SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PHARMAKINETICS LABORATORIES, INC.
---------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration number, or the form or schedule and the date of its
filing.
<PAGE>
PHARMAKINETICS LABORATORIES, INC.
302 WEST FAYETTE STREET
BALTIMORE, MARYLAND 21201
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD [______,____________, 1998, AT 11:00 A.M.]
AT
PHARMAKINETICS LABORATORIES, INC.
302 WEST FAYETTE STREET
BALTIMORE, MARYLAND 21201
The Special Meeting in Lieu of Annual Meeting of Stockholders ("the
Meeting") of PharmaKinetics Laboratories, Inc., a Maryland corporation, will be
held on ________ __, 1998, at 11:00 a.m., local prevailing time, at
PharmaKinetics Laboratories, Inc., 302 West Fayette Street, Baltimore, Maryland
21201, to consider and vote upon:
1. The election of six directors to serve until the next Annual Meeting of
Stockholders, and until their successors are duly elected and
qualified.
2. A proposal to ratify the selection of Coopers & Lybrand L.L.P., as the
Company's independent auditors for the fiscal year ending June 30,
1998.
3. A proposal to approve and adopt the restatement and amendment of the
Company's Charter, among other things, in order to increase the number
of authorized shares of the Company's Common Stock.
4. A proposal to approve of a five to one reverse split of the Company's
Common Stock and the change of authorized shares of the Company's
Common Stock to 10,000,000 shares, par value $.005 per share.
5. A proposal to ratify the adoption of the PharmaKinetics Laboratories,
Inc. 1996 Non-Employee Directors Stock Option Plan, as amended.
6. Any other matters that may properly come before the Meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on February 23,
1998, as the date for determining stockholders of record entitled to notice of
and to vote at the Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT, PLEASE
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AS SOON AS POSSIBLE IN THE
ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. The
affirmative vote of at least two-thirds of all the shares of Common Stock and
Preferred Stock entitled to vote at the meeting, voting together, is required
for the approval of Proposals Three and Four. The affirmative vote of at least a
majority of all votes cast at the Meeting in person or by proxy is sufficient
for the election of directors and the approval of Proposals Two and Five. You
are cordially invited to attend the Meeting in person. If you attend the Meeting
and wish to vote in person, your proxy can be revoked at any time before it is
voted.
By Order of the Board of Directors,
Taryn L. Kunkel
Secretary
___________, 1998
<PAGE>
PRELIMINARY COPY
----------------
PHARMAKINETICS LABORATORIES, INC.
302 West Fayette Street
Baltimore, Maryland 21201
PROXY STATEMENT
Special Meeting in Lieu of Annual Meeting of Stockholders to be held on
[______, ________ __, 1998 at 11:00 A.M.]
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of
PharmaKinetics Laboratories, Inc. (the "Company") for use at the Special Meeting
in Lieu of Annual Meeting of Stockholders (the "Meeting") to be held on ________
__, 1998, and is revocable at any time prior to its exercise. In addition to
solicitation by mail, proxies may be solicited by officers, directors, and
regular employees of the Company personally or by telephone or facsimile
transmission. The cost of soliciting proxies will be borne by the Company and
may include reasonable out-of-pocket expenses in forwarding proxy materials to
beneficial owners. This proxy material is being sent to stockholders on or about
_______ __, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
Stockholders of record at the close of business on February 23, 1998
are entitled to notice of and to vote at the Meeting. As of the close of
business on that date, there were outstanding and entitled to vote __________
shares of Common Stock, $.001 par value ("Common Stock"), each of which is
entitled to one vote and 833,300 shares of Class A Convertible Preferred Stock
("Preferred Stock"), each of which is entitled to ten votes.
The presence, in person or by proxy, of stockholders entitled to cast a
majority of all votes entitled to be cast at the meeting shall constitute a
quorum. The affirmative vote of at least two-thirds of all the shares of Common
Stock and Preferred Stock entitled to vote at the Meeting, voting together, is
required for the approval of Proposals Three and Four described on the preceding
page. The affirmative vote of at least a majority of all votes cast at the
Meeting is sufficient for the election of directors and for the approval of
Proposals Two and Five described on the preceding page. The members of the Board
of Directors intend to vote their shares "FOR" each director nominee and "FOR"
each proposal described herein. An abstention or broker non-vote has the same
effect as a vote against Proposals Three and Four, and is not included in
calculating votes cast for purposes of the election of directors or the other
Proposals. The Company designates an individual to serve as the Inspector of
Elections for purposes of tallying shares voted. The Inspector of Elections will
be present at the Meeting.
ITEM ONE
ELECTION OF DIRECTORS
Six directors will be elected at the Meeting, each director to hold
office until the next Annual Meeting of Stockholders and until the election and
qualification of a successor. Four of these directors are elected by holders of
Common Stock and Preferred Stock, voting together. Two of these directors are
elected by the holders of Preferred Stock, voting as a separate class. The
persons named in the enclosed proxy will vote all properly executed proxies FOR
the election of the nominees named below unless authority to vote is withheld.
In the event any of the nominees is unable to serve, the persons named in the
proxy may vote for such substitute nominee or nominees as they, in their
discretion, shall determine. The Board of Directors has no reason to believe
that any nominee named herein will be unable to serve as a director.
The following table sets forth certain information concerning the
nominees for election by holders of Common Stock and Preferred Stock, voting
together. All nominees are currently directors of the Company.
<PAGE>
NOMINEES FOR ELECTION
Name, Age, and Year
in which first
Elected a Director Business Experience
- ------------------- -------------------
James K. Leslie President and Chief Executive Officer of
53 (1995) PharmaKinetics Laboratories, Inc. since July
1995; Executive Vice President and Chief
Operating Officer of PharmaKinetics since
June 1995; President and Chief Executive
Officer of BioFin, Inc., a start up
biotechnology company from July 1993 to June
1995; President and Chief Executive Officer
of SICPA Industries of America from 1991 to
1992; and President and Chief Operating
Officer of Ecogen, Inc. from 1988 to 1990.
Roger C. Thies Director of Hyman, Phelps and McNamara, P.C.
54 (1991) representing a broad range of clients on
legal issues concerning food, drug, medical
devices, and cosmetic law and legislation
since 1988; Vice President and General
Counsel of G.D. Searle managing all of the
company's legal matters from 1986 to 1988.
Thomas F. Kearns, Jr. Retired from Bear Stearns, Inc. In 1987;
61 (1995) Director of Biomet, Inc., and Fibrogen,
Inc.; Trustee of the University of North
Carolina Foundation and Endowment Fund.
Grover C. Wrenn Chairman and CEO of Better Health Network,
55 (1997) Inc., a provider of consumer health
information to physician waiting rooms in
more than 30 media markets since 1996;
President and CEO of Ensys Environmental
Products, Inc. from 1995 to 1996; President
and CEO of Applied Bioscience International
from 1990 to 1995; Director of Strategic
Diagnostics, Inc. and Laidlaw Environmental
Services.
The Board of Directors recommends a vote "FOR" the election of each of
these nominees.
In addition to the foregoing nominees, the following persons have been
nominated for election as directors by the holders of Preferred Stock. These
nominees were appointed by the incumbent directors to serve on the Company's
Board of Directors on January 20, 1998. For a description of the rights of
holders of Preferred Stock to elect directors, see the discussion later in this
Proxy Statement under the caption "APPROVAL OF AMENDMENT AND RESTATEMENT OF
ARTICLES OF INCORPORATION - Purpose of Proposed Amendments - Increase in
Authorized Shares of Common Stock--Preferred Stock and Class A Convertible
Preferred Stock."
Name and Age Business Experience
- ------------ -------------------
Leslie B. Daniels Principal of CAI Advisors & Co., an investment
50 company with offices in New York, Montreal,
London and Paris, since 1988; Director
of IVAX Corporation from December 1994 to
December 1995; Chairman of the Board of
Directors of Zenith Laboratories, Inc., a
major generic drug manufacturer from April
1990 to December 1994, and a Director from
December 1989 to December 1994. Director of
MIM, Inc. and Aster.Cephac.
John J. Thebault, M.D. Founder and Chief Executive Officer of Aster.
51 Cephac S.A., a CRO in France and Europe
specializing in providing clinical pharmacology
services (Phase I and IIA studies) and
bioanalytical services to the international
pharmaceutical, biotechnology and medical
device industries, along with cosmetic products
testing services to the international cosmetic
and personal care industries, since 1975.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation
Committee, each consisting of all directors who are not employees of the
Company. The Board of Directors does not have a Nominating Committee.
2
<PAGE>
The functions of the Audit Committee include: review of the scope of
audits and the results of such audits; review of accounting policies and
adequacy of internal controls; review of the fees paid to, and the scope of
services provided by, the independent auditors; and recommending selection of
the independent auditors. The members of this Committee are Messrs. Daniels,
Kearns, Thebault, Thies and Wrenn.
The Compensation Committee considers and makes recommendations to the
Board of Directors with respect to matters relating to executive compensation,
and considers and recommends grants under the Company's stock option plans. The
members of this Committee are Messrs. Daniels, Kearns, Thebault, Thies and
Wrenn.
During the fiscal year ended June 30, 1997, the Board of Directors met
eleven times, the Audit Committee met one time, and the Compensation Committee
met six times.
Each member of the Board of Directors who is not an employee of the
Company, except one, received a monthly retainer of $1,366.66 and reimbursement
of expenses for attendance at meetings during the period July 1, 1996 through
November 30, 1996. One director opted to forego his monthly retainer for
personal reasons. Subsequent to the Annual Meeting of Stockholders on November
25, 1996, the Company discontinued paying cash retainers to its directors, and
instituted a stock option plan for non-employee directors pursuant to which each
director is granted options to purchase 120,000 shares at the fair market value
of the Company's common stock on the effective date of the grant. The grant
vests in four equal installments of 30,000 shares over 4 years. As of January
20, 1998, 562,500 options have been granted under the plan. See the description
of Proposal Five herein for additional information regarding this plan.
Directors continue to receive reimbursement of expenses for attendance at
meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 31, 1998,
regarding stock ownership of management and owners of 5% or more of the
Company's Stock:
<TABLE>
<CAPTION>
Beneficial Ownership of
Beneficial Ownership of Class A Convertible
Common Stock Preferred Stock
----------------------------------------- -----------------------------------------
Number of Percent of Number of Percent of
Shares Owned Shares Owned Shares Owned Shares Owned
---------------- ---------------- ---------------- ----------------
<S><C>
Allen & Company, Incorporated 852,673 7.0%
Allen Holding Inc.
711 Fifth Avenue
New York, NY 10022
Aster S.A. 1,666,600 (3)(4) 12.0% 166,660 20.0%
3 et 5 rue Eugene Millon
75015 Paris France
Leslie B. Daniels 1,053,850 (1)(3)(4) 8.0% 103,885 12.5%
CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
Peter M. Gottsegen 1,038,850 (3)(4) 7.8% 103,885 12.5%
CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
GES Investments, S.A. 166,660 (3)(4)(5) 1.3% 16,666 2.0%
Avenue Delleur, 18
Brussels, Belgium 1170
Initiative & Finance Investissement 666,640 (3)(4) 5.2% 66,664 8.0%
16 rue Chauveau Lagarde
Paris, France 75008
Robert A. Mackie, Jr. 898,383 7.4%
18 North Astor Street
Irvington, NY 10533
R.A. Mackie and Co., L.P. 173,583 1.4%
18 North Astor Street
Irvington, NY 10533
Michael F. Price 1,666,600 (3)(4) 12.0% 166,660 20.0%
1180 Larger Cross Road
P.O. Box 434
Far Hills, New Jersey 07931
Richard J. Schmeelk 1,038,850 (3)(4) 7.8% 103,885 12.5%
CAI Advisors & Co.
767 Fifth Avenue, 5th Floor
New York, NY 10153
Thomas F. Kearns, Jr. 180,178 (1)(3)(4) 1.5% 11,110 1.3%
Elizabeth A. Lane, Ph.D. 75,000 (1) (6)
James K. Leslie 245,000 (1)(2) 2.0%
John J. Thebault, M.D. 15,000 (1) (6)
Roger C. Thies 44,600 (1) (6)
James M. Wilkinson II, Ph.D. 17,500 (1) (6)
Grover C. Wrenn 22,500 (1) (6)
All directors and officers as a group 1,746,128 (1)(3) 12.7% 114,995 13.8%
</TABLE>
3
<PAGE>
(1) Includes shares of stock which directors and officers have exercisable
rights to acquire as of or within 60 days of January 31, 1998, through
the exercise of options, in the amount of 15,000 shares for Mr.
Daniels; 30,000 shares for Mr. Kearns; 75,000 shares for Dr. Lane;
135,000 shares for Mr. Leslie; 15,000 shares for Dr. Thebault; 44,600
shares for Mr. Thies; 17,500 shares for Dr. Wilkinson; 22,500 shares
for Mr. Wrenn; and 447,100 shares for all directors and officers as a
group.
(2) Of the total shares, 10,000 shares are held in the estate of Mary Hogan
Leslie for which Mr. Leslie is a beneficiary. Mr. Leslie serves as
executor of the estate.
(3) Includes shares of stock which investors have rights to acquire upon
conversion of Class A Convertible Preferred Stock, in the amount of
1,666,600 shares for Aster S.A.; 1,038,850 shares for Mr. Daniels;
1,038,850 shares for Mr. Gottsegen; 166,660 for GES Investments, S.A.;
666,640 shares for Initiative and Finance Investissement; 1,666,600
shares for Mr. Price; 1,038,850 shares for Mr. Schmeelk; 111,100
shares for Mr. Kearns; and 1,149,950 shares for all directors and
officers as a group.
