501 -
Excess of book basis over tax basis of
property and equipment (12,497) (27,200)
--------- --------
$ (651) $ 23,600
========= ========
</TABLE>
F-11
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE F - LEASES
Future minimum lease payments under capital leases at June 30, 1999 are as
follows:
<TABLE>
<S> <C>
Year ending June 30, 2000 $ 9,898
Less amount representing interest 331
----------
Present value of minimum lease payments 9,567
Less current portion 9,567
----------
Long-term portion $ -
==========
</TABLE>
The Company has operating leases for certain office equipment and, prior to
February 1998, month-to-month operating leases for office and warehouse
facilities. Rental expense under the operating leases was $11,983 and
$36,621 in 1999 and 1998, respectively.
NOTE G - COMMITMENTS AND CONTINGENCIES
The Company is subject to various federal, state, and local government
regulations. Matters subject to regulation include the distribution and
recordkeeping of certain pharmaceutical products. From time to time, the
Company is subject to review by these regulating entities to ensure
compliance with laws and regulations. Management has developed policies and
procedures designed to ensure that the Company complies with laws and
regulations. Management is not aware of any regulatory fines or assessments
for which the Company is liable.
The Company is the subject of two lawsuits filed by a stockholder. One suit,
which is pending but inactive, seeks to force the Company to release certain
corporate records, board minutes, all corporate transactions, and
stockholder records. The other suit seeks payment in liquidation of the
stockholder's Class A preferred stock ($150,000) and related dividends in
arrears (approximately $213,000). The Company does not believe these matters
will have any material impact on the Company's financial statements.
Additionally, the Company is a defendant in numerous multi-defendant
lawsuits involving the manufacture and sale of dexfenfluramine,
fenfluramine, and phentermine. The plaintiffs in these cases claim injury as
a result of ingesting a combination of these weight-loss drugs. These suits
have been filed in various jurisdictions throughout the United States and in
each of these suits the Company is one of many defendants, including
manufacturers and other distributors of these drugs. Management believes
that the Company does not have any significant liability incident to the
distribution or repackaging of these drugs, and the Company has tendered
defense of these lawsuits to its insurance carrier for handling. The
lawsuits are in various stages of litigation, and it is too early to
determine what, if any, liability the Company will have with respect to the
claims made in these lawsuits. If the Company's insurance coverage of
$1,000,000 per occurrence and $5,000,000 per year in the aggregate is
inadequate to satisfy any resulting liability, the Company will be required
to undertake defense of these lawsuits and be responsible for the costs and
damages, if any, that the Company suffers as a result of these lawsuits.
Management does not believe that the outcome of these lawsuits will have a
material adverse effect on the Company's business, financial condition,
results of operations, or prospects.
F-12
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1999 and 1998
NOTE H - STOCK OPTION
In June 1998, the Company issued a stock option to an officer and director.
The stock option provided for the purchase of 150,000 shares of common stock
at $.14 per share. The option, exercisable from June 30, 1998 through June
30, 1999, was exercised in September 1998 on execution of a $21,000
noninterest-bearing promissory note payable in three equal annual
installments beginning one year from the date of exercise. Past due
installments bear interest at the rate of 18% per annum and the note is
collateralized by the related common stock. This note receivable has been
reflected as a reduction of stockholders' equity in the accompanying
financial statements.
The Company applied APB Opinion 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related Interpretations, in accounting for this option. The
quoted market price of the stock at date of grant exceeded the exercise
price of the option; accordingly, compensation cost of $30,000 has been
recognized for this option for 1998. Had compensation cost for the plan been
determined based on the fair value of the option at the grant date
consistent with the method of Statement of Financial Accounting Standards
(SFAS) No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net
earnings and loss per share for 1998 would have been reduced to the pro
forma amounts indicated below.
<TABLE>
<S> <C>
Net earnings
As reported $ 23,058
Pro forma $ 21,213
Basic and diluted loss per share
As reported $ (.02)
Pro forma $ (.02)
</TABLE>
The fair value of the option ($.21 per share) was estimated on the date of
grant using the Black-Scholes options-pricing model with the following
assumptions used: no dividend yield; expected volatility of 133 percent;
risk-free interest rate of 5.3 percent; and expected life of 100 days.
F-13
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1999 1999
------------ --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 104,552 $ 168,493
Accounts receivable, net 624,744 620,735
Inventories 650,732 531,860
Other 11,737 4,103
---------- ----------
Total current assets 1,391,765 1,325,191
PROPERTY AND EQUIPMENT, net 970,386 941,994
---------- ----------
$2,362,151 $2,267,185
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 309,627 $ 226,859
Accrued liabilities 63,745 50,870
Current portion of notes payable 16,914 18,775
Current portion of obligations under capital leases - 9,567
Income taxes payable 30,076 55,458
---------- ----------
Total current liabilities 420,362 361,529
LONG-TERM DEBT
Notes payable, less current portion 449,926 458,861
DEFERRED INCOME TAXES 651 651
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock - $.10 par value; authorized, 10,000,000 shares; issued and
outstanding, 351,200 shares (aggregate liquidation
preference of $351,200) 35,120 35,120
Common stock - $.01 par value; authorized, 3,000,000 shares;
issued and outstanding, 1,694,804 shares in December 1999 and
June 1999 16,948 16,948
Additional paid-in capital 1,552,541 1,552,541
Accumulated deficit (92,397) (137,465)
Stockholder note receivable (21,000) (21,000)
---------- ----------
1,491,212 1,446,144
---------- ----------
$2,362,151 $2,267,185
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
STATEMENTS OF EARNINGS
For the six months ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- ----------
(unaudited)
<S> <C> <C>
Net sales $3,192,126 $3,273,714
Cost of sales 2,335,973 2,472,171
---------- ----------
Gross profit 856,153 801,543
Selling, general, and administrative expenses 786,523 733,867
---------- ----------
Operating income 69,630 67,676
Other income (expense)
Rental and interest 28,797 31,346
Interest (17,063) (21,576)
---------- ----------
Total other income (expense) 11,734 9,770
---------- ----------
Net earnings before income taxes 81,364 77,446
Income tax expense 30,918 30,115
---------- ----------
NET EARNINGS 50,446 47,331
Cumulative preferred stock dividends
Class A undeclared 17,888 17,888
Class C paid 5,380 5,380
---------- ----------
Total cumulative preferred stock dividends 23,268 23,268
---------- ----------
NET EARNINGS AVAILABLE TO COMMON STOCKHOLDERS $ 27,178 $ 24,063
========== ==========
Earnings per common share - basic $ .02 $ .01
========== ==========
Earnings per common share - diluted $ .02 $ .01
========== ==========
Weighted average number of common shares outstanding - basic 1,694,804 1,632,304
========== ==========
Weighted average number of common shares outstanding - diluted 1,694,804 1,669,068
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
For the six months ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- ----------
(unaudited)
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities
Net earnings $ 50,446 $ 47,331
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for deferred income taxes - 23,600
Depreciation and amortization 59,848 75,160
Changes in assets and liabilities
Accounts receivable (4,009) (31,036)
Inventories (118,872) 89,079
Other assets (7,634) -
Accounts payable 82,768 (167,991)
Accrued liabilities 12,875 16,375
Income taxes payable (25,382) 6,515
--------- ---------
Net cash provided by operating activities 50,040 59,033
Cash flows from investing activities
Purchases of property and equipment (88,238) (13,341)
Cash flows from financing activities
Principal payments on notes payable (10,796) (8,367)
Principal payments on obligations under capital leases (9,567) -
Class C preferred stock dividend paid (5,380) (5,380)
--------- ---------
Net cash provided by (used in) financing activities (25,743) (13,747)
--------- ---------
NET INCREASE/(DECREASE) IN CASH (63,941) 31,945
Cash at beginning of period 168,493 155,270
--------- ---------
Cash at end of period $ 104,552 $ 187,215
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-16
<PAGE>
PD-Rx PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
PD-Rx Pharmaceuticals, Inc. (the Company) is involved principally in the
repackaging and distribution of prepackaged pharmaceutical products. The
Company's customers consist primarily of physicians and medical clinics
located in the south-central, southeastern, and western United States. The
Company's fiscal year ends on June 30th.
NOTE 2 - SUMMARY SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
results of operations for the periods presented have been included.
The financial data at June 30, 1999 is derived from audited financial
statements which are included in the Company's Form 10 and should be read in
conjunction with the audited financial statements and notes thereto.
Interim results are not necessarily indicative of results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 3 - NET EARNINGS PER COMMON SHARE
Earnings per common share are computed based upon net earnings, after
deducting the dividend requirements of preferred stock, divided by the
weighted average number of common shares outstanding during each period.
The cumulative convertible preferred stock is antidilutive.
F-17
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization is entered into this 5th day
of February, 1988, by and between BUCKINGHAM VENTURE CORP., a Colorado
corporation, (hereinafter referred to as "Acquiror") and PHYSICIANS DISPENSING
RX, INC., an Oklahoma corporation, (hereinafter referred as "Acquiree") and the
undersigned Stockholders of the Acquiree (hereinafter referred to as
"Stockholders"), as indicated on Exhibit A, and the directors of Acquiror.
RECITALS
Stockholders of Acquiree own a majority of the issued and outstanding
common stock of Acquiree. Acquiror desires to acquire all of the issued and
outstanding stock of Acquiree, making Acquiree a wholly-owned subsidiary of
Acquiror, and Stockholders desire to make a tax free exchange solely of their
shares in Acquiree for shares of Acquiror's $0.0001 par value common stock to be
exchanged as set out herein with said Stockholders
NOW THEREFORE for the mutual consideration set out herein, the parties
agree as follows
AGREEMENT
1. PLAN OF REORGANIZATION. Stockholders of Acquiree are the owners of a
majority of the issued and outstanding common stock of said Acquiree. It is the
intention of the parties hereto that one hundred percent of the issued and
outstanding capital stock of Acquiree shall be acquired by Acquiror in exchange
for stock in the Acquiror, provided that, if less than all of the shares of
Acquiree are acquired, then the number of shares delivered to Acquiree shall be
proportionately reduced. It is the intention of the parties hereto that this
transaction qualify as a tax-free reorganization under Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended, and related sections thereunder.
2. TRANSFER OF SHARES. Acquiror and Stockholders agree that all of the
issued and outstanding shares of common stock of Acquiree shall be transferred
to the Acquiror in consideration for which Acquiror shall transfer to
Stockholders 101,433,633 shares of common stock of Acquiror, or if less than all
of the shares, then a pro-rata number of shares. Acquiror represents that the
101,433,633 shares transferred to Shareholders of Acquiree at closing will
represent eighty-five percent (85%) of the issued and outstanding shares of
Acquiror on the Closing Date without giving effect to the contemplated transfer
of the insider shares as set forth below. Acquiror shares will, on the Closing
Date, as hereafter defined, be delivered to the Stockholders in exchange for
their shares in Acquiree. Stockholders represent and warrant that they and other
stockholders will hold such shares of common stock of Acquiror for investment
purposes and not for further public distribution and agree that the shares shall
be appropriately restricted. The Stockholders of Physicians Dispensing Rx, Inc.
shall purchase eighty-five percent (85%) of the insider shares or 8,500,000
shares of the Acquiror for Forty Thousand Dollars ($40,000.00), payable at
closing.
3. DELIVERY OF SHARES. Within ten days after the Closing Date,
Stockholders will deliver certificates or stock powers representing a majority
of the shares of Acquiree duly endorsed so as to make Acquiror the sole holder
thereof, free and clear of all claims and encumbrances; and on such Closing
Date, delivery of the Acquiror shares, which will be appropriately restricted as
to transfer, will be made to the Stockholders as set forth herein. The
transaction contemplated herein shall not close unless a majority of the shares
of Acquiree are delivered at Closing and the Stockholders of Acquiree owning
such shares execute this Agreement. The Acquiror shall deliver 101,433,633
shares of its common stock to the stockholders at closing.
4. REPRESENTATIONS OF_STOCKHOLDERS AND ACQUIREE. The Stockholders and
Acquiree, hereby represent and warrant that, with respect to their own shares
and as to Acquiree, effective this date and the Closing Date, the
representations listed below are true and correct.
(a) The Stockholders are the owners of a majority of the
issued and outstanding shares of common stock of Acquiree or
certain options to encumbrances; and Stockholders have the
unqualified right to transfer Inc. shareholders were issued
pursuant to a 504 offering and are therefore restricted
securities
1
<PAGE>
(b) The shares constitute validly issued shares of Acquiree
are fully-paid and nonassessable.
(c) The unaudited nine month financial statements as of
October 31, 1987, Exhibit B hereto, which have been delivered
to Acquiror are complete, accurate and fairly present the
financial condition of Acquiree as of the date thereof and the
results of its operations for the periods covered. There are
no liabilities, either fixed or contingent, not reflected in
such financial statements other than contracts or obligations
in the ordinary and usual course of business constituting
liens or other liabilities which, if disclosed, would not
alter substantially the financial condition of such Acquiree
as reflected in such financial statements. The Acquiree agrees
to supply unaudited financial statements within thirty days of
closing, which will be as of January 31, 1988. These financial
statements have been prepared in accordance with generally
accepted accounting principles consistently applied, except as
otherwise stated therein. Said October 31, 1987 financial
statements reflect a net worth of no less than $100,000
(d) Prior to the Closing Date there will be no negative
material changes in the financial position of Acquiree, except
changes arising in the ordinary course of business, which
changes will in no event materially adversely affect the
financial position of said Acquiree
(e) Acquiree is not involved in any material pending
litigation or governmental investigation or proceeding not
reflected in such financial statement, or otherwise disclosed
in writing to Acquiror and, to the best knowledge of Acquiree
and Stockholders, no material litigation, claims assessments
or governmental investigation or proceeding is threatened
against Acquiree, its principal Stockholders or properties
(f) As of the Closing Date, Acquiree will be in good standing
in its state of incorporation, and will be in good standing
and duly qualified to do business in each state where required
to be so qualified.
(g) Acquiree, to its knowledge, has complied with all state,
federal and local laws in connection with its formation,
issuance of securities, organization, operations, and
capitalization, and no contingent liabilities have been
threatened or claims made, and to its knowledge, no basis for
the same exists with respect to said operations, formation or
capitalization including claims for violation of any state or
federal securities laws.
(h) Acquiree, to its knowledge, has filed all governmental,
tax or related returns and reports due or required to be filed
and has paid all taxes or assessments which have become due as
of the Closing
Acquiree, to its knowledge, has not materially breached any
agreement to which it is a party.
