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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Health-Chem Corporation
(Name of Registrant as Specified in Its Charter)
Health-Chem Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
..................................................................
2) Aggregate number of securities to which transaction applies:
..................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
..................................................................
4) Proposed maximum aggregate value of transaction:
..................................................................
5) Total fee paid:
..................................................................
[ ] Fee paid previously with preliminary material:
..................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
..............................................................
2) Form, Schedule or Registration Statement No.:
..............................................................
3) Filing Party:
..............................................................
4) Date Filed:
..............................................................
<PAGE>
HEALTH-CHEM CORPORATION
460 PARK AVENUE
NEW YORK, NEW YORK 10022
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 1, 1999
To the Stockholders of Health-Chem Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
Health-Chem Corporation (the "Company") will be held at the Marriott Financial
Center, 85 West Street, New York, New York, on December 1, 1999, at 10:00 A.M.
(local time) for the following purposes:
1. To elect six directors.
2. To transact any such other business as may come before the meeting or
any adjournment or adjournments thereof.
MANAGEMENT'S SLATE FOR ELECTION AS DIRECTORS ARE DR. MARTIN BENIS, DR.
MATTHEW GOLDSTEIN, MR. EUGENE ROSHWALB, MR. BRUCE M. SCHLOSS, MR. MARVIN M.
SPEISER AND MR. ROBERT D. SPEISER.
You may have received proxy materials from Andy E. Yurowitz ("Yurowitz")
who is soliciting proxies for the election of six directors in opposition to
those directors nominated by the Company (the "Yurowitz Nominees").
THE BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY URGE YOU NOT TO VOTE
FOR ANY OF THE YUROWITZ NOMINEES.
The Board of Directors has fixed the close of business on October 29, 1999
as the record date for determining stockholders entitled to notice of and to
vote at the meeting.
A proxy and return envelope are enclosed for your convenience.
Whether or not you expect to attend the Meeting, please sign, date and
return the enclosed proxy in the enclosed envelope at your earliest convenience.
If you return your proxy, you may nevertheless attend the meeting, revoke your
proxy, and vote your shares in person.
IMPORTANT
1. REGARDLESS OF HOW MANY SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD.
PLEASE VOTE EACH PROXY CARD YOU RECEIVE FROM THE COMPANY SINCE EACH
ACCOUNT MUST BE VOTED SEPARATELY. ONLY YOUR LATEST DATED PROXY COUNTS.
2. WE URGE YOU NOT TO SIGN ANY PROXY CARDS SENT TO YOU BY YUROWITZ.
3. EVEN IF YOU HAVE SENT A PROXY CARD TO YUROWITZ, YOU HAVE EVERY RIGHT
TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY, AND VOTE FOR THE
BOARD'S NOMINEES BY SIGNING, DATING AND MAILING THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE.
4. IF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER
NOMINEE, PLEASE DIRECT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT TO VOTE
THE PROXY CARD AS RECOMMENDED BY YOUR BOARD OF DIRECTORS.
5. YOU MAY VOTE THE PROXY CARD, OR REVOKE A PREVIOUSLY VOTED YUROWITZ
PROXY CARD, UNTIL THE MEETING ON DECEMBER 1, 1999.
<PAGE>
All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors
Marvin M. Speiser,
Chairman of the Board and President
November 11, 1999
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, A RETURN ENVELOPE
REQUIRING NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR YOUR
CONVENIENCE.
<PAGE>
HEALTH-CHEM CORPORATION
460 PARK AVENUE
NEW YORK, NEW YORK 10022
-----------------
PROXY STATEMENT
-----------------
This Proxy Statement is furnished to the stockholders of Health-Chem
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the annual meeting
of stockholders of the Company (the "Meeting") to be held on December 1, 1999
and any adjournment or adjournments thereof. A copy of the notice of meeting
accompanies this Proxy Statement. It is anticipated that the mailing of this
Proxy Statement and the enclosed proxy will commence on November 12, 1999.
Only stockholders of record at the close of business on October 29, 1999,
the record date for the Meeting, will be entitled to notice of and to vote at
the Meeting. On the record date, the Company had outstanding for purposes of
voting at the Meeting 7,665,018 shares of common stock, par value $.01 per share
(the "Common Stock").
On March 10, 1999, the Company received notice of the nomination of certain
individuals (the "Yurowitz Nominees") to stand for election as directors of the
Company.
The solicitation of proxies is made by the Company on behalf of the Board
of Directors of the Company. The Company requests that you sign, date and return
the enclosed proxy card voting for the election of the Company's nominees, Dr.
Martin Benis, Dr. Matthew Goldstein, Mr. Eugene Roshwalb, Mr. Bruce M. Schloss,
Mr. Marvin M. Speiser and Mr. Robert D. Speiser. Please do not sign and return
any proxy card received from or on behalf of the Yurowitz Nominees.
The presence, in person or by proxy, of shares of Company Common Stock
representing a majority of shares of Common Stock outstanding and entitled to
vote on the record date is necessary to constitute a quorum at the Meeting.
Shares of Common Stock present in person at the Meeting but not voting will be
counted as present for purposes of determining the presence or absence of a
quorum for the transaction of business. Shares of Common Stock for which the
Company has received proxies indicating that its holders have abstained, will be
counted as present at the Meeting for purposes of determining the presence or
absence of a quorum for the transaction of business.
Directors of the Company will be elected by a plurality vote of the
outstanding shares of Common Stock present and entitled to vote at the Meeting.
Therefore, the six nominees with the highest number of votes shall be elected to
serve as directors of the Company. Action on any other matter is approved by a
majority vote of the outstanding shares of Common Stock present and entitled to
vote at the Meeting.
Stockholders who execute proxies may revoke them by giving written notice
to the Secretary of the Company at any time before such proxies are voted or by
submitting a duly executed proxy bearing a later date. Attendance at the Meeting
shall not have the effect of revoking a proxy unless the stockholder so
attending shall, in writing, so notify the Secretary of the Meeting at any time
prior to the voting of the proxy.
The Board of Directors does not know of any matter that is expected to be
presented for consideration at the Meeting other than as is described in this
Proxy Statement. However, if other matters properly come before the Meeting, the
persons named in the accompanying proxy intend to vote thereon in accordance
with their judgment.