(4) The Company issued 6,250,000 warrants to purchase common stock of the
Company, at an exercise price of $1.20 per share, to certain investors,
on December 23, 1997, subject to shareholder approval and adoption of
the restatement and amendment of the Company's charter, which among
other things, will increase the number of authorized shares of the
Company's Common Stock. The warrants to be issued are not included in
the table above as they were not exercisable within 60 days of January
31, 1998. The warrants issued are as follows: 1,250,000 to Aster S.A.;
779,166 to Mr. Daniels; 779,166 to Mr. Gottsegen; 125,000 to GES
Investments, S.A.; 500,000 to Initiative and Finance Investissement;
1,250,000 to Mr. Price; 779,166 to Mr. Schmeelk; and 83,334 to
Mr. Kearns.
(5) Affiliate of Aster.Cephac and John J. Thebault, M.D., Director.
(6) Less than 1%.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Position With the Company and Employed Officer
Name Age Principal Occupation Since Since
---- --- ----------------------------- -------- -------
<S><C>
Melany Adamcio 43 Vice President Business Development 1997 1998
- -------------- -- -----------------------------------
since January 1998; Executive Director of Clinical
Trials Management from June 1997 to January 1998;
Director, Clinical Trials Management of PPD Pharmaco
International, Inc. from November 1990 to
June 1997. Education - Golden Gate University,
San Francisco, California; Marywood College,
Scranton, Pennsylvania
Taryn L. Kunkel 36 Vice President, Chief Financial Officer and Treasurer 1990 1991
- --------------- -- -----------------------------------------------------
since February 1991; Controller from
November 1990 to February 1991;
Director of Financial Analysis from
July 1990 to November 1990. Education
- M.A.S., Management, The Johns
Hopkins University, Baltimore,
Maryland 1989; B.S., Accounting (Magna
Cum Laude), Loyola College, Baltimore,
Maryland 1983. Certified Public
Accountant.
Elizabeth A. Lane, Ph.D. 52 Vice President Biopharmaceutics and Regulatory Affairs 1988 1992
- ------------------------ -- ------------------------------------------------------
since May 1992; Director of Pharmacokinetics and
Regulatory Affairs from September 1988 to May 1992.
Education - Ph.D., Pharmaceutical Sciences, University
of Washington, Seattle, Washington, 1981; B.S.
Pharmacy, University of Washington, Seattle,
Washington, 1973; B.Pharm., University of Sydney,
Australia, 1965.
James K. Leslie 53 President and Chief Executive Officer 1995 1995
- --------------- -- -------------------------------------
since July 1995; Executive Vice President and Chief
Operating Officer from June 1995 to July 1995; President
and Chief Executive Officer of BioFin, Inc., A start up
biotechnology company from July 1993 to June 1995;
President and Chief Executive Officer of SICPA Industries
of America from 1991 to 1992; and President and Chief
Operating Officer of Ecogen, Inc. From 1988-1990.
Education - M.B.A. (with distinction), Harvard Business
School, Boston, Massachusetts, 1969; B.Sc., Chemical
Engineering (First Class Honors), University of
Edinburgh, Edinburgh, Scotland, 1967.
Vernon D. Parker, Ph.D. 50 Vice President Clinical Services 1997 1997
- ----------------------- -- --------------------------------
since January 1997; Director, Clinical Pharmacology from (1)
1995 to 1997 of Wyeth-Ayerst Research; Associate Director,
Clinical Pharmacology from 1990 to 1995, and Assistant
Director, Clinical Pharmacology from 1988 to 1990 also
at Wyeth-Ayerst Research. Education - Ph.D., Clinical
Pharmacy with a minor in pharmacology, Purdue
University School of Pharmacy, West Lafayette, Indiana,
1983; M.S., Pharmacology and Physiology, Tuskeagee
University School of Veterinary Medicine, Tuskeagee
Alabama, 1976; B.S. Pharm., Pharmacy with a minor in
chemistry, Florida A&M University of Pharmacy,
Tallahassee, Florida, 1970.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Position With the Company and Employed Officer
Name Age Principal Occupation Since Since
---- --- ----------------------------- -------- -------
<S><C>
James M. Wilkinson II, Ph.D. 46 Vice President Analytical Laboratory Services 1996 1996
- ---------------------------- -- ---------------------------------------------
since July 1996; Associate Director, Pharmaco
International, Inc., Analytical Laboratory Division from
December 1992 to June 1995. Education-Postdoctoral
Associate, University of Washington, Seattle, Washington,
1979; Ph.D., Organic Chemistry, Duke University, Durham,
North Carolina, 1978; B.S., Chemistry, Virginia Military
Institute, Lexington, Virginia, 1974.
</TABLE>
(1) Dr. Parker joined the Company on January 3, 1997 and resigned effective
January 30, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of copies of reporting forms received by
it, the Company believes that during the fiscal year ended June 30, 1997, all
applicable filing requirements were complied with, except that one report on
Form 4 was filed late by Mrs. Kunkel.
EXECUTIVE COMPENSATION
The following table sets forth, for the Company's last three fiscal
years, the cash compensation paid or accrued by the Company, as well as certain
other compensation paid or accrued for those years, to its Chief Executive
Officer and the four other most highly compensated executive officers whose
remuneration exceeded $100,000 for the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term All Other
-------------------------------------------------- Compensation ----------------
---------------
Securities All Other
Name and Fiscal Salary Bonus Other Annual Underlying Compensation
Principal Position Year ($) ($) Comp. ($)(1) Options(#) ($)(2)
- ------------------ ---- -------- -------- ----------------- --------------- ----------------
<S><C>
James K. Leslie(3) 1997 150,000 - 6,000 100,000 -
President, CEO, 1996 124,000 87,043 6,000 100,000 -
and Director 1995 4,700 - 230 120,000 -
Christopher H. Hendy, Ph.D.(4) 1997 28,700 - 1,500 - -
Vice President 1996 102,000 32,226 6,000 - -
Clinical Evaluation Services 1995 102,000 - 6,000 10,000 -
Elizabeth A. Lane, Ph.D. 1997 100,000 - - - -
Vice President 1996 88,000 10,742 - - -
Biopharmaceutics and 1995 85,000 - 3,000 - -
Regulatory Affairs
Vernon D. Parker, Ph.D.(5) 1997 51,000 - 2,500 60,000 3,600
Vice President 1996 - - - - -
Clinical Evaluation Services 1995 - - - - -
</TABLE>
5
<PAGE>
<TABLE>
<S><C>
James M. Wilkinson II, Ph.D. 1997 106,000 - 6,000 70,000 7,000
Vice President 1996 - - - - -
Analytical Laboratory Services 1995 - - - - -
</TABLE>
(1) Other Annual Compensation includes personal benefits provided by the
Company.
(2) Other compensation includes amounts paid for relocation and related
expenses.
(3) Mr. Leslie joined the Company in June 1995.
(4) Dr. Hendy resigned from the Company effective September 24, 1996.
(5) Dr. Parker joined the Company on January 3, 1997 and resigned effective
January 30, 1998. Dr. Parker's annual salary was $105,000, plus other
compensation of $5,000.
Severance Agreements
The Company has severance agreements with Mr. Leslie and Mrs. Kunkel.
The Agreements, which are identical, provide for continuance of their respective
annual base salaries for a period of twelve (12) months from the date of
termination of employment if such termination occurs at any time during a two
(2) year period after a "Significant Transaction" of a "Change of Board
Composition" and is for reasons other than "Just Cause", such terms being
defined in the agreements. Upon termination of employment, the Agreements also
provide for accelerated vesting of all stock options and the option to extend
the exercise period of such options. The Agreements were effective April 22,
1997. As of June 30, 1997 benefits payable would be approximately $156,000 for
Mr. Leslie and approximately $90,500 for Mrs. Kunkel.
Stock Option Grants
The following table sets forth information concerning the grant of
stock options under the Company's 1996 Incentive Stock Option Plan during fiscal
1997 to the executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#)(1) Fiscal Year ($/share) Date
- ---- -------------- ------------ --------- ----------
<S><C>
James K. Leslie 100,000 13.8% $0.469 7/01/06
Vernon D. Parker, Ph.D.(2) 60,000 8.3% $0.4531 1/13/07
James M. Wilkinson, II, 70,000 9.6% $0.469 7/01/06
Ph.D.
</TABLE>
(1) All options were granted under the 1996 Incentive Stock Option Plan. All
options vest over a four year period from the date of grant and all options
expire ten years from the date of grant, if not exercised earlier. Material
terms of the options are set forth under the caption "Incentive Stock Option
Plans."
(2) Dr. Parker resigned effective January 30, 1998.
Stock Option Exercises and Holdings
The following table sets forth information related to the number and
value of options held by four of the Company's executive officers. No options
were exercised during the fiscal year ended June 30, 1997.
6
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Shares ($) Number of Unexercised In-the-Money
Acquired Value Options at FY-End (#) Options at FY-End ($)(1)
Name in Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- --------------------------------- ---------------------------
<S><C>
James K. Leslie - - 85,000 235,000 - -
Elizabeth A. Lane, Ph.D. - - 75,000 - - -
Vernon D. Parker, Ph.D.(2) - - - 60,000 - -
James M. Wilkinson, II, Ph.D. - - - 70,000 - -
</TABLE>
(1) The exercise price of all options exceeded market value at June 30, 1997.
(2) Dr. Parker resigned effective as of January 30, 1998.
Incentive Stock Option Plans
The Company's Incentive Stock Option Plan (the "ISO Plan") was adopted
by the Board of Directors on September 9, 1985, and approved by stockholders on
November 14, 1985. The ISO Plan permits the Company to grant options to purchase
up to an aggregate of 1,700,000 shares of its Common Stock to key employees of
the Company. As of June 30, 1997, an aggregate of 501,900 shares of Common Stock
were subject to options granted under the ISO Plan. By its terms, the ISO Plan
expired in September 1995.
The ISO Plan had a ten-year term, subject to earlier termination by the
Board of Directors, and was administered by the Compensation Committee of the
Board of Directors. Under the ISO Plan, options were granted to selected key
employees of the Company. Approximately 100 employees were eligible for option
grants. Subject to the terms and conditions of the ISO Plan, the Committee
selected optionees and determined the number of shares to be granted, the option
prices, the term of each option, and the terms and conditions of stock option
agreements. Payment of the option price is made, as specified in the option
agreement, either in cash at the time of exercise or, at the discretion of the
Board of Directors or Committee, (i) by delivery of shares of the Company's
Common Stock, valued as of the option exercise date, (ii) according to a
deferred payment or other arrangement or (iii) in any other form of payment
acceptable to the Board of Directors or Committee in its discretion, either at
the time of grant or exercise of the option.
Options granted under the ISO Plan are intended to qualify as
"incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code. The exercise price of options granted under the ISO Plan may not
be less than 100% of the fair market value of the Common Stock at the time of
the grant, or 110% of the fair market value of the Common Stock at the time of
the grant in the case of a key employee who holds more than 10% of the combined
voting power of the Common Stock as of the date of the grant. The term of any
option granted under the ISO Plan may not exceed ten years, or five years in the
case of a key employee who holds more than 10% of the combined voting power of
the Common Stock as of the date of grant.
Options granted under the ISO Plan are non-assignable and may be
exercised, except in the case of death, only by the option holder. Options
terminate ninety days after termination of employment, except by reason of death
or total and permanent disability.
The Board of Directors may alter, suspend or amend the ISO Plan at any
time. However, no such action by the Board of Directors shall affect any option
theretofore granted under the ISO Plan without the consent of the option holder
so affected. In addition, no such action by the Board of Directors may, without
stockholder approval (except pursuant to the anti-dilution provisions of the ISO
Plan), increase the number of shares reserved for options under the ISO Plan,
materially modify the requirements as to eligibility for participation in the
ISO Plan, or materially increase the benefits accruing to participants under the
ISO Plan.
7
<PAGE>
An optionee recognizes no taxable income at the time a stock option is
granted or exercised under the ISO Plan. However, the excess of the fair market
value of the shares received on the date of exercise (or six months after the
date of exercise, in the case of an optionee subject to Section 16(b) of the
Securities Exchange Act of 1934) over the exercise price is taken into account
in determining whether he is subject to the alternative minimum tax. Assuming
compliance with applicable holding period requirements, an optionee realizes
long-term capital gain or loss when he disposes of his shares, measured by the
difference between the exercise price and the amount received for the shares at
the time of disposition. If the optionee disposes of shares acquired by the
exercise of the option before the expiration of at least one year from the date
of exercise and two years from the date of grant of the option, any amount
realized from such disqualifying disposition is generally taxable as ordinary
income in the year of disposition to the extent that the lesser of (i) fair
market value on the date the option was exercised or (ii) the amount realized
upon such disposition, exceeds the exercise price. Any amount realized in excess
of fair market value on the date of exercise will be treated as long or
short-term capital gain, depending upon the holding period of the shares. If the
amount realized upon such disposition is less than the exercise price, the loss
is treated as long or short-term capital loss, depending upon the holding period
of the shares.
No deduction is allowed to the Company for federal income tax purposes
at the time of grant or exercise of an option under the ISO Plan. In the event
of a disqualifying disposition by an optionee, the Company is entitled to a
deduction for the amount taxable to the optionee as ordinary income.
The Company also has an 1996 Incentive Stock Option Plan effective as
of January 31, 1996 (the "1996 ISO Plan") which was adopted by the Board of
Directors on October 10, 1996 and approved by the stockholders on November 25,
1996. The provisions of the 1996 ISO Plan and the tax consequences thereunder
are virtually identical to those of the ISO Plan. The 1996 ISO Plan permits the
Company to grant options to purchase up to an aggregate of 1,500,000 shares of
its Common Stock to key employees of the Company. As of June 30, 1997, 415,675
shares of the Company's Common Stock were subject to options granted under the
1996 ISO Plan.
ITEM TWO
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors desires to obtain from the stockholders their
approval of the Board of Directors' actions in appointing Coopers & Lybrand
L.L.P., Certified Public Accountants, as independent auditors of the Company for
the fiscal year ending June 30, 1998.