(j) The corporate financial records, minute books, tax
returns, and other documents and records of Acquiree are to be
available to present management of Acquiror prior to the
Closing Date
(k) The execution of this Agreement will not violate or breach
any agreement, contract or commitment to which Acquiree or its
Stockholders are a party and has been duly authorized by all
appropriate and necessary action
(1) At the date of this Agreement, Stockholders have, and at
the Closing Date will have to the best of their knowledge,
disclosed all events, conditions and facts materially
affecting the business and prospects of Acquiree. Stockholders
have not now and will not have, at the Closing Date, withheld
knowledge of any such events, conditions, and facts which he
knows or has reasonable grounds to know, may materially affect
the business and prospects of Acquiree
(m) Stockholders hereby state that the materials, including
current financial statement, current
2
<PAGE>
income tax returns, prepared and delivered by Acquiror to
Stockholders, have been read and understood by Stockholders,
and that they are familiar with the business of Acquiror, that
they are acquiring the Acquiror shares under Section 4(2),
commonly known as the private offering exemption of the
Securities Act of 1933
5. REPRESENTATIONS OF ACQUIRING CORPORATION. Acquiror and its
shareholders hereby represent and warrant as follows
(a) As of the Closing Date, the Acquiror's shares to be
delivered to the Stockholders will constitute valid and
legally issued shares of Acquiror, fully-paid and
nonassessable, and will be legally equivalent in all respects
to the common stock of Acquiror issued and outstanding as of
the date thereof.
(b) The officers of Acquiror are duly authorized to execute
this Agreement and have taken all action required by law and
agreements, charters, and by-laws, to properly and legally
execute this Agreement.
(c) Acquiror represents that, as of the Closing Date, it will
have no liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or
to become due) except as otherwise expressly stated herein.
(d) Since the completion of the Company's public offering
there have not been, and as of the Closing Date there shall
not be, any material changes in the financial position of
Acquiror, except changes arising in the ordinary course of
business, which changes shall in no event adversely affect the
financial condition of the Acquiror.
(e) Acquiror is not involved in any pending litigation, claims
or governmental investigation or proceeding not reflected in
such financial statements or otherwise disclosed in writing to
the Stockholders and there are no lawsuits, claims,
assessments, investigations or similar matters, to be the best
knowledge of management, threatened or contemplated against
Acquiror, its management or properties.
(f) As of the Closing Date and the date hereof Acquiror is
duly organized, validly existing and in good standing under
the laws of the State of Colorado; it has the corporate power
to own its property and to carry on its business as now being
conducted and is duly qualified to do business in any
jurisdiction where so required.
(g) Acquiror has not breached, nor is there any pending or
threatened claims or any legal basis for a claim that Acquiror
has breached, any of the terms or conditions of any
agreements, contracts or commitments to which it is a party or
is bound and the execution and performance hereof will not
violate any provisions of applicable law of any agreement to
which Acquiror is subject.
(h) The capitalization of Acquiror comprises authorized common
stock of 300,000,000 shares, $0.0001 par value, of which
17,899,000 shares are issued and outstanding as of the date
hereof. All outstanding shares have been duly authorized,
warrants, options or related commitments of any nature not
reflected in the current financial statements of Acquiror.
Acquiror has no subsidiary corporation.
(ii)
(j) The shares of restricted common stock of Acquiror to be
issued to Stockholders at Closing will be validly issued,
nonassessable and fully paid under Colorado corporation law
and will be issued in a non-public offering and isolated
transaction under federal and state securities laws.
(k) The corporate financial records, minute books, tax
returns, and other documents and records
3
<PAGE>
of Acquiror are to be available to present management of
Acquiree prior to the Closing Date and turned over to new
management in their entirety at Closing or as soon thereafter
as practicable.
(l) Acquiror has filed all governmental, tax or related
returns and reports due or required to be filed and has paid
all taxes or assessments which have become due as of the
Closing.
(m) The execution of this Agreement will not violate or breach
any agreement, contract or commitment to which Acquiror is a
party and has been duly authorized by all appropriate and
necessary action..
(n) At the date of this Agreement, Acquiror has, and at the
Closing Date will have to the best of its knowledge, disclosed
all events, conditions and facts materially affecting the
business and prospects of Acquiror. Acquiror has not now and
will not have, at the Closing Date, withheld knowledge of any
such events, conditions, and facts which Acquiror knows or has
reasonable grounds to know, may materially affect the business
and prospects of Acquiror.
(o) Acquiror shall have a minimum of $130,000 in its bank
accounts and certificates of deposit on the Closing Date, and
will take all steps necessary at closing so as to allow the
new directors of the Acquiror as contemplated by Section 14 of
this agreement to have immediate access to such funds.
Acquiror's only liability or obligation of any type at closing
shall be to American Financial Group, which obligation is
payable at $1,000.00 per month for a period of ten (10) months
subsequent to closing. American Financial Group has assisted
in evaluating a merger candidate.
(p) Acquiror is aware that the Physicians Dispensing Rx, Inc.
shares involved in the exchange were issued pursuant to an
exemption from registration under the securities laws, and,
therefore, are subject to restrictions on transfers. Acquiror
is acquiring the shares solely for its own account for
investment and not for the purpose of resale, distribution,
subdivision or fractionalization thereof..
6. CLOSING DATE. The Closing Date herein referred to shall be upon such date as
the parties hereto may mutually agree upon but is expected to be on or about
February 5, 1988. At the Closing the Stockholders will be deemed to have
accepted delivery of the certificate of stock to be issued in their names, and
in connection therewith will make delivery of their stock in Acquiree to
Acquiror. Certain opinions, exhibits, etc. may be delivered subsequent to the
Closing Date upon the mutual agreement of the parties hereto.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIREE. All obligations of
Acquiree and Stockholders under this Agreement are subject to the fulfillment,
prior to or as of the Closing Date, of each of the following conditions.
(a) The representations and warranties by or on behalf of
Acquiror contained in this Agreement or in any certificate or
documents delivered to Acquiree pursuant to the provisions
hereof shall be true in all material respects at and as of the
time of Closing as though such representations and warranties
were made at and as of such time.
(b) Acquiror shall have performed and complied with all
covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or
at the Closing on the Closing Date.
(c) The present directors of Acquiror will cause the
appointment of all of Acquiree's nominees to the Board of
Directors of Acquiror as directed by Acquiree and will have
arranged for the resignation of the existing officers and
directors of Acquiror.
(d) All instruments and documents delivered to Stockholders
pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for Stockholders.
4
<PAGE>
(e) Acquiror, to its knowledge, has complied with all state,
federal and local laws in connection with its formation,
issuance of securities, organization, operations, and
capitalization, and no contingent liabilities have been
threatened or claims made, and to its knowledge, no basis for
the same exists with respect to said operations, formation or
capitalization including claims for violation of any state or
federal securities laws.
(f) All state and federal securities filings, notices and/or
any other necessary steps associated with the Regulation A
offering of Buckingham have been taken as of the date of
closing, and the directors, officers, principal shareholders
and counsel for Buckingham agree to assist Acquiree in
complying with any requirements associated with the Regulation
A offering subsequent to Closing. Counsel's professional
assistance in such matters shall be compensable at his normal
and customary fee.
(g) Acquiror shall have delivered to Stockholders and Acquiree
an opinion of its counsel dated the Closing Date to the effect
that.
( i) Acquiror is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Colorado.
( ii) Acquiror has the corporate power to carry on
its business as now being conducted, and is duly
qualified to do business in any jurisdiction where so
required.
(iii) This Agreement has been duly authorized,
executed and delivered by Acquiror and is a valid and
binding obligation of Acquiror enforceable in
accordance with its terms.
( iv) Acquiror through its Board of Directors has
taken all corporate action necessary for performance
under this Agreement.
( v) The documents executed and delivered to Acquiree
and Stockholders hereunder are valid and binding in
accordance with their terms and vest in Stockholders
all right, title and interest in and to the stock of
Acquiror and said stock when issued will be duly and
validly issued, fully-paid and nonassessable.
( vi) Except as referred to herein such counsel knows
of (a) no actions, suit or other legal proceedings or
investigations pending or threatened against or
relating to or materially adversely affecting
Acquiror; and (b) no unsatisfied judgments against
Acquiror.
(vii) Counsel has no reason to doubt the accuracy or
completeness of any representation or warranty made
by the Acquiror herein.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACQUIROR. All obligations
of Acquiror under this Agreement are subject to the fulfillment, prior to or as
of the Closing Date, of each of the following conditions.
(a) The representations and warranties by Acquiree and
Stockholders contained in this Agreement or in any certificate
or document delivered to Acquiror pursuant to the provisions
hereof shall be true at and as of the time of Closing as
though such representations and warranties were made at and as
of such time.
(b) Acquiree and Stockholders shall have performed and
complied with all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by
it prior to or at the Closing; including the delivery of all
of the outstanding stock, either stock certificates or stock
powers, of Acquiree within ten days after closing.
(c) The Stockholders shall deliver within twenty days after
closing to Acquiror a letter commonly known as an "investment
letter" agreeing that the shares of stock in Acquiror are
being acquired
5
<PAGE>
for investment purposes, and not with a view to public resale.
(d) Acquiree, through its counsel, shall deliver to Acquiror
an opinion to the effect that
( i) Acquiree is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Oklahoma and is duly qualified to do
business in any jurisdiction where so required.
( ii) Acquiree has the corporate power to carry on
its business as now being conducted.
(iii) This Agreement has been duly authorized,
executed and delivered by Acquiree and is a valid and
binding obligation of Acquiree and is enforceable in
accordance with its terms.
( iv) Acquiree, through its Board of Directors, has
taken all corporate action necessary for performance
under this Agreement.
( v) To the best knowledge of Counsel, the documents
executed and delivered to Acquiror hereunder are
valid and binding in accordance with their terms and
vest in Acquiror all right, title and interest in and
to the stock of Acquiree and said stock is duly and
validly issued, fully-paid and nonassessable.
( vi) To the best knowledge of Counsel, except as
referred to herein the officers know of (a) no
actions, suit or other legal proceedings or
investigations pending or threatened against or
relating to or materially adversely affecting
Acquiree; and (b) no unsatisfied judgments against
Acquiree.
(vii) Counsel has no reason to doubt the accuracy or
completeness of any representation or warranty made
by the Acquiree herein.
9. INDEMNIFICATION. Within the period provided in paragraph herein and
in accordance with the terms of that paragraph, each party to this Agreement
shall indemnify and hold harmless each other party at all times after the date
of this Agreement against and in respect of any liability, damage or deficiency,
all actions, suits, proceedings, demands, assessments, judgments, costs and
expenses including attorney's fees incident to any of the foregoing, resulting
from any misrepresentations, breach of covenant or warranty or nonfulfillment of
any agreement on the part of such party under this Agreement or from any
misrepresentation in or omission from any certificate furnished or to be
furnished to a party hereunder. Subject to the terms of this Agreement, the
defaulting party shall reimburse the other party or parties on demand, for any
reasonable payment made by said parties at any time after the Closing, in
respect of any liability of claim to which the foregoing indemnity relates, if
such payment is made after reasonable notice to the other party to defend or
satisfy the same and such party failed to defend or satisfy the same.
10. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing hereunder and the consummation of the transactions contemplated hereby
for two years from the date hereof. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for and not upon
any representations, warranty, agreement, promise or information, written or
oral, made by the other party or any other person other than as specifically set
forth herein.
11. DOCUMENTS AT CLOSING. At the Closing, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
(a) Stockholders will deliver, or cause to be delivered, to
Acquiror the following:
6
<PAGE>
( i) Within ten days after closing, stock
certificates or stock powers for the stock of
Acquiree being tendered hereunder, duly endorsed and
guaranteed or notarized in blank.
( ii) All corporate records of Acquiree, including
without limitation corporate minute books (which
shall contain copies of the Articles of Incorporation
and By-Laws, as amended to the Closing), stock books,
corporate seals, and other such corporate books and
records as may reasonably be requested for review by
Acquiror and its counsel.
(iii) The opinion of counsel as set forth herein.
( iv) Such other instruments, documents and
certificates, if any, as are required to be delivered
pursuant to the provisions of this Agreement or which
may be reasonably requested in furtherance of the
provision of this Agreement.
(b) Acquiror will deliver or cause to be delivered to
Stockholders and Acquiree:
( i) Stock certificates for common stock to be
issued as a part of the exchange as listed on
Exhibit A.
( ii) A certificate of the President and Secretary of
Acquiror to the effect that all representations and
warranties of Acquiror made under this Agreement are
reaffirmed on the Closing Date, the same as though
originally given to Stockholders on said date.
(iii) The opinions of Acquiror's counsel set forth
herein.
( iv) Copies of resolutions by Acquiror's Board of
Directors authorizing this transaction.
( v) Such other instruments and documents as are
required to be delivered pursuant to the provisions
of this Agreement.
12. MISCELLANEOUS. The Acquiror's name shall be changed to Physicians
Dispensing Rx, Inc.
13. FINDERS FEES. Edmond Pistone shall receive 2,000,000 shares of the
Acquiror as a consultant to this transaction. Mr. Travis shall receive his
shares out of the 101,433,633 referred to in Section 2 but not with respect to
the costs relating to the registration of said shares. No other party has dealt
with any broker or agent in connection with the execution of this Agreement
other than Messrs. Pistone and Travis. No additional compensation of any kind is
due to any parties besides Messrs. Pistone and Travis. Messrs. Pistone and
Travis will receive restricted shares.
14. BOARD OF DIRECTORS. New directors for the Acquiror shall be Robert
D. Holsey, D.O., C.T. Jones, D.O., Ronald R. Tutor, David W. Dare and Bryce 0.
Bliss.
15. PIGGY BACK RIGHTS. The Acquiree's officers and directors agree to
give "piggy back" registration rights to all restricted shareholders of the
Acquiror after the merger. Such rights are as follows:
REGISTRATION RIGHTS: If, during the 24-month period following the
Closing Date, the Acquiror files a registration statement with the Securities
and Exchange Commission (the "SEC") on Forms S-1, S-2 or S-3 for the purpose of
registering any of its common stock pursuant to the Securities Act of 1933, the
Acquiror agrees to notify all persons who hold stock which is, as of the Closing
Date, restricted from resale ("'Restricted Stock") of its intent to file such
registration and, if requested within five (5) days from the date of such
notification, to include the Restricted Stock in such registration statement.
The provisions hereof shall not impose any obligation on the Acquiror to file
any registration statement nor shall any statement contained herein be construed
as a representation of any intent by the Acquiror or the Acquiree to file any
registration statement. The Acquiror's obligation to include shares of the
Restricted Stock in any registration statement shall cease 24 months from the
Closing Date.