<PAGE>
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, they will be voted in accordance with such
specification. If no instructions are given, the proxy will be voted for the
nominees for election as directors of the Company listed below. Abstentions and
broker non-votes will each be counted as present for purposes of determining the
presence of a quorum but will not be treated as votes cast for purposes of any
of the matters to be voted on at the meeting.
The address of the Company's principal executive office is 460 Park Avenue,
New York, New York 10022.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES LISTED BELOW AS DIRECTORS.
The By-laws of the Company provide that the Board of Directors may, from time to
time, fix the number of directors constituting the Board of Directors to be not
less than three and not more than fifteen. The Board of Directors has fixed the
number of directors at six. At the Meeting, six directors are to be elected to
serve until the next annual meeting of stockholders or until their respective
successors are elected and qualified. Set forth below are the names of the
Company's nominees for director, their ages, principal occupations and
professional experience for at least the previous five years. All of the
nominees are currently directors of the Company. It is the intention of the
persons named in the enclosed proxy to vote for the election as directors of the
persons named in the table below unless a contrary direction is indicated on the
enclosed proxy. If any such nominee should become unavailable for any reason,
which the Board of Directors has no reason to anticipate, the persons named in
the enclosed proxy reserve the right to substitute another person of their
choice in his or her place. The holders of Common Stock are entitled to one vote
per share. The election of each director will require the affirmative vote of a
plurality of the votes cast at the Meeting.
Name Age(1) Principal Occupation
- - ---- ------ --------------------
Martin Benis, Ph.D. 72 Professor of Accounting and
Auditing at Baruch College of
the City University of New
York
Matthew Goldstein, Ph.D. 57 Chancellor of the City
University of New York
Eugene Roshwalb 60 Certified Public Accountant
Bruce M. Schloss 43 Vice President, Secretary and
General Counsel of the Company
Marvin M. Speiser(2) 74 Chairman of the Board and
President of the Company
Robert D. Speiser(2) 46 Executive Vice President of
the Company, President of
Transderm Laboratories
Corporation and Hercon
Laboratories Corporation
(1) Age as of September 1, 1999.
(2) Marvin M. Speiser is the father of Robert D. Speiser.
3
<PAGE>
The following are summaries of the business experience during at least the
last five years of each of the persons nominated for election as a director of
the Company.
Martin Benis, Ph.D. has been Professor of Accounting and Auditing at Baruch
College of the City University of New York since 1972. Dr. Benis served as the
Chairman of the Department of Accounting at Baruch from 1981 to 1987. He is a
certified public accountant and the author of a book on auditing standards and
procedures as well as numerous articles and chapters in books on accounting and
auditing. He became a director of the Company in March 1996.
Matthew Goldstein, Ph.D. has served as Chancellor of the City University of
New York ("The City University") since September 1999. From June 1998 to August
1999, Dr. Goldstein was President of Adelphi University. From September 1991 to
June 1998, Dr. Goldstein served as President of Baruch College of The City
University of New York. He was previously the Acting Vice Chancellor for
Academic Affairs for The City University and President of the Research
Foundation of The City University. Dr. Goldstein is a member of the Board of
Trustees of the Bronx-Lebanon Hospital Center and of the Board of Directors of
the Jean Cocteau Repertory, ex-officio. He also serves on the Board of Directors
of Audits and Surveys Worldwide, a market research company. Dr. Goldstein became
a director of the Company in March 1994.
Eugene Roshwalb is a certified public accountant. He has maintained a
practice as a sole practitioner for more than five years. He became a director
of the Company in March 1991.
Bruce M. Schloss is an attorney. He has been General Counsel of the Company
since September 1991, Secretary since October 1991 and Vice President since May
1992. Prior to joining the Company, Mr. Schloss was a member of the firm of
McLaughlin & Stern, Ballen and Ballen. Mr. Schloss initially became a director
of the Company in May 1994.
Marvin M. Speiser has served as Chairman of the Board of Directors of the
Company and President since January 1969.
Robert D. Speiser has been Executive Vice President of the Company since
April 1, 1994, President of the Company's 90% owned subsidiary Transderm
Laboratories Corporation ("Transderm") since April, 1989 and President of
Transderm's 98.5% owned subsidiary Hercon Laboratories Corporation ("Hercon
Laboratories") since May 1990. From October 1986 to March 1994, he served as
Senior Vice President of the Company. Mr. Speiser also served as President of
Union Broach Corporation, a former wholly-owned subsidiary of the Company, from
January 1983 through November 1993. Prior to 1986, he served as Vice President
of the Company. Mr. Speiser became a director of the Company in February 1983.
Mr. Speiser is an attorney.
Directors' Fees, Committees and Meetings
The Company does not compensate its employee directors for services
rendered as directors. During 1998, non-employee directors received $1,250 per
month and an additional fee of $500 for each meeting of the Board of Directors
attended and $500 for each committee meeting attended that was independently
scheduled. Non-employee directors were also reimbursed for expenses incurred in
attending such meetings. In April 1999, the Company suspended payment of all
directors' fees until the Company's financial position improves enough to resume
their payment.
In 1998, Mr. Eugene Roshwalb, a non-employee director, was provided with
the use of a leased automobile for consulting services rendered to the Company
in connection with the resolution of certain workers' compensation rate
disputes. The adjusted annual lease value of this automobile in 1998 was
4
<PAGE>
$3,407. Mr. Roshwalb was also paid $5,500 for certain tax consulting services
rendered on behalf of Mr. Marvin M. Speiser.
During 1998, the Board of Directors held four meetings. During such period
no director participated in fewer than 80% of the aggregate of the number of
meetings of the Board of Directors and committees thereof of which such director
was a member. The Board of Directors has, among others, an Audit Committee and a
Compensation Committee. The Committees receive their authority and assignments
from the Board of Directors and report to the Board. The Audit Committee and the
Compensation Committee are both composed of Martin Benis and Eugene Roshwalb.
All Committee members are non-employee directors.
The Audit Committee, among other things, is empowered to recommend to the
Board of Directors the engagement of the independent auditors and to review the
scope and procedures of the activities of the independent auditors and their
reports on their audits. The Audit Committee meets periodically with the
independent auditors and management to review their work and confirm that they
are properly discharging their responsibilities. The Audit Committee met twice
during 1998.