Coopers & Lybrand has served the Company in such capacity since January
1992. The Company has been informed that neither Coopers & Lybrand nor any of
its partners has any direct financial interest or any material indirect
financial interest in the Company and during the past three years has had no
connection therewith in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
A representative of Coopers & Lybrand is expected to be present at the
Meeting with the opportunity to make a statement, if such representative so
desires, and to be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" the ratification of the
appointment of Coopers & Lybrand L.L.P.
ITEM THREE
APPROVAL OF
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
INCLUDING AN INCREASE IN THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
General
By resolutions adopted January 20, 1998, the Board of Directors
approved and declared advisable the adoption of certain amendments to the
Company's Articles of Incorporation pursuant to which:
1. Article SIXTH would be amended to provide that the number of
authorized shares of common stock shall be increased to 50,000,000;
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2. Former Article EIGHTH, relating to perpetual existence of the
Company, would be removed;
3. Former Article TENTH, now Article NINTH, would incorporate
indemnification provisions relating to directors and officers,
which provisions formerly appeared in the Company's By-Laws;
4. Former Article ELEVENTH, now Article TENTH, would further clarify
certain powers of the Company, its directors and its stockholders;
and
5. Former Article TWELFTH, which was added to the Company's Articles
of Incorporation during the period in which the Company reorganized
pursuant to Chapter 11, Title 11 of the United States Code (the
"Bankruptcy Code"), would be removed.
If the stockholders approve the amendments, the Articles of
Incorporation will be amended and restated as proposed by the Board, and the
provisions described above will take effect upon acceptance of the Articles of
Amendment and Restatement by the Maryland State Department of Assessments and
Taxation in substantially the form attached hereto as Exhibit A.
Purposes of Proposed Amendments
1. Increase in Authorized Shares of Common Stock. The Board of
Directors has deemed it to be in the best interest of the Company and its
stockholders to advise an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of Common Stock, $.001 par value per
share, to 50,000,000. Currently, the number of authorized shares of Common
Stock, $.001 par value per share is 25,000,000. As of January 1, 1998, the
number of issued and outstanding shares of the Common Stock was 12,195,891, and
the number of shares reserved for issuance upon the exercise of outstanding
options or the conversion of the Company's Class A Convertible Preferred Stock,
without par value, was 10,000,550. Therefore, 22,196,441 shares, in the
aggregate, were issued or reserved for issuance as of January 1, 1998.
The increase in the number of authorized shares is necessary in order
to provide shares of Common Stock available for issuance upon the exercise of
warrants issued as of December 23, 1997 to certain investors (the "Investors"),
for the purchase of up to 6,250,000 shares of Common Stock at an exercise price
of $1.20 per share, as described further below (the "Warrants"). In addition,
the Board of Directors believes it to be in the best interest of the Company and
its stockholders to have additional shares of Common Stock available for
issuance upon the exercise of options that may be granted in the future under
the Company's stock option plans, or otherwise. Finally, the Board of Directors
believes it to be in the best interest of the Company and its stockholders to
have shares of Common Stock available for issuance in connection with possible
transactions or other corporate purposes that could result in the issuance of
additional shares, such as a business combination or a strategic investment
transaction. The Company has no present plans to engage in any such possible
transaction.
As described above, as of December 23, 1997, the Company issued the
Warrants to the Investors, along with 833,300 shares of the Company's Class A
Convertible Preferred Stock in a private placement. The total purchase price for
the Warrants and the shares of Class A Convertible Preferred Stock was
$5,000,000. Giving effect to the transaction, the Investors collectively hold
indirectly approximately 41% of the Company's Common Stock or approximately 54%
assuming exercise of the Warrants. These percentages are calculated on the basis
of shares of Common Stock actually outstanding as of January 1, 1998, and do not
give effect to the possible exercise of outstanding options. The Company
proposes to use the proceeds of the sale of these securities for the purchase of
certain laboratory instruments and information systems, and other corporate
purposes. The Board of Directors approved this transaction with the Investors
because it resulted in a cash infusion, plus a strategic partnership with the
leading French contract research organization, plus access to the expertise of
an experienced investor in the Company's industry. Prior to the receipt of the
proceeds of this transaction, the Company's ability to pursue its strategic
plans had been curtailed by lack of funds.
At the time that the Company issued these securities to the Investors,
it also entered into a Technology Sharing Agreement with Aster-Cephac, S.A., and
affiliate of the Investors, and its wholly-owned subsidiary, Cephac, S.A.
(collectively, "Aster"). Pursuant to that agreement, the Company and Aster will
exchange certain bioanalytical assay methods for measuring drug concentrations
in serum or plasma, and develop and implement cooperative marketing efforts in
the United States and Europe. The Company also agreed to provide certain
registration rights to the Investors
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for the shares issuable upon exercise of the Warrants or the conversion of the
shares of Class A Convertible Preferred Stock.
The Warrants are not exercisable unless the Company files with the
Maryland State Department of Assessments and Taxation an amendment to its
Articles of Incorporation providing for an increase in the number of authorized
shares of its Common Stock at least sufficient to provide enough shares for
issuance upon exercise of the Warrants. In the event, however, that such an
amendment is not filed by April 30, 1998 or such later date as the Company and
the Investors agree, then the number of shares issuable upon the exercise of the
Warrants shall be 2,750,000 and the exercise price shall be reduced to $0.60 per
share.
The Board of Directors believes it is in the best interest of the
Company and its stockholders to approve the proposed increase in the number of
authorized shares of Common Stock, to avoid a reduction in the warrant exercise
price and the number of shares issuable upon exercise of the Warrants (which
would reduce the amount of proceeds to the Company upon the exercise of the
Warrants), and to permit the Company to have sufficient shares for future
issuances.
A description of the Company's capital stock is as follows:
Common Stock
The Company currently has authorized 25,000,000 shares of Common Stock,
par value $.001 per share, each of which is entitled to one vote per share,
subject to the voting rights of any series of preferred stock. Dividends may be
paid on the Common Stock when and in such amounts as the Board of Directors may
determine from time to time, subject to any preferences of preferred
stockholders. The Company has not paid dividends on its Common Stock
historically. In addition, if the amendment and restatement of the Company's
articles of incorporation is approved as described in Proposal Two in this Proxy
Statement, no dividends may be declared without the approval of all of the
directors elected by holders of the Company's Class A Convertible Preferred
Stock.
Warrants to Purchase Common Stock
The Company has outstanding the Warrants to purchase an aggregate of
6,250,000 shares of Common Stock at an exercise price of $1.20 per share. All
Warrants are held by the Investors and are not exercisable until the Company
files with the Maryland State Department of Assessments and Taxation an
amendment to its articles of incorporation to increase the number of authorized
shares of Common Stock, as described in Proposal Two in this Proxy Statement.
The Warrants are exercisable until December 23, 2000. The number of shares
issuable upon exercise and the exercise price are subject to adjustment upon
certain changes in the Company's Common Stock. The Warrants may not be
transferred without the consent of the Company.
Preferred Stock and Class A Convertible Preferred Stock
The Company has authorized 1,500,000 shares of preferred stock, without
par value, of which 833,300 shares have been classified and issued as Class A
Convertible Preferred Stock. The remaining unissued shares of preferred stock
may be issued from time to time in one or more series as authorized by the Board
of Directors of the Company, with such terms, preferences and rights as the
Board may determine.
The terms, preferences and rights of the Class A Convertible Preferred
Stock are summarized as follows:
Each share is convertible at any time into ten (10) shares of the
Company's Common Stock (on a pre-split basis). The conversion ratio is subject
to adjustment if the Company sells shares of its Common Stock, or issues certain
Common Stock equivalents, for a price less than $.5925, or if the Company pays a
stock dividend or subdivides or combines shares of its Common Stock. For
example, if the reverse stock split as described in Proposal Four in this Proxy
Statement is approved, each share of Class A Convertible Preferred Stock will be
convertible into two (2) shares of Common Stock.
Each share is entitled to the number of votes that the holder would
have if such shares was converted to Common Stock. Currently, each share is
entitled to ten (10) votes per share. On matters other than the election of
directors, approval of certain charter amendments or other matters governed by
specific provisions of law, holders of
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Class A Convertible Preferred Stock vote together with the holders of Common
Stock, as though all of the stock were of one class.
Holders of Class A Convertible Preferred Stock have certain rights to
elect directors for so long as share ownership is maintained at certain levels.
Currently, these stockholders have the right to elect half of the members of the
Company's Board of Directors.
If the Company declares a dividend on Common Stock, each holder of
Class A Convertible Preferred Stock is entitled to participate in such dividend
as if the holder held the number of shares of Common Stock into which the shares
are convertible. Upon the liquidation, dissolution or winding-up of the Company,
whether or not voluntary, the holders of Class A Convertible Preferred Stock are
entitled to a liquidation preference of $5.925 per share. Upon the merger,
consolidation or other corporate reorganization or combination in which the
Company is not the surviving entity, or upon the sale of all or substantially
all of the assets of the Company, the holders of Class A Convertible Preferred
Stock that have not converted their shares to Common Stock will be entitled to
receive an amount equal to $5.925 per share.
2. Removal of Former Articles EIGHTH and TWELFTH. Former Article EIGHTH
of the Company's Articles of Incorporation provided that the Company shall have
a perpetual existence. Section 2-103(1) of the Maryland General Corporation Law
provides that a corporation has perpetual existence unless otherwise provided by
law or its charter. It is not necessary that the Articles of Incorporation
contain a provision relating to perpetual existence.
Former Article TWELFTH of the Company's Articles of Incorporation
prohibited the Company from issuing any non-voting stock prior to the time that
the Company consummated its plan of reorganization in connection with
proceedings under Chapter 11 of the Bankruptcy Code that commenced in 1990. On
May 23, 1996, the United States Bankruptcy Court for the District of Maryland
approved the Company's Application for Final Decree, thus closing the bankruptcy
case. Therefore, former Article TWELFTH is no longer required to be included in
the Company's Articles of Incorporation.
The Board of Directors of the Company has deemed it to be in the best
interest of the Company to restate the Articles of Incorporation, in conjunction
with the amendment of the Articles of Incorporation and, as part of such
restatement, the Board of Directors recommends the approval of the removal of
these unnecessary Articles.
3. Indemnification Provisions. Currently, the Company's by-laws and
Articles of Incorporation include provisions that limit the personal liability
of officers and directors of the Company, and provide for indemnification of
currently acting officers and directors to the maximum extent permitted by
Maryland law. Former Article TENTH of the Company's Articles of Incorporation
provides that a director or officer of the Company will not be liable to the
Company or its stockholders for money damages except under circumstances in
which such limitation of liability is prohibited by Maryland law. Maryland law
does not permit personal liability to be limited when a director or officer
received an improper benefit or profit or when a judgement or other final
adjudication is entered against a director or officer based on a finding that
his or her action or failure to act was the result of active and deliberate
dishonesty and was material to the cause of action.
Article VII of the Company's by-laws contained indemnification
provisions, providing for indemnification of the Company's officers and
directors to the maximum extent permitted by Maryland law. Indemnification is
not permitted under Maryland law in cases where the director's or officer's act
or omission was material to the cause of action, and was committed in bad faith
or was the result of active and deliberate dishonesty, or where the individual
received an improper benefit (or in a criminal case, had reasonable cause to
believe that his act or omission was unlawful).
In connection with the amendment and restatement of the Articles of
Incorporation, the Board of Directors deems it to be desirable to incorporate
all provisions relating to the limitation of liability and indemnification of
directors and officers in one Article in the Company's Articles of
Incorporation, and to extend the coverage of the indemnification provisions to
former officers and directors and persons who serve at the Company's request as
directors, partners, employees or agents of other entities. In addition, the
proposed amendment would permit, but not require, the Company to advance
expenses to indemnified persons to the extent permitted by Maryland law, and
would provide that the limitation of liability and indemnification provisions
could not be eliminated or reduced by repeal or amendment of the Company's
Articles of Incorporation, with respect to acts or omissions that occurred prior
to such repeal or amendment. The Board believes that indemnification provisions
such as the proposed amendments are widely in force
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in Maryland corporations' charters, and are necessary to enhance the Company's
ability to attract and retain highly qualified officers and directors.
4. Definition of Certain Corporate Powers. Former Article ELEVENTH
permitted the Company to amend its charter from time to time; provided that any
amendment which changes the terms of any class or series of any class of
outstanding stock must be authorized by holders of not less than two-thirds of
all shares of such class or series of such class outstanding at the time of the
proposed amendment. As part of the proposed amendment and restatement of the
Company's articles of incorporation, the Board of Directors has deemed it to be
in the best interest of the Company to add two provisions to former Article
ELEVENTH, now Article TENTH, one of which would make clear that the Board of
Directors may authorize the issuance of shares of the Company's capital stock of
any class, whether currently authorized or authorized in the future, and to
issue convertible securities, without stockholder approval. The other new
provision would make clear that the Board of Directors is authorized to classify
or reclassify any unissued shares and to fix or alter, before the issuance of
such shares, all the terms and provisions of such shares. The Board believes
that such provision are widely in force in Maryland corporations' charters, and
are desirable to make the Company's articles of incorporation reflect customary
practice in Maryland.
The Board of Directors also proposes to add to new Article TENTH a
third new provision that would limit the Board's ability to declare a dividend
on any class or series of stock, unless the dividend is approved by all of the
directors elected by the holders of the Class A Convertible Preferred Stock. In
connection with the issuance and sale of the Class A Convertible Preferred Stock
and the Warrants to the Investors, the Board of Directors agreed to advise and
seek stockholder approval of the amendment of the Company's articles of
incorporation to include such a provision.
