PHARMACEUTICAL FORMULATIONS, INC.
460 Plainfield Avenue
Edison, New Jersey 08818
____________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 1995
To the Stockholders of Pharmaceutical Formulations, Inc.:
You are hereby notified that the Annual Meeting of
Stockholders of Pharmaceutical Formulations, Inc., a Delaware
corporation (the "Company") will be held at The Plaza Hotel, New
York, New York, on Thursday, November 9, 1995, at 4:30 p.m.
local time, for the following purposes:
1. To elect five members to the Board of Directors of the
Company for a term of one year, to serve until their
respective successors are elected and qualified;
2. To consider and vote on an amendment to the
Certificate of Incorporation to authorize a new class
of 10,000,000 shares of Series Preferred Stock with
such terms as the Board of Directors may, from time to
time, determine;
3. To ratify the selection by the Company of BDO Seidman,
LLP as independent auditors of the Company for the
year ending June 30, 1996; and
4. To transact such other matters as may properly come
before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on
September 29, 1995 (the "Record Date"), are entitled to notice
of and to vote at the meeting or any adjournments thereof.
A proxy statement and proxy are enclosed herewith. If you
are unable to attend the meeting in person you are urged to
sign, date and return the enclosed proxy promptly in the
enclosed addressed envelope which requires no postage if mailed
within the United States. If you attend the meeting in person,
you may withdraw your proxy and vote your shares. Also enclosed
herewith is the Company's Annual Report for Fiscal 1995.
By Order of the Board
of Directors
Sandra J. Brown, Secretary
Edison, New Jersey
October ___, 1995
<PAGE>
PROXY STATEMENT
PHARMACEUTICAL FORMULATIONS, INC.
460 Plainfield Avenue
Edison, New Jersey 08818
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation of proxies for use at the Annual Meeting of
Stockholders (the "Annual Meeting") of Pharmaceutical
Formulations, Inc. (the "Company") to be held on Thursday, November 9,
1995, and at any adjournments thereof. The accompanying proxy is solicited
by the Board of Directors of the Company and is revocable by the stockholder
by notifying the Company's secretary at any time before it is voted, by
giving a valid proxy bearing a later date or by voting in person at the
Annual Meeting. This proxy statement and accompanying proxy
will be distributed to stockholders of the Company beginning on
or about October ___, 1995. The principal executive offices of
the Company are located at 460 Plainfield Avenue, Edison,
New Jersey 08818, telephone (908) 985-7100.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record of the Company at the close of
business on September 29, 1995, are entitled to receive notice
of, and vote at, the Annual Meeting. As of that date, the
number and class of stock outstanding and entitled to vote at
the meeting was 29,403,641 shares of common stock, par value
$.08 per share (the "Common Stock"). Each share of Common Stock
is entitled to one vote on all matters. No other class of
securities will be entitled to vote at the meeting. There are
no cumulative voting rights.
The director nominees who receive the highest number of
votes for the number of positions to be filled will be elected.
Except as otherwise required by law or the Company's Certificate
of Incorporation, an affirmative vote of the holders of the
majority of the shares present or represented by proxy at the
Annual Meeting is required for the approval of each of the other
matters to be voted upon. Abstentions will be treated as votes
cast on a particular matter as well as shares present and
represented for purposes of establishing a quorum, with the
result that an abstention has the same effect as a negative
vote. Where nominee record holders do not vote on specific
issues because they did not receive specific instructions on
such issues from the beneficial owners, such broker nonvotes
will not be treated as votes cast on a particular matter, and
will therefore have no effect on the vote, but will be treated
as shares present or represented for purposes of establishing a
quorum. A quorum is representation in person or by proxy at
the Annual Meeting of at least one-third of the outstanding
shares of the Company. ICC Industries Inc. ("ICC"), an
affiliate of the Company with an address of 460 Park Avenue, New
York, NY, owns 19,635,894 shares (approximately 66.7% of the
total number of shares outstanding). Accordingly, ICC may elect
all of the directors, ratify the selection of BDO to audit the
financial statements of the Company, and generally
take any action upon which the stockholders are requested to
vote. ICC has indicated that it intends to approve all
proposals set forth in this Proxy Statement and vote in favor of
the election of all nominated directors (except that it has
agreed to vote its shares on Proposal No. 2, the authorization
of a class of series preferred stock, proportionately to the
votes on that issue cast by all other stockholders actually
voting on such issue). Therefore, approval of Proposal No. 3
and the election of all directors who have been nominated is
assured.
A list of stockholders of the Company satisfying the
requirements of Section 219 of the Delaware General Corporation
Law shall be available for inspection for any purpose germane to
the meeting during normal business hours at the offices of ICC
Industries Inc., 460 Park Avenue, New York, NY at least 10
days prior to the Annual Meeting.
PROPOSAL NO.1
ELECTION OF DIRECTORS
Each nominee to the Board of Directors will serve until the
next Annual Meeting of stockholders, or until his earlier
resignation, removal from office, death or incapacity.
ICC has advised the Company that it plans to nominate
members to the Company's Board of Directors from time to time,
in accordance with the laws of the State of Delaware and the
By-Laws of the Company. Messrs. Oram and Cheesman have been
nominated pursuant to the request of ICC. Additional
nominees to the Board of Directors can be appointed to the Board
by ICC, as majority stockholder. Upon any such appointments,
the Company will issue a press release to identify the
appointee.
Unless otherwise specified, the enclosed proxy will be
voted in favor of the election of Max A. Tesler, John L. Oram,
Ray W. Cheesman, Ben Blackshire and Michael Callahan (or for
substitute nominees in the event of contingencies not known at
present). Information is furnished below with respect
to all nominees.