The Compensation Committee is empowered to make recommendations to the
Board of Directors relating to the overall compensation arrangements for senior
management of the Company and to make recommendations to the Board of Directors
pertaining to any compensation plans in which officers and directors of the
Company are eligible to participate. The Compensation Committee is also
responsible for the administration of the Company's stock option and performance
equity plans and is the approving authority for management's recommendations
with respect to option grants. The Compensation Committee met twice during 1998.
The Company does not have a standing nomination committee.
5
<PAGE>
EXECUTIVE OFFICERS
The following are the executive officers of the Company:
Officers Position Age(1)
- - -------- -------- ------
Marvin M. Speiser(2) Chairman of the Board 74
and President
Robert D. Speiser(2) Executive Vice President of 46
the Company and President
of Transderm and Hercon
Laboratories
Thomas J. Atkins, Ph.D. Vice President of Transderm 52
and Vice President-Research
and Development of Hercon
Laboratories
David J. Heath, Jr. Vice President-Finance 41
Donald E. Kauffman, Jr. Vice President of 45
Transderm and Vice
President-Manufacturing of
Hercon Laboratories
Murray Lieber Vice President of Transderm 61
and Vice President-Marketing
of Hercon Laboratories
Bruce M. Schloss Vice President, Secretary 43
and General Counsel
(1) As of September 1, 1999.
(2) Marvin M. Speiser is the father of Robert D. Speiser.
The following is a summary of the business experience during at least the
last five years of all executive officers of the Company and its subsidiaries
who are not directors or nominees for election as directors. Each of the
officers serves at the discretion of the Board of Directors of the Company or
its subsidiary, as the case may be, from the date of his election until the next
annual meeting of the Board of Directors of the Company or its subsidiary or
until his successor is elected and qualified, subject to earlier termination by
removal or resignation.
Thomas J. Atkins, Ph.D. has been Vice President of Transderm and Vice
President-Research and Development of Hercon Laboratories since March 1996.
Prior to joining Hercon Laboratories and since 1995, Dr. Atkins served as Vice
President, Research and Development for Medisorb Technologies International,
L.P. ("Medisorb"). From 1988 to 1994, he served as Director, Polymer Research
and Drug Delivery Systems for Stolle Research & Development Corporation
("Stolle"). Both Medisorb and its parent Stolle are engaged in research and
manufacturing of controlled release drug delivery systems. Dr. Atkins is the
author of numerous publications and the named inventor on numerous United States
and foreign patents.
David J. Heath, Jr. has been Vice President-Finance of the Company and
Transderm since August 1999. From January 1998 through August 1999, Mr. Heath
served as Controller of the Company. Mr. Heath served as Assistant Controller of
the Company from March 1989 through December 1997.
6
<PAGE>
Donald E. Kauffman, Jr. has been Vice President of Transderm since July
1995 and Vice President-Manufacturing of Hercon Laboratories since July 1987.
Mr. Kauffman joined the Company in June 1976 and has served in various positions
prior to becoming a Vice President of Hercon Laboratories in 1987.
Murray Lieber has been Vice President of Transderm since July 1995 and Vice
President-Marketing of Hercon Laboratories since June 1992. From September 1989
to June 1992, he was Vice President, Account Supervisor at Klemtner Advertising,
a pharmaceutical advertising agency. Mr. Lieber was Vice President of
Diversified Health Affiliates, Inc., a pharmaceutical and health care consulting
firm, from January 1988 to September 1989. Prior thereto, Mr. Lieber held
positions in marketing and business development at companies including Berlex
Laboratories (a division of Schering AG), Roche Laboratories, and
Warner-Chilcott Laboratories (a division of Warner Lambert Company).
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
(a) As of August 31, 1999 other than as set forth in the following table, the
Company knows of no other person or "group" (as that term is defined in
Section 13(d)(3) of the Securities Exchange Act of 1934) who beneficially
owns more than 5% of any class of the Company's voting securities. The
following table contains, as to each class of the Company's voting
securities, the name and address of each such 5% beneficial owner, the
amount of securities of such class beneficially owned, and the percent of
such class beneficially owned.
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER AUGUST 31, 1999(1) OF CLASS
- - -------------- ------------------- ------------------ --------
Common Stock Marvin M. Speiser (2) 2,396,020 (3) 30.86%
Common Stock Laura G. Speiser (2) 2,396,020 (3) 30.86%
Common Stock Andy E. Yurowitz 551,200 (4) 7.19%
8 Kupperman Lane
Monsey, NY 10952
- - ----------
(1) The information concerning security holders is based upon information
furnished to the Company by such security holder. Except as otherwise
indicated, all of the shares are owned of record and beneficially and the
persons identified have sole voting and dispositive power with respect
thereto.
(2) Address is c/o Health-Chem Corporation, 1212 Avenue of the Americas, New
York, NY 10036.
(3) Includes the following shares of Common Stock: (i) 266,664 shares owned by
Lauralei Investors, Inc. ("Lauralei"), of which Marvin M. Speiser and his
wife, Laura G. Speiser, are the sole stockholders; (ii) 100,000 shares
which Mr. Speiser would receive upon the exercise of all stock options
which are currently exercisable or exercisable within 60 days; (iii)
512,763 shares owned by Marvin M. Speiser; and (iv) 1,516,593 shares owned
by Laura G. Speiser. Marvin M. Speiser disclaims beneficial ownership of
the shares of Common Stock referenced in (iv) above. Laura G. Speiser
disclaims beneficial ownership of the shares of Common Stock referenced in
(i), (ii) and (iii).
7
<PAGE>
(4) Pursuant to Amendment No. 1 to Schedule 13D filed with the Company in March
1999. Includes shares where voting and/or dispositive power is shared with
other family members. Does not include 116,100 shares of Common Stock owned
beneficially by Mr. Yurowitz's son as to which Mr. Yurowitz disclaims
beneficial ownership.
(b) As of August 31, 1999, each director of the Company, each of the Company's
executive officers named in the Summary Compensation Table below and all
directors and officers of the Company, as a group, beneficially owned the
following amounts (and percentages) of each class of the voting securities
of the Company.