Potential Impact of Proposed Amendments
The proposal to amend Article SIXTH of the Articles of Incorporation to
increase the number of authorized shares of Common Stock from 25,000,000 to
50,000,000 would have no immediate impact upon the Company and its stockholders
and will not result in an immediate or automatic issuance of additional shares
of Common Stock. Approval of the amendment will permit the Board of Directors to
issue such additional shares without further approval of stockholders and upon
such terms and at such times as it may determine unless stockholder approval is
required by applicable law or other applicable rules. Holders of the Company's
securities have no preemptive rights to subscribe to the Company's securities
when additional shares are issued. Stockholders should be aware that the Company
could issue additional shares to a holder who might vote against a proposed
merger or sale of assets or other corporate transaction, and therefore
additional shares could be available for use to attempt to prevent or discourage
an attempted takeover of the Company. The Company has no present plans to make
such an issuance of shares.
The proposal to remove former Article EIGHTH will have no substantive
impact, because the Company will have perpetual existence under Maryland General
Corporation Law even without the express provision for perpetual existence
included in former Article EIGHTH.
The proposal to remove former Article TWELFTH will have no impact other
than to permit the Company to issue non-voting stock in the future if the Board
of Directors of the Company deems such issuance to be in the best interest of
the Company. Currently, there is no plan to issue non-voting stock.
The proposal to amend former Article TENTH, now Article NINTH, will
permit indemnification of former officers and directors, and will permit
indemnification of persons who serve, at the Company's request, as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture or other enterprise. Currently, indemnification is
provided only to currently acting directors and officers. The provision also
would permit, but not require, the Company to advance expenses to indemnified
persons to the extent permitted by Maryland law. In addition, the limitation on
liability and the indemnification provisions could not be eliminated or reduced
by amendment or repeal of the Articles of Incorporation. The Board of Directors
believes that providing indemnification to former directors and officers and to
persons who serve another entity at the request of the Company will have a
positive impact by enhancing the Company's ability to attract and retain
qualified persons. In addition, the Board of Directors believes that the Company
and its stockholders will be best served when the Company's officers and
directors have the opportunity to make business decisions without threat of
personal liability. The proposed amendment could, however, have a negative
impact in the event of legal proceedings that require the Company to indemnify
former directors and officers or persons serving other entities at the Company's
request. If the Company would be required to indemnify a larger number of
individuals, the financial impact upon the Company could be more substantial
than the impact resulting from the
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Company's indemnification obligations as they currently exist. Currently, there
is no litigation pending or, to the Company's knowledge, threatened which could
trigger the indemnification provisions as they are proposed to be amended.
The proposal to amend former Article ELEVENTH, Article TENTH, has the
effects described above in the paragraph captioned "Definition of Certain
Corporate Powers."
The Board of Directors recommends a vote "FOR" the approval of the
Articles of Amendment and Restatement. Directors Thomas Kearns, Jr. and Leslie
Daniels are Investors , and director John Thebault is an affiliate of an
Investor, who purchased Warrants and shares of the Company's Class A Convertible
Preferred Stock. As a result, those individuals have an interest in the approval
of the proposed amendments and restatement of the Company's articles of
incorporation because the increase in the number of authorized shares of Common
Stock will facilitate the exercise of their Warrants. In addition, the proposed
limitation on the declaration of dividends without the approval of directors
elected by the holders of the Class A Convertible Preferred Stock will permit
those directors and the other Investors to have more control over the
declaration of dividends than holders of Common Stock or any other class of
securities that may be issued in the future will have.
ITEM FOUR
APPROVAL OF REVERSE STOCK SPLIT
AND
CHANGE IN SHARES OF AUTHORIZED
COMMON STOCK
General
By resolutions adopted January 20, 1998, the Board of Directors
approved and declared advisable the adoption of an amendment to the Company's
articles of incorporation to effect a five to one reverse stock split of the
Company's outstanding Common Stock, par value $.001 per share. As of January 1,
1998 the Company has 12,195,891 shares of Common Stock issued and outstanding.
The reverse stock split would reduce the number of shares of the Company's
outstanding Common Stock to approximately 2,439,178 shares. The reverse stock
split is proposed for the reasons described below and with a view toward
facilitating the listing of the Company's Common Stock on the Nasdaq SmallCap
Market. However, the Company cannot provide any assurances that the reverse
stock split will enable the Company to list its Common Stock on the Nasdaq
SmallCap Market or achieve any of the other purposes described below.
If the reverse stock split is approved, the Company will file with the
Maryland State Department of Assessments and Taxation a further amendment to and
restatement of its articles of incorporation which will provide that, as of the
date of acceptance for filing of articles of amendment and restatement relating
to the reverse stock split (the "Effective Date"), (1) each share of Common
Stock, par value $.001, outstanding immediately prior to the reverse stock split
will be deemed automatically, without any action on the part of a stockholder,
to represent one-fifth (1/5) of a share, par value $.005, after the reverse
stock split and (2) the authorized Common Stock of the Company shall be
10,000,000 shares, par value $.005 per share. The amendment of the Company's
Articles of Incorporation will affect only the first paragraph of Article Sixth
of the Articles of Incorporation, and will be substantially in the form attached
hereto as Exhibit B. In all other respects, the provisions of the Company's
Articles of Incorporation will be as set forth in Exhibit A, assuming approval
by the stockholders of the Articles of Amendment and Restatement.
No fractional shares will be issued as a result of the reverse stock
split, and each fraction of a share will be exchanged for cash. The amount of
cash payable for such fractional shares will be equal to the product of (i) the
per share fair market value of the Company's Common Stock on the Effective Date,
multiplied by (ii) the fraction of a share remaining after giving effect to the
reverse stock split. The fair market value per share will be the average of the
average bid and asked prices of the Company's Common Stock for the ten trading
days prior to the Effective Date. After the Effective Date, stockholders may
exchange certificates for new certificates representing the new number of
shares. Stockholders who wish to exchange their certificates may contact the
Company for appropriate instructions.
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Purpose of the Reverse Stock Split
The Nasdaq Stock Market's requirements for listing on the Nasdaq
SmallCap Market include, among other things, a minimum bid price of $4.00 per
share. For several years, the price of the Company's Common Stock has fluctuated
and has been less than $1.00 for protracted periods. Management believes that
the reverse stock split could result in the Company's Common Stock having a
minimum bid price of $4.00. The Nasdaq Stock Market has other quantitative
requirements for listing on the Nasdaq SmallCap Market, which the Company
believes it meets or is likely to meet in the foreseeable future.
Additionally, management believes that the reverse stock split will
enhance the marketability of the Company's Common Stock in the financial and
investing community. Many brokerage firms and institutional investors do not
trade in stocks that have a low trading price. Also, management believes that
brokerage commissions on the sale of lower priced stocks often are
proportionally higher than commissions on the sale of higher price securities.
By increasing the price of the Company's Common Stock, management hopes to
encourage interest and trading in the Common Stock among a broader market, and
to provide greater liquidity for the Company's stockholders.
No assurance can be given that (1) the Company will be able to list its
Common Stock on the Nasdaq SmallCap Market, (2) the market price per share after
the reverse stock split will be five times higher than the current market price
per share, (3) the market price per share will exceed at all, or remain in
excess of, the current market price per share, or (4) the Company's Common Stock
will enjoy a broader trading market after the reverse stock split. If the
Company is unsuccessful in listing its Common Stock on the Nasdaq SmallCap
Market, or does not continue to meet the listing requirements if it is initially
listed, management believes that the Company's Common Stock will continue to
trade in the over-the-counter market on the OTC Bulletin Board.
Potential Impact of the Reverse Stock Split
The reverse stock split will have no effect on the proportionate stock
ownership of any stockholder, except for such minor adjustments as may occur as
a result of exchanging fractional shares for cash. Also, the Company is not
changing the aggregate par value of its Common Stock in connection with the
reverse stock split. The total amount of stockholders' equity ($_____________ as
of December 31, 1997) will remain the same.
Except for the reduction in the number of shares of Common Stock
outstanding, as of January 1, 1998, from 12,195,891 to approximately 2,439,178,
the rights and privileges of holders of the Common Stock will remain the same,
both before and after the reverse stock split.
As of January 1, 1998, the Company had outstanding options and warrants
to purchase 1,667,550 shares of its Common Stock. In addition, the Company
had outstanding 833,300 shares of its Class A Convertible Preferred Stock,
currently convertible into shares of Common Stock on a 10 to 1 basis. All
outstanding options and warrants, and the terms of the shares of Class A
Convertible Preferred Stock, provide for an adjustment in proportion to any
change in the amount of Common Stock outstanding. Therefore, appropriate
adjustments would be made in connection with the reverse stock split to the
number of shares issuable upon the exercise of outstanding options or warrants
or the conversion of shares of Class A Convertible Preferred Stock.
The reverse stock split will not affect the registration of the
Company's Common Stock under the Securities Exchange Act of 1934, as amended,
and the Company's reporting obligations under the Act. For so long as the
Company is required to file annual, quarterly, and other reports and statements
with the Securities and Exchange Commission pursuant to such Act, it will
continue to do so.
Tax Consequences
The reverse stock split will not, in general, result in a stockholder's
recognition of gain or loss for federal income tax purposes. The tax basis of
shares held by a stockholder after the reverse stock split (including any
fractional shares to which a stockholder may be entitled) will be equal in the
aggregate to the basis of shares held prior to the reverse stock split. For tax
purposes, the holding period for shares held prior to the reverse stock split
will be included in the holding period for shares held after the reverse stock
split. Stockholders who receive cash in lieu of a fractional share will
recognize capital gain or loss in an amount equal to the difference between the
amount of cash received and the adjusted basis of the fractional share exchanged
for cash.
The Board of Directors recommends a vote "FOR" the approval of the
reverse stock split and change in shares of authorized Common Stock.
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ITEM FIVE
RATIFICATION OF THE APPROVAL OF 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
General
By resolution adopted November 25, 1996, the Board of Directors
approved the adoption, effective as of November 25, 1996, of the PharmaKinetics
Laboratories, Inc. 1996 Non-Employee Directors Stock Option Plan (the "1996
Plan"). The 1996 Plan was amended by resolution of the Board of Directors on
January 20, 1998 in order to increase to 1,000,000 (on a pre-split basis) the
number of shares of Common Stock subject to options available for grant under
the 1996 Plan. This increase resulted from the expansion of the Board of
Directors in connection with the Transaction described above. Options to
purchase an aggregate of 562,500 shares of the Company's Common Stock have been
granted under the 1996 Plan as of January 20, 1998. Although stockholder
approval of the 1996 Plan or the amendment to the 1996 Plan is not required, the
Board of Directors of the Company has determined that it is in the best interest
of the Company and its stockholders to have the stockholders ratify the approval
of the 1996 Plan as amended.
Summary of the 1996 Plan
Purpose of the 1996 Plan
The purpose of the 1996 Plan is to provide a means by which
non-employee directors of the Company may acquire equity interests or increase
their equity interests in the Company, thereby encouraging such persons to
remain in the service of the Company and to work for the growth and success of
the Company.
Eligible Participants
Non-employee directors of the Company or subsidiaries, if any
(collectively, "Affiliates"), are eligible to receive options under the 1996
Plan to purchase shares of the Company's Common Stock, $.001 par value. No
member of the Board who is an officer or otherwise a salaried employee of the
Company or Affiliate is eligible to receive a grant under the 1996 Plan. At
January 31, 1998, 6 persons were eligible to participate in the 1996 Plan.
Administration of the 1996 Plan
Within the limitations described in the 1996 Plan, the 1996 Plan is
administered by the Board of Directors of the Company (the "Board") and/or a
compensation committee of the Board as designated from time to time (the
"Committee"). The Committee has the full administrative power which otherwise
would be exercised by the Board, subject, however, to such resolutions, not
inconsistent with the 1996 Plan, as may be adopted from time to time by the
Board, and subject further to the right of the Board to revest administration of
the 1996 Plan in the Board at any time. The Board or the Committee is authorized
to construe and interpret the 1996 Plan and options granted under it, and to
establish, amend and revoke rules and regulations for administration of the 1996
Plan.
Terms and Conditions of the 1996 Plan
Certain features of the 1996 Plan are summarized below. Reference is
hereby made to the full text of the 1996 Plan (a copy of which is attached to
this Proxy Statement as Exhibit C) for complete information concerning the 1996
Plan, and all summary information is qualified in its entirety by this
reference.
(a) Grant of Options. Options granted under the 1996 Plan are
non-qualified stock options ("NQSOs"), and are not intended to be incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Options under the 1996 Plan are evidenced by written
option agreements in a form approved by the Board or Committee and containing
such terms and conditions, not inconsistent with the 1996 Plan, as the Board or
Committee may determine.
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(b) Number of Shares and Option Price. The 1996 Plan permits the grant
of options for the purchase of up to an aggregate of 1,000,000 shares of the
Company's Common Stock. Each option agreement specifies the total number of
shares to which it pertains. The 1996 Plan provides a formula for the granting
and vesting of options as follows:
(i) Non-Employee Directors Serving on the Effective Date. Each
non-employee director who was serving on the Board on November 25, 1996
("Serving Director"), was granted on November 25, 1996 options to purchase One
Hundred and Twenty Thousand (120,000) shares of the stock (the "Grant") which
shall vest in four equal installments of one-quarter (1/4) over four (4) years.
The first installment shall vest on the Effective Date of the Grant. Thereafter,
on the date of each of the next three (3) annual meetings of stockholders at
which elections to the Board are conducted (each, an "Annual Meeting"), an
installment of one-quarter (1/4) of the Grant shall vest in each Serving
Director who is reelected to the Board.