Each of the nominees named below has served as a director
during the fiscal year ended June 30, 1995 ("Fiscal 1995").
Information with respect to the principal occupation or
employment of the nominees, the name and principal business of
the corporation or other organization in which such occupation
or employment is carried on and other affiliations and business
experience during the past five years has been furnished to the
Company by the respective nominees.
The Board of Directors unanimously recommends that the
shareholders vote FOR the election as directors of the nominees
listed below for terms expiring in 1996. If one or more of the
nominees should become unavailable or unable to serve at the
time of the Annual Meeting, the shares to be voted for such
nominee or nominees which are represented by proxies will be
voted for any substitute nominee or nominees designated by the
Board or, if none, the size of the Board will be reduced. The
Board knows of no reason why any of the nominees will be
unavailable or unable to serve at the time of the Annual
Meeting.
DR. MAX A. TESLER, age 64, has been Chairman of the
Company's Board of Directors since its formation in
June 1981 and Chief Executive Officer since July
1, 1983. Dr. Tesler has been President of the Company
from 1983 until August 1990, and from April 1991 to
the present. From 1962 to 1982, and from 1991 to
the present, Dr. Tesler has been an attending
physician in charge of gastroenterology at St. Clare's
Hospital in New York City and an Assistant in
Medicine at New York University Hospital. Dr. Tesler
was a director of MTG Capital Corp., a publicly-held
company, from November 1988 until or about
December 1991. Dr. Tesler received a degree from New
York University in 1951, and his Doctor of Medicine
degree from New York University-Bellevue Medical
School in 1955. Although Dr. Tesler still maintains a
very limited private practice of medicine, to which he
devotes approximately eight hours per week, he devotes
substantially all of his business time to the
Company's affairs.
BEN BLACKSHIRE, age 58, has been a director of the
Company since December 1989. Since 1987, Mr.
Blackshire has been President and Chief
Executive Officer of Stratagem, Inc., a company which
licenses pharmaceutical products to United States
companies from international pharmaceutical
companies. From 1983 to 1987, Mr. Blackshire was
Chairman and Chief Executive Officer of B.C.
Christopher & Co., of Kansas City, Missouri, a
securities and commodities broker-dealer.
MICHAEL CALLAHAN, age 47, has been a director of the
Company since July 1993. Since December 1994, Mr.
Callahan has been Chief Financial Officer and
Operating Officer and member of the Executive
Committee of the Board of Directors of Intersport
Limited, a company engaged in the design, marketing
and distribution of athletic equipment. From March
1989, until January 1994, Mr. Callahan was employed as
Chief Financial Officer and a director of Candie's,
Inc. ("Candie's"), a publicly traded company engaged
in the design, marketing and distribution of footwear.
From February 1992 through February 1993, Mr.
Callahan was also President of Candie's. From
February 1987 through March 1989, Mr. Callahan was
Vice President - Finance of Coherent Communications, a
company engaged in the manufacture of
telecommunications equipment. Mr.
Callahan is a licensed Certified Public Accountant.
RAY W. CHEESMAN, age 64, has been a director of the
Company since July 1993, and has been a consultant to
KPMG Peat Marwick, an international accounting firm
since 1987. Prior thereto, Mr. Cheesman was a partner
in such firm. Mr. Cheesman is a licensed Certified
Public Accountant.
JOHN L. ORAM, age 51, has been a director of the
Company since July 1993. Mr. Oram has been President
and Chief Operating Officer of ICC since 1987.
ICC, an affiliate of the Company, is a major
international manufacturer and marketer of chemical,
plastic and pharmaceutical products. Since 1980, Mr.
Oram has been a director of Electrochemical Industries
(Frutarom) Ltd., an Israeli subsidiary of ICC listed
on the Tel-Aviv and American Stock Exchange
engaged in the manufacture and distribution of
chemical products.
Compensation of Directors; Board Meetings
Members of the Board of Directors who are not employees of the Company
or ICC are compensated at the rate of $2,500 per year, plus
$500 for each meeting attended. Members are also paid for
special projects undertaken on behalf of the Company and
for actual expenses incurred in connection with their attendance
at Board meetings. In Fiscal 1995 the three directors who were
not officers of the Company or ICC also received stock grants of
15,000 shares as additional compensation for services performed
as a director (valued at $.375 per share) and options to
purchase 75,000 shares of Common Stock at $.91 per share, 50,000
of which were immediately exercisable and 25,000 of which become
exercisable on December 16, 1995).
Eight meetings of the Company's Board of Directors were
held during the fiscal year ended June 30, 1995. All of the
incumbent directors attended at least 75% of the meetings of the
Board and committees of which they are members in fiscal 1995.
Board Committees
The Board of Directors has Audit and Compensation
Committees but does not have any Nominating Committee. The
Board also appoints the members of the Stock Option Committee
constituted under the Company's 1994 Stock Option Plan. The
members of the Audit Committee and the Stock Options Committee
are Messrs. Cheesman, Blackshire and Callahan. The members of
the Compensation Committee are Messrs. Oram, Cheesman,
Blackshire and Callahan. The Compensation Committee met
twice in fiscal 1995. Its function is to review compensation
issues; approve salaries and review benefit programs for the
executive officers; review and recommend incentive compensation
(including stock compensation) plans; and approve any employment
contracts with, or other contractual benefits for,
executive officers. The Audit Committee met three times in
fiscal 1995. It performs activities, and reviews and makes
recommendations, relating to the accounting controls, audit and
financial statements of the Company. The Stock Option Committee
makes awards under, prescribes rules for and interprets the
provisions of the Company's 1994 Stock Option Plan. It met once
times during fiscal 1995.