NUMBER OF SHARES
NAME OF BENEFICIALLY OWNED AS OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER AUGUST 31, 1999 (1) OF CLASS
-------------- ---------------- ------------------- --------
Common Stock Martin Benis 3,900 *
Common Stock Steven Bernstein 5,000 (3) *
Common Stock Matthew Goldstein 3,000 *
Common Stock Peter F. McKernan 5,000 (3) *
Common Stock Eugene Roshwalb 6,500 *
Common Stock Bruce M. Schloss 30,000 (2) *
Common Stock Marvin M. Speiser 2,396,020 (2)(4) 30.86%
Common Stock Robert D. Speiser 85,897 (2) 1.11%
Common Stock Milton Y. Zussman 29,380 (5) *
Common Stock All directors and officers
as a group (13 Persons) 2,602,197 (6) 33.00%
- - -------------
* Indicates ownership of less than one percent (1%) of class.
(1) The information concerning security holders is based upon information
furnished to the Company by such security holder. Except as otherwise
indicated, all of the shares are owned of record and beneficially and
the persons identified have sole voting and dispositive power with
respect thereto.
(2) Includes the following shares of Common Stock subject to stock options
which are currently exercisable or exercisable within 60 days: Mr.
Schloss - 30,000; Mr. Marvin M. Speiser - 100,000; and Mr. Robert D.
Speiser - 60,000.
(3) Former executive officer of the Company who resigned in August 1999.
(4) See footnote (3) to the table under (a) above for the number of shares
with respect to which Marvin M. Speiser has the right to acquire
beneficial ownership.
(5) Resigned as a director as of September 30, 1999.
(6) Includes the following shares of Common Stock: (i) 221,000 shares
which six of such persons would receive upon the exercise of stock
options which are either currently exercisable or exercisable within
60 days; and (ii) an aggregate of 266,664 shares owned by an entity
controlled by or for the benefit of certain relatives of two of such
persons, all of which shares are or may be deemed to be beneficially
owned by such persons.
8
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports filed by such persons.
Based solely on the Company's review of such reports furnished to the
Company, and written representations from certain reporting persons, the Company
believes that all such filing requirements were complied with during or in
respect of the year ended December 31, 1998.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation of
each of the Chief Executive Officer and the four most highly-compensated
executive officers of the Company whose annual salary and bonus, if any,
exceeded $100,000 for services in all capacities to the Company during the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------
SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPEN-SATION
YEAR SALARY BONUS COMPENSATION(1) OPTIONS (1)(2)
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) ($)
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARVIN M. SPEISER 1998 484,208 51,523 18,255 0 49,325
Chairman and Chief 1997 458,147 121,178 12,772 0 86,758
Executive Officer 1996 443,462 78,553 36,151 0 99,785
ROBERT D. SPEISER 1998 260,622 4,541 4,306 0 870
Executive Vice President and 1997 246,594 -- 3,686 0 510
President -Transderm 1996 238,691 -- 3,876 0 510
Laboratories Corporation and
Hercon Laboratories
Corporation
PETER F. MCKERNAN(3) 1998 145,270 37,579 11,711 0 522
Former Executive Vice 1997 135,000 98,947 7,646 0 306
President-Herculite 1996 132,500 39,277 4,892 0 301
Products, Inc. and Pacific
Combining Corporation
STEVEN BERNSTEIN(3) 1998 155,462 22,985 7,997 0 306
Former Senior Vice President 1997 145,000 39,000 7,450 0 306
1996 140,000 10,000 12,687 0 198
BRUCE M. SCHLOSS 1998 161,310 -- 9,021 0 306
Vice President and General 1997 154,000 -- 9,302 0 306
Counsel 1996 150,500 -- 10,698 0 306
</TABLE>
9
<PAGE>
(1) Does not include information with respect to personal benefits, if any,
provided to the named individuals which do not exceed disclosure thresholds
established under Securities and Exchange Commission rules.
(2) Represents the term cost value of all excess group life insurance policies
on behalf of the named individuals. For Marvin M. Speiser, also includes
$38,045 which represents the term portion of the premium paid with respect
to a split dollar life insurance arrangement between the Company and Mr.
Speiser, and $51,046 which represents the present value to Mr. Speiser of
the non-term portion of the premium paid by the Company with respect to
this arrangement. The present value was calculated as an interest-free loan
on the whole life portion of the premium over the maturation of the policy.
(3) Resigned as an officer of the Company and its subsidiaries effective August
19, 1999 upon the sale of assets of the Company's Herculite Products, Inc.
and Hercon Environmental Corporation subsidiaries.
OPTION GRANTS IN LAST FISCAL YEAR
During 1998, no options to purchase Common Stock of the Company were
granted to any named executives.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN--THE-MONEY OPTIONS
SHARES ACQUIRED VALUE REALIZED OPTIONS AT 12/31/98 AT 12/31/98 (2)
ON EXERCISES (1) (1) EXERCISABLE/UNEX-ERCISABLE EXERCISABLE/UN-EXERCISABLE
NAME (#) ($) (#) ($)
- - --------------------- ------------------- ------------------- ------------------------- ---------------------
<S> <C> <C> <C> <C>
Marvin M. Speiser -- -- 94,000/6,000 0/0
Robert D. Speiser -- -- 56,000/4,000 0/0
Peter F. McKernan(3) -- -- 4,000/1,000 0/0
Steven Bernstein(3) -- -- 26,000/2,000 0/0
Bruce M. Schloss -- -- 28,000/2,000 0/0
</TABLE>
(1) None of the named executive officers exercised any stock options during the
fiscal year ended December 31, 1998.
(2) Based upon the closing sale price per share of $.8125 of the Company's
Common Stock on December 31, 1998 on the American Stock Exchange minus the
respective option exercise price. In April 1999, the American Stock
Exchange instituted a trading halt on the Company's securities and
subsequently moved to delist the Company's securities for failure to meet
the Exchange's continued listing eligibility based on the Exchange's
guidelines. Since April 1999, the Company's Common Stock has traded in the
over-the-counter market.
10
<PAGE>
(3) Former officer of the Company whose options expired unexercised in August
1999.
EMPLOYMENT AND OTHER AGREEMENTS
In April 1995, Health-Chem entered into a five-year Employment Agreement
with Marvin M. Speiser which provided for an initial base annual salary of
$415,552 ($120,000 in respect of services as an officer of the Company's
Herculite subsidiary) plus an annual bonus determined by the Company's Board at
least equal to ten percent of the amount by which pretax net income of each of
the Company's Herculite, Hercon Laboratories and Hercon Environmental
subsidiaries for a calendar year exceeds the average of such subsidiary's pretax
net income, as defined, for the prior two calendar years, and for similar
benefits, vacation and perquisites as that made available to comparable
executives of the Company. The Employment Agreement also provides for minimum
yearly salary increases of 4% on each September 1 during the employment period.