(ii) Non-Employee Directors Elected or Appointed After the Effective
Date. Each non-employee director who is elected or appointed to the Board after
November 25, 1996 ("Subsequent Director") shall be granted on the date of his or
her election or appointment an option to purchase One Hundred and Twenty
Thousand (120,000) shares of the stock (adjusted, if applicable, as provided in
subparagraph (ii) below) which shall vest in four installments as follows:
(A) if the Subsequent Director is elected on the date of an
Annual Meeting, one-quarter (1/4) of the Grant shall vest on the date of the
Subsequent Director's election to the board. Thereafter, on the date of each of
the next three (3) Annual Meetings at which elections to the Board are
conducted, an installment of one-quarter (1/4) of the Grant shall vest in each
Subsequent Director who is reelected to the Board; and
(B) if the Subsequent Director is appointed on a date other
than the date of an Annual Meeting, then the first installment of the Grant
shall be prorated to equal an amount equal to the product of 30,000 times a
fraction, the numerator of which shall be the number of calendar months during
which the Subsequent Director will serve on the Board prior to the next
succeeding Annual Meeting and the denominator of which shall be the number
twelve (12). Notwithstanding this formula, in no case shall the first
installment be less than fifteen thousand (15,000) shares and the amount of such
installment shall be rounded to the nearest whole share. Thereafter, on the date
of each of the next three (3) Annual Meetings an installment of one-quarter
(1/4) of the Grant shall vest in each Subsequent Director who is reelected to
the Board.
The purchase price per share shall be determined by the Board or
Committee, but may not be less than 100% of fair market value at the date of
grant. Fair market value shall be the mean of the bid and asked prices as
determined by over-the-counter trading on the date the option is issued. At
January 20, 1998, the market value of the Common Stock underlying the options
was $1.025 per share, as determined by the mean of the bid and asked prices on
that date.
(c) Option Period. Options are granted for terms of ten years. Each
option shall be exercisable in periodic installments, as described above. Such
periods may be altered by the Board or the Committee. Six months must elapse
between the date of grant of an option and the disposition of stock upon
exercise.
(d) Rights as a Stockholder. An option holder has no voting, dividend
or other rights as a stockholder with respect to any shares covered by an option
until such time as such shares have been issued to him upon exercise of an
option.
(e) Nonassignability. Options may not be transferred other than by will
or by the laws of descent and distribution, and during the option holder's
lifetime may be exercised only by the option holder or his guardian or legal
representative.
(f) Exercise and Payment. In order to exercise an option under the 1996
Plan, the option holder shall deliver to the Company written notice of the
number of full shares with respect to which the option is to be exercised, which
may not be less than 100 shares. Payment shall be made, as specified in the
option agreement, either (i) in cash or cash equivalents at the time the option
is exercised, or (ii) by delivery of shares of the Company's Common Stock, or
(iii) through the tender of options to purchase the Company's Common Stock, or
(iv) by a combination of the
16
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foregoing methods. The value of securities delivered in full or partial payment
of the option price shall be based on the fair market value of the shares at the
time the option is exercised.
(g) Termination of Employment, Disability and Death. An option shall
terminate ninety days after termination of the optionee's membership on the
Board of Directors of the Company or an Affiliate, unless the termination is due
to such person's permanent and total disability or such person's death, in which
case the option may be exercised at any time within one year following such
termination, by the optionee, or if termination is due to death, by the person
or persons to whom the optionee's rights under such option pass by will or by
the laws of descent and distribution. In no event may an option be exercised
after the expiration date of the option set forth in the option agreement.
(h) Adjustment for Certain Events. In the event of a reorganization,
recapitalization, stock dividend (or dividend in property other than cash),
stock split, liquidating dividend, combination of shares, exchange of shares, or
any other change in the corporate structure or shares of the Company's Common
Stock, adjustments, if any, are appropriate will be made in the maximum number
of shares subject to the 1996 Plan and the number and option price of shares
covered by the options granted. If the Company is not the surviving company in a
merger or certain other transactions, all options vest and become exercisable
immediately.
(i) Amendments and Termination. The Board may alter, amend, suspend or
terminate the 1996 Plan at any time. However, no amendment by the Board shall
affect any option theretofore granted under the 1996 Plan without the consent of
the option holder so affected. Unless sooner terminated, the 1996 Plan shall
terminate on November 25, 2006.
Federal Income Tax Consequences
The following is a summary of certain of the federal income tax
consequences with respect to the 1996 Plan under existing provisions of the
Code:
1) Grant of Options
A director will not recognize income and the Company will not
receive a deduction at the time of the grant of an option since the Company's
NQSOs are not publicly traded.
2) Exercise of Options
The exercise of a NQSO generally results in a compensation
deduction to the Company and the recognition of income by the director equal to
the excess of the fair market value of the Common Stock on the date of exercise
over the exercise price of the option. The director's basis in the shares
received upon the exercise of the option will be equal to the exercise price
plus the amount equal to the excess of the fair market value of the Common Stock
on the date of exercise over the exercise price of the option.
3) Sale or Exchange of Stock Received Upon Exercise of Options
A subsequent sale or exchange of stock received upon the
exercise of an NQSO granted under the 1996 Plan will generate either short term,
mid-term or long term capital gain or loss, depending on the period of time that
the director held the stock before the sale or exchange and the sale or exchange
price compared to the director's basis in the stock that was sold or exchanged.
The foregoing summary discussion of federal income tax consequences
applies to an option holder only if his income is subject to U.S. federal income
tax and relates only to laws, regulations and published administrative
interpretations in effect on the date of this document. Such discussion may no
longer apply if changes in such laws, regulations or interpretations occur.
New Plan Benefits
The following table summarizes stock options which have been granted,
under the 1996 Plan to the persons described below:
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NEW PLAN BENEFITS
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Name and Position Number of Options Awarded(1)
----------------- ----------------------------
Thomas Kearns, Jr., Director (2) 120,000
Roger Thies, Director (2) 120,000
Grover Wrenn, Director (3) 112,500
Leslie Daniels, Director (4) 105,000
John Thebault, Director (4) 105,000
All current executive officers, as a group 0
All current directors who are not executive 562,500
officers, as a group
All employees, including current officers 0
who are not executive officers, as a group
(1) Each option entitles the holder to purchase one share of Common Stock of the
Company subject to the provisions of the 1996 Plan and any additional provisions
imposed by the Board or the Committee as permitted by the 1996 Plan.
(2) Messrs. Kearns and Thies each received options to purchase 120,000 shares of
Common Stock, at an exercise price of $0.5469 per share, which was the fair
market value of the shares of Common Stock on November 25, 1996, the date of
grant of the options. The options vest in four installments, as indicated in the
description above of the terms of the 1996 Plan.
(3) Mr. Wrenn received options to purchase 112,500 shares of the Common Stock,
at an exercise price of $0.395 per share, which was the fair market value of the
shares of Common Stock on February 10, 1997, the date of grant of the options.
The options vest in four installments, as indicated in the description above of
the terms of the 1996 Plan.
(4) Messrs. Daniels and Thebault each received options to purchase 105,000
shares of Common Stock, at an exercise price of $1.025 per share, which was the
fair market value of the shares of Common Stock on January 20, 1998, the date of
grant of the options. The options vest in four installments, as indicated in the
description above of the terms of the 1996 Plan.
The Board of Directors recommends a vote "FOR" the ratification of the
PharmaKinetics Laboratories, Inc. 1996 Non-Employee Directors Stock Option Plan.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy
material for the Annual Meeting of Stockholders anticipated to be held in
November 1998 must be received in writing by the Company on or before June 1,
1998. The inclusion of any proposal will be subject to applicable rules of the
Securities and Exchange Commission.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1997, as filed with the Securities and Exchange Commission is enclosed
herewith. Additional copies are available to shareholders without charge on
written request directed to Taryn L. Kunkel, Secretary, PharmaKinetics
Laboratories, Inc., 302 West Fayette Street, Baltimore, Maryland 21201.
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OTHER MATTERS
Management knows of no other business to be presented for action at the
Meeting, but if any other business should properly come before the Meeting, it
is intended that the proxies will be voted in accordance with the best judgment
of the persons acting thereunder in their discretion.
By Order of the Board of Directors,
Taryn L. Kunkel
Secretary
__________, 1998
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EXHIBIT A
FORM OF ARTICLES OF AMENDMENT AND RESTATEMENT
OF
PHARMAKINETICS LABORATORIES, INC.
PHARMAKINETICS LABORATORIES, INC., a Maryland corporation, having its
principal office at 302 West Fayette Street, Baltimore, Maryland 21201
(hereinafter referred to as the "Corporation") hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect as hereinafter provided. The provisions set forth in these
Articles of Amendment and Restatement are all the provisions of the charter of
the Corporation as currently in effect.
SECOND: The charter of the Corporation is hereby amended by striking in
its entirety Articles FIRST through TWELFTH, inclusive, and by substituting in
lieu thereof the following Articles FIRST through TENTH:
FIRST: That we, the subscribers, W.D. Zander, Bernhard E.
Holzapfel, and Alan G. Woodman, all of whom have a post office address
of 750 Third Avenue, New York, New York 10017, and all of whom are at
least eighteen years of age, intend to form a corporation under the
general laws of the State of Maryland.
SECOND: That the name of the Corporation is PHARMAKINETICS
LABORATORIES, INC.
THIRD: The purposes for which the Corporation is formed are as
follows:
A. To engage in the business for profit of
bioavailability testing in human volunteers with
complete laboratory capabilities in microbiological
and chemical assays.
B. To engage in the business for profit of
providing complete in vitro and in vivo evaluations
of drug dosage forms.
C. To engage in the business for profit of
general pharmaceutical and medical research.
D. To acquire by purchase, lease, or
otherwise, and to improve, and develop real property
which is deemed necessary or useful in conducting the
business of the Corporation.
E. To acquire by purchase, lease,
manufacture, or otherwise any personal property which
is deemed necessary or useful in conducting the
business of the Corporation.
F. To engage in all other businesses,
occupations, and activities which may be conducive to
achieving the above-enumerated purposes and to engage
in any and all businesses, occupations, and
activities in which a corporation may lawfully
engage.
FOURTH: The post office address of the principal office of
the Corporation in this state is 302 West Fayette Street, Baltimore,
Maryland 21201.
FIFTH: The resident agent of the Corporation is Taryn L.
Kunkel, whose post office address is 302 West Fayette Street,
Baltimore, Maryland 21201, said resident agent being a citizen of the
State of Maryland, and actually residing therein.
SIXTH: The total number of shares of stock of all classes
which the Corporation has authority to issue is 51,500,000 shares,
divided into 50,000,000 shares of Common Stock, par value $.001, and
1,500,000
<PAGE>
shares of Preferred Stock, without par value, 833,300 shares of which
have been classified as Class A Convertible Preferred Stock. The
aggregate par value of all shares having par value is $50,000.
The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms
and conditions of redemption of each class are as follows:
A. Common Stock. Subject to the voting rights of any
series of Preferred Stock pursuant to the terms of such
series, each outstanding share of Common Stock shall be
entitled to one vote on each matter submitted to a vote or
approval of stockholders. Subject to the provisions of law and
any preferences of Preferred Stock, dividends may be paid on
the Common Stock at such time and in such amounts as the Board
of Directors may from time to time determine. Upon any
voluntary or involuntary liquidation or dissolution of the
Corporation, after payment or provision for the payment of the
debts and other liabilities of the Corporation and of the
amounts to which holders of any Preferred Stock may be
entitled, the holders of shares of Common Stock shall be
entitled to share ratably in all remaining assets of the
Corporation.
B. Preferred Stock. The Preferred Stock may be
issued, from time to time, in one or more series as authorized
by the Board of Directors. Prior to issuance of each series,
the Board of Directors by resolution shall designate that
series to distinguish it from all other series and classes of
stock of the Corporation, shall specify the number of shares
to be included in the series, and shall fix the terms, rights,
restrictions, qualifications and limitations of the shares of
the series, including any preferences, voting powers, dividend
rights, liquidation rights, and redemption, sinking fund and
conversion rights. Subject to the express terms of any other
series of Preferred Stock outstanding at the time, and
notwithstanding any other provision of the charter, the Board
of Directors may increase or decrease the number of shares or
alter the designation or classify or reclassify any unissued
shares of a particular series of Preferred Stock by setting or
changing in any one or more respects, from time to time before
issuing the shares, the preferences, conversion or other
rights, voting powers, restrictions, limitation as to
dividends, qualifications, terms or conditions of redemption,
or any other terms of such series of Preferred Stock.
C. Class A Convertible Preferred Stock.
1. DESIGNATION AND AMOUNT
A total of 833,300 shares of the Corporation's
Preferred Stock shall be designated the "Class A Convertible
Preferred Stock."
2. VOTING RIGHTS
2.1 General. Each holder of Class A Convertible
Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the holders of the Common Stock of the
Corporation and, with respect to each such matter, shall be
entitled to that number of votes equal to the number of whole
shares of Common Stock into which such holder's shares of
Class A Convertible Preferred Stock could be converted,
pursuant to the provisions of Section 5 of this Article SIXTH,
Paragraph C, on the record date for the determination of
stockholders entitled to vote on such matters, or if no such
record date is established, on the date such vote is taken.
Except as otherwise provided herein or otherwise required by
law, the holders of shares of Class A Convertible Preferred
Stock and the holders of shares of Common Stock shall vote
together as a single class on all matters submitted to the
stockholders of the Corporation.
2.2 Director Election Rights.
(a) Definitions. For purposes of this Subsection 2.2:
"Affiliate", with respect to any person, shall mean
any other person that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under
common control with such person, or any other person that is a
partner of such person in any general or limited partnership;
2
<PAGE>
"Conversion Shares" means the sum of (A) the number
of whole shares of Common Stock into which the outstanding
shares of Class A Convertible Preferred Stock are convertible
pursuant to the provisions of Section 5, plus (B) the number
of shares of Common Stock owned of record by the Initial
Holders, regardless of how or when acquired.