MANAGEMENT
The current executive officers and directors of the Company
are set forth below:
<TABLE>
<CAPTION>
Name Positions
<S> <C>
Dr. Max A. Tesler President, Chief Executive Officer and Director
Frank Marchese Vice President, Finance; Chief Financial Officer;
and Treasurer
George Chin Executive Vice President, Sales & Marketing
Anthony Cantaffa Vice President, Mergers & Acquisitions
Alessandro Pierpaoli Vice President, Technical Affairs
Brian W. Barbee Vice President, Quality Assurance, Quality Control and
Regulation
Sandra J. Brown Secretary
John L. Oram Director
Ray W. Cheesman Director
Ben A. Blackshire Director
Michael Callahan Director
</TABLE>
FRANK MARCHESE, age 40, has been the Company's Vice
President, Finance, Chief Financial Officer and Treasurer since
September 1995. He was Vice President, Finance and
Administration of the Company's subsidiary Private Formulations,
Inc. from October 1992 until July 1995 when it was merged
into the Company. Mr. Marchese was formerly Vice President,
Finance of Primex Plastics, Inc., a subsidiary of ICC Industries
Inc, from August 1989 to September 1992. Mr. Marchese is a
licensed Certified Public Accountant.
GEORGE CHIN, age 42, has been Vice President, Sales &
Marketing, since 1991. Mr. Chin was Field Sales Manager from
1989 until 1991. Prior to joining the Company, he was National
Account Manager of Perigo Company, a store brand health and
beauty aids manufacturer, from 1986 to 1989 and District
Supervisor of Beecham Products. Mr. Chin attended Bard College
in New York City.
ANTHONY CANTAFFA, age 52, has been the Company's Vice
President, Mergers & Acquisitions since September 1995. He was
also Chief Financial Officer and Treasurer from 1988 until
August 1990 and from April 1991 to August 1995. Mr. Cantaffa
was also the Company's Chief Operating Officer from 1988 until
May 1995. Mr. Cantaffa has also been employed as the Company's
Vice President-Finance since 1987 and Corporate Controller since
1983. Mr. Cantaffa graduated from Fairleigh Dickinson
University in 1969 with a B.S. degree in Accounting and obtained
a Masters Degree in Finance from that institution in 1971.
A. RANDALL PIERPAOLI, Ph.D., age 51, has been the Company's
Vice President, Technical Affairs, since September 1995. From
December 1991 to February 1994, he held directorships for
Quality Control and Analytical R&D and was senior GMP compliance
officer at Barr Laboratories, Inc., a premier independent
producer of generic ethical drugs; he was Executive Director,
R&D Technical Affairs, from February 1994 until his departure in
1995. From July 1984 to December 1991, Dr. Pierpaoli was
divisional Quality Control Manager and Corporate QA Liaison for
the Consumer Healthcare Division of Pfizer, Inc. Dr. Pierpaoli
holds a Ph.D. in Physical Chemistry and is an acknowledged
expert in regulatory, statistical, and analytical protocols
appropriate to drug manufacture and testing.
BRIAN W. BARBEE, age 45, has been Vice President, Quality
Assurance/Quality Control and Regulatory, since January 1993.
He joined the Company in 1978 and held the Directorship of its
laboratory from 1987 until 1993. Mr. Barbee holds a B.A. in
Biology from Boston University and an M.S. in Zoology from
Rutgers University.
SANDRA J. BROWN, age 50, has been Secretary of the Company
since its formation in June 1981 and was a director of the
Company from 1981 until 1988. Ms. Brown was Treasurer of the
Company from June 1981 to August 1983. Ms. Brown received an
associate degree in science from Dean Junior College in 1965.
EXECUTIVE COMPENSATION
Report of the Compensation Committee and Stock Option Committee
on Compensation of Executive Officers of the Company*/fn/This
section shall nto be deemed incorporated by reference by any
general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent
the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts./fn/
Compensation Philosophy
The philosophy of the Company's compensation for executive
officers has been to provide reasonably competitive levels of
compensation, reward corporate performance and recognize
individual initiative and achievements in achieving corporate
goals. The Company does not determine compensation
based on any specific formulas, targets or weighed criteria.
Base Salaries
The base salaries for each of the persons who were
executive officers in Fiscal 1995 is determined by employment
contracts which were first entered into in February 1984 and (as
amended) expire in December 1997, for the President and December
1996 for the Vice President, Mergers & Acquisitions and
for the Secretary.
Incentive Compensation
Annual incentive compensation is based primarily on
corporate operating performance and includes an informal overall
assessment by the Committee of each executive officer's role in
helping the Company to achieve its goals. Incentive
compensation has taken the form of cash bonuses and, for certain
officers, stock grants.
Stock Options
In Fiscal 1995, the Stock Option Committee granted stock
options to key employees to reward them for their contribution
to the Company's long-term share performance and to provide
incentives to encourage future efforts.