Mr. Speiser received a 5% salary increase on September 1, 1996. Mr. Speiser and
the Company agreed to defer consideration of the September 1, 1997 salary
increase until consideration of the salary increase to which Mr. Speiser was
entitled in 1998 pursuant to the Employment Agreement. Mr. Speiser received an
11% salary increase on September 1, 1998. The Employment Agreement further
provides that upon retirement on or after January 1, 2000 (the "retirement
date"), Marvin M. Speiser will be entitled to receive an annual supplemental
pension benefit equal to 60% of his final base salary, which for this purpose
will be the highest nominal annual salary paid to him during his employment. The
supplemental pension will be payable for a period of ten (10) years beginning on
the retirement date, or if later, the January 1 following termination of
employment. In the event of termination of employment prior to the retirement
date, the amount of the supplemental pension payable on that date will be
prorated based on the period of employment from December 31, 1994 to the date of
termination. No proration will be applied, however, if Mr. Speiser's employment
is involuntarily terminated (as described below). An actuarially reduced
supplemental pension benefit may be paid if the benefit is commenced upon
termination of employment prior to the retirement date. In August 1999, Mr.
Speiser agreed to waive his supplemental pension benefit for the year commencing
January 1, 2000. See "Interest of Management in Certain Transactions."
Pursuant to the Employment Agreement, the Company caused its Transderm
subsidiary to grant to Marvin M. Speiser, in November 1995, an option to
purchase 5,000,000 shares of common stock of Transderm. After amendment to the
option in November 1998, the exercise price is $.15 per share, and the option is
exercisable from April 4, 2000 through November 13, 2005, unless there is a
transaction in which Transderm is acquired in which case the number of shares as
to which the option is exercisable will be limited to twenty (20%) percent of
the total number of shares underlying the option for each year that has passed
since April 4, 1995 with part years to be pro-rated temporally.
Marvin M. Speiser is entitled to continue to receive the salary, bonus and
other compensation provided for under the Employment Agreement for a period of
five (5) years following an involuntary termination of his employment during the
term of the Employment Agreement. Marvin M. Speiser's employment will be deemed
to have been involuntarily terminated if his employment is terminated by the
Company for reasons other than cause, as defined in the Employment Agreement.
Mr. Speiser's employment will be deemed to have been involuntarily terminated in
certain events as listed in the Employment Agreement, including termination for
any reason within one year following a Change in Control, as defined by the
Employment Agreement. The Employment Agreement also provides that Mr. Speiser
will be entitled to supplemental compensation to mitigate the effect of any
excise taxes to which he may be subject as a result of a Change in Control.
11
<PAGE>
In April 1995, Health-Chem also entered into a similar Employment Agreement
with Robert D. Speiser, with the following material differences: (i) his initial
base annual salary was $223,668 ($104,000 in respect of his services as an
officer of Hercon Laboratories) plus an annual bonus determined by the Company's
Board at least equal to the increase in pretax net income, as defined, for
Hercon Laboratories under the same terms as set forth above for Marvin M.
Speiser; and (ii) his "retirement date," as defined in the Employment Agreement,
is January 1, 2010. Mr. Speiser received a 5% salary increase on September 1,
1996. Mr. Speiser and the Company agreed to defer consideration of the September
1, 1997 salary increase until consideration of the salary increase to which Mr.
Speiser was entitled in 1998 pursuant to the Employment Agreement. Mr. Speiser
received an 11% salary increase on September 1, 1998. In 1995, the Company also
caused Transderm to grant Robert D. Speiser, in accordance with his Employment
Agreement, an option to purchase up to 5,000,000 shares of common stock of
Transderm. Robert D. Speiser's option was amended in November 1998 on
substantially the same terms and conditions as set forth above for Marvin M.
Speiser.
In March 1999, the Company entered into indemnification agreements with
each of its executive officers and directors, in anticipation of a proxy contest
to effect a change in control of the Company. The indemnification agreements
indemnify those persons who were or are a party or are threatened to be made a
party to any pending or completed action, suit or proceeding, whether criminal,
civil, administrative or investigative, to the full extent authorized and
permitted by Delaware law.
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return for the five years ended December 31, 1997
based upon the market price of the Company's Common Stock, with the cumulative
total return on the AMEX Market Value Index and the Russell 2000 Index. The
graph assumes a $100 investment on December 31, 1993 and the reinvestment of any
and all dividends.
HEALTH-CHEM CORPORATION
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Health-Chem Corporation, AMEX Market Value Index and Market
Capitalization Peer Group
[GRAPHICAL REPRESENTATION OF CHART]
================================================================================
_____ _____
v Health-Chem Corporation o AMEX Market Value Index*
_____
h Russell 2000 Index*
================================================================================
<TABLE>
<CAPTION>
==============================================================================================================
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Health-Chem Corporation $100.00 83.00 48.00 38.00 19.00 31.00
- - --------------------------------------------------------------------------------------------------------------
AMEX Market Value Index* $100.00 91.00 115.00 122.00 148.00 151.00
- - --------------------------------------------------------------------------------------------------------------
Russell 2000 Index $100.00 98.00 126.00 147.00 180.00 179.00
==============================================================================================================
</TABLE>
- - -----------
* In April 1999, the American Stock Exchange instituted a trading halt on the
Company's securities which were subsequently delisted in May 1999 for
failure to meet the Exchange's guidelines for continued listing. Since
then, the Company's Common Stock has traded in the over-the-counter market.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two independent outside directors of the Company. During 1998, the
Committee met on one occasion to carry out its responsibilities including the
development and administration of policies governing annual compensation for
senior executives of the Company.
In developing and administering the policies, the Committee has focused on
compensating Company executives: on a competitive basis with other comparably
sized (in terms of revenues and assets) and managed companies (which are not the
same group of companies used for purposes of the five-year performance chart);
in a manner consistent and supportive of overall Company objectives; and,
through a compensation plan which is intended to balance the longer and
shorter-term strategic initiatives of the Company. Consistent with compensation
program objectives identified in last year's Compensation Committee Report, the
Committee intends that the executive compensation program will:
1. reward executives for strategic management and enhancement of
stockholder value;
2. reflect each executive's success at resolving key operational issues;
3. facilitate both the short and long-term planning process; and
4. attract and retain key executives believed to be critical to the
long-term success of the Company.