7
<PAGE>
The holders of any Restricted Stock shall bear all of their own
expenses, if any, incurred in connection with the offering and sale of their
Restricted Stock, but not with respect to the cost relating to the registration
of said shares. In the event any information is furnished in writing to the
Acquiror by or on behalf of the seller of any Restricted Stock for inclusion in
a registration statement, and any such information contains any untrue
statements or allegedly untrue statements of material fact or fails to state any
material facts required to be stated to make the statements made not misleading,
the seller who furnished such information or on his behalf such information is
furnished, shall agree to indemnify the Acquiror, its directors and such of its
officers as shall have signed any registration statement for such sale of common
stock and each person who controls the Acquiror within the meaning of Section 15
of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of
1934 for all losses, claims, damages or liabilities to which they or any of them
may become subject under the Securities Act, under any other statute, at common
law, or otherwise, and shall reimburse such persons for any legal or other
expenses (including the cost of any investigation and preparation) reasonably
incurred by them or any of them in connection with the investigating or
defending against any such losses, claims, damages or liabilities.
16. ADDITIONAL PROVISIONS.
(a) FURTHER ASSURANCES. At any time and from time to time,
after the effective date, each party will execute such
additional instruments and take such action as may be
reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
(b) WAIVER. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed.
(c) NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if
delivered in person or sent by pre-paid first class registered
or certified mail, return receipt requested.
(d) HEADINQS. The section and subsection heading in this
Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(e) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) GOVERNING LAW. This Agreement was negotiated and is being
contracted for in the State of Colorado and shall be governed
by the laws of the State of Colorado, and the securities being
issued herein are being issued and delivered in the State of
Colorado in accordance with isolated transaction and
non-public offering exemption.
(g) BINDING EFFECT. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors and
assigns.
(h) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and supersedes any and
all prior agreements, arrangements or understandings between
the parties relating to the subject matter hereof. No oral
understandings, statements, promises or inducements contrary
to the terms of this Agreement exist. No representations,
warranties, covenants or conditions, express or implied, other
than as set forth herein, have been made by any party.
(i) TIME. Time is of the essence.
(j) SEVERABILITY. If any part of this Agreement is deemed to
be unenforceable the balance of the
8
<PAGE>
Agreement shall remain in full force and effect.
(k) DEFAULT COSTS. In the event any party hereto has to resort
to legal action to enforce any of the terms hereof, such party
shall be entitled to collect attorney's fees and other costs
from the party in default.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
BUCKINGHAM VENTURE CORP. PHYSICIANS DISPENSING RX, INC.
BY /s/ A. Herbert Cohen BY /s/ Robert D. Holsey
-------------------- --------------------
TITLE President TITLE President
------------------ ------------------
/s/ A. Herbert Cohen
- --------------------
A. Herbert Cohen
On behalf of the Board of
Directors of the Company
9
<PAGE>
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made the 20 day of January, 1995, between
PD-Rx Pharmaceuticals, Inc., an Oklahoma corporation, hereinafter called the
Oklahoma Company, and a majority of the directors thereof, and PD-Rx
Pharmaceuticals, Inc., a Colorado corporation, hereinafter called the Colorado
Company, and a majority of the directors thereof.
WHEREAS, the Oklahoma Company was formed as a wholly owned subsidiary
of the Colorado Company to be the vehicle through which the Colorado Company
would reincorporate itself under the laws and jurisdiction of the State of
Oklahoma.
WHEREAS, the Oklahoma Company has an authorized capital stock
consisting of (i) 3,000,000 shares of Common Stock, par value $.01 ("Common
Stock"), of which Five Hundred (500) shares have been duly issued and are now
outstanding; and (ii) 9,000,000 shares of Preferred Stock, par value $.10 per
share ("Preferred Shares"), of which no shares have been duly issued or are
outstanding; 500,000 shares each of Class A 13.25% Cumulative Convertible
Preferred Stock, par value $.10 per share ("Class A Preferred Stock"), of which
no shares have been duly issues or are outstanding; and 500,000 shares of Class
C 13.25% Cumulative Convertible Preferred Stock, par value $.10 per share
("Class C Preferred Stock") of which no shares have been duly issued or are
outstanding.
WHEREAS, the principal office of the Oklahoma Company in the State of
Oklahoma is located at 6000 NW 2nd, Suite 800, City of Oklahoma City, County of
Oklahoma, and Dr. Robert D. Holsey, D.O. is the agent in charge thereof upon
whom process against the Oklahoma Company may be served within the State of
Oklahoma;
WHEREAS, the Colorado Company, as of December 31, 1993, has authorized
capital consisting of (a) 3,000,000 shares of Common Stock, par value $.01 per
share ("Common Share"), (i) of which 1,544,804 shares were duly issued and
outstanding, (ii) _____ shares were reserved for issuance upon exercise of
outstanding options, and (iii) 351,200 shares were reserved for conversion of
the Series A Preferred Stock and Series C Preferred Stock; (b) 9,000,000 shares
of Preferred Stock, par value $.10 per share ("Preferred Stock"), of which no
shares were issued or outstanding; (c) 500,000 shares of Class A 13.25%
Cumulative Convertible Preferred Stock, par value $.10 per share ("Series A
Preferred Stock"), of which 270,000 shares were duly issued and outstanding, and
(d) 500,000 shares of Class C 13.25% Cumulative Convertible Preferred Stock, par
value $.10 per share ("Series C Preferred Stock"), of which 81,200 shares were
duly issued and outstanding;
<PAGE>
WHEREAS, the principal office of the Colorado Company in the State of
Colorado is located at 5600 S. Quebec, Suite 148-B, City of Englewood, Colorado
80111 and Mr. Louis J. Davis, Esquire, is the agent in charge thereof upon whom
process against the Colorado Company may be served within the State of Colorado;
WHEREAS, the holders of the outstanding capital stock of the Colorado
Company entitled to vote thereon approved the reincorporation of the Colorado
Company under the laws and jurisdiction of the State of Colorado at the
Corporation's annual shareholders meeting on December 29, 1993; and
WHEREAS, the Boards of Directors of the Oklahoma Company and of the
Colorado Company, respectively, deem it advisable and generally to the advantage
and welfare of the two corporate parties and their respective shareholders that
the Colorado Company merge with and into the Oklahoma Company under and pursuant
to the provisions of Section 1083 of the Oklahoma General Corporation Act.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
1. MERGER. The Colorado Company shall be and it hereby is merged into
the Oklahoma Company.
2. EFFECTIVE DATE. This Agreement and Plan of Merger shall become
effective immediately upon compliance with the laws of the States of Colorado
and Oklahoma, the time of such effectiveness being hereinafter called the
Effective Date. The Effective Date shall be the happening of whichever of the
following events happens last:
(a) the filing in the office of the
Secretary of State of the State of Colorado, the
Articles of Merger of PD-Rx Pharmaceuticals, Inc,
the Colorado corporation, into PD-Rx Pharmaceuticals,
Inc., the Oklahoma corporation, pursuant to
Sections 7-111-104 and 105 of the Colorado Business
Corporation Act; or
(b) the filing of the Certificate of
Ownership and Merger in the office of the Secretary
of State of the State of Oklahoma.
3. SURVIVING CORPORATION. The Oklahoma Company shall survive the merger
herein contemplated and shall continue to be governed by the laws of the State
of Oklahoma, but the separate corporate existence of the Colorado Company shall
cease forthwith upon the Effective Date.
<PAGE>
4. AUTHORIZED CAPITAL. The authorized capital stock of the Oklahoma
Company following the Effective Date shall be (i) 3,000,000 shares of Common
Stock, par value $.01 per share, (ii) 9,000,000 shares of Preferred stock, par
value $.10 per share, (ii) 500,000 shares of Class A Cumulative Convertible
Preferred Stock, par value $.10 per share, and (iii) 500,000 shares of Class C
Cumulative Convertible Preferred Stock, par value $.10 per share, unless and
until the same shall be changed in accordance with the laws of the State of
Oklahoma.
5. CERTIFICATE OF INCORPORATION. (a) The Certificate of Incorporation
of the Oklahoma Company which is set forth as Appendix A hereto shall be the
Certificate of Incorporation of the Oklahoma Company following the Effective
Date unless and until the same shall be amended or repealed in accordance with
the provisions thereof, which power to amend or repeal is hereby expressly
reserved, and all rights or powers of whatsoever nature conferred in such
Certificate of Incorporation or herein upon any shareholder or director or
officer of the Oklahoma Company or upon any other person whomsoever are subject
to this reserve power. Such Certificate of Incorporation shall constitute the
Certificate of Incorporation of the Oklahoma Company separate and apart from
this Agreement and Plan of Merger and may be separately certified as the
Certificate of Incorporation of the Oklahoma Company.
(b) The Certificates of Designations setting forth the rights,
priorities, preferences and powers of the Class A Preferred Stock and Class C
Preferred Stock which are set forth as Appendix B and C, respectively, shall be
the same rights, priorities, preferences and powers of the Series A Preferred
Stock and Series C Preferred Stock as authorized and issued by the Colorado
Company following the Effective Date unless and until the same shall be amended
or repealed in accordance with the provisions thereof, which power to amend or
repeal is hereby expressly reserved, and all rights or powers of whatsoever
nature conferred in such Certificate of Designations or herein upon any
shareholder or director or officer of the Oklahoma Company or upon any other
person whomsoever are subject to this reserve power.
6. BYLAWS. The Bylaws of the Colorado Company which is set forth as
Appendix D hereto shall be the Bylaws of the Oklahoma company following the
Effective Date unless and until the same shall be amended or repealed in
accordance with the provisions thereof.
7. FURTHER ASSURANCE OF TITLE. If at any time the Oklahoma Company
shall consider or be advised that any acknowledgments or assurances in law or
other similar actions are necessary or desirable in order to acknowledge or
confirm in and to the Oklahoma Company any right, title, or interest of the
Colorado Company held immediately prior to the Effective Date, the Colorado
Company and its proper officers and directors shall and will execute and deliver
all such acknowledgements or assurances in law and do all things necessary to
carry out the purposes of this Agreement and Plan of Merger, and the Oklahoma
Company and the proper officers and
<PAGE>
directors thereof are fully authorized to take any and all such action in the
name of the Colorado Company or otherwise.
8. RETIREMENT OF ORGANIZATION STOCK. Forthwith upon the Effective
Date, each of the 500 shares of the Common Stock of the Oklahoma Company
presently issued and outstanding shall be retired, and no shares of Common
Stock or other securities of the Oklahoma Company shall be issued in respect
thereof.
9. CONVERSION OF OUTSTANDING STOCK.
(a) Common Stock. Upon the Effective Date, each of the issued and
outstanding shares of Common Share of the Colorado Company and all rights in
respect thereof shall be converted into one fully paid and nonassessable
share of Common Stock of the Oklahoma Company, and each certificate nominally
representing shares of Common Share of the Colorado Company shall for all
purposes be deemed to evidence the ownership of a like number of shares of
Common Stock of the Oklahoma Company. The holders of such certificates shall
not be required immediately to surrender the same in exchange for
certificates of Common Stock of the Oklahoma Company; provided, however, that
as certificates nominally representing shares of Common Share of the Colorado
Company are surrendered for transfer, the Oklahoma Company will cause to be
issued certificates representing shares of Common Stock of the Oklahoma
Company and, at any time upon surrender by any holder of certificates
nominally representing shares of Common Share of the Colorado Company, the
Oklahoma Company will cause to be issued therefor certificates for a like
number of shares of Common Stock of the Oklahoma Company.
(b) Class A 13.25% Cumulative Convertible Preferred Stock. Upon the
Effective Date, each of the issued and outstanding shares of Series A
Preferred Stock of the Colorado Company and all rights in respect thereof
shall be converted into one fully paid and nonassessable share of Class A
Preferred Stock of the Oklahoma Company, and each certificate nominally
representing shares of Series A Preferred Stock of the Colorado Company shall
for all purposes be deemed to evidence the ownership of a like number of
shares of Class A Preferred Stock of the Oklahoma Company. The holders of
such certificates shall not be required immediately to surrender the same in
exchange for certificates of Class A Preferred Stock of the Oklahoma Company;
provided, however, that as certificates nominally representing shares of
Series A Preferred Stock of the Colorado Company are surrendered for
transfer, the Oklahoma Company will cause to be issued certificates
representing shares of Class A Preferred Stock of the Oklahoma Company and,
at any time upon surrender by any holder of certificates nominally
representing shares of Series A Preferred Stock of the Colorado Company, the
Oklahoma Company will cause to be issued therefor certificates for a like
number of shares of Class A Preferred Stock of the Oklahoma Company.
(c) Class C 13.25% Cumulative Convertible Preferred Stock. Upon the
Effective Date, each of the issued and outstanding shares of Series C Preferred
Stock of the Colorado Company and all rights in respect
<PAGE>
thereof shall be converted into one fully paid and nonassessable share of
Class C Preferred Stock of the Oklahoma Company, and each certificate
nominally representing shares of Series C Preferred Stock of the Colorado
Company shall for all purposes be deemed to evidence the ownership of a like
number of shares of Class C Preferred Stock of the Oklahoma Company. The
holders of such certificates shall not be required immediately to surrender
the same in exchange for certificates of Class C Preferred Stock of the
Oklahoma Company; provided, however, that as certificates nominally
representing shares of Series C Preferred Stock of the Colorado Company are
surrendered for transfer, the Oklahoma Company will cause to be issued
certificates representing shares of Class C Preferred Stock of the Oklahoma
Company and, at any time upon surrender by any holder of certificates
nominally representing shares of Series C Preferred Stock of the Colorado
Company, the Oklahoma Company will cause to be issued therefor certificates
for a like number of shares of Class C Preferred Stock of the Oklahoma
Company.
10. OUTSTANDING STOCK OPTIONS. Forthwith upon the Effective Date,
each outstanding option to purchase shares of Common Shares of the Colorado
Company shall be converted into and become an option to purchase the same
number of shares of Common Stock of the Oklahoma Company, upon the same terms
and subject to the same conditions as set forth in such option. The same
number of shares of Common Stock of the Oklahoma Company shall be reserved
for issuance upon the exercise of restricted stock options as were so
reserved for issuance by the Colorado Company immediately prior to the
Effective Date.
11. BOARD OF DIRECTORS AND OFFICERS. The members of the Board of
Directors and the officers of the surviving corporation immediately after the
Effective Date of the merger shall be those persons who were the members of
the Board of Directors and the officers, respectively, of the Colorado
Company immediately prior to the Effective Date of the merger, and such
persons shall serve in such offices, respectively, for the terms provided by
law or in the Bylaws, or until their respective successors are elected and
qualified.