"Initial Holders" means CAI Advisors & Co., Astero
Cephac S.A., and any Affiliate of CAI Advisors & Co. or Astero
Cephac S.A. or any holder of Class A Convertible Preferred
Stock or warrants to purchase Common Stock that obtained such
preferred stock or warrants by assignment from CAI Advisors &
Co. or Astero Cephac S.A. pursuant to the terms of that
certain Preferred Stock and Warrant Purchase Agreement dated
December 4, 1997 by and among the Corporation, CAI Advisors &
Co., and Astero Cephac S.A. (the "Purchase Agreement");
"Total Shares Outstanding" means the sum of (A) the
total number of shares of Common Stock outstanding and (B) the
number of whole shares of Common Stock into which the
outstanding shares of Class A Convertible Preferred Stock are
convertible pursuant to the provisions of Section 5 of this
Article SIXTH, Paragraph C.
(b) Director Election Rights of Holders. So long as
the Conversion Shares constitute at least ten percent (10%) of
the Total Shares Outstanding, the holders of Class A
Convertible Preferred Stock, voting as a separate class, shall
have the right to elect that number of Directors to the Board
of Directors of the Corporation (the "Board") that bears the
same proportion to the total number of directors on the Board
as the Conversion Shares bear to the Total Shares Outstanding,
rounded up to the next whole number; provided, however, that
so long as the Conversion Shares constitute at least
thirty-five percent (35%) of the Total Shares Outstanding, the
holders of Class A Convertible Preferred Stock shall have the
right to elect at least fifty percent (50%) of the Board
members. For purposes of this Subsection 2.2(b), the number of
Conversion Shares shall be determined on the record date for
the determination of stockholders entitled to vote on the
election of directors, or if no such record date is
established, on the date such vote is taken.
3. DIVIDENDS
If the Corporation declares a dividend on its Common
Stock, each holder of shares of Class A Convertible Preferred
Stock shall be entitled to participate in such dividend as if
such holder was the holder of the number of whole shares of
Common Stock into which such holder's shares of Class A
Convertible Preferred Stock could be converted, pursuant to
the provisions of Section 5 of this Article SIXTH, Paragraph
C, on the record date for the determination of holders of
Common Stock entitled to receive the declared dividend.
4. LIQUIDATION, DISSOLUTION, OR WINDING-UP
4.1 Preference Right. Upon the liquidation,
dissolution, or winding-up of the Corporation, whether
voluntary or involuntary, before any payment or distribution
shall be made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated
to be junior to the Class A Convertible Preferred Stock, the
holders of Class A Convertible Preferred Stock shall be
entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from
capital, surplus or earnings (the "Proceeds"), an amount per
share equal to the Preference Amount (as defined in Subsection
4.2 below). If the Proceeds are insufficient to pay each
holder of Class A Convertible Preferred Stock an amount per
share equal to the Preference Amount, then each such holder
shall share in the Proceeds in the same proportion that the
number of shares of Class A Convertible Preferred Stock
registered in the name of such holder bears to the total
number of shares of Class A Convertible Preferred Stock
outstanding.
4.2 Preference Amount. The Preference Amount per
share of Class A Convertible Preferred Stock shall be Five and
92.5/100 Dollars ($5.925).
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<PAGE>
4.3 Merger, Consolidation, etc. Upon any merger,
consolidation or other corporate reorganization or combination
to which the Corporation is a non-surviving party (other than
a merger into a wholly-owned subsidiary of the Corporation),
or any sale of all or substantially all of the assets of the
Corporation, the holders of Class A Convertible Preferred
Stock that have not converted their shares to Common Stock
pursuant to Section 5 shall be entitled to receive the cash,
securities or other property in the amount that they would
have received under Subsection 4.1, above, upon a liquidation.
5. CONVERSION.
5.1 Conversion Right and Conversion Rate. Any holder
of Class A Convertible Preferred Stock shall have the right,
at the holder's option, to convert at any time, or from time
to time, any or all of the such holder's shares of Class A
Convertible Preferred Stock into fully-paid and nonassessable
shares of the Common Stock of the Corporation, subject to the
terms and conditions of this Section 5. The number of shares
of Common Stock issuable for each share of Class A Convertible
Preferred Stock upon any such conversion (herein called the
"Conversion Rate") shall be 10 shares of Common Stock for each
share of Class A Convertible Preferred Stock; provided,
however, that if the application of the then current
Conversion Rate to the aggregate number of shares of Class A
Convertible Preferred Stock surrendered by a single holder in
a single transaction would result in a fraction, then the next
lower whole number of shares of Common Stock shall be issuable
upon such conversion. The Conversion Rate shall be subject to
adjustment from time to time in certain instances as provided
in Section 5.3 of this Article SIXTH, Paragraph C. The
Corporation shall make no payment or adjustment on account of
any dividends accrued on the Common Stock issuable upon such
conversion, or on account of the rounding down to the next
lower whole number of shares issuable upon any conversion.
5.2 Manner of Conversion. In order to convert shares
of Class A Convertible Preferred Stock into Common Stock, the
record holder of such shares shall surrender the certificate
or certificates therefor, duly endorsed or accompanied by duly
executed stock powers, at the principal office of the
Corporation. Together with such certificates, the converting
holder shall give a written conversion notice to the
Corporation of the election to convert a specified number of
shares of Class A Convertible Preferred Stock. The converting
holder shall state in its notice of conversion the name or
names that shall appear on the certificate or certificates for
Common Stock issuable upon such conversion. The Corporation
shall, as soon as practicable thereafter, cause to be issued
and delivered to the converting holder, or to the converting
holder's designated transferees or nominees, if permitted by
applicable law, certificates for the number of full shares of
Common Stock to which the converting holder is entitled. If
the converting holder has elected to convert only a portion of
the shares of Class A Convertible Preferred Stock represented
by the surrendered certificates, the Corporation shall issue,
at its expense, a new certificate representing the unconverted
shares of Class A Convertible Preferred Stock, registered in
the name of the converting holder, or in the name or names of
the converting holder's designated transferees or nominees, if
permitted by applicable law. Shares of Class A Convertible
Preferred Stock shall be deemed to have been converted as of
the close of business on the date when the surrender of the
certificates therefor and the giving of notice as required
above has been completed. The person or persons entitled to
receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of
such Common Stock at and after such time.
5.3. Adjustment to Conversion Rate.
(a) Generally. In order to prevent dilution of the
conversion rights granted under Section 5.1 hereof, the
Conversion Rate in effect at any time shall be subject to
adjustment from time to time pursuant to this Section 5.3. Any
such adjustment shall be automatic and shall not require any
further action on the part of the Corporation (except for the
preparation of an Adjustment Certificate pursuant to Section
5.4 below) or of any registered owner of Class A Convertible
Preferred Stock.
(b) Sale or Issuance of Common Stock. If and whenever
the Corporation issues or sells, or in accordance with
paragraph (c) of this Section 5.3 is deemed to have issued or
sold, any shares of its Common Stock for consideration per
share less than Fifty-Nine and 25/100 Cents ($0.5925)
4
<PAGE>
(hereafter, the "Adjustment Trigger Price"), then immediately
upon such issuance or sale (or deemed issuance or sale) the
Conversion Rate then in effect shall be increased by
multiplying such Conversion Rate by a fraction, the numerator
of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance or
sale (or deemed issuance or sale) plus (ii) the number of
shares of Common Stock so issued or sold (or deemed issued or
sold), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding immediately
prior to such issuance or sale (or deemed issuance or sale)
plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation (or deemed received
by the Corporation) in connection with such issuance or sale
(or deemed issuance or sale), determined in accordance with
Subsection 5.3(e) hereof, would purchase at a price per share
equal to the Adjustment Trigger Price. For purposes of this
Section 5.3, the term "Common Stock" shall include all
securities of the Corporation having characteristics
substantially equivalent to those of the Corporation's Common
Stock.
(c) Deemed Sale or Issuance of Common Stock. For
purposes of this Section 5.3, the following events shall be
deemed an issuance or sale of Common Stock:
(i) Issuance of Rights, Warrants or Options.
If the Corporation in any manner grants any rights, warrants
or options to subscribe for or to purchase Common Stock (such
rights, warrants or options being herein called "Options") and
the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Adjustment
Trigger Price, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options shall
be deemed to have been issued and sold by the Corporation upon
the grant of such Options for such price per share. For
purposes of this paragraph, the "price per share for which
Common Stock is issuable" will be determined by dividing (x)
the total amount, if any, received or receivable by the
Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such
Options, by (B) the total maximum number of shares of Common
Stock issuable upon the exercise of all such Options. No
further adjustment of the Conversion Rate shall be made when
shares of Common Stock are actually issued upon the exercise
of such Options.
(ii) Issuance of Convertible Securities. If
the Corporation in any manner issues or sells any securities
convertible into or exchangeable for Common Stock (such
convertible or exchangeable securities being herein called
"Convertible Securities") and the price per share for which
Common Stock is issuable upon such conversion or exchange is
less than the Adjustment Trigger Price, then the total maximum
number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities shall be deemed to
have been issued and sold by the Corporation for such price
per share upon the issuance or sale of such Convertible
Securities. For purposes of this paragraph, the "price per
share for which Common Stock is issuable" shall be determined
by dividing (x) the total amount received or receivable by the
Corporation as consideration for the issuance or sale of such
Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation
upon the conversion or exchange thereof, by (y) the total
maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Rate shall be made when
shares of Common Stock are actually issued upon the conversion
or exchange of such Convertible Securities.
(iii) Treatment of Expired Options and
Unexercised Convertible Securities. Upon the expiration of any
Option or the termination of any right to convert or exchange
any Convertible Securities without exercise of the underlying
option or right, provided such Options or Convertible
Securities are not reissued by the Corporation, the Conversion
Rate then in effect hereunder will be adjusted to the
Conversion Rate that would have been in effect at the time of
such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
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(iv) Integrated Transactions. In case any
Option is issued in connection with the issuance or sale of
other securities of the Corporation together comprising one
integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of One
Cent ($0.01).
(d) Certain Events Excepted. Notwithstanding the
other provisions of this Section 5.3, the following events
shall not trigger an adjustment to the Conversion Rate:
(i) the issuance or sale (or deemed issuance
or sale) of Common Stock reserved for issuance in connection
with the Conversion of Class A Convertible Preferred Stock;
(ii) the issuance or sale (or deemed
issuance or sale) of Common Stock reserved for issuance upon
the exercise of warrants purchased under the Purchase
Agreement; and
(iii) the grant of Options, or the issuance
or sale (or deemed issuance or sale) of Common Stock, to
officers, employees, directors, consultants or advisors of the
Corporation pursuant to any stock option plan or restricted
stock purchase plan adopted by the Corporation.
(e) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or
sold, or deemed to have been issued or sold, for cash, the
consideration received therefor shall be deemed to be the net
amount of cash received by the Corporation therefor. In case
any Common Stock, Option or Convertible Security is issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be the fair market value of such consideration. If any
Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Corporation is the
surviving corporation, the amount of consideration therefor
shall be deemed to be the fair market value of such portion of
the net assets and business of the non-surviving corporation
as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair market value of any
consideration other than cash and securities shall be
determined by the Board of Directors of the Corporation.
(f) Dividend in Common Stock. If the Corporation pays
a dividend in shares of its Common Stock, the Conversion Rate
shall be increased by multiplying the Conversion Rate then in
effect by a fraction, the numerator of which shall be the sum
of (A) the number of shares of Common Stock outstanding at the
opening of business on the date fixed for such dividend plus
(B) the total number of shares constituting such dividend, and
the denominator of which shall be the number of shares of
Common Stock outstanding at the opening of business on the
date fixed for such dividend.
(g) Subdivision or Combination of Common Stock. If
the Corporation at any time subdivides (by any stock split,
stock dividend, recapitalization or otherwise) the outstanding
shares of Common Stock into a greater number of shares, the
Conversion Rate and the Adjustment Trigger Price in effect
immediately prior to such subdivision will be, respectively,
proportionately increased and decreased. If the Corporation at
any time combines (by reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of
shares, the Conversion Rate and the Adjustment Trigger Price
in effect immediately prior to such combination will be,
respectively, proportionately decreased and increased.
(h) Waiver of Automatic Adjustment. An automatic
adjustment to the Conversion Rate or the Adjustment Trigger
Price pursuant to this Section 5.3 may not be waived except by
written notice to the Corporation executed by the registered
owners of 100 percent of then outstanding shares of Class A
Convertible Preferred Stock.
5.4 Adjustment Certificate. The Treasurer or Chief
Financial Officer of the Corporation shall compute all
required adjustments to the Conversion Rate or the Adjustment
Trigger Price under this Section 5 and shall prepare a
certificate setting forth the adjusted Conversion Rate or
Adjustment Trigger Price and showing in detail the facts upon
which the adjustment was based (the "Adjustment Certificate").
The Treasurer or Chief Financial Officer shall promptly file
the Adjustment Certificate
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with the Transfer Agent, if any, for the Class A Convertible
Preferred Stock and shall promptly mail a copy of the
Adjustment Certificate to each record holder of Class A
Convertible Preferred Stock.
5.5 Notice of Certain Events. In case:
(i) the Corporation shall declare a
dividend payable in Common Stock;
(ii) of any capital reorganization
of the Corporation, reclassification of the capital
stock of the Corporation, consolidation or merger of
the Corporation with or into another corporation, or
conveyance of all or substantially all of the assets
of the Corporation to another corporation; or
(iii) of the voluntary or
involuntary dissolution, liquidation or winding-up of
the Corporation; then, and in any such case, the
Corporation shall cause to be mailed to the Transfer
Agent, if any, for the Class A Convertible Preferred
Stock and to the record holders of the outstanding
shares of Class A Convertible Preferred Stock, at
least twenty days prior to the record date for any
such event, a notice disclosing the event to occur
and the record date for determination of the
stockholders entitled to participate in such event.