Chief Executive Officer's Compensation
Dr. Tesler, the Company's President and Chief Executive
Officer, is being compensated pursuant to an employment
agreement, which sets forth all of the elements of his
compensation. See "Employment Contracts and Change-in-Control
Arrangements". The initial salary level was based on
negotiation between the Company and the employee and does not
vary based on the Company's performance. Dr. Tesler also
receives stock grants if holders of certain outstanding
convertible securities exercise their rights thereunder,
such grants being made pursuant to the terms of an agreement
between the Company and ICC. See "Related Transactions"
regarding grants in Fiscal 1995.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in
1993, generally disallows a tax deduction beginning in 1994 to
public companies for compensation over $1 million received by a
corporation's Chief Executive Officer and four other most highly
compensated executive officers if not pursuant to qualifying
performance-based plans. No executive officer's cash
compensation was in excess of $1,000,000 in Fiscal 1995 and, at
this time, it is not anticipated that any executive officer of
the Company will receive any such cash compensation in excess of
this limit during 1995. Therefore, during Fiscal 1995 the
Committee did not take any action to comply with the new limit.
Conclusion
The Committee believes the current compensation structure
appropriately compensates its officers in a manner that relates
to performance and to the shareholders' long-term interests.
The Committee will continue to review compensation practices,
with respect to both overall arrangements and the compensation
of specific officers.
Respectfully submitted,
For the Compensation Committee:
John Oram
Ray Cheesman
Ben Blackshire
Michael Callahan
For the Stock Option Committee:
Ray Cheesman
Ben Blackshire
Michael Callahan
Compensation Committee Interlocks and Insider Participation
No members of the Company's Compensation Committee or Stock
Option Committees are employed by the Company. No director of
the Company served, during the last completed fiscal year, as
an executive officer of any entity whose compensation committee
(or other comparable committee, or the Board, as appropriate)
included an executive officer of the Company. There are no
"interlocks" as defined by the Securities and Exchange
Commission ("SEC").
Compensation Tables
This section of the Proxy Statement discloses Fiscal 1995
plan and non-plan compensation awarded or paid to, or earned by,
the Company's Chief Executive Officer ("CEO") and, of the
Company's other executive officers at June 30, 1995, each of the
persons who received in Fiscal 1995 salary and bonuses exceeded
$100,000 (together, these two persons are sometimes referred to
as the "Named Executives").
<PAGE>
Summary Compensation Table
The following table contains compensation data for the
Named Executives for the past three fiscal years:
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Salary Bonus Compensation Awards Options Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Max A. Tesler,
President and 1995 $242,000 $30,000 $ 7,000 $50,0001
Chief Executive 1994 223,000 22,000 50,0001
Officer 1993 200,000 54,000 333,2002 42,0001
Anthony Cantaffa, 1995 $145,000 $15,000
Vice President, 1994 132,000 5,000 26,8002
Mergers & 1993 122,500 5,000
Acquisitions
___________________________
</TABLE>
1 Consists of $50,000, $50,000 and $42,000 paid in fiscal
1995, 1994 and 1993, respectively, in connection
with the waiver of certain provisions of Dr. Tesler's
employment agreement in connection with the change of
control provision of such agreement. See "Employment
Agreements."
2 Issued in connection with the waiver of certain provisions
of Dr. Tesler's employment agreement in connection with the
change of control provision of such agreement.
Option Grants in Fiscal 1995
The following table contains information concerning the
grant of stock options under the Company's stock option plans to
the Named Executives during fiscal 1995 (the Company has no
outstanding stock appreciation rights -- "SARs" -- and granted
no SARs during fiscal 1995):
<TABLE>
<CAPTION>
Individual Grants
Percent of Potential Realizable Value
Number of Total at Assumed Annual Rates of
Securities Options Stock Price Apprciation
Underlying Granted to Exercise for Option
Options Employees in Price Expiration Term1
Name Granted (#)2 Fiscal Year ($/Share)3 Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Max A. 162,500 27% $.85 1999-2001 $0 $24,000
Tesler
Anthony 85,000 14% $.85 1999-2001 $0 $13,000
Cantaffa
</TABLE>
_____________________
1 Executives may not sell or assign any stock grants, which
have value only to the extent of stock price appreciation,
which will benefit all shareholders commensurately. The
amounts set forth are based on assumed appreciation rates
of 5% and 10% as prescribed by the Securities and Exchange
Commission rules and are not intended to forecast future
appreciation, if any, of the stock price. The company did
not use an alternate formula for a grant date valuation as
it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown
or volatile factors. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the
future performance of the Common Stock and overall stock
market conditions. There can be no assurance that the
amounts reflected in this table will be achieved.
2 All of the noted options are exercisable in three equal
installments, commencing on the date of grant and each
installment is exercisable for five years.
3 The exercise price is equal to or higher than the fair
market value of the Company's Common Stock on the date of
the grant.
Aggregated Option Exercises in Fiscal 1995
and Fiscal Year-End Option Value
No options or SARs were exercised by any executive officer
of the Company during fiscal 1995. The following table sets
forth information with respect to the Named Executives
concerning unexercised options held at fiscal year-end (as noted
above, the Company has no outstanding SARs and no SARs were
exercised in the current fiscal year).
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Securities Underlying In-The-Money Options
Shares Value Options at 6/30/95 at 6/30/95 ($)1
Acquired On Realized
Name Exercise (#) ($)1 Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Max A. Tesler - 0 - N/A 504,033 54,167 $ 33,000 - 0 -
Anthony Cantaffa - 0 - N/A 83,467 28,333 7,000 - 0 -
</TABLE>
____________________
1 Market value of underlying securities at year end, as
applicable, minus the exercise price. The "bid"
and "asked" prices on the OTC Bulletin Board on June 30,
1995, were $.45 and $.83, respectively. Certain options
are excluded since they are "out of the money."