12. VACANCIES. If, upon the Effective Date, a vacancy shall exist in
the Board of Directors or in any of the offices of the Oklahoma Company as
the same are specified above, such vacancy shall thereafter be filled in the
manner provided by law and the Bylaws of the Oklahoma Company.
13. TERMINATION. Anything herein to the contrary notwithstanding,
this Agreement and Plan of Merger may be terminated and abandoned by action
of the Board of Directors of the Colorado Company at any time prior to the
Effective Date, whether before or after approval by holders of the
outstanding capital stock of the Colorado Company.
14. PLAN OF REORGANIZATION. The Agreement and Plan of Merger
constitutes a Type F Plan of Reorganization as defined under the Internal
Revenue Code, 1986 as amended, to be carried forth in the manner,
<PAGE>
on the terms and subject to the conditions herein set forth, and as set forth
in the Proxy Statement dated December 9, 1993 delivered to the Colorado
Company holders of capital stock outstanding as of the record date.
15. BOOK ENTRIES. The merger contemplated hereby shall be treated as
a pooling of interests and as of the Effective Date entries shall be made
upon the Books of the Oklahoma Company in accordance with the following:
(a) The assets and liabilities of the Colorado Company shall be
recorded at the amounts at which they are carried on the books of the
Colorado Company immediately prior to the Effective Date with appropriate
adjustment to reflect the retirement of the 500 share of Common Stock of the
Oklahoma Company presently issued and outstanding.
(b) There shall be credited to Capital Account the aggregate amount
of the par value per share of all of the Common Stock of the Oklahoma Company
resulting from the conversion of the outstanding Common Shares of the
Colorado Company. There shall also be credited to the Capital Account the
aggregate amount of the par value per share of all of the Class A Preferred
Stock of the Oklahoma Company resulting from the conversion of the
outstanding Series A Preferred Stock of the Colorado Company along with a
credit of the aggregate amount of the par value per share of all of the Class
C Preferred Stock of the Oklahoma Company resulting from the conversion of
the outstanding Series C Preferred Stock of the Colorado Company.
(c) There shall be credited to Additional Paid-in Capital an amount
equal to that carried on the Additional Paid-in Capital of the Colorado
Company immediately prior to the Effective Date.
(d) There shall be credited or debited to Accumulated Deficit an
amount equal to that carried on the Accumulated-Deficit of the Colorado
Company immediately prior to the Effective Date.
16. EXPENSES AND RIGHTS OF DISSENTING SHAREHOLDERS. The Oklahoma
Company shall pay all expenses of carrying this Agreement and Plan of Merger
into effect and of accomplishing the merger, including amounts, if any, to
which dissenting shareholders of the Colorado Company may be entitled by
reason of this merger. The Oklahoma Company will, in the manner prescribed in
Section 7-111-104 of the Colorado Business Corporation Act (the "Act"),
within ten days after the filing and recording of the Articles of Merger
pursuant to Section 7-111-105 of the Act, notify every shareholder of the
Colorado Company whose shares were not voted in favor of the reincorporation
and who before the taking of the vote filed with the Colorado Company a
written objection to the reincorporation, that the Articles of Merger have
been so filed and recorded. If any such shareholder shall, within 30 days
after the date of mailing of such notice, demand in writing from the Oklahoma
Company payment for his stock, the Oklahoma Company shall, pay to him the
value of his stock on the date of the
<PAGE>
recording of the Articles of Merger, exclusive of any element of value
arising from the expectation or accomplishment of the merger. Such appraisal
proceedings and the rights thereunder of such shareholders and the surviving
corporation shall in all respects be subject to and governed by the
provisions of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant
to authority duly granted by the Board of Directors, has caused this
Agreement and Plan of Merger to be executed by a majority of its directors
and its corporate seal to be hereunto affixed.
PD-Rx PHARMACEUTICALS, INC.
(Colorado)
ATTEST:
(CORPORATE SEAL) By:
--------------------------------
- -------------------------- Name:
Name: ------------------------------
-------------------- Title: Director
Title: Secretary
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Director Title: Director
PD-Rx PHARMACEUTICALS, INC.
(Oklahoma)
ATTEST:
(CORPORATE SEAL) By:
--------------------------------
- -------------------------- Name:
Name: ------------------------------
-------------------- Title: Director
Title: Secretary
By: By:
-------------------------------- --------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Director Title: Director
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PD-RX PHARMACEUTICALS, INC.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned incorporator, whose name and address is shown below,
being a person legally competent to enter into contracts, under the provisions
of the Oklahoma General Corporation Act, does hereby adopt the following
Certificate of Incorporation:
ARTICLE I
NAME
The name of this Corporation is: PD-Rx Pharmaceuticals, Inc.
ARTICLE II
REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Oklahoma is 6000 N.W. 2nd, Suite 800, Oklahoma City, Oklahoma County, Oklahoma
73127, and the name of the registered agent of the Corporation at such address
is Dr. Robert D. Holsey, D.O.
ARTICLE III
DURATION
The duration of the Corporation is perpetual.
ARTICLE IV
PURPOSES
The objectives and purposes for which the Corporation is organized are
for any lawful act or activity for which a corporation may be organized under
the general corporation law of the State of Oklahoma, now or hereafter in
effect, and to do any of such things as fully and to the same extent as natural
persons might or could do.
ARTICLE V
INCORPORATOR
The name and address of the Incorporator is Dr. Robert D. Holsey, 6000 NW
2nd, Suite 800, Oklahoma City, Oklahoma 73127.
ARTICLE VI
AUTHORIZED CAPITAL
The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is 13,000,000 , which shall consist of
(1) 10,000,000 shares of preferred stock, par value $.10 per share
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("Preferred Stock"); and (ii) 3,000,000 shares of common stock, par value
$.01 par value ("Common Stock").
The following is a statement of the designations, powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, of the
classes of stock of the Corporation, and of the authority with respect thereto
expressly granted to the Board of Directors of the Corporation:
A. PREFERRED STOCK.
The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issuance of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to time
in one or more series, and in such amount as may be determined by the Board of
Directors in such resolution or resolutions. Each such series shall have such
powers, designations, preferences and relative, participating, optional or other
rights, if any, and such qualifications, limitations or restrictions thereof, if
any (collectively, the "Class Terms"), as are stated and expressed in a
resolution or resolutions providing for the creation of such series, or the
revision of the Class Terms of such series, adopted by the Board of Directors.
The powers of the Board of Directors with respect to the Class Terms of a
particular series shall include, but not be limited to determination of the
following:
(1) the number of shares constituting that series and the distinctive
designation of that series or any increase or decrease (but not below the number
of shares thereof then outstanding) in such number;
(2) the dividend rate on the shares of that series, if any, whether
such dividends shall be cumulative, and, if so, the date or dates from which
dividends payable on such shares shall accumulate and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(3) whether that series shall have voting rights in addition to the
voting rights provided by law, and, if so, the terms and conditions of such
voting rights;
(4) whether that series shall have conversion privileges with respect
to shares of any other class or classes of stock or shares of any other series
of any class of stock, and, if so, the terms and conditions of such conversion
privileges, including the conversion price or rate and the method, if any, of
adjusting such conversion price or rate upon occurrence of such events as the
Board of Directors shall determine;
(5) whether shares of that series shall be redeemable, and, if so, the
terms and conditions of such redemption, including their relative rights of
priority of redemption, if any, the date or dates upon or after which they shall
be redeemable, provisions regarding redemption notices and the redemption price
per share, which price may vary under different conditions and at different
redemption dates;
(6) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series;
(8) the conditions or restrictions upon the creation of indebtedness of
the Corporation or upon the issuance of additional Preferred Stock or other
capital stock ranking PARI PASSU therewith or prior thereto with respect to
dividends or distributions of assets upon liquidation;
(9) the conditions or restrictions with respect to the issuance of,
payment of dividends upon, or the making of other distributions to, or the
acquisition or redemption of, shares ranking junior to the Preferred Stock or to
any series thereof with respect to dividends or payment or distributions of
assets upon liquidation, dissolution or winding up of the affairs of the
Corporation; and
(10) any other designations, powers, preferences and rights, including
without limitation, any qualifications, limitations or restrictions thereof.
2
<PAGE>
Any of the Class Terms, including voting rights, of any series may be made
dependent upon facts ascertainable outside this Certificate of Incorporation and
the resolution or resolutions designating that series of Preferred Stock,
provided that the manner in which such facts shall operate upon such Class Terms
is clearly and expressly set forth in this Certificate of Incorporation or in
the resolution or resolutions designating that series of Preferred Stock.
Subject to the provisions of this Article VI, shares of one or more
series of Preferred Stock may be authorized or issued from time to time as shall
be determined by and for such consideration as shall be fixed by the Board of
Directors or a designated committee thereof, in an aggregate amount not
exceeding the total number of shares of Preferred Stock authorized by this
Certificate of Incorporation. Except as fixed by the Board of Directors in a
resolution or resolutions designating any series of Preferred Stock, all shares
of Preferred Stock shall be of equal rank and shall be identical in all
respects. All shares of any one series of Preferred Stock so designated by the
Board of Directors shall be identical in all respects, except that shares of any
one series issued at different times may differ as to the date from which
dividends thereon shall accumulate.
Except as expressly set forth herein or in the resolution or
resolutions of the Board of Directors designating any series of Preferred Stock,
the holders of shares of any series of Preferred Stock shall have no other
rights other than those provided by applicable law.
B. COMMON STOCK.
(1) The Common Stock may be issued by the Corporation from time to time
for such consideration and upon such terms as may be fixed from time to time by
the Board of Directors and as may be permitted by law, without action by any
stockholders. Each share of Common Stock shall have the same powers and rights,
shall rank PARI PASSU and share equally, share for share, in any dividends or
other distributions thereon and shall be identical in all respects.
(2) Subject to any voting rights (inclusive or exclusive) which may
vest in holders of Preferred Stock under the provision of any series of
Preferred Stock fixed by the Board of Directors pursuant to the authority herein
provided (whether now existing or hereafter created), each holder of Common
Stock shall be entitled to one vote for each share of Common Stock standing in
his name on the books of the Corporation on all matters submitted to a vote of
the stockholders of the Corporation (except that in the election of directors he
shall have the right to vote such number of shares for as many persons as there
are directors to be elected). At any meeting of stockholders at which the
holders of such capital stock are entitled to vote on any such transaction, the
affirmative vote of a majority of the votes cast by the holders of the
outstanding shares of all such stock present in person or represented by proxy
and entitled to vote shall be required to approve such transaction and a
majority of the shares entitled to vote as such meeting, represented in person
or by proxy, shall constitute a quorum.
(3) No stockholder of the Corporation shall have any preemptive or
other right to subscribe for any additional shares of stock, or for other
securities of any class, or for rights, warrants or options to purchase stock or
for script, or for securities of any kind convertible into stock or carrying
stock purchase warrants or privileges, subject to rights (inclusive or
exclusive) which may vest in holders of Preferred Stock under the provision of
any series of Preferred Stock fixed by the Board of Directors pursuant to the
authority herein provided (whether now existing or hereafter created).
(4) The Board of Directors may from time to time distribute to the
stockholders in partial liquidation, out of stated capital or capital surplus of
the Corporation, a portion of its assets, in cash or property, subject to the
limitations contained in Oklahoma law. The holders of Common Stock shall be
entitled to dividends only if, when and as the same shall be declared by the
Board of Directors and my be permitted by Oklahoma law.
ARTICLE VII
BOARD OF DIRECTORS
The number of directors of this Corporation shall be as specified in
the Bylaws, and such number may
3
<PAGE>
from time to time be increased or decreased under the Bylaws or any
amendment, or change thereof, upon resolution of the Board of Directors.
The names and mailing addresses of the persons who are to serve as
initial Directors of the Corporation until the first annual meeting of the
Stockholders or until their successors are elected and qualify are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Robert D. Holsey, D.O. Rt. 1, Box 145
Gracement, OK 73042
David Dare, Vice Chairman Rt. 1, Box 142A
Gracement, OK 73042
Vicki Carpenter Clingenpeel 4625 NW 33rd Terrace
Oklahoma City, OK 73122
Carl Ennis 711 Stanton L. Young Blvd., Suite 101
Oklahoma City, OK 73104
Bryce O. Bliss, M.D. 3105N.W. 63rd
Oklahoma City, OK 73116
</TABLE>
ARTICLE VIII
BYLAWS
The Bylaws for the governing of this Corporation may be adopted,
amended, altered, repealed, or readopted by the Board of Directors at any stated
or special meeting of such Board. The powers of such Directors in this regard
shall at all times be subject to the rights of the Stockholders to alter or
repeal such Bylaws at any annual meeting of Stockholders.
ARTICLE IX
REGULATION OF DIRECTORS AND STOCKHOLDERS
The following provisions are hereby adopted for the purpose of
defining, and regulating the powers of the Corporation and of the Directors and
Stockholders.
(1) The Board of Directors of the Corporation is hereby empowered to
withdraw to authorize the issuance from time to time of shares of its stock of
any class, whether now or hereafter authorized, or securities convertible into
shares of its stock of any class or classes, whether now or hereafter
authorized.
(2) The Board of Directors shall have power, if authorized by the
Bylaws, to designate by resolution or resolutions adopted by a majority of the
whole Board of Directors, one or more committees, each committee to consist of
two or more of the Directors of the corporation, which, to the extent provided
in said resolutions or in the Bylaws of the Corporation and permitted by the
Oklahoma General Corporation Act, shall have and may exercise any or all of the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and shall have power to authorize the seal of the
Corporation to be affixed to all instruments and documents which may require it.
(3) The Board of Directors shall have power to borrow or raise money,
from time to time and without limit, and upon any terms, for any corporate
purposes; and, subject to the Oklahoma General Corporation Act, to authorize the
creation, issue, assumption or guaranty of bonds, notes or other evidences of
indebtedness for moneys so borrowed, to include therein such provisions as to
redeemability, convertibility or otherwise, as the Board of Directors, in its
sole discretion, may determine and to secure the payment of principal, interest
or sinking fund in respect thereof by mortgage upon, or the pledge of, or the
conveyance or assignment in trust of,
4
<PAGE>
the whole or any part of the properties, assets and goodwill of the
Corporation then owned or thereafter acquired.
(4) No contract or other transaction of the Corporation with any other
person, firm or corporation or in which the Corporation is interested, shall be
affected or invalidated by: (i) the fact that any one or more of the directors
or officers of the Corporation is interested in or is a director of or officer
of another corporation; or (ii) the fact that any director of officer,
individually or jointly with others, may be a party to or may be interested in
any such contract or transaction. Each person who may become a director or
officer of the Corporation is hereby relieved from any liability that might
otherwise arise by reason of his contracting with the Corporation for the
benefit of himself or any firm or corporation in which he may be in any way
interested.