5.6 Common Stock Reserve. The Corporation shall at
all times reserve and keep available, out of its authorized
but unissued Common Stock, solely for the purpose of effecting
the conversion of the shares of Class A Convertible Preferred
Stock, the full number of shares of Common Stock issuable upon
the conversion of all shares of Class A Convertible Preferred
Stock from time to time outstanding.
5.7 Taxes. The Corporation shall pay any and all
issue taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock upon conversion of shares
of Class A Convertible Preferred Stock.
6. RESTRICTIONS AND LIMITATIONS ON CORPORATE ACTION
The approval by vote of the holders of at least a
majority of the outstanding shares of Class A Convertible
Preferred Stock, voting as a single class, each share of Class
A Convertible Preferred Stock to be entitled to one vote in
each instance, shall be required for any action by the
Corporation or any amendment to the corporate charter if such
corporate action or amendment would (i) change or limit any of
the rights, preferences, or privileges of the Class A
Convertible Preferred Stock, or (ii) authorize, create, or
issue, or obligate the Corporation to authorize, create, or
issue, additional shares of Class A Convertible Preferred
Stock or shares of any other class or series of stock having
rights, preferences, or privileges senior to or on a parity
with those of the Class A Convertible Preferred Stock.
7. NO IMPAIRMENT
The Corporation will not, by amendment of its
corporate charter or through any reorganization, transfer of
capital stock or assets, consolidation, merger, dissolution,
issue or sale of securities, or through any other voluntary
action, avoid or seek to avoid the observance or performance
of any of the terms of the Class A Convertible Preferred
Stock, but will at all times in good faith assist in the
carrying out of all such terms.
8. NO REISSUANCE OF CLASS A CONVERTIBLE PREFERRED
STOCK; TERMINATION
No share or shares of Class A Convertible Preferred
Stock acquired by the Corporation by reason of conversion or
otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the
Corporation is authorized to issue. Upon the cancellation of
all outstanding shares of the Class A Convertible Preferred
Stock, these charter provisions regarding the Description and
Designation of Class A Convertible Preferred Stock shall
terminate and have no further force and effect.
7
<PAGE>
SEVENTH: The number of directors of the Corporation shall be
three (3), which number may be increased pursuant to the By-Laws of the
Corporation, but shall never be less than three (3); and the names of
the directors who shall act until the next annual meeting of
stockholders or until their successors are duly chosen and qualified
are:
Leslie B. Daniels
James K. Leslie
Thomas F. Kearns
John J. Thebault
Roger C. Thies
Grover C. Wrenn
EIGHTH: No holders of any class of stock of the Corporation
shall have any preemptive rights to acquire additional stock in the
Corporation.
NINTH: A. Directors and officers of the Corporation shall not
be liable to the Corporation or its stockholders for money damages. The
purpose of this limitation of liability is to limit liability to the
maximum extent that the liability of directors and officers of Maryland
corporations is permitted to be limited by Maryland law. This
limitation of liability shall apply to events which occurred during the
term of office of any director or officer whether or not such director
or officer is serving as such at the time any proceeding in which
liability is asserted commences.
B. To the maximum extent permitted by Maryland law,
the Corporation shall indemnify its currently acting and its former
directors against any and all liabilities and expenses incurred in
connection with their services in such capacities, and shall indemnify
its currently acting and its former officers to the full extent that
indemnification shall be provided to directors, and may indemnify, to
the same extent, persons who serve and have served, at its request, as
a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture or other enterprise. This
indemnification of directors and officers shall also apply to directors
and officers who are also employees, in their capacity as employees.
The Board of Directors may by By-Law, resolution or agreement make
further provision for indemnification of employees and agents to the
extent permitted by Maryland law and for advancing expenses to the
Corporation's directors and officers and the other persons referred to
above to the extent permitted by Maryland law.
C. References to Maryland law shall include the
Maryland General Corporation Law as from time to time amended. Neither
the repeal or amendment of this Article NINTH nor any other amendment
to these Articles of Incorporation, shall eliminate or reduce the
protection afforded to any person by the foregoing provisions of this
Article NINTH with respect to any act or omission which shall have
occurred prior to such repeal or amendment.
TENTH: The following provisions are adopted for the purposes
of defining, limiting and regulating certain powers of the Corporation
and of the directors and the stockholders:
A. The Board of Directors of the Corporation is
hereby authorized and empowered 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.
B. The Board of Directors may classify or reclassify
any unissued shares by fixing or altering in any one or more respects,
from time to time before issuance of such shares, the preferences,
rights, voting powers, restrictions and qualifications of, the
dividends on, the times and prices of redemption of, and the conversion
rights of, such shares.
C. The Corporation reserves the right to amend its
Charter so that such amendment may alter the contract rights as
expressly set forth in the Charter of any outstanding stock but no such
amendment may change the terms of any class or series of any class of
outstanding stock unless such change of terms shall have been
authorized by the holders of not less than two-thirds of all shares of
such class or series of such class at the time outstanding.
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D. For so long as directors are elected by holders of
the Class A Convertible Preferred Stock, the Corporation shall not
declare any dividend on any class or series of the capital stock of the
Corporation unless such dividend shall have been approved by all of the
members of the Board of Directors elected by the holders of the Class A
Convertible Preferred Stock.
THIRD: Immediately before the effective date of this amendment, the
Corporation had authority to issue 26,500,000 shares of capital stock, divided
into 25,000,000 shares of Common Stock, par value $0.001 per share, and
1,500,000 shares of Preferred Stock, without par value, 833,300 of which have
been classified as Class A Convertible Preferred Stock. The aggregate par value
of all shares having par value was $25,000. Immediately after the effective date
of this amendment, the Corporation had authority to issue 51,500,000 shares of
capital stock, divided into 50,000,000 shares of Common Stock, $0.001 par value
per share, and 1,500,000 shares of Preferred Stock, without par value, 833,300
of which have been classified as Class A Convertible Preferred Stock. The
aggregate par value of all shares having par value is $50,000.
FOURTH: At a duly called meeting of the Board of Directors on January
20, 1998, the Board of Directors of the Corporation duly advised the foregoing
Articles of Amendment and Restatement, and at a duly called meeting of the
stockholders of the Corporation on ___________, 1998, the stockholders of the
Corporation duly approved said Articles of Amendment and Restatement.
IN WITNESS WHEREOF, PHARMAKINETICS LABORATORIES, INC. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be affixed hereunder and attested by its Secretary on this
____ day of _________ , 1998, and its President acknowledges that these Articles
of Amendment and Restatement are the act and deed of PHARMAKINETICS
LABORATORIES, INC., and, under the penalties of perjury, that the matters and
facts set forth herein with respect to authorization and approval are true in
all material respects to the best of his knowledge, information and belief.
ATTEST PHARMAKINETICS LABORATORIES, INC.
__________________________ By: __________________________(SEAL)
Taryn L. Kunkel, Secretary James K. Leslie, President
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<PAGE>
EXHIBIT B
FORM OF FURTHER AMENDMENT TO FIRST PARAGRAPH OF
ARTICLE SIXTH OF
ARTICLES OF INCORPORATION
OF PHARMAKINETICS LABORATORIES, INC.
SIXTH: The total number of shares of stock of all classes
which the Corporation has authority to issue is 11,500,000 shares,
divided into 10,000,000 shares of Common Stock, par value $.005, and
1,500,000 shares of Preferred Stock, without par value, 833,300 shares
of which have been classified as Class A Convertible Preferred Stock.
The aggregate par value of all shares having par value is $50,000. Each
share of Common Stock, par value $.001, issued and outstanding
immediately prior to the time this Article SIXTH becomes effective
shall be and is by this means automatically reclassified and changed
into one-fifth fullly-paid and nonassessable share of Common Stock, par
value $.005.
<PAGE>
EXHIBIT C
PHARMAKINETICS LABORATORIES, INC.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(Amended as of January 20, 1998)
PHARMAKINETICS LABORATORIES, INC. (the "Corporation") sets forth herein
the terms of this 1996 Non-Employee Directors Stock Option Plan (the "Plan") as
follows:
1. Purpose
-------
The Board of Directors (the "Board) believes that the success of the
Corporation depends in part on its ability to attract and retain directors with
relevant beneficial experience who are motivated to exert their best efforts on
behalf of the Corporation. The Board believes that a program that permits the
grant of stock options to Non-Employee Directors, as defined below in this
Section, promotes the long-term financial success of the Corporation by further
aligning the interests of the Non-Employee Directors with the interests of the
Corporation and its stockholders. The Plan is intended to promote the interests
of the Corporation by providing Non-Employee Directors with a program to acquire
or increase a proprietary interest in the Corporation. Each stock option granted
under the Plan (an "Option) is intended to be granted to directors of the
Corporation who are not officers or other salaried employees (the "Non-Employee
Directors" or "Optionees") of the Corporation or any "subsidiary corporation" (a
"Subsidiary") thereof within the meaning of Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Administration
--------------
(a) Administration. The Plan shall be administered by the Board or the
Compensation Committee established by the Board (the "Committee"), if the Board
duly resolves to delegate administration to the Committee, which shall have full
power and authority to take all actions, and to make all determinations required
or provided for under the Plan or any Option granted or Option Agreement (as
defined in Section 7 below) entered into hereunder and all such actions and
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by the Board or Committee to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The interpretation and construction by the Board or Committee of
any provision of the Plan or of any Option granted or Option Agreement entered
into hereunder shall be final and conclusive. The Board or Committee shall cause
a copy of this Plan to be delivered to each participant in the Plan.
(b) No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.
(c) Delegation to the Committee. In the event that the Plan or any
Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(a) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
3. Stock
-----
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of Common Stock, part value $.001 per share, of the Corporation
(the "Stock"), which shares may be authorized but unissued shares or shares that
may be purchased by the Corporation in the open market or in private
transactions. The number of shares of Stock that may be issued pursuant to
Options granted under the Plan shall not exceed in the aggregate 1,000,000
shares, which number of shares is subject to adjustment as hereinafter provided
in Section 16 below. If any Option expires, terminates, or is terminated or
canceled for any reason prior to exercise in full, the shares of Stock that were
subject to the unexercised portion of such Option shall be available for future
Options granted under the Plan.
<PAGE>
4. Eligibility. Only those directors of the Company who are Non-Employee
Directors of the Corporation and who are not holders, directly or indirectly, of
ten percent (10%) or more of the combined voting power of the Corporation are
eligible to participate in the Plan.
5. Effective Date and term of the Plan.
------------------------------------
(a) Effective Date. The Plan shall be effective as of November 25,
1996 (the "Effective Date"), the date of adoption by the Board.
(b) Term. The Plan shall terminate on the 10th anniversary of the
Effective Date.
6. Grant of Options.
-----------------
(a) Non-Employee Directors Serving on the Effective Date. Each
Non-Employee Director who is serving on the Board on the Effective Date
("Serving Director"), shall be granted on the Effective Date options to purchase
One Hundred and Twenty Thousand (120,000) shares of the Stock (the "Grant")
which shall vest in four equal installments of one-quarter (1/4) over four (4)
years. The first installment shall vest on the Effective Date of the Grant.
Thereafter, on the date of each of the next three (3) annual meetings of
stockholders at which elections to the Board are conducted (each, an "Annual
Meeting"), an installment of one-quarter (1/4) of the Grant shall vest in each
Serving Director who is reelected to the Board.
(b) Non-Employee Directors Elected or Appointed After the Effective
Date. Each Non-Employee Director who is elected or appointed to the Board after
the Effective Date ("Subsequent Director") shall be granted on the date of his
or her election or appointment an option to purchase One Hundred and Twenty
Thousand (120,000) shares of the Stock (adjusted, if applicable, as provided in
subparagraph (ii) below) which shall vest in four installments as follows:
(i) if the Subsequent Director is elected on the date of an
Annual Meeting, one-quarter (1/4) of the Grant shall vest on the date of the
Subsequent Director's election to the board. Thereafter, on the date of each of
the next three (3) Annual Meetings at which elections to the Board are
conducted, an installment of one-quarter (1/4) of the Grant shall vest in each
Subsequent Director who is reelected to the Board; and
(ii) if the Subsequent Director is appointed on a date other
than the date of an Annual Meeting, then the first installment of the Grant
shall be prorated to equal an amount equal to the product of 30,000 times a
fraction, the numerator of which shall be the number of calendar months during
which the Subsequent Director will serve on the Board prior to the next
succeeding Annual Meeting and the denominator of which shall be the number
twelve (12). Notwithstanding this formula, in no case shall the first
installment be less than fifteen thousand (15,000) shares and the amount of such
installment shall be rounded to the nearest whole share. Thereafter, on the date
of each of the next three (3) Annual Meetings an installment of one-quarter
(1/4) of the Grant shall vest in each Subsequent Director who is reelected to
the Board.
7. Option Agreement.
-----------------
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements"), to be executed by the Corporation and by the
Optionee, in such form or forms as the Board or Committee shall from time to
time determine. Option Agreements covering Options granted from time to time or
at the same time need not contain similar provisions; provided, however, that
all such Option Agreements shall comply with all terms of the Plan.
8. Option Price.
-------------
The purchase price of each share of the Stock subject to an Option (the
"Option Price") shall be fixed by the Board or Committee and stated in each
Option Agreement, and shall be equal to 100% of the fair market value of the
Stock which is deemed to be the mean of the bid and asked prices as determined
by trading over-the-counter or on an interdealer quotation system, as the case
may be, on the date the Option is granted pursuant to the terms and conditions
of Section 6 herein, or, if no sale of the Stock has been made on such day, on
the next preceding day on which any such sale has been made.
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<PAGE>
9. Term and Exercise of Options.
-----------------------------
(a) Term. Each Option granted under the Plan shall terminate, and all
rights to purchase shares thereunder shall cease, upon the expiration of ten
(10) years from the date such Option is granted, unless otherwise provided in
this Plan.