Employment Contracts and Change-In-Control Arrangements
Dr. Tesler, Mr. Cantaffa and Ms. Brown each have an
employment agreement with the Company. Dr. Tesler's agreement,
as amended, provides for an annual base salary of $200,000 and
expires on December 31, 1997; Mr. Cantaffa's agreement, as
amended, provides for an annual base salary of $125,000
and expires on December 31, 1996; Ms. Brown's agreement provides
for an annual base salary of $46,000 and expires on December 31,
1996. In connection with the execution of the ICC Option
Agreement described below under "Certain Relationships and
Related Transactions", as amended, Dr. Tesler, Mr.
Cantaffa and Ms. Brown each executed an amendment to their
employment agreement pursuant to which the terms of the
agreements were extended and the provisions for
cost of living increases and other provisions were deleted. Dr.
Tesler's employment agreement also provided that, in the event
of a "Change of Control" of the Company (as defined in his
agreement), he was entitled to receive cash compensation
equal to two times his last annual salary and 10% of the total
number of shares outstanding on the date of such Change of
Control on a fully diluted basis (i.e. giving effect to the
exercise of all outstanding warrants, options and other rights
to shares of the Company's Common Stock). In addition, the
employment agreement provided for Dr. Tesler to receive 5% of
pre-tax profits and specified warrants to purchase
Common Stock. Dr. Tesler waived the right to receive such
pre-tax profits and warrants in connection with the ICC Option
Agreement. Also in connection with the ICC transaction, Dr.
Tesler waived the right to receive $400,000 (twice his last
annual salary) and instead agreed to receive $50,000 per year
for four years and also agreed to receive 400,000 options to
purchase Common Stock at $.50 per share, of which
66,800 options were distributed to other key management
personnel.
Options granted under the Company's 1994 Stock Option Plan
may include provisions accelerating the vesting schedule in the
case of defined changes-in-control. Options granted to-date
under such plan have included such provision.
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION**[FN]This
section shall not be deemed incorporated by reference by any
general incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company
specifically incorporates this inforamtion by reference, and
shall not otherwise be deemed filed under such Acts.[FN]
Set forth below is a line graph and chart comparing the
yearly percentage change in the cumulative total shareholder
return (change in year-end stock price plus reinvested
dividends) on the Company's Common Stock with the cumulative
total return of the Nasdaq Stock Market Index and a peer
group for the period of five fiscal years commencing on July
1, 1990 and ending on June 30, 1995. The graph and chart
assumes that the value of the investment in the Company's stock
and for each index was $100 on July 1, 1990 and reflects
reinvestment of dividends and market capitalization weighing.
The dollar amounts indicated in the graph and chart are as of
June 30th in each year indicated.
$100 invested on 06/30/90 in stock or index including
reinvestment of dividends. Fiscal year ending June 30.
<TABLE>
<CAPTION>
Cumulative Total Return ($)
<S> <C> <C> <C> <C> <C> <C>
Registrant/Index 6/90 6/91 6/92 6/93 6/94 6/95
Pharmaceutical Formulations $100 2 10 17 25 19
Peer Group 100 78 73 83 72 45
Nasdaq Stock Market Index 100 106 127 160 162 215
</TABLE>
The common stocks of the following companies have been
included in the peer group index: Intelligent Surgical Laser,
Devbeg-Bullard, Inc., One Liberty Properties, Inc., Arrow
Automotive Industries, Inc., KRUG International Corp., EDO
Corp., GameTek, Inc., Jos. A. Banks Clothiers, Inc., K-Tron
International, Inc. and Frequency Electronics, Inc. The members
of the peer group are companies with a market capitalization
similar to that of the Company (five companies in the group have
a market capitalization immediately higher than the Company and
five have a market capitalization immediately below
that of the Company). Because of the Company's exclusive
involvement in the store-brand solid-dosage over-the-counter
pharmaceutical business and the fact that no other public
companies are engaged in this business on an exclusive basis, no
grouping could exactly mirror the Company's business. All of
the companies included in the Company's peer group index are
engaged in certain other businesses in which the Company is not
engaged. Historical stock price performance shown on the graph
is not necessarily indicative of the future price performance.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information, as of September 29,
1995, with respect to the beneficial ownership of Common Stock
by (i) each director, (ii) each Named Executive, (iii) each
person or group known to the Company to own beneficially more
than 5% of the outstanding Common Stock and (iv) all
executive officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership1 of Class
<S> <C> <C>
Dr. Max A. Tesler2 1,204,160 4.20%
30 Central Park South
New York, NY 10019
ICC Industries Inc.3 19,635,894 66.7%
460 Park Avenue
New York, NY 10022
Dr. John Farber3 19,635,894 66.7%
c/o ICC Industries Inc.
460 Park Avenue
New York, NY 10022
John L. Oram -0- -0-
c/o ICC Industries Inc.
460 Park Avenue
New York, NY 10022
Anthony Cantaffa4 175,338 -0-
c/o Pharmaceutical Formulations, Inc.
460 Plainfield Avenue
Edison, NJ 08818
Ben A. Blackshire4 65,0004 *
c/o Strateagem, Inc.
8012 State Line Road
Leawood, KS 66208
Ray W. Cheesman4 95,0004 *
c/o Pharmaceutical Formulations, Inc.
460 Plainfield Avenue
Edison, NJ 08818
Michael P. Callahan4 65,0004 *
c/o Pharmaceutical Formulations, Inc.
460 Plainfield Avenue
Edison, NJ 08818
Officers and Directors 1,785,4864 5.5%
as a Group (11 persons)4
</TABLE>
______________________________
* Less than 1%.
1 Except as described in the following notes, beneficial
ownership assumes each person or group owns the shares
directly and has sole voting and investment power with
respect to such shares. A person is deemed to be the
beneficial owner of securities that can be acquired by such
person within 60 days upon the exercise of outstanding
options.