(5) The Corporation shall be entitled to treat the registered holder of
any shares of the Corporation as the owner thereof for all purposes, including
all rights deriving from such share, and shall not be bound to recognize any
equitable or other claim to, or interest in, such shares or rights deriving from
such shares, on the part of any other person including but without limiting the
generality hereof, a purchaser, assignee or transferee of such shares or rights
deriving from such shares, unless and until such purchaser, assignee, transferee
or the person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the interest of
such purchaser, assignee, transferee or other person. The purchaser, assignee or
transferee or any of the shares of the Corporation shall not be entitled: to
receive the shares of the Corporation shall not be entitled; to receive notice
of the meetings of the shareholders; to vote as such meeting; to examine a list
of shareholders; to be paid dividends or other sums payable to shareholder; or
to own, enjoy and exercise any other property or rights deriving from such
shares against the Corporation until such purchaser, assignee, or transferee has
become the registered holder of such shares.
The enumeration and definition of a particular power of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other section of the Certificate of Incorporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the Laws of the State of Oklahoma now or
hereafter in force, as the same are in furtherance of and not in limitation or
exclusion of the powers conferred by law.
ARTICLE X
INDEMNIFICATION
Any person who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (whether or not by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, incorporator, employee, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, incorporator,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise (including an employee benefit plan), shall be entitled to be
indemnified by the Corporation to the full extent then permitted by law against
expenses (including attorneys' fees), judgments, fines (including excise taxes
assessed on a person with respect to an employee benefit plan), and amounts paid
in settlement incurred by him in connection with such action, suit, or
proceeding; provided, however, that the Corporation shall not indemnify any such
person in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for gross negligence or willful misconduct, or
to have not acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation. Such right of
indemnification shall inure whether or not the claim asserted is based on
matters which antedate the adoption of this Article X. Such right of
indemnification shall continue as to a person who has ceased to be a director,
officer, incorporator, employee, or agent and shall inure to the benefit of the
heirs and personal representatives of such a person. The indemnification
provided by this Article X shall not be deemed exclusive of any other rights
which may be provided now or in the future under any provisions currently in
effect or hereafter adopted by the Bylaws, by any agreement, by vote of
Stockholders, by resolution of disinterested directors, by provision of law, or
otherwise.
5
<PAGE>
ARTICLE XI
EXCULPATORY PROVISIONS
No Director of the Corporation shall be liable to the Corporation or
any of its Stockholders for monetary damages for breach of fiduciary duty as a
Director, provided that this provision does not eliminate the liability of the
Director (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 of law, (iii) under
Section 1053 of the Oklahoma General Corporation Act, or (iv) for any
transaction from which the Director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine, amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, counsel fees and disbursements). Each person who serves as a
Director of the Corporation while this Article XI is in effect shall be deemed
to be doing so in reliance on the provisions of this Article XI, and neither the
amendment or repeal of this Article XI, nor the adoption of any provision of
this Certificate of Incorporation inconsistent with this Article XI, shall apply
to or have any effect on the liability or alleged liability of any Director or
the Corporation for, arising out of, based upon, or in connection with any acts
or omissions of such Director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Article XI are
cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of Directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, bylaw, agreement, vote of Stockholders
or disinterested Directors, or otherwise.
If the Oklahoma General Corporation Act is amended to further limit or
eliminate liability of this Corporation's Directors for breach of fiduciary
duty, then a Director of this Corporation shall not be liable for any such
breach to the fullest extent permitted by the Oklahoma General Corporation Act
as so amended. If the Oklahoma General Corporation Act is amended to increase or
expand liability of the Corporation's Directors for breach of fiduciary duty, no
such amendment shall apply to or have any effect on the liability or alleged
liability of any Director of this Corporation for or with respect to any acts or
omissions of such Director occurring prior to the time of such amendment or
otherwise adversely affect any right or protection of a Director of this
Corporation existing at the time of such amendment.
ARTICLE XII
COMPROMISE OR ARRANGEMENT BY
CORPORATION WITH CREDITORS OR STOCKHOLDERS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its Stockholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 1106 of the Oklahoma General Corporation Act or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 1100 of the Oklahoma
General Corporation Act, may order a meeting of the creditors or class of
creditors, and/or of the Stockholders or class of Stockholders of this
Corporation, as the case may be, to be summoned in such manner as the court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the Stockholders or class of
Stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the compromise or arrangement and the
reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, and/or on all
the Stockholders or class of Stockholders, of this Corporation, as the case may
be, and also on this Corporation.
6
<PAGE>
IN WITNESS WHEREOF, I have signed this Certificate of Incorporation
this 19th day of January, 1995 and I acknowledge the same to be my act.
/S/ROBERT D. HOLSEY
------------------------------
Dr. Robert D. Holsey
6000 NW 2nd, Suite 800
Oklahoma City, Oklahoma 73127
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
BEFORE ME, the undersigned, a Notary Public in and for said County and
State, personally appeared the foregoing incorporator to me known to be the
identical person who executed the foregoing Certificate of Incorporation, and
acknowledged to me that he executed the same as his free and voluntary act and
deed for the uses and purposes therein set forth, on this 19th day of January,
1995.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and
year first above written.
-------------------------------------
Notary Public
(SEAL)
Notary Public
My Commission Expires:
- -----------------------
7
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
PD-Rx PHARMACEUTICALS, INC.
ARTICLE I.
Section 1.1 REGISTERED OFFICE. The registered office of 6000 N.W.
Second Street Suite 800 (hereinafter referred to as the "Corporation") shall
be located in Oklahoma City, Oklahoma.
Section 1.2 OFFICES. The Corporation may establish or discontinue,
from time to time, such other and places of business within or without the
State of Oklahoma as may be deemed proper for the conduct of the Corporation's
business.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.1 ANNUAL MEETING. An annual meeting of shareholders for
the purpose of electing directors and transacting such other business as may
come before it shall be held at such place, within or without the State of
Oklahoma, on such date and at such time as shall be designated by the Board of
Directors. If the date of the annual meeting shall fall upon a legal holiday,
the meeting shall be held on the next succeeding business day.
Section 2.2 SPECIAL MEETINGS. Special meetings of the shareholders,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
shall be called by the President or Secretary at the request in writing of a
majority of the directors or shareholders entitled to vote. Such request shall
state the purpose of the meeting of the shareholders shall be limited to the
purpose stated in the notice.
Section 2.3 NOTICE OF MEETINGS. Written notice of each meeting of
shareholders shall be giving to each shareholder of record entitled to vote at
the meeting at his/her address as it appears on the stock books of the
Corporation. Notice of each meeting of shareholders shall state the purpose or
purposes for which the meeting is called, and the time and the place it is to
be held, and shall be delivered or mailed not less than ten (10) nor more than
sixty (60) days before the day of the meeting.
Section 2.4 INSPECTORS. Expect as otherwise provided by law or by
the Certificate of Incorporation, all votes by ballot at any meeting of the
shareholders shall be conducted by two inspectors who shall be appointed by
the chairman of the meeting. The inspectors shall decide upon the
qualifications of voters, count the votes and declare the results.
Section 2.5 LIST OF SHAREHOLDERS ENTITLED TO VOTE. 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 share registered in the name
of each shareholder, shall be prepared by or for the Secretary and 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 lease ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, with place shall be specified in the notice of the meeting, or,
it not so specified, at the place where the meeting is to be held. Such list
shall be available for inspection at the meeting.
Section 2.6 FIXING OF RECORD DATE. In order that the Corporation may
determine to shareholders entitled to notice of or to vote at any meeting of
the 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
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<PAGE>
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. If no record date is fixed, the record
date for determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be close of business on the day next preceding
the day on which the notice is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. The
record date for determining shareholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall by the day on which the first written
consent is expressed. The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholder shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 2.7 QUORUM AND ADJOURNMENT. Except as otherwise provided by
law, by the Certificate of Incorporation or by these Bylaws, the presence in
person or by proxy, of the holders of a majority of the shares of stock
entitled to vote on every matter that is to be voted on without regard to
class or series shall constitute a quorum at all meetings of the shareholders.
In the absence of a quorum, the holders of a majority of such shares of stock
present in person or by proxy may adjourn such meeting, from time to time,
without notice other than announcement at the meeting, until a quorum shall
attend. At any such adjourned meeting at which a quorum may be present, any
business may be transacted with might have been transacted at the meeting as
originally called; but only those shareholders entitled to vote at any
adjournment or adjournments thereof. If the adjournment is for more than
thirty (30) 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.
Section 2.8 VOTING; PROXIES. Except as otherwise provided by law or
the Certificate of Incorporation, and subject to the provisions of Section 2.
(a) Each Shareholder shall at every meeting of the
shareholders be entitled to one vote for each share of capital stock having
voting rights held by him/her.
(b) Each shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him/her
by proxy, but no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period.
(c) Each matter properly presented to any meeting shall
decide by a majority of the votes cast on the matter.
(d) Upon demand of any shareholder, the election of
directors and the vote on any other matter present to a meeting shall be by
written ballot. In a vote by ballot each ballot shall state the number of
shares voted and the name of the shareholder of proxy voting.
Section 2.9 CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. Any action
that may be taken at any annual or special meeting of shareholders may be
taken without a meeting, without a prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of
the taking of such action without a meeting by less than unanimous written
consent shall be given to each shareholder who did not consent thereto in
writing.
2
<PAGE>
ARTICLE III.
DIRECTORS
Section 3.1 NUMBER AND TERM OF OFFICE. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors. The number of directors that shall constitute a whole Board may be
fixed from time to time by resolution of the Board of directors and shall
consist of one or more members. Directors shall be elected at the annual
meeting of shareholders to hold office until the next annual meeting of
shareholders and until their respective successors are elected and have
qualified.
Section 3.2 PLACE OF MEETINGS. Meetings of the Board of Directors
may be held at any place, within or without the State of Oklahoma, from time
to time designated by the Chairman of the Board or by the body or person
calling such meeting.
Section 3.3 ANNUAL MEETINGS. A newly elected Board of Directors
shall meet and organize as soon as practicable after each annual meeting of
shareholders took place, without notice of such meeting, provided a majority
of the whole Board of Directors is present. If such a majority is not present,
such organizational meeting may be held at any other time or place which may
be specified in a notice given in the manner provided for special meetings of
the Board of Directors, or in a waiver of notice thereof.
Section 3.4 REGULAR MEETINGS. Regular meeting of the Board of
Directors shall be held at such times as may be determined by resolution of
the Board of Directors and not notice shall be required for any regular
meeting. Except as otherwise provided by law, any business may be transacted
at any regular meeting of the Board of Directors.
Section 3.5 SPECIAL MEETINGS; NOTICE AND WAIVER OF NOTICE. Special
meetings of the Board of Directors shall be called by the Secretary on the
request of the Chairman of the Board or the President, or on the request in
writing signed by at lease two directors stating the purpose or purposes of
such meeting. Notice of any special meeting shall be in form approved by the
Chairman of the Board or the President, as the case may be, or if the meeting
is approved by them. Notices of special meeting shall be mailed to each
director, addressed to him/her at his/her residence or usual place of
business, not later than three days before the day on which the meeting is to
be held, or shall be sent to him/her at such place by telegraph, or be
delivered personally or by telephone, or not later than forty-eight hours
before the time of such meeting. Notice of any meeting of the Board of
Directors need not be given to any director if he/she shall sign a written
waiver thereof either before or after the time stated therein, or if he/she
shall be present at the meeting and participate in the business transacted;
and any meeting of the Board of Directors shall be a legal meeting without
notice thereof having been given, if all members shall be present. Unless
otherwise restricted by the Certificate of Incorporation, or by the terms of
the notice thereof, any and all business may be transacted at any special
meeting.
Section 3.6 ACTION WITHOUT MEETING. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors
or of such committee.
Section 3.7 PRESIDING OFFICER AND SECRETARY AT MEETINGS. Each
meeting of the Board of Directors shall be presided over by the Chairman of
the Board of Directors, or in his/her absence by the President, of if neither
is present by such member of the Board of Directors as shall be chosen by the
meeting. The Secretary, or in his/her absence an Assistant Secretary, shall
act as secretary of the meeting, or if no such officer is present, a secretary
of the meeting shall be designated by the person presiding over the meeting.
Section 3.8 QUORUM. A majority of the total number of Directors
shall constitute a quorum for the transaction of business. In the absence of a
quorum, a majority of those present (or if only one present, then that one)
may adjourn the meeting, without notice other than announcement at the
meeting, until such time as a quorum is present. Except as otherwise required
by the Certificate of Incorporation or the Bylaws, the vote of the majority of
the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
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Section 3.9 MEETING BY TELEPHONE. Members of the Board of Directors
or of any committee thereof may participate in a meeting of the Board of
Directors or of such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence
in person at such meeting.
Section 3.10 COMPENSATION. Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the Board of Directors a fixed fee and expenses of attendance
may be allowed for attendance at each meeting. Nothing herein contained shall
be construed to preclude any director from serving the Corporation in any
other capacity as an officer, agent or otherwise, and receiving compensation
therefor.
Section 3.11 RESIGNATIONS. Any director, member of a committee or
other officer may resign at any time. Such resignation shall be make be giving
written notice thereof to the Board of Directors, the Chairman of the Board,
the President or the Secretary of the Corporation, and shall be effective at
the time of its receipt by the Chairman of the Board, the President or the
Secretary, unless a date certain is specified for it to take affect.
Acceptance of any resignation shall not be necessary to make it effective.
Section 3.12 REMOVAL OF DIRECTORS. Except as otherwise provided by
law, any director may be removed, with or without cause, at any time, by
affirmative vote of the holders of record of a majority of the outstanding
shares of stock entitled to vote at an election of directors at a special
meeting of the shareholders called for that purpose. The vacancy thus created
may be filled by affirmative vote of the majority of shareholders at such
meeting, or at any subsequent meeting.
Section 3.13 FILLING OF VACANCIES NOT CAUSED BY REMOVAL. Except as
otherwise provided by law, in case of any increase in the number of directors,
or of any vacancy created by death or resignation, at the additional director
or directors may be elected, or, as the case may be, the vacancy or vacancies
may be filled, either (a) by the Board of Directors at any meeting by
affirmative vote of a majority of the remaining directors though the remaining
directors be less than a quorum, or (b) by the holders of voting stock of the
Corporation either at an annual meeting of shareholders or at a special
meeting of such holders called for that purpose. The directors so chosen shall
hold office until the next annual meeting of shareholders and until their
successors are elected and qualify.
ARTICLE IV.
COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each such
committee to consist of one or more directors of the Corporation. In the
absence or disqualifications of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or
not he/she 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. Any such committee, to the extent provided in
such resolution or resolutions, shall have and may exercise all the powers and
authority of the Board of Directors in 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; but no such committee shall
have such power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending
to the shareholders the sale, lease, or exchange of all or substantially all
of the Corporation's property and assets, recommending to the shareholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
the Bylaws; and, unless the resolution expressly so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
ARTICLE V.
THE OFFICERS
Section 5.1 DESIGNATION. The Corporation shall have such officers
with such titles and duties as set forth in these Bylaws or in a resolution of
the Board of Directors adopted on or after the effective date of these Bylaws
which is not inconsistent with these Bylaws and as may be necessary to enable
the Corporation to sign
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instruments and stock certificates as required by law.
Section 5.2 ELECTION; QUALIFICATIONS. The officers of the
Corporation shall, at a minimum, consist of a President and a Secretary, each
of whom shall be elected by the Board of Directors. The Board of Directors
also may elect a Chairman of the Board, one or more Vice Presidents, a
Treasurer, one or more Assistant Secretaries and/or Treasurers, and such
officers and agents as it may deem advisable. None of the officers of the
Corporation need be directors. Two or more offices may be held by the same
person.
Section 5.3 TERM OF OFFICE. Officers shall be chosen in such manner
and shall hold their offices for such term as determined by the Board of
Directors. Each officer shall hold office from the time of his/her election
and qualifications to the time at which his/her successor is elected and
qualified, or until his/her earlier resignation, removal or death.
Section 5.4 RESIGNATION. Any officer of the Corporation may resign
at any time by giving written notice of such resignation to the Board of
Directors, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if no time be
specified, upon receipt thereof by the Board of Directors or one of the
above-named officers. Unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.5 REMOVAL. Any officer may be removed at any time, with
or without cause, by the vote of a majority of the whole Board of Directors.
Section 5.6 VACANCIES. Any vacancy however caused in any office of
the Corporation may be filled by the Board of Directors.
Section 5.7 COMPENSATION. The compensation of each officer shall be
such as the Board of Directors may from time to time determine.
Section 5.8 THE CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and shall have and perform such duties as shall be determined from
time to time by the Board of Directors.
Section 5.9 THE PRESIDENT. The President shall be the chief
executive officer of the Corporation and, subject to the control of the Board
of Directors, shall have general and active charge, control and supervision of
all of the business and affairs of the Corporation. The President shall report
to the Board of Directors, and shall direct the implementation of the
decisions, policies and procedures established by the Board of Directors.
He/She shall have general authority to execute bonds, deeds and contracts in
the name and on behalf of the Corporation, and in general to exercise all the
powers generally appertaining to the chief executive officer of a corporation.
Section 5.10 VICE PRESIDENT. Each Vice President shall have such
powers and shall perform such duties as shall be assigned to him/her by the
Board of Directors. During the absence of the President or his/her inability
to act, the Vice President, or if there shall be more than one Vice President,
subject to the direction of the Board of Directors.
Section 5.11 SECRETARY. The Secretary shall keep the minutes of all
meetings of shareholders and of the Board of Directors in a book to be kept
for that purpose. He/She shall be custodian of the corporate seal and, when
authorized by the Board of Directors, shall affix the same to any instruments
requiring it, and when so affixed, it shall be attested by his/her signature
or by the signature of any assistant secretary. He/She shall exercise the
powers and shall perform the duties incident to the office of Secretary, and
those that might otherwise from time to time be assigned to him/her, subject
to the direction of the Board of Directors.
Section 5.12 TREASURE. The Treasure shall have custody of all
corporate funds and securities, and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He/She shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors,
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or the President, making proper vouchers for such disbursements. He/She shall
render to the President and Board of Directors at the regular meetings of the
Board of Directors, or whenever they may request it, an account of all his/her
transactions as Treasure and of the financial condition of the Corporation. If
required by the Board of Directors, he/she shall give the Corporation a bond
for faithful discharge of his/her duties in such amount and with such surety
as the Board of Directors shall prescribe.
Section 5.13 OTHER OFFICERS. Each other officer of the Corporation
shall have such powers and shall perform such duties as shall be assigned to
him/her by the Board of Directors.
ARTICLE VI.
CERTIFICATES OF STOCK,
TRANSFERS OF STOCK AND
REGISTERED SHAREHOLDERS
Section 6.1 STOCK CERTIFICATES. The interest of each holder of
stock of the Corporation shall be evidenced by a certificate or certificates
signed by, or in the name of the Corporation by the Chairman of the Board of
Directors, or the President or the Vice President, and by the Treasure or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation certifying the number of shares owned by him/her in the
Corporation. Any of or all of the signatures on the certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issue,
the certificate may be issued by the Corporation with the same effect as if
he/she were such officer, transfer agent or registrar at the date of issuance.
Section 6.2 CLASSES/SERIES OF STOCK. The Corporation may issue one
or more classes of stock or one or more series of stock within any class
thereof, as stated and expressed in the Certificate of incorporation or of any
amendment thereto, any or all of which classes may be stock with par value or
stock without par value. The powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof the qualifications, limitations or restrictions of such
preferences and/or rights shall be set froth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, the Oklahoma General Corporation Act,
in lieu of the foregoing requirements, there may be set forth in the face or
back of the Corporation will furnish without charge to each shareholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 6.3 TRANSFER OF STOCK. Subjected to the transfer
restrictions permitted by Section 1005 of Title 18 of the Oklahoma Statutes
and to stop transfer orders directed in good faith by the Corporation to any
transfer agent to prevent possible violations of federal or state securities
laws, rules or regulations, the shares of stock of the Corporation shall be
transferable upon its books by the holders thereof or by their duly authorized
attorneys or legal representatives, and upon such transfer the old
certificates shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to
such other persons as the directors may designate, by who they shall be made
for collateral security, and not absolutely, it shall be so expressed in the
entry of the transfer.
Section 6.4 HOLDERS OF RECORDS. Prior to due presentment for
registration of transfer, the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications and otherwise entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a
complete owner thereof, notwithstanding notice of the contrary.
Section 6.5 LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. A
new certificate of stock may be issued to replace a certificate theretofore
issued by the Corporation, alleged to have been lost, stolen, destroyed or
mutilated, and the directors may, in their discretion, require the owner of
the lost or destroyed certificate or his/her legal representatives, to give
the sum as they may direct, not exceeding double the value of the stock, to
indemnify the Corporation against it on account of the alleged loss of such
new certificate.
Section 6.6 DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation the directors may, out of funds legally available therefore
at any regular or special meeting, declare dividends upon the capital stock of
the Corporation as and when they seem expedient. Before declaring any
dividends there may be set
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apart out of any funds of the Corporation available for dividends, such sum or
sums as the directors from time to time in their discretion deem proper
working capital to serve as a reserve fund to meet contingencies or as
equalizing dividends or for such other purposes as the directors shall deem
conducive to the interest of the Corporation.
ARTICLE VII.
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
Section 7.1 INDEMNIFICATION. To the extent and in the manner
permitted by the laws of the State of Oklahoma and specifically as is
permitted under Section 1031 of Title 18 of the Oklahoma Statutes, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other
than an action by or in the right of the Corporation, by reason of the fact
that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement.
Section 7.2 OTHER INDEMNIFICATION. The indemnification herein
provided shall not limit the Corporation from providing any other
indemnification permitted by law nor shall it be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his/her official capacity and as to action in another capacity
while holding such office, and shall continue as to a 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.
Section 7.3 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of 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
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him/her and incurred by him/her in any such capacity, or
arising out of his/her status as such, whether or not the Corporation would
have the power to indemnify him/her against such liability under these
provisions.
Section 7.4 OTHER ENTITIES. For the purposes of this section,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents so that any person who is a director, officer, and
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, and employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
section with respect to the resulting or surviving corporation as he/she would
have with respect to such constituent corporation if its separate existence
had continued.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1 FISCAL YEAR. The fiscal year of the Corporation shall
be determined by resolution of the Board of Directors.
Section 8.2 CORPORATE SEAL. The corporate seal shall be in such
form as the Board of Directors may from time to time prescribe and the same
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
Section 8.3 REFERENCES. Whenever in the Bylaws reference is made to
an Article or Section number, such reference is to the number of an Article or
Section of the Bylaws. Whenever in the Bylaws reference is made to the Bylaws,
such reference is to these Bylaws of the Corporation, as the same may from time
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to time be amended, and whenever reference is amended to the Certificate of
Incorporation, such reference is to the Certificate of Incorporation of the
Corporation, as the same may from time to time be amended.
ARTICLE IX.
AMENDMENT OF BYLAWS
These Bylaws may be made, altered, or repealed at any meeting of
shareholders by the affirmative vote of a majority of the stock issued and
outstanding or entitled to vote thereat; or at any meeting of the Board of
Directors by a majority vote of the whole Board.
APPROVAL OF DIRECTORS
The foregoing Bylaws, after being read section by section, were
adopted by the Directors of PD-Rx Pharmaceuticals, Inc. on the 20th day of
January, 1995.
/S/ROBERT D. HOLSEY /S/ VICKI CLINGENPEEL
- ------------------------ -----------------------
Chairman Secretary
<PAGE>
EXHIBIT 4.1
PD-RX PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS
OF
CLASS A 13.25% CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 1032 of the
General Corporation Act of the State of Oklahoma
PD-Rx Pharmaceuticals, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma (the "Act"), does hereby certify that, pursuant to (i) the authority
conferred upon the Board of Directors of the Corporation by its Certificate of
Incorporation, and (ii) the provisions of Section 1032 of the Act, the Board of
Directors of the corporation, on January 20th, 1995, duly approved and adopted
the following resolutions:
RESOLVED, that pursuant to the authority vested in the board of
Directors by its Certificate of Incorporation (as the same may be further
amended from time to time, the "Certificate of Incorporation"), the Board of
Directors does hereby create, authorized and provide for the issue of a series
of preferred stock of the Corporation, par value $.10 per share, designated as
Class A 13.25% Cumulative Convertible Preferred Stock, having the designations,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in the
Certificate of Incorporation and in this Resolution as follows:
1. DESIGNATION AND NUMBER. The distinctive designation of such
series is "Class A 13.25% Cumulative Convertible Preferred Stock" ("Class A
Preferred Stock"), and such series shall consist initially of 500,000 shares.
2. RANK. Except as otherwise provided herein or in the Certificate
of Incorporation the Class A Preferred Stock shall, with respect to rights
upon liquidation, dissolution or winding up of the affairs of the Corporation
and with respect to dividend and redemption rights, rank equal to the
Corporation's Class C 13.25% Cumulative Convertible Preferred Stock, par
value $.10 per share ("Class C Preferred Stock") and rank senior to the
Corporation's Common Stock, par value $.01 per share ("Common Stock").
3. DIVIDENDS.
(a) From the date of such shares issuance, holders of
outstanding shares of Class A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends at a rate per annum equal to 13.25% of the
Liquidation Preference (as defined in Section 4 hereof) of such shares,
payable in arrears on March 1, June 1, September 1 and December 1 of each
year (each such date is hereinafter referred to as a "Dividend Payment
Date"), with the first such payment to be made on March 1, 1995; provided,
however, that if any such date is a Saturday, Sunday or legal holiday in the
State of Oklahoma, then such dividend shall be payable on the first
immediately succeeding day which is not a Saturday, Sunday or legal holiday
in the State of Oklahoma (a "business day"). Each such quarter dividend shall
be fully cumulative and shall accrue commencing immediately, whether or not
declared and whether or not the Corporation shall have funds legally
available for the payment of such dividends, without interest. Dividends
shall accumulate on a daily basis without regard to the occurrence of a
Dividend Payment Date or the declaration of any dividend.
(b) Dividends on Class A Preferred Stock shall be paid to
holders of record as they appear on the stock register of the Corporation at
the close of business five (5) business days prior to the Dividend Payment
Date. All dividends paid with respect to outstanding shares of Class A
Preferred Stock shall be paid pro
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rata to such holders of record based upon the Liquidation Preference of such
outstanding shares. If the funds of the Corporation legally available for the
payment of dividends shall be insufficient for the payment of the entire amount
of the dividends payable on any Dividend Payment Date with respect to the
outstanding shares of Class A Preferred Stock, the amount of such legally
available funds shall be allocated for the payment of dividends with respect to
the outstanding shares of Class A Preferred Stock pro rata based upon the
Liquidation Preference of such outstanding shares.
(c) Dividends on the Class A Preferred Stock shall be entitled
to receive the dividends provided for in section 3(a) hereof in preference to
and in priority over all dividends upon the Common Stock.
4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
the issued and outstanding Class A Preferred Stock shall be entitled to
receive for each share of Class A Preferred Stock, before any distribution of
the assets of the Corporation shall be made to the holders of the Common
Stock an amount in cash equal to the sum of (i) $1.00 for each outstanding
share of Class A Preferred Stock held by such holder (such per share amount
is referred to herein as the "Liquidation Preference") plus (ii) an amount in
cash equal to the sum of all accumulated and unpaid dividends on each such
share to the date fixed for such distribution. A consolidation or merger of
the Corporation, a share exchange, a sale, lease, exchange or transfer of all
or substantially all of its assets as an entirety, or any purchase or
redemption of stock of the Corporation of any class, shall not be regarded as
a "liquidation, dissolution, or winding-up of the affairs of the Corporation"
within the meaning of this Section 4. If the assets of the Corporation are
insufficient to permit payment in full to the holders of the Class A
Preferred Stock of the amount thus distributable, then the entire assets of
the Corporation shall be distributed ratably among the holders of the Class A
Preferred Stock. After such payment shall have been made in full to the
holders of the Class A Preferred Stock or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account holders
of the Class A Preferred Stock so as to be available for such payment,
holders of the Class A Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation and shall
have no further rights, and the remaining assets available for distribution
shall be distributed ratably among the holders of the Common Stock.
5. VOTING RIGHTS. Holders of Class A Preferred Stock shall not be
entitled to any voting rights, other than voting rights expressly provided by
the applicable Oklahoma law or in the Certificate of Incorporation.
6. CONVERSION PRIVILEGE. Class A Preferred Stock shall be
convertible into Common Stock as hereinafter provided and, when so converted,
shall be cancelled and retired and shall not be reissued as such:
(a) Any holder of the Class A Preferred Stock may at any time
or from time to time, convert such stock into the Common Stock of the
Corporation on presentation and surrender to the Corporation of the
Certificates of the Class A Preferred Stock to be so converted.