(b) Option Period and Limitations on Exercise. Except as otherwise
provided in an Option Agreement, each Option granted may be exercised in whole
or in part at any time after the date of vesting provided, however, that a
period of six months must elapse between the date of grant of an Option and the
date of disposition of the Stock purchased upon the exercise of such Option.
Notwithstanding the foregoing, the Board or Committee, subject to the terms and
conditions of the Plan, may in its sole discretion provide other time periods
during which an Option may be exercised in whole or in part while such Option is
outstanding. Any limitation on the exercise of an Option may be rescinded,
modified or waived by the Board or Committee, in its sole discretion, at any
time and from time to time after the date of grant of such Option, so as to
accelerate the time at which the Option may be exercised.
(c) Method of Exercise. An Option that is exercisable hereunder may be
exercised by delivery to the Corporation on any business day, at its principal
office, addressed to the attention of the Board, of a written notice of
exercise, which notice shall specify the number of shares with respect to which
the Option is being exercised. The minimum number of shares of Stock with
respect to which an Option may be exercised, in whole or in part, at any time
shall be the lesser of 100 shares or the maximum number of shares available for
purchase under the Option at the time of exercise. Payment of the Option Price
for the shares of Stock purchased pursuant to the exercise of an Option shall be
made (i) in cash or in cash equivalents; (ii) through the tender to the
Corporation of shares of Stock which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
fair market value (determined in the manner described in Section 8 above) on the
date of exercise; (iii) through the tender to the Corporation of Options, to the
extent of the difference between the Option Price and the fair market value of
the shares of Stock subject to such Option (determined in the manner described
in Section 8 above) on the exercise date; or (iv) by combination of the methods
described in (i), (ii), (iii) above. Payment in full of the Option Price need
not accompany the written notice of exercise provided the notice of exercise
directs that the Stock certificate or certificates for the shares for which the
Option is exercised by delivered to a licensed broker applicable to the
Corporation as the agent for the individual exercising the Option and, at the
time such Stock certificate or certificates are delivered, the broker tenders to
the Corporation cash (or cash equivalents acceptable to the Corporation) equal
to the Option Price for the shares of stock purchased pursuant to the exercise
of the Option plus the amount (if any) of taxes and/or charges which the
Corporation may, in its judgment, be required to withhold with respect to the
exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Promptly after the exercise of an Option and the payment in full of the Option
Price of the shares of Stock covered thereby, the individual exercising the
Option shall be entitled to the issuance of a stock certificate or certificates
evidencing his ownership of such shares; provided however, that the Corporation
shall have the right to withhold and deduct from the number of shares of Stock
deliverable upon exercise of an Option, a number of shares having an aggregate
fair market value (determined in the manner described in Section 8 above) equal
to the amount of any taxes and other charges the Corporation or any Subsidiary
is obligated to withhold or deduct from amounts payable to such individual. An
individual holding or exercising an Option shall have none of the rights of a
shareholder until the shares of Stock covered thereby are fully paid and issued
to him, and except as provided in Section 16 below, no adjustment shall be made
for dividends or other rights, if any, for which the record date is prior to the
date of such issuance.
10. Transferability of Options.
---------------------------
During the lifetime of an Optionee to whom an Option is granted, any
such Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise the Option. No Option
shall be assignable or transferable by the Optionee to whom it is granted, other
than by will or the laws of the descent and distribution.
11. Termination of Service.
-----------------------
Any Option granted to a Non-Employee Director shall terminate upon the
expiration of ninety (90) days following the date on which the Non-Employee
Director ceases to be a member of the Board other than because of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Optionee. All Options that
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<PAGE>
have not vested on the date the Non-Employee Director ceases to be a member of
the Board other than by death or permanent and total disability shall expire
immediately upon said date.
12. Rights in the Event of Death or Disability.
-------------------------------------------
Any Option granted to a Non-Employee Director shall terminate upon the
expiration of one year following the date on which the Non-Employee Director
ceases to be a member of the Board by reason of death or "permanent and total
disability" as defined above or, if earlier, upon the expiration of ten years
following grant of the Option.
13. Use of Proceeds.
----------------
The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation.
14. Requirements of Law.
--------------------
(a) Violations of Law. The Corporation shall not be required to sell or
issue any shares of stock under any Option if the sale or issuance of such
shares would constitute a violation by the individual exercising the Option or
the Corporation of any provision of any law or regulation of any governmental
authority, including without limitation any federal or state securities laws or
regulations. Specifically in connection with the Securities Act of 1933 (as then
in effect with respect to the shares of Stock covered by such Option), the
Corporation shall not be required to sell or issue such shares unless the
Corporation has received evidence satisfactory to it that the holder of such
Option may acquire such shares pursuant to an exemption from registration under
such Act, and the shares of Stock to be issued upon the exercise of all or any
portion of any Option granted under the Plan shall be issued on the condition
that the Optionee represents that the purchase of Stock upon such exercise shall
be for investment purposes and not with a view to resale, distribution,
offering, transferring, mortgaging, pledging, hypothecating, or otherwise
disposing of any such Stock under the circumstances which would constitute a
public offering or distribution under the Securities Act of 1933 or the
securities laws of any state. No shares of stock shall be issued upon the
exercise of any Option unless the Corporation shall have received from the
Optionee a written statement satisfactory or legal to counsel for the
Corporation containing the above representations, stating that certificates
representing such shares may bear a legend restricting their transfer and
stating that the Corporation's transfer agent or agents may be given
instructions to stop transfer of any certificate bearing such legend. Such
representation and restrictions provided for herein shall not be required if (i)
an effective registration statement for such shares under the Securities Act of
1933 and any applicable state laws has been filed with the Securities and
Exchange Commission and with the appropriate agency or commission of any state
whose laws apply to the transaction, or (ii) an opinion of counsel satisfactory
to the Corporation has been delivered to the Corporation to the effect that the
registration is not required under the Securities Act of 1933 or under the
applicable securities laws of any state. Any determination by the Board or
Committee regarding the foregoing shall be final, binding, and conclusive. The
Corporation shall not be obligated to take any affirmative action in order to
cause the exercise of an Option or the issuance of shares pursuant thereto to
comply with any law or regulation or any governmental authority.
(b) Restriction on Transfer of Stock. The certificate or certificates
for Stock issued upon the exercise of an Option shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO AN INVESTMENT REPRESENTATION ON THE PART OF THE HOLDER
THEREOF AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED, WHETHER OR NOT FOR CONSIDERATION EXCEPT UPON
THE ISSUANCE TO THE ISSUER OF A FAVORABLE OPINION OF ITS COUNSEL
AND/OR DELIVERY OF OTHER EVIDENCE SATISFACTORY TO COUNSEL TO THE
ISSUER, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE
STATE SECURITIES LAWS.
15. Amendment and Termination of the Plan.
--------------------------------------
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The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. Except as permitted under Section 16 hereof, no amendment, suspension
or termination of the Plan shall, without the consent of the holder of the
Option, alter or impair rights or obligations under any Option theretofore
granted under the Plan.
16. Effect of Changes in Capitalization.
------------------------------------
(a) Changes in Stock. If the outstanding shares of Stock are increased
or decreased or changed into or exchanged for a different number or kind or
shares or other securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other increase
or decrease in such shares effected without receipt of consideration by the
Corporation, occurring after the effective date of the Plan, the number and
kinds of shares for the purchase of which Options may be granted under the Plan
shall be adjusted proportionately and accordingly by the Corporation. In
addition, the number and kind of shares for which Options are outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the holder of the Option immediately following such event shall, to the
extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Option Price
payable with respect to shares subject to the unexercised portion in the Option
outstanding but shall include a corresponding proportionate adjustment in the
Option Price per share.
(b) Reorganization in which the Corporation is the Surviving
Corporation. Subject to Subsection (d) hereof, if the Corporation shall be the
surviving corporation in any reorganization, merger, share exchange or
consolidation of the Corporation with one or more other corporation, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
(c) Reorganization in which the Corporation is not the Surviving
Corporation or Sale of Assets or Stock. In the event of the commencement of a
tender offer (other than by the Corporation) for any shares of the Corporation
or a sale or transfer, in one or a series of transactions, of assets having a
fair market value of 50% or more of the fair market value of all assets of the
Corporation, or a merger, consolidation or share exchange pursuant to which
shares of the Corporation may be exchanged for or converted into cash, property,
or securities of another issuer, or the liquidation of the Corporation (an
"Extraordinary Event"), then regardless of whether or not any Option granted
pursuant to the Plan shall have vested or become fully exercisable, all Options
granted pursuant to the Plan shall immediately vest and become fully exercisable
for the full number of shares subject to any such Options on and at all times
after the "Event Date" of the Extraordinary Event.
(i) The "Event Date" is the date of the commencement of the
tender offer, if the Extraordinary Event is a tender offer, and in the case of
any other Extraordinary Event, the day preceding the date as of which
shareholders of record become entitled to the consideration payable in respect
of such Extraordinary Event.
(ii) In the case of an Extraordinary Event other than a tender
offer, the exercise of an Option pursuant to this Section prior to the Event
Date shall be effective on and as of the Event Date. Upon the exercise of an
Option upon the occurrence of an Extraordinary Event, the Corporation shall
issue, on and as of the effective date of such exercise, all shares with respect
to which the Option shall have been exercised.
(iii) In the event of the exercise pursuant to this Section of
any Option the Option Price for which shall to have been fixed as of the Event
Date, the Option Price in respect of such Option shall be equal to the average
fair market value (determined in the manner described in Section 8 above) for
the 30 days preceding the announcement or other publication of the Extraordinary
Event.
(iv) In the event that an Optionee fails to exercise his or
her Option, in whole or in part, pursuant to this Section upon an Extraordinary
Event, the Corporation shall take such action as may be necessary to enable each
Optionee to receive upon any subsequent exercise of his or her Option, in whole
or in part, in lieu of shares of the Corporation, securities or other assets as
were issuable or payable upon such Extraordinary Event in respect of, or in
exchange for, such shares.
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<PAGE>
(d) Adjustments. Adjustments under this Section 16 related to stock or
securities of the Corporation shall be made by the Board or Committee, whose
determination in that respect shall be final, binding, and conclusive. No
fractional shares of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
(e) No Limitations on Corporation. The grant of an Option pursuant to
the Plan shall not affect or limit in any way the right or power of the
Corporation to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge, consolidate, dissolve, or
liquidate, or sell or transfer all of any part of its business or assets.
17. Disclaimer of Rights.
---------------------
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the service of the Corporation or any
Subsidiary, or to interfere in any way with the right and authority of the
Corporation or any Subsidiary either to increase or decrease the compensation of
any individual at any time, or to terminate any relationship between any
individual and the Corporation or any Subsidiary.
18. Non-Exclusivity of the Plan.
----------------------------
The adoption of the Plan shall not be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
19. Governing Law.
--------------
This Plan shall be construed and governed under the laws of the State
of Maryland.
6
<PAGE>
PROXY PRELIMINARY COPY
----------------
PHARMAKINETICS LABORATORIES, INC.
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
to be held on ___________________, 1998
The undersigned hereby appoints James K. Leslie and Taryn L. Kunkel, or
either of them as attorney- or attorneys-in-fact of the undersigned, with full
power of substitution in them and in each of them, to vote in the name, place
and stead of the undersigned, in the manner indicated herein, and with
discretionary authority as to any other matters that may properly come before
the meeting, all shares of common stock of PharmaKinetics Laboratories, Inc.
which the undersigned is entitled to vote at the Special Meeting in Lieu of
Annual Meeting of Stockholders of PharmaKinetics Laboratories, Inc. to be held
on______________, 1998 at 11:00 a.m., local time, at the offices of the Company
located at 302 West Fayette Street, Baltimore, Maryland 21201, or at any
adjournment thereof. THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF
DIRECTORS.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is indicated, this proxy
will be voted FOR Proposals Two through Five, and FOR each of the nominees for
director named below. The Board of Directors recommends a vote FOR all of the
nominees for director named below and FOR all of the proposals set forth below.
ITEM 1
To elect directors (for all of the following nominees except as marked to the
contrary):
Thomas F. Kearns, Jr., James K. Leslie, Roger C.Thies, and Grover C. Wrenn
_____ FOR all nominees, except as indicated
_____ Withhold authority for all nominees
To withhold authority for any individual nominee(s), write the nominee(s)
name(s) below:
- ----------------------------------------------------------------
ITEM 2
To ratify the selection of Coopers & Lybrand as independent auditors for the
fiscal year ending June 30, 1998.
______FOR _______AGAINST _______ABSTAIN
ITEM 3
To approve and adopt an amendment and restatement of the Company's Charter,
among other things, in order to increase the number of authorized shares of the
Company's Common Stock.
______FOR _______AGAINST _______ABSTAIN
ITEM 4
To approve a five to one reverse stock split and the change of authorized shares
of the Company's Common Stock to 10,000,000 shares, par value $.005 per share.
______FOR _______AGAINST _______ABSTAIN
<PAGE>
ITEM 5
To ratify the adoption of the PharmaKinetics Laboratories, Inc. 1996
Non-Employee Directors Stock Option Plan, as amended.
______FOR _______AGAINST _______ABSTAIN
ITEM 6
In their discretion, to act upon any other matter that may properly come before
the meeting or any adjournment thereof.
______FOR _______AGAINST _______ABSTAIN
Proxy must be signed exactly as the name appears herein.
Receipt of notice of the meeting and proxy statement is hereby
acknowledged, and the terms of the notice and statement are hereby incorporated
by reference into this proxy. The undersigned hereby revokes all proxies
heretofore given for the meeting described on this proxy.
Please mark, sign, date and return this proxy promptly using the
enclosed envelope. If signing for a trust, estate, corporation, or other entity,
please state your title or the capacity in which you are signing. If shares are
held jointly, each joint owner should personally sign.
Dated: __________________, 1998 Signatures: ________________________
________________________
________________________
2