The Company's compensation program for executive officers generally
consists of a fixed base salary, performance-related bonus awards and long-term
incentive compensation in the form of stock options. In addition, Company
executives are able to participate in various benefit plans generally available
to other full-time employees of the Company.
In reviewing the Company and executives' performance of the past fiscal
year and making its compensation recommendations, the Committee took several
issues into consideration, including performance factors such as the overall
improved performance of certain of the Company's subsidiaries.
Compensation of two senior executives, Marvin M. Speiser and Robert D.
Speiser, is governed largely by the terms of employment agreements entered into
between the Company and each of them in 1995. For a more complete description of
these agreements see "Executive Compensation-Employment and Other Agreements"
elsewhere in this Proxy Statement.
BASE SALARY
An executive's base salary is intended to provide competitive remuneration
for services provided to the Company over a one-year period or such longer
period as may be covered under employment agreements. Base salaries are set at
levels designed to attract and retain the most appropriately qualified
individuals for each of the key management level positions within the Company.
In determining these amounts, the Committee has taken into consideration
regional and national compensation information for comparable companies,
industry patterns, and levels of executive responsibility.
SHORT-TERM INCENTIVES
Short-term incentives are paid primarily to recognize specific operating
performance achieved within the last fiscal year. Since such incentive payments
are related to a specific year's performance, the Committee
14
<PAGE>
understands and accepts that such payments may vary considerably from one year
to the next. The Company's bonus program ties executive compensation directly
back to operating profitability in each of the Company's subsidiaries. Depending
on management level and seniority, certain executives within each entity are
able to earn a percentage of the improvement in earnings over the average
earnings for the preceding two calendar years within the entity. Based on this
formula, certain of the named executives earned bonus payments aggregating
$89,628 for the fiscal year 1998 based on the increase in average earnings of
Herculite Products, Inc. ("Herculite"), Hercon Environmental Corporation
("Hercon Environmental") and Transderm Laboratories Corporation ("Transderm").
In addition, an aggregate of $27,000 in minimum bonus payments were paid to two
named executives in respect of additional duties assumed by such executives in
connection with the Company's Pacific Combining Corporation subsidiary.
LONG-TERM INCENTIVES
Although the Committee recognizes the value of stock option grants in
motivating long-term strategic decision making, in 1998 no options to acquire
Common Stock of the Company were granted nor were any awards made under the
Company's 1995 Performance Equity Plan to any executive officers, officers or
any employees of the Company.
CHIEF EXECUTIVE OFFICER
Under his employment agreement with the Company, Mr. Marvin M. Speiser,
Chief Executive Officer, is entitled to an increase in his base salary of at
least 4% over the prior year's level. Mr. Speiser and Health-Chem had agreed to
defer consideration of the September 1, 1997 salary increase until consideration
of the salary increase to which Mr. Speiser was entitled in 1998 pursuant to the
employment agreement. Mr. Speiser received an 11% salary increase on September
1, 1998. In acting upon Mr. Speiser's base salary increase in 1998, the
Committee took into consideration a number of managerial and leadership factors
including Mr. Speiser's role in working out certain corporate problems as well
as increases due pursuant to Mr. Speiser's employment agreement.
Pursuant to his employment agreement, the amount of any bonus for Mr.
Speiser is based on the improvement in earnings over the average earnings for
the preceding two calendar years within certain of the Company's operating
businesses. On this basis, Mr. Speiser earned a bonus for fiscal year 1998 in
the amount of $51,523 due to the improvement in earnings of Herculite, Hercon
Environmental and Transderm.
The Committee believes that Mr. Speiser's compensation reflects his
contribution to the Company and the achievement of specific long-term and
short-term objectives of the Company and that the performance bonus arrangement
under his employment agreement creates the appropriate incentives to improve
Company performance.
Compensation Committee,
MARTIN BENIS
EUGENE ROSHWALB
15
<PAGE>
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In September 1996, the Company exercised its options pursuant to option
agreements with Marvin M. Speiser entered into in 1991 and 1994, respectively
(the "Option Agreements") and acquired 952,520 shares of Common Stock from Mr.
Speiser for an aggregate of $1,030,246 (or $1.0816 per share). This amount
represented a portion of the proceeds received by the Company from the sale of
952,520 shares of Common Stock (at $1.10 per share) pursuant to a subscription
rights offering commenced in August 1996 to its stockholders of record. Of the
total of 1,782,689 shares of Common Stock previously held by Mr. Speiser subject
to the Company's repurchase rights under the Option Agreements, 952,520 shares
were repurchased by the Company, 512,763 shares were retained by Mr. Speiser
free of the Company's option (as the deemed exercise of his prorata subscription
rights) and 317,406 shares remained subject to the Option Agreements though June
30, 1999. At December 31, 1998, the exercise prices of the 1991 and 1994 Option
Agreements were $0.5305 per share and $2.7632 per share, respectively. The
Option Agreements provided that Mr. Speiser vote all shares subject thereto on
all matters in which stockholders are entitled to vote at any annual or special
meeting substantially in the same proportion as all other shares of Common Stock
are voted.
In July 1994, Mr. Speiser purchased 575,000 shares of Common Stock from the
Company which shares were the subject of the 1994 Option Agreement. For this
purchase he borrowed $1,150,000 from The First National Bank of Maryland
("FNBM"). The FNBM loan bore interest at the prime rate and was secured by the
stock, and other collateral, including the cash value of a life insurance policy
on Mr. Speiser. In 1996, concurrently with the Company's purchase of the 952,520
shares of Common Stock from Mr. Speiser, the FNBM loan was repaid in full. In
July 1995 and July 1996, the Company advanced Mr. Speiser $150,000 and $250,000,
respectively, the amounts of the annual principal repayment under the FNBM loan.
In addition, the Company advanced to Mr. Speiser amounts equal to the interest
on the FNBM loan. During 1998, the highest amount owed by Mr. Speiser to the
Company was $337,100, and the aggregate amount due from him at December 31, 1998
was $251,608. This amount, together with interest at the prime rate as published
in the Wall Street Journal, was intended to be repaid by Mr. Speiser upon the
earliest of (i) the sale of the shares which remain subject to the Option
Agreements; (ii) the Company's exercise of its options under the Option
Agreements; and (iii) the expiration of the Option Agreements on June 30, 1999.