(b) Each share of Class A Preferred Stock shall be converted into
Common Stock at the conversion rate (the "Conversion Rate") of one share of
Common Stock for each one and one-half shares of Class A Preferred Stock; and
(c) To convert Preferred Stock into Common Stock, the holder
thereof shall on any business day surrender to the Corporation the
certificate or certificates representing such shares, duly endorsed to the
Corporation or in blank, and give written notice to the Corporation at said
office of the number of said shares which such holder elects to convert,
along with a cash payment for the costs of issuing the new certificates.
Class A Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the day of such surrender for conversion
and payment of funds to effect the conversion, and the person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the date of any
conversion, the Corporation shall issue and deliver a certificate or
certificates representing the number of shares of Common Stock issuable upon
such conversion. In case of the conversion of only a part of the shares of
any holder of Class A Preferred Stock, the Corporation shall also issue and
deliver to such holder a new certificate of Preferred Stock representing the
number of shares of such Class A Preferred Stock not converted by such holder.
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7. REDEMPTION.
(a) The Corporation may, at its sole option, upon the terms and
subject to the conditions set forth herein (including, without limitation,
the right to convert option set forth in section 6 hereof), redeem for cash,
at any time and from time to time, all or part of the outstanding shares of
Class A Preferred Stock, at a redemption price of $1.05 per share, plus, in
each case, a cash payment of an amount equal to the sum of all accumulated
and unpaid dividends on such shares to the date fixed for redemption by the
Board of Directors (a "Redemption Date").
(b) With respect to any redemption of outstanding shares of
Class A Preferred Stock, the aggregate number of shares to be redeemed shall
be determined by the Board of Directors, but shall be not less than 20% of
the Class A Preferred Stock outstanding at that time. In the case of a
redemption of any part of the Class A Preferred Stock, such redemption will
be made pro rata among all holders of record of shares of Class A Preferred
Stock outstanding on the Redemption Date.
(c) If the Corporation shall elect to redeem shares of Class A
Preferred Stock pursuant to this Section 7, the Corporation will give notice
of such redemption by first class mail or expedited delivery service, postage
prepaid, mailed not less than 40 nor more than 60 days prior to the
applicable Redemption Date, to each holder of record of shares of Class A
Preferred Stock at such holder's address appearing on the stock register of
the Corporation; provided, however, that no failure to give such notice nor
any defect therein shall affect the validity of the proceedings for the
redemption of any shares of Class A Preferred Stock to be redeemed, except as
to the holder to whom the Corporation failed to give such notice or except as
to the holder whose notice was defective. Each such notice or redemption
shall state: (i) the Redemption Date; (ii) the total number of shares of
Class A Preferred Stock to be redeemed; (iii) the redemption price per share;
(iv) the place, time and manner in which certificates for such shares are to
be surrendered for payment of the redemption price; and (v) that dividends on
the shares to be redeemed shall cease to accumulate upon such Redemption Date.
(d) If the Corporation redeems such shares of Class A Preferred
Stock, prior to January 25, 1994, holders of Class A Preferred Stock shall
have 30 days from date of receipt of redemption notice by which to notify the
Corporation of his election to exercise the conversion rights set forth in
Section 6.
8. CHANGES IN TERMS OF CLASS A PREFERRED STOCK. The terms of the
Class A Preferred Stock may not be amended, altered, or repealed.
9. ADJUSTMENT OF CONVERSION RATE. The Conversion Rate shall be
subject to the following adjustments:
(a) If the Corporation shall at any time pay a dividend or
distribution on all outstanding shares of Common Stock in shares of Common
Stock, subdivide all of the outstanding shares of Common Stock into a larger
number of shares or combine all of the outstanding shares of Common Stock
into a smaller number of shares, the Conversion Rate in effect immediately
prior to the record date for any such stock dividend or distribution or the
effective date of any such other event shall be proportionately adjusted so
the holder of each share of Class A Preferred Stock shall thereafter be
entitled to receive upon the conversion of such shares the aggregate number
of shares of Common Stock that such holder would have been entitled to
receive after the happening of any of the events described above had such
shares of Class A Preferred Stock been converted immediately prior to the
close of business on such record date or effective date. Such adjustments
shall be made successively whenever any event described above shall occur.
The adjustments herein provided for shall become effective immediately
following the record date for any such stock dividend or distribution or the
effective date of any such other event. An adjustment made pursuant to this
section 9(a) shall become effective retroactively to the record date in the
case of such stock dividend or distribution and shall become effective on the
effective date in the case of such subdivision or combination.
(b) In the event of any capital reorganization of the
Corporation or any reclassification or similar change of outstanding shares
of Common Stock (other than as set forth in section 9(a) above), or in the
event of the consolidation or merger of the Corporation with or into another
corporation or other entity (other than a merger which does not result in any
reclassification, conversion, exchange or redemption of outstanding shares of
Common Stock), each share of Class A Preferred Stock shall, after such
capital reorganization, reclassification, change, consolidation or merger be
convertible only into the number of shares of stock or other
3
<PAGE>
securities or property, including cash, to which a holder of the number of
shares of Common Stock deliverable upon conversion of such share of Class A
Preferred Stock would have been entitled upon such capital reorganization,
reclassification, change, consolidation or merger had such share of Class A
Preferred Stock been converted immediately prior to the effective date of
such event; and in any case, appropriate adjustments (as determined by the
Board of Director), shall be made in the application of the provision herein
set forth with respect to the rights and interests thereafter of the holders
of the share of the Class A Preferred Stock to the end that the provision set
forth herein (including provisions with respect to changes in and other
adjustments of the Conversion Rate) shall thereafter be applicable, so nearly
as may reasonable be, in relation to any shares of stock or other securities
thereafter deliverable upon the conversion of shares of the Class A Preferred
Stock.
(c) Whenever the Conversion Rate or terms of conversion are
adjusted as herein provided, the Corporation shall forthwith file with the
transfer agent for the Class A Preferred Stock a certificate signed by the
chief financial officer of the Corporation, stating the adjusted Conversion
Rate determined as provide herein. Such certificate shall show in reasonable
detail the method of calculation of such adjustment and the facts requiring
such adjustment. Whenever the Conversion Rate is adjusted, the Corporation
will cause a notice stating the adjustment and the Conversion Rate to be sent
by first class mail, postage prepaid, to each holder of record of shares of
Class A Preferred Stock at its address appearing on the stock register of the
Corporation.
10. NO IMPLIED LIMITATION. Except as otherwise provided by express
provision of the Certificate of Designation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Certificate of
Incorporation of the Corporation.
11. GENERAL PROVISIONS. In addition to the above provisions with
respect to the Class A Preferred Stock, such Class A Preferred Stock shall be
subject to, and entitled to the benefits of, the provisions set forth in the
Corporation's Certificate of Incorporation, as may be amended, with respect
to Preferred Stock generally.
12. NOTICES. All notices required or permitted to be given by the
Corporation with respect to the Class A Preferred Stock shall be in writing,
and if delivered by first class United States Mail, postage prepaid, to the
holders of the Class A Preferred Stock, at their last addresses as they shall
appear upon the books of the Corporation, such notice shall be conclusively
presumed to have been duly given, whether or not the shareholder actually
receives such notice; provided, however, that failure to duly give such
notice by mail, or any defect in such notice, to the holders of any stock
designated for redemption, shall not affect the validity of the proceeding
for the redemption of any other shares of Class A Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Class A Cumulative Convertible 13.25% Preferred Stock to be duly
executed by its President and attested to by its Secretary, dated as of 20th of
January, 1995.
ATTEST: PD-Rx Pharmaceuticals, Inc.
- -------------------------------- -------------------------------
Name: Vicki Clingenpeel Name: Dr. Robert D. Holsey, D.O.
Title: Secretary Title: President
4
<PAGE>
EXHIBIT 4.2
PD-RX PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS
OF
CLASS C 13.25% CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 1032 of the
General Corporation Act of the State of Oklahoma
PD-Rx Pharmaceuticals, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma (the "Act"), does hereby certify that, pursuant to (i) the authority
conferred upon the Board of Directors of the Corporation by its Certificate of
Incorporation, and (ii) the provisions of Section 1032 of the Act, the Board of
Directors of the corporation, on January 20th, 1995, duly approved and adopted
the following resolutions:
RESOLVED, that pursuant to the authority vested in the board of
Directors by its Certificate of Incorporation (as the same may be further
amended from time to time, the "Certificate of Incorporation"), the Board of
Directors does hereby create, authorized and provide for the issue of a series
of preferred stock of the Corporation, par value $.10 per share, designated as
Class C 13.25% Cumulative Convertible Preferred Stock, having the designations,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in the
Certificate of Incorporation and in this Resolution as follows:
1. DESIGNATION AND NUMBER. The distinctive designation of such
series is "Class C 13.25% Cumulative Convertible Preferred Stock" ("Class C
Preferred Stock"), and such series shall consist initially of 500,000 shares.
2. RANK. Except as otherwise provided herein or in the
Certificate of Incorporation the Class C Preferred Stock shall, with respect
to rights upon liquidation, dissolution or winding up of the affairs of the
Corporation and with respect to dividend and redemption rights, rank equal to
the Corporation's Class A 13.25% Cumulative Convertible Preferred Stock, par
value $.10 per share ("Class A Preferred Stock") and rank senior to the
Corporation's Common Stock, par value $.01 per share ("Common Stock").
3. DIVIDENDS.
(a) From the date of such shares issuance, holders of
outstanding shares of Class C Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends at a rate per annum equal to 13.25% of the
Liquidation Preference (as defined in Section 4 hereof) of such shares, payable
in arrears on the first day of each month (each such date is hereinafter
referred to as a "Dividend Payment Date"); provided, however, that if any such
date is a Saturday, Sunday or legal holiday in the State of Oklahoma, then such
dividend shall be payable on the first immediately succeeding day which is not a
Saturday, Sunday or legal holiday in the State of Oklahoma (a "business day").
Each such monthly dividend shall be fully cumulative and shall accrue commencing
immediately, whether or not declared and whether or not the Corporation shall
have funds legally available for the payment of such dividends, without
interest. Dividends shall accumulate on a daily basis without regard to the
occurrence of a Dividend Payment Date or the declaration of any dividend.
(b) Dividends on Class C Preferred Stock shall be paid to
holders of record as they appear on the stock register of the Corporation at the
close of business one (1) week prior to the Dividend Payment Date. All dividends
paid with respect to outstanding shares of Class C Preferred Stock shall be paid
pro rata to such holders of record based upon the Liquidation Preference of such
outstanding shares. If the funds of the Corporation legally available for the
payment of dividends shall be insufficient for the payment of the entire amount
of the dividends payable on any Dividend Payment Date with respect to the
outstanding shares of Class C Preferred Stock, the amount of such legally
available funds shall be allocated for the payment of
1
<PAGE>
dividends with respect to the outstanding shares of Class C Preferred Stock pro
rata based upon the Liquidation Preference of such outstanding shares.
(c) Dividends on the Class C Preferred Stock shall be entitled
to receive the dividends provided for in section 3(a) hereof in preference to
and in priority over all dividends upon the Common Stock.
4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
the issued and outstanding Class C Preferred Stock shall be entitled to
receive for each share of Class C Preferred Stock, before any distribution of
the assets of the Corporation shall be made to the holders of the Common
Stock an amount in cash equal to the sum of (i) $1.00 for each outstanding
share of Class C Preferred Stock held by such holder (such per share amount
is referred to herein as the "Liquidation Preference") plus (ii) an amount in
cash equal to the sum of all accumulated and unpaid dividends on each such
share to the date fixed for such distribution. A consolidation or merger of
the Corporation, a share exchange, a sale, lease, exchange or transfer of all
or substantially all of its assets as an entirety, or any purchase or
redemption of stock of the Corporation of any class, shall not be regarded as
a "liquidation, dissolution, or winding-up of the affairs of the Corporation"
within the meaning of this Section 4. If the assets of the Corporation are
insufficient to permit payment in full to the holders of the Class C
Preferred Stock of the amount thus distributable, then the entire assets of
the Corporation shall be distributed ratably among the holders of the Class C
Preferred Stock. After such payment shall have been made in full to the
holders of the Class C Preferred Stock or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account holders
of the Class C Preferred Stock so as to be available for such payment,
holders of the Class C Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation and shall
have no further rights, and the remaining assets available for distribution
shall be distributed ratably among the holders of the Common Stock.
5. VOTING RIGHTS. Holders of Class C Preferred Stock shall not
be entitled to any voting rights, other than voting rights expressly provided
herein or by the applicable Oklahoma law. Holders of Class C Preferred Stock
will not have the right to vote towards the merger or consolidation of the
Corporation provided the surviving or successor company assumes all the
obligations of the Class C Preferred Stock; provided, however a vote of 51% of
the then outstanding shares of Class C Preferred Stock is required to (i) amend,
alter or repeal the preferences or rights of the holders of the Class C
Preferred Stock in a manner which adversely affects their rights, (ii) create a
Preferred Stock which ranks senior to the Class A Preferred Stock or Class C
Preferred Stock, or (iii) create a Preferred Stock ranking on a parity with the
Class A Preferred Stock or Class C Preferred Stock as to liquidation rights or
dividends unless the consideration received by the Corporation upon the stock's
issuance (after payment of all expenses including without limitation
underwriting commissions) is equal to or greater than 100% of the liquidation
preference of such stock.
6. CONVERSION PRIVILEGE. Class C Preferred Stock shall be
convertible into Common Stock as hereinafter provided and, when so converted,
shall be cancelled and retired and shall not be reissued as such:
(a) Any holder of the Class C Preferred Stock may at any time
or from time to time prior to January 25, 1995, convert such stock into the
Common Stock of the Corporation on presentation and surrender to the Corporation
of the certificates of the Class C Preferred Stock to be so converted. In no
event can Class C Preferred Stock be converted into Common Stock after January
25, 1995. All shares of Common Stock issued upon conversion shall bear a
restrictive legend against the public sale or transfer without an effective
registration statement or other applicable exemption from the appropriate
security laws.
(b) Each share of Class C Preferred Stock shall be converted
into Common Stock at the conversion rate (the "Conversion Rate") calculated as
follows:
<TABLE>
<CAPTION>
- ---------------------------- -------------------------------------------------
Years Since
Class C Preferred Stock Conversion Ratio of Class C Preferred Stock to
Was Initially Issued Common Stock
- ---------------------------- -------------------------------------------------
<S> <C>
1 1.5 to 1
- ---------------------------- -------------------------------------------------
2 2 to 1
- ---------------------------- -------------------------------------------------
2
<PAGE>
3 3 to 1
- ---------------------------- -------------------------------------------------
4 4 to 1
- ---------------------------- -------------------------------------------------
5 5 to 1
- ---------------------------- -------------------------------------------------
</TABLE>
(c) To convert Class C Preferred Stock into Common Stock, the
holder thereof shall on any business day surrender to the Corporation the
certificate or certificates representing such shares, duly endorsed to the
Corporation or in blank, and give written notice to the Corporation at said
office of the number of said shares which such holder elects to convert along
with a cash payment for the costs of issuing the new certificates. Class C
Preferred Stock shall be deemed to have been converted immediately prior to the
close of business on the day of such surrender for conversion, and the person or
persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the date of any conversion,
the Corporation shall issue and deliver a certificate or certificates
representing the number of shares of Common Stock issuable upon such conversion.