2 Includes (i) 340,442 shares of Common Stock owned by
NuMatco, Inc. ("NuMatco"), a company of which Mr. Tesler is
sole officer, director and stockholder; (ii) currently
exercisable warrants to purchase 333,200 shares of Common
Stock, exercisable at a price of $.50 per share until
October 1, 1998; (iii) exercisable incentive stock options
to purchase a total of 78,431 shares, at a price of
$.85 per share, expiring August 29, 1999 through August 29,
2001; (iv) exercisable non-qualified options to purchase
29,902 shares at $.85 expiring on August 29, 1999; (v)
currently exercisable warrants to purchase 62,500 shares at
$1.60 per share until August 22, 1996; (vi) 20 shares
issuable upon conversion of each of 327 8% Convertible
Debentures for a total of 6,813 shares, which debentures
are owned by BTS Therapeutics Corp., a company wholly-owned
by Dr. Tesler; and (vi) 75,652 shares owned by HTA Co.
which shares represent Dr. Tesler's 50% ownership interest
in the total 151,305 shares owned by HTA.
3 Does not include approximately 3,700,000 shares includable
in connection with ICC's Limited Preemptive Rights. Dr.
Farber is the majority stockholder of ICC. See "Certain
Relationships and Related Transactions."
4 Includes shares of Common Stock subject to stock options
exercisable as of September 29, 1995 or within 60 days
thereof as follows: Mr. Cantaffa: 83,467; Mr. Blackshire:
50,000; Mr. Cheesman: 50,000; Mr. Callahan: 50,000; and
all officers and directors as a group: 850,014.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC")
and any exchange on which the Company's securities may be
traded. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain
reporting persons that no Forms 5 were required for those
persons, the Company believes that all such filing requirements
for the year ended June 30, 1995 were complied with except as
follows: one form each was filed late by Dr. Tesler, Mr.
Cantaffa and Ms. Brown with respect to the options
granted in August 1994; one form was filed late by Dr. Tesler
with respect to shares received in June 1995; one form each was
filed late by Messrs. Blackshire, Callahan and Cheesman with
respect to the options and stock bonuses which they received in
December 1994; and three forms were filed late by ICC with
respect to grants and exercises of preemptive rights in August
and September 1994 and May 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Option Agreement with ICC
In September 1991, the Company entered into an option
agreement with ICC (the "ICC Option Agreement"), subsequently
amended several times in 1992 and 1993, pursuant to which ICC
was granted certain options to acquire a total of 66.67% of the
number of shares of the Company's Common Stock outstanding after
the exercise of all options owned by ICC and certain other
outstanding options, warrants, rights and convertible
securities, all of which options have been exercised. All of
such options were exercised by May 16, 1994.
Under the ICC Option Agreement, as amended, ICC was also
granted certain preemptive rights (the "Limited Preemptive
Rights") at a price equal to the lesser of the exercise price
(or conversion price, at the case may be), of certain additional
outstanding options, warrants and other rights to purchase
shares of Common Stock (the "Convertible Securities") or $.25
(except with respect to certain warrants to purchase 400,000
shares of the Company's Common Stock granted to management in
September 1992, in which case the price is $.50). The Limited
Preemptive Rights are exercisable for a period of 45 days after
the Company sends notice to ICC that shares have been issued in
connection with any outstanding Convertible Securities. The
Company cannot predict whether any shares will be issued
pursuant to the exercise of outstanding Convertible Securities
or whether ICC will exercise any preemptive rights.
The only events in Fiscal 1995 which necessitated an
antidilution adjustment or preemptive right with respect to the
ICC Option Agreement occurred in (a) August and September 1994
when ICC exercised its right to purchase an aggregate of 4,798
shares of Common Stock at a per share purchase price of $.25,
which right arose as a result of the conversion in June 1994 of
8.25% Convertible Debentures into 2,167 shares of Common Stock
and the issuance of 233 shares to key management, payment for
which was made in cash and (b) in May 1995, when ICC exercised
its right to purchase 269,670 shares of Common Stock at a
per-share purchase price of $.25, which right arose as a result
of the conversion in April 1995 of 8.25% Convertible Debentures
into 121,727 shares of Common Stock and the issuance of
13,108 shares to key management, payment for which was made in
cash. In September 1995, ICC exercised its right to purchase
75,926 shares of Common Stock at a per share purchase price of
$.25, which right arose as a result of the conversion in August
1995 of 8.25% Convertible Debentures into 34,272 shares of
Common Stock and the issuance of 3,691 shares to key management,
payment for which was made in cash.
Accordingly, as of September 29, 1995, ICC owned a total of
19,635,894 shares of the Company's Common Stock, representing
approximately 66.7% of the total number of shares outstanding on
that date, and it held rights to acquire additional shares under
the Limited Preemptive Rights.
Lease Financing
ICC has also assisted the Company in obtaining certain
machinery and equipment for the expansion of the Company's
production capacity. In such cases, ICC, or its affiliates,
typically acted as lessor of the equipment for which a fee is
paid by the Company.
There are currently several leases entered into pursuant to
the Master Equipment Lease Agreements with ICC. ICC's cost for
the leased equipment was approximately $5,848,000; monthly rent
is currently approximately $135,000. The terms of the rental
are scheduled to expire at various times in the years 1995
through 2000. The Company has options to purchase the leased
equipment at the expiration of the lease terms. The Company
believes that its leasing and financing transactions are on
terms which are at least as favorable as the Company could
receive from an unaffiliated third party.