It was intended that Mr. Speiser would be fully reimbursed for all costs he
incurred in connection with his purchase of the Option Shares which was effected
as accommodation to the Company. As the exercise prices of the Option Agreements
continued to increase and the market price for the Company's Common Stock
continued to fall to a level significantly below these exercise prices, the
Option Agreements were allowed to expire unexercised on June 30, 1999.
By letter agreement dated August 25, 1999 between Mr. Speiser and the
Company, the Company agreed to cancel Mr. Speiser's outstanding debt owed to the
Company due to the advances paid in respect of the FNBM loan in the approximate
amount of $249,000 and Mr. Speiser agreed to transfer the 317,046 shares of the
Company's Common Stock previously subject to the Option Agreements to the
Company. As further consideration, Mr. Speiser waived his first year's
supplemental pension benefit, payable commencing January 1, 2000 in accordance
with Mr. Speiser's Employment Agreement with the Company, in the amount of
$300,000.
In January 1999, the Company and its subsidiaries entered into a Waiver and
Third Amendment to Revolving Credit, Term Loan and Security Agreement (the "Loan
Agreement") with IBJ Whitehall Business Credit Corporation (f/k/a IBJ Schroder
Business Credit Corporation) (as successor in interest to IBJ Schroder Bank &
Trust Company) ("IBJ") pursuant to which IBJ agreed to waive certain events of
default under the Loan Agreement and to provide the Company with an overadvance
facility of approximated $1.2 million through March 31,
16
<PAGE>
1999. In connection with the Loan Agreement, as amended, Marvin M. Speiser and
his wife, Laura G. Speiser pledged certain investment property consisting of
marketable securities valued in excess of $710,000 (the "Collateral") and
entered into a limited guaranty of the Company's obligations under the Loan
Agreement not to exceed the principal sum of $1,000,000 plus interest. Mr. and
Mrs. Speiser received no compensation for these undertakings. IBJ released its
security interest in all of the Collateral upon repayment of the Loan in August
1999.
THE YUROWITZ NOMINEES
The Yurowitz Nominees for election as directors of the Company are set
forth below, along with their ages, their ownership of Company Common Stock and
their current business experience. All information set forth below regarding the
Yurowitz Nominees is taken from a letter from Yurowitz to the Company dated
March 10, 1999 (the "Yurowitz Letter") notifying the Company of such nominations
and has not been independently verified or confirmed by the Company. The Company
does not have, nor does it have access to, information regarding the Yurowitz
Nominees' business experience during the last five years, except with respect to
Dr. David. [Yurowitz has agreed to reduce the number of his nominees from nine
to six before the end of October, 1999.]
<TABLE>
<CAPTION>
Yurowitz Nominee Name, Age Beneficial Ownership
and Business Address of Shares President Occupation
- - -------------------------------- --------- --------------------
<S> <C> <C>
Mordecai Cohen (33) 0 Principal, Madison Avenue
172 Madison Avenue Collections (retail merchandise
Suite 402 liquidator)
New York, New York
Aaron David, M.D. (49) 3,081 Obstetrician and gynecologist (since
980 Broadway 1982)
Massapequa, New York 11758
Michael M. Goldberg, M.D. (40) 0 Chairman of the Board and Chief
Emisphere Technologies, Inc. Executive Officer of Emisphere
765 Old Saw Mill River Road Technologies, Inc. (developer and
Tarrytown, NY 10591 producer of drug delivery systems)
Barry B. Kanarek, M.D., Ph.D. (54) 0 Senior Vice President Clinical
Emisphere Technologies, Inc. Affairs and Chief Medical Officer of
765 Old Saw Mill River Road Emisphere Technologies, Inc.
Tarrytown, NY 10591
Jacob Kraitenberger (46) 0 President of American Water
American Water Connection Corp. Connection Corp.
5002 16th Avenue (producer of mineral water)
Brooklyn, NY 11204
Wolf Prensky, Ph.D. (68) 500 Biologist (self-employed consultant)
28-10 High Street
Fair Lawn, NJ
Zachary Prensky (25) 500 Principal of Zackfoot Investments
372 Central Park West LLC (investment banking
Suite 9S and venture capital firm)
New York, NY 10025
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Yurowitz Nominee Name, Age Beneficial Ownership
and Business Address of Shares President Occupation
- - -------------------------------- --------- --------------------
<S> <C> <C>
Andy E. Yurowitz (63) (1) 551,200 Vice President - Investments of
2125 Center Avenue Gruntal & Co. LLC (investment
Fort Lee, NJ 07024 banking firm)
Jack I. Zwick (63) 0 Certified Public Accountant and
3000 Southfield Town Center principal of Zwick & Solomon,
Suite 2300 P.L.L.C. (public accounting firm)
Southfield, MI 48075
</TABLE>
- - -----------
(1) According to Yurowitz's Amendment No. 1 to Schedule 13D dated March 10,
1999, 400,000 shares of such Common Stock are held in an Individual
Retirement Account established for Yurowitz's benefit, and 151,200 shares
of Common Stock are held in a brokerage account owned jointly by Yurowitz
and his wife, Helen Yurowitz. Of the shares held in such brokerage account,
151,000 shares are held in street name and 100 shares are owned of record
by Yurowitz and his wife as JTWROS. Such amount does not include 116,100
shares of Common Stock owned beneficially by Yurowitz's son, Alan J.
Yurowitz, as to which Yurowitz disclaims beneficial ownership.
According to the Yurowitz Letter, Manfred Mayerfeld, a retired school
teacher, contributed $25,000 to Yurowitz to support his efforts to elect the
Yurowitz Nominees. Mr. Mayerfeld is the beneficial owner of 391,789 shares of
Common Stock. Mr. Mayerfeld is 67 years of age and lives at 116 College Road,
Monsey, New York 10952.
BOARD OF DIRECTORS' RESPONSE TO YUROWITZ NOMINEES
On March 10, 1999, the Company received the Yurowitz Letter which purported
to nominate for election as directors of the Company the Yurowitz Nominees set
forth above. On March 12, 1999, the Company received a demand from Yurowitz to
inspect the Company's stock ledger and most recent stockholder list. As reasons
therefore, Yurowitz stated that he wished to communicate with other holders of
Common Stock regarding, among other things, the nomination of the Yurowitz
Nominees as directors of the Company and the solicitation of proxies in
connection therewith. By letter dated March 18, 1999, the Company through its
counsel responded by advising Yurowitz that the Company had elected pursuant to
Rule 14a-7 under the Securities Exchange Act of 1934 to mail any solicitation
materials of Yurowitz to the Company's stockholders at the expense of Yurowitz.