In case of the conversion of only a part of the shares of any holder of Class C
Preferred Stock, the Corporation shall also issue and deliver to such holder a
new certificate of Class C Preferred Stock representing the number of shares of
such Class C Preferred Stock not converted by such holder.
7. REDEMPTION.
(a) The Corporation may, at its sole option, upon the terms
and subject to the conditions set forth herein (including, without limitation,
the right to convert option set forth in section 6 hereof), redeem for cash, at
any time and from time to time, all or part of the outstanding shares of Class C
Preferred Stock, at the a redemption price of $1.25 per share, plus, in each
case, a cash payment of an amount equal to the sum of all accumulated and unpaid
dividends on such shares to the date fixed for redemption by the Board of
Directors (a "Redemption Date"); provided, however, in no event shall redemption
occur if there are outstanding and unpaid cumulative dividends on Class C
Preferred Stock.
(b) With respect to any redemption of outstanding shares of
Class C Preferred Stock, the aggregate number of shares to be redeemed shall be
determined by the Board of Directors, but shall be not less than 20% of the
Class C Preferred Stock outstanding at that time. In the case of a redemption of
any part of the Class C Preferred Stock, such redemption will be made pro rata
among all holders of record of shares of Class C Preferred Stock outstanding on
the Redemption Date.
(c) If the Corporation shall elect to redeem shares of Class C
Preferred Stock pursuant to this Section 7, the Corporation will give notice of
such redemption by first class mail or expedited delivery service, postage
prepaid, mailed not less than 90 nor more than 120 days prior to the applicable
Redemption Date, to each holder of record of shares of Class C Preferred Stock
at such holder's address appearing on the stock register of the Corporation;
provided, however, that no failure to give such notice nor any defect therein
shall affect the validity of the proceedings for the redemption of any shares of
Class C Preferred Stock to be redeemed, except as to the holder to whom the
Corporation failed to give such notice or except as to the holder whose notice
was defective. Each such notice or redemption shall state: (i) the Redemption
Date; (ii) the total number of shares of Class C Preferred Stock to be redeemed;
(iii) the redemption price per share; (iv) the place, time and manner in which
certificates for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed shall cease to
accumulate upon such Redemption Date.
(d) If the Corporation redeems such shares of Class C
Preferred Stock, prior to January 25, 1995, holders of Class C Preferred Stock
shall have at least 30 days and no more than 90 days from the Redemption Date by
which to notify the Corporation of his election to exercise the conversion
rights set forth in Section 6. Such conversion rights on redeemed shares will
expire at the close of business on the seventh day preceding the Redemption
Date, provided, there is no default in the payment of the redemption price.
(e) From and after the later of (i) the Redemption Date or
(ii) 30 days from the date the Corporation gave notice of Redemption Date, no
shares of Class C Preferred Stock subject to redemption shall be entitled to any
further accrual of any dividends pursuant to Section 3 hereof or to the
conversion provisions
3
<PAGE>
set forth in Section 4 hereof.
8. CHANGES IN TERMS OF CLASS C PREFERRED STOCK. The terms of
the Class C Preferred Stock may not be amended, altered, or repealed.
9. ADJUSTMENT OF CONVERSION RATE. The Conversion Rate shall be
subject to the following adjustments:
(a) If the Corporation shall at any time pay a dividend or
distribution on all outstanding shares of Common Stock in shares of Common
Stock, subdivide all of the outstanding shares of Common Stock into a larger
number of shares or combine all of the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Rate in effect immediately prior to the
record date for any such stock dividend or distribution or the effective date of
any such other event shall be proportionately adjusted so the holder of each
share of Class C Preferred Stock shall thereafter be entitled to receive upon
the conversion of such shares the aggregate number of shares of Common Stock
that such holder would have been entitled to receive after the happening of any
of the events described above had such shares of Class C Preferred Stock been
converted immediately prior to the close of business on such record date or
effective date. Such adjustments shall be made successively whenever any event
described above shall occur. The adjustments herein provided for shall become
effective immediately following the record date for any such stock dividend or
distribution or the effective date of any such other event. An adjustment made
pursuant to this section 9(a) shall become effective retroactively to the record
date in the case of such stock dividend or distribution and shall become
effective on the effective date in the case of such subdivision or combination.
(b) In the event of any capital reorganization of the
Corporation or any reclassification or similar change of outstanding shares of
Common Stock (other than as set forth in section 9(a) above), or in the event of
the consolidation or merger of the Corporation with or into another corporation
or other entity (other than a merger which does not result in any
reclassification, conversion, exchange or redemption of outstanding shares of
Common Stock), each share of Class C Preferred Stock shall, after such capital
reorganization, reclassification, change, consolidation or merger be convertible
only into the number of shares of stock or other securities or property,
including cash, to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Class C Preferred Stock would have
been entitled upon such capital reorganization, reclassification, change,
consolidation or merger had such share of Class C Preferred Stock been converted
immediately prior to the effective date of such event; and in any case,
appropriate adjustments (as determined by the Board of Director), shall be made
in the application of the provision herein set forth with respect to the rights
and interests thereafter of the holders of the share of the Class C Preferred
Stock to the end that the provision set forth herein (including provisions with
respect to changes in and other adjustments of the Conversion Rate) shall
thereafter be applicable, so nearly as may reasonable be, in relation to any
shares of stock or other securities thereafter deliverable upon the conversion
of shares of the Class C Preferred Stock.
(c) Whenever the Conversion Rate or terms of conversion are
adjusted as herein provided, the Corporation shall forthwith file with the
transfer agent for the Class C Preferred Stock a certificate signed by the chief
financial officer of the Corporation, stating the adjusted Conversion Rate
determined as provide herein. Such certificate shall show in reasonable detail
the method of calculation of such adjustment and the facts requiring such
adjustment. Whenever the Conversion Rate is adjusted, the Corporation will cause
a notice stating the adjustment and the Conversion Rate to be sent by first
class mail, postage prepaid, to each holder of record of shares of Class C
Preferred Stock at its address appearing on the stock register of the
Corporation.
10. REGISTRATION RIGHTS.
(a) If, at any time and from time to time, the Corporation
proposes to register any of its securities on Forms S-1, S-2, S-3, or S-18, or
any Forms SB, or any successor forms, under the Securities Act of 1933 (the
"Act") and applicable state securities laws (the "State Acts"), the Corporation
shall give prompt written notice to each holder of Class C Preferred Stock (or
Common Stock into which it has been converted) of the Corporation's intention to
do so, and, upon the written request of any such holder made within 30 days
after the receipt of any such notice, which written request shall specify the
number of shares such holder desires to be registered, the Corporation shall use
its reasonable efforts to cause all such shares of such holder to be registered
under the Act and State Acts to permit the sale of such shares. Notwithstanding
anything contained herein to the
4
<PAGE>
contrary, the Corporation shall have the right to discontinue any registration
of holder's shares at any time prior to the effective date of such registration
if the registration of other securities giving rise to such registration is
discontinued.
(b) If any holder of Class C Preferred Stock shall request
inclusion of any shares held by such holder in the registration of other
securities of the Corporation and such proposed registration by the Corporation
is, in whole or in part, an underwritten Public Offering, and if the managing
underwriter determines and advises the Corporation in writing that inclusion in
such registration of all proposed securities (including securities being offered
by or on behalf of the Corporation and securities covered by requests for
registration) would adversely affect the marketability of the offering of the
securities proposed to be registered by the Corporation, then the holder of
Class C Preferred Stock shall be entitled to participate pro rata with the other
holders having similar incidental registration rights with respect to such
registration to the extent the managing underwriter determines that such shares
may be included without such adverse effect.
(c) The Corporation shall pay all expenses incident to its
performance of or compliance with the provisions of this Section 9, including
without limitation, all registration and filing fees, fees and expenses of
compliance with the Act and State Acts, printing expenses, messenger and
delivery expenses, fees and disbursements of counsel for the Corporation and all
independent public accountants and other persons retained by the Corporation,
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (excluding underwriting commissions and discounts).
11. NO IMPLIED LIMITATION. Except as otherwise provided by express
provision of the Certificate of Designation, nothing herein shall limit, by
inference or otherwise, the discretionary right of the Board of Directors to
classify and reclassify and issue any shares of Preferred Stock and to fix or
alter all terms thereof to the full extent provided in the Certificate of
Incorporation of the Corporation.
12. GENERAL PROVISIONS. In addition to the above provisions with
respect to the Class C Preferred Stock, such Class C Preferred Stock shall be
subject to, and entitled to the benefits of, the provisions set forth in the
Corporation's Certificate of Incorporation, as may be amended, with respect to
Class C Preferred Stock generally.
13. NOTICES. All notices required or permitted to be given by the
Corporation with respect to the Class C Preferred Stock shall be in writing, and
if delivered by first class United States Mail, postage prepaid, to the holders
of the Class C Preferred Stock, at their last addresses as they shall appear
upon the books of the Corporation, such notice shall be conclusively presumed to
have been duly given, whether or not the shareholder actually receives such
notice; provided, however, that failure to duly give such notice by mail, or any
defect in such notice, to the holders of any stock designated for redemption,
shall not affect the validity of the proceeding for the redemption of any other
shares of Preferred Stock.
14. DEFAULT.
(a) Default is defined in this Section 13 as: (i) the failure
by the Corporation for a period of 90 continuous days to make a payment of any
dividends on the Class C Preferred Stock, or (ii) events wherein the Corporation
itself is involved in or subject to a bankruptcy insolvency, liquidation or
reorganization proceeding.
(b) Upon the Corporation's default, the holder's of Class C
Preferred Stock shall become creditors of the Corporation in an amount equal to
the unpaid dividends on the Class C Preferred Stock without further action on
their part.
(c) The holders of the Class C Preferred Stock may by a 51%
vote of the then outstanding shares of Class C Preferred Stock declare the
entire unpaid and accumulated dividends due and payable with the power to
institute proceedings for collection thereof. The payment by the Corporation of
such unpaid and accumulated dividends prior to the rendering of a judgment or
decree shall be deemed a waiver by the holders of the Class C Preferred Stock of
the default and shall be grounds for dismissal of the collection proceedings.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Class C
5
<PAGE>
Cumulative Convertible 13.25% Preferred Stock to be duly executed by its
President and attested to by its Secretary, dated as of 20th of January, 1995.
ATTEST: PD-Rx Pharmaceuticals, Inc.
/s/ VICKI CLINGENPEEL /s/ ROBERT D. HOLSEY
Name: Vicki Clingenpeel Name: Dr. Robert D. Holsey, D.O.
- -------------------------- -------------------------------
Title: Secretary Title: President
6
<PAGE>
EXHIBIT 4.3
PD-RX PHARMACEUTICALS, INC.
- ---------- Incorporated Under the Laws of State of Oklahoma ----------
NUMBER 3,000,000 Authorized Shares, $.01 Par Value SHARES
- ---------- 10,000,000 Preferred Shares, Par Value $.10 Per Share ----------
CUSIP 693298 10 1
SEE REVERSE
FOR CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $.01 PAR VALUE COMMON STOCK OF
PRECIS SMART CARD, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar.
IN WITNESS WHEREOF the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated: [corporate seal]
Secretary
President
COUNTERSIGNED AND REGISTERED
American Securities Transfer, Inc.
P.O. Bos 1596
By
Transfer Agent & Registrar Authorized Signature
<PAGE>
PD-RX PHARMACEUTICALS, INC.
The Company is authorized to issue more than one class, namely,
3,000,000 Common Shares and 10,000,000 Preferred Shares. The Company will
furnish to any shareholder upon request (addressed to the attention of the
Secretary of the Company) and without charge a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class of stock authorized to be issued by the Company and of the variations in
the relative rights and preferences between the shares of each series of the
Preferred Shares of the Company insofar as any such series has been fixed and
determined, and a statement of the authority of the Board of Directors of the
Company to fix and determine the relative rights and preferences of subsequent
series of the Preferred Shares.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -as tenants in common UNIF GIFT
TEN ENT -as tenants by the entireties MIN ACT-_______ Custodian ______________
JT TEN -as joint tenants with right (Cust) (Minor)
of survivorship and not as Under Uniform Gifts to Minors Act________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not
in the above list.
For Value received,___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________attorney-in-fact to
transfer the said stock on the books of the within-named Corporation, with full
power of substitution in the premises.
Dated
-----------
____________________________________________
____________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED BY:
_____________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998 DEC-31-1999 DEC-31-1998
<PERIOD-START> JUL-01-1998 JUL-01-1997 JUL-01-1999 JUL-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998 DEC-31-1999 DEC-31-1998
<CASH> 168,493 155,270 104,552 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 632,249 533,424 624,744 0
<ALLOWANCES> 11,514 14,264 0 0
<INVENTORY> 531,860 548,303 650,732 0
<CURRENT-ASSETS> 1,325,191 1,222,733 1,391,765 0
<PP&E> 941,994 949,070 970,386 0
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 2,267,185 2,195,403 2,362,151 0
<CURRENT-LIABILITIES> 361,529 434,199 420,362 0
<BONDS> 458,861 488,566 449,926 0
0 0 0 0
351,200 351,200 351,200 0
<COMMON> 16,948 15,448 16,948 0
<OTHER-SE> 1,394,076 1,222,503 1,439,144 0
<TOTAL-LIABILITY-AND-EQUITY> 2,267,185 2,195,403 2,362,151 0
<SALES> 6,715,089 5,872,858 3,192,126 3,273,714
<TOTAL-REVENUES> 6,730,176 5,895,916 3,203,189 3,283,489
<CGS> 4,984,884 4,376,165 2,335,973 2,472,171
<TOTAL-COSTS> 1,481,750 1,446,530 786,523 733,867
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 42,679 38,903 17,063 21,576
<INCOME-PRETAX> 263,542 62,458 81,364 77,446
<INCOME-TAX> 79,709 39,400 30,918 30,115
<INCOME-CONTINUING> 183,833 23,058 50,446 47,331
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 183,833 23,058 50,446 47,331
<EPS-BASIC> .08 (.02) .02 .01
<EPS-DILUTED> .08 (.02) .02 .01
</TABLE>