Cimetidine Agreement
In August 1993, the Company and ICC Chemical Corporation,
an affiliate of ICC, entered into a cooperative joint venture
regarding the manufacture of cimetidine, an antiulcer drug (the
"Cimetidine Agreement") pursuant to which ICC would supply raw
material, pay outside expenses relating to the preparation of
certain ANDA's and be the exclusive sales agent for
Company-manufactured products over a term of 10 years from the
date of FDA approval of the sale and distribution of such
product. As of June 30, 1995, the Company has not expended any
funds on this product.
Related Transactions
Pursuant to the ICC Option Agreement and the waiver of
certain provisions of Dr. Tesler's employment agreement, as
amended, certain members of management were issued shares of the
Company's Common Stock in Fiscal 1995 and Fiscal 1996 as
follows:
<TABLE>
<CAPTION>
Name Number of Shares Date of Issue
<S> <C> <C>
Max A. Tesler 156 shares September 1, 1994
13,108 shares June 30, 1995
3,691 shares September 20, 1995
Anthony Cantaffa 31 shares September 1, 1994
Sandra J. Brown 15 shares September 1, 1994
</TABLE>
The Company utilizes a third-party administrator to control
its partially-self-insured health benefits program. This entity
leases a portion of a 1,600-square-feet office at 30 Central
Park South in New York City at a monthly rental of $3,000 from a
corporation in which the President of the Company has a minority
interest.
PROPOSAL NO. 2
PROPOSAL TO AUTHORIZE SERIES PREFERRED STOCK
The Company's Board of Directors has unanimously approved a
proposal to amend the Company's Certificate of Incorporation to
authorize a new class of Series Preferred Stock, consisting of
10,000,000 shares, par value $1.00 per share. The Series
Preferred Stock will be issuable from time to time in series
with such series designations, number of shares in each series,
relative rights, preferences and limitations as the Board of
Directors may determine. Among the determinations to be made by
the Board of Directors at the time each series is issued would
be (a) dividend rights, including the dividend rate and whether
dividends would be cumulative; (b) conversion rights, and the
terms of any conversion; (c) voting rights, which might also
include the right to elect a specified number of directors if
dividends were not paid for a specified period of time; (d)
liquidation rights, and whether there would be any preference
with respect to such rights; and (e) redemption rights, and the
terms of any redemption, including the establishment of a
sinking fund. Holders of Series Preferred Stock will not have
preemptive rights.
Purpose
The Board of Directors believes that the authorization of
Series Preferred Stock is in the best interests of the Company
and its shareholders. Such action will provide greater
flexibility to the Company in connection with possible future
financings and acquisitions and will make such shares available
for issuance without the delay and expense of calling a special
meeting of stockholders to secure approval prior to issuing such
shares.
The Company has been in negotiations with ICC with respect
to the possible sale of preferred stock to ICC if Series
Preferred Stock is approved by the stockholders. The terms of
any such stock issuance can not be determined at this time. The
purposes of any such sale of preferred stock to ICC may
be to generate additional working capital and/or to increase the
capital of the Company in order to satisfy certain requirements
for having the Company's Common Stock being relisted on the
Nasdaq Stock Exchange. There are, however, other requirements
for listing which the Company does not yet satisfy and
there can therefore be no assurance that the sale of preferred
stock would enable the Company's Common Stock to be relisted.
Since ICC may purchase certain shares of Series Preferred
Stock if such stock is approved by the shareholders, directors
who are officers of ICC have abstained on all action related to
the Series Preferred Stock taken at the Board of Directors level
and ICC has agreed to vote its shares of Common Stock at the
Annual Meeting in proportion to the votes on such issue cast at
the Annual Meeting. In other words, if 60% of the votes
actually cast at the meeting by stockholders other than ICC are
cast in favor of the proposal and 40% are cast in opposition,
ICC will cast its shares in the same proportion. This procedure
will serve to avoid ICC's votes influencing the matter, while
still satisfying statutory requirements that a majority of the
shares present at a meeting vote for a proposal (if a majority
of the voted shares held by holders other than ICC are actually
voted for the proposal) in order for such proposal to be
adopted.
Series Preferred Stock could also be issued to effect a
"Shareholder Rights Plan" (sometimes called a "poison pill")
pursuant to which shares of Preferred Stock would be issued to
existing holders which have certain rights when another
shareholder acquires a stated percentage of the Company's stock,
which may have the effect of making the acquisition of such
stock by the other shareholder less attractive, or under other
circumstances that could make it more difficult, and thereby,
discourage attempts to acquire control of the Company or remove
incumbent management. The Company, however, has no current
intent to adopt such a plan and the Company knows of no
existing or contemplated takeover attempts.
The Board of Directors will offer the following resolution
at the Annual Meeting:
RESOLVED, that Article FOURTH of the Company's
Certificate of Incorporation shall be amended to read in its
entirety as follows:
"FOURTH. The total number of shares which the
Corporation shall have the authority to issue is fifty
million (50,000,000), which are divided into ten
million (10,000,000) Preferred Shares of a par value
of $1.00 per share and forty million (40,000,000)
Common Shares of a par value of $.08 per share. The
relative rights, preferences and limitations
of the shares of each class are as follows:
(a) The Preferred Shares authorized hereby may be
issued (i) in such series and with such voting powers,
full or limited, or no voting powers, and such
designations, preferences and relative participating,
optional or other special rights, and with such
qualifications, limitations or restrictions thereon,
as the Board of Directors shall fix by resolution,
and (ii) in such number of shares in each series as
the Board of Directors shall fix by resolution
provided that the aggregate number of all
Preferred Shares issued does not exceed the number of
Preferred Shares authorized hereby.
(b) Holders of Common Shares shall be entitled to
such dividend, liquidation and voting rights and
privileges as are provided by the Business Corporation
Law, subject to the rights of holders of
Preferred Shares issued pursuant to paragraph (a)
above."
Vote Required for Approval
Approval of the amendment to the Company's Certificate of
Incorporation to authorize the Series Preferred Stock will
require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company entitled to
vote thereon at the Annual Meeting. Accordingly, abstentions
and broker non-votes will have the effect of "no" votes. As
noted above, ICC will vote its shares in proportion to the votes
cast on this issue by all other voting shareholders. There are
no rights of appraisal or dissenter's rights which arise as a
result of a vote on this issue.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF AUDITORS
The firm of BDO Seidman, LLP audited the financial
statements of the Company for the fiscal years ended June 30,
1990 through 1994. On September 27, 1994, pursuant to a vote of
the Board of Directors, the firm of BDO Seidman, LLP was
selected to audit the financial statements of the Company for
the year ending June 30, 1995. Accordingly, the Board of
Directors will offer the following resolution at the Annual
Meeting:
RESOLVED, that the appointment by the Board of
Directors of BDO Seidman, LLP, independent public
accountants, to audit the financial statements of the
Company for the year ending June 30, 1996 is hereby is
ratified and approved.
It is anticipated that a member of BDO Seidman will be
present at the Annual Meeting to respond to appropriate
questions and will have the opportunity, if he desires, to make
a statement.
The affirmative vote of at least a majority of the shares
present in person or by proxy and entitled to vote at the Annual
Meeting is necessary for approval of Proposal No. 3. Under
Delaware law, there are no rights of appraisal or dissenter's
rights which arise as a result of a vote to ratify the selection
of auditors.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
STOCKHOLDERS' PROPOSALS
It is anticipated that the Company's 1996 Annual Meeting of
Stockholders will be held in November, 1996. Stockholders who
seek to present proposals at the Company's Annual Meeting of
Stockholders must submit their proposals to the Secretary of the
Company on or before September 15, 1996.
GENERAL
The Company does not intend to hire a proxy solicitor. In
addition to the use of mails, proxies may be solicited by
personal interview, telephone and telegraph, by directors,
officers and regular employees of the Company, without special
compensation therefor. The Company expects to reimburse
banks, brokers and other persons for their reasonable
out-of-pocket expenses in handling proxy materials
for beneficial owners of the Company's Common Stock.
Unless contrary instructions are indicated on the proxy,
all shares of Common Stock represented by valid proxies received
pursuant to this solicitation (and not revoked before they are
voted) will be voted FOR Proposals No. 2 and 3 and FOR the
election of all directors nominated.
The Board of Directors knows of no business other than that
set forth above to be transacted at the meeting, but if other
matters requiring a vote of the stockholders arise, the persons
designated as proxies will vote the shares of Common Stock
represented by the proxies in accordance with their
judgment on such matters. If a stockholder specifies a
different choice on the proxy, his or her shares of
Common Stock will be voted in accordance with the specification
so made.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE
YOU TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY
IN THE PREPAID ENVELOPES PROVIDED, NO MATTER HOW LARGE OR SMALL
YOUR HOLDINGS MAY BE.
FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements
of the Company (including the independent auditors' report
thereon and the notes thereto) and Management's Discussion and
Analysis of Financial Condition and Results of Operations which
are hereby incorporated by reference from the 1995 Annual Report
enclosed with this Proxy Statement.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON SOLICITED, ON WRITTEN REQUEST OF SUCH PERSON, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE
30, 1995. Such a written request is to be directed to Sandra J.
Brown, Secretary, Pharmaceutical Formulations, Inc., 460
Plainfield Avenue, Edison, New Jersey 08818.
By Order of the Board of Directors,
Sandra J. Brown, Secretary
Edison, New Jersey
October ___, 1995
PHARMACEUTICAL FORMULATIONS, INC.
Annual Meeting of Stockholders - Thursday, November 9,
1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints MAX A. TESLER and FRANK
MARCHESE and each of them, with power of substitution, as
proxies to represent the undersigned at the Annual Meeting of
Stockholders to be held at The Plaza Hotel, New York, New York,
on Thursday, November 9, 1995, at 4:30 p.m. local time and at
any adjournment thereof, and to vote the shares of stock the
undersigned would be entitled to vote if personally present, as
indicated on the reverse side hereof.
The shares represented by the proxy will be voted as
directed. If no contrary instruction is given, the shares will
be voted FOR Proposals No. 2 and 3 and FOR the election of Dr.
Tesler and Messrs. Oram, Blackshire, Cheesman and Callahan as
Directors.
1. ELECTIONS OF DIRECTORS:
[ ]FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all
nominees listed
below.
Dr. Max A. Tesler, John L. Oram, Ben Blackshire, Ray W. Cheesman
and Michael Callahan.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through or otherwise strike nominee's
name in the list above.)
2. FOR AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO
AUTHORIZE A CLASS OF SERIES PREFERRED STOCK.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. FOR RATIFICATION OF THE SELECTION OF BDO SEIDMAN, LLP AS
THE INDEPENDENT AUDITORS OF THE COMPANY.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
Please date, sign as name appears at left, and return promptly.
If the stock is registered in the name of two or more persons,
each should sign. When signing as Corporate Officer, Partner,
Executor, Administrator, Trustee, or Guardian, please give full
title. Please note any change in your address alongside the
address as it appears in the Proxy.
Dated:_______________________________________________________
_____________________________________________________________
(Signature)
_____________________________________________________________
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