On August 9, 1999, Yurowitz initiated an action against the Company and its
directors in the Court of Chancery of the State of Delaware in and for New
Castle County, in which he sought to summarily direct the prompt holding of a
meeting of the Company's stockholders pursuant to Court supervision. In
connection with this action, Yurowitz also sought to enjoin the sale of assets
by the Company's subsidiaries Herculite Products, Inc. and Hercon Environmental
Corporation (the "Asset Sale"). On August 13, 1999, Yurowitz and the Company
entered into a stipulation (the "August Stipulation") wherein, among other
things: (i) Yurowitz agreed to withdraw his motion for injunctive relief and to
take no steps to interfere with or impede the consummation of the Asset Sale;
and (ii) the Company agreed to provide Yurowitz with prior notice before
entering into and/or consummating any extraordinary corporate transaction
requiring approval of the Company's Board of Directors in advance of the
Meeting.
On October 27, 1999, the Company and Yurowitz entered into a further
stipulation amending the Stipulation with respect to such litigation (the
"October Stipulation") which provides, among other things, that: (1) the Company
will provide two business days' notice of any extraordinary corporate
transaction requiring the approval of the Company's Board of Directors; (ii)
18
<PAGE>
the Company will mail on behalf of Yurowitz and at his expense any soliciting
materials prepared by Yurowitz; (iii) Yurowitz shall reduce from nine to six the
persons nominated by him for election as directors at the Meeting; and (iv)
Yurowitz shall not solicit or encourage an involuntary bankruptcy petition
naming the Company as debtor.
The Company's nominees for directors (and in fact its current directors)
have been and remain committed to enhancing stockholder value. Their
contribution to the Company is expected to include a commitment to oversee and
advise the Company's management with respect to actions that offer a chance to
increase the Company's revenues and results of operations. Management and the
Company's directors believe that the Company's nominees are the best-suited,
based on their experience with and knowledge of the Company, particularly in
light of the Company's current financial position, to continue to lead the
Company while focusing on enhancement of value for the Company's stockholders.
THE BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY DO NOT BELIEVE THAT
THE BEST INTERESTS OF YOUR COMPANY OR ITS STOCKHOLDERS WOULD BE SERVED BY
ELECTING ANY OF THE YUROWITZ NOMINEES.
In the past, Yurowitz has been indicted for crimes and charged by the New
York Stock Exchange for facilitating the provision of brokerage services by his
son without a license. Additionally, two of the Yurowitz Nominees, Michael
Goldberg and Barry Kanarek, are officers and/or directors of Emisphere
Technologies, Inc. ("Emisphere"), a company that develops and produces drug
delivery systems and a potential competitor of the Company. As such, there exist
inherent conflicts of interest should these two nominees serve as officers
and/or directors of the Company and Emisphere at the same time.
The Company believes that Yurowitz and the Yurowitz Nominees and their
course of action may be motivated by a personal agenda that is not in the best
interests of the Company's stockholders. As reasons therefore, the Company
believes that Yurowitz is using the mechanism of a proxy contest for personal
gain and as a means of redressing a previous lawsuit brought by the Company
against Yurowitz and others in 1996 in partial response to a derivative and
class action initially brought by two stockholders of the Company seeking to
enjoin the consummation of the transactions contemplated by a certain Stock
Purchase Agreement. This action was ultimately dismissed in July 1997.
In 1987, Yurowitz was indicted, according to the New York Times, on charges
of laundering money for organized crime in connection with illicit drug sales.
At the time of his arrest and indictment, he was a broker with E.F. Hutton. The
federal grand jury indictment alleged that Yurowitz concealed the origin of
illegally obtained funds by filtering such funds through various banks on behalf
of alleged operators of a drug ring that smuggled marijuana and cocaine. After a
trial in the Federal District Court for the Middle District of Florida, Yurowitz
was found not guilty of the charges alleged in the indictment.
According to disclosure contained in Yurowitz's Schedule 13D filed on
September 19, 1996, the New York Stock Exchange filed charges against him
alleging that he facilitated his son's acting as a securities broker without
being registered as such, as required by the New York Stock Exchange as well as
the Securities and Exchange Commission. The New York Stock Exchange ultimately
dismissed the charges.
For the reasons stated above, the Board of Directors and management of the
Company believe that the election of the Yurowitz Nominees is not in the best
interests of the Company and its stockholders. Accordingly, the Board recommends
a vote AGAINST the Yurowitz Nominees and FOR Messrs. Benis, Goldstein, Roshwalb,
Schloss, Marvin and Robert Speiser. We urge you not to sign any proxy card from
or on behalf of the Yurowitz Nominees. If you have mistakenly executed and
delivered a proxy card from or on behalf of the Yurowitz Nominees, you may
revoke such proxy at any time prior to its exercise
19
<PAGE>
by executing a later-dated Company proxy card. You may also revoke a prior proxy
by attending the Meeting in person and voting your shares for the Company's
nominees.
INDEPENDENT PUBLIC ACCOUNTANTS
Richard A. Eisner & Company, LLP, independent public accountants, currently
audits the Company's books and records.
Representatives of Richard A. Eisner & Company, LLP are expected to be
present at the Meeting, will be given the opportunity to make a statement if
they so desire, and are expected to be available to respond to appropriate
questions.
ANNUAL REPORT TO STOCKHOLDERS
A copy of the Company's 1998 Annual Report has been mailed to stockholders
of record at the close of business on October 29, 1999 together with this Notice
of Meeting and Proxy Statement. The Company files an annual report on Form 10-K
with the Securities and Exchange Commission which includes additional
information concerning the Company and its operations. This report, except for
exhibits, will be furnished to stockholders, without charge, upon written
request to the Secretary of the Company.
COST OF SOLICITATION
The Company will bear the cost of the Meeting and the cost of soliciting
proxies, including the cost of mailing the proxy material. In addition to
solicitation by mail, directors, officers, and regular employees of the Company
(who will not be specifically compensated for such services) may solicit proxies
by telephone or otherwise. Arrangements will be made with brokerage houses and
other custodians, nominees, and fiduciaries to forward proxies and proxy
material to their principals, and the Company will reimburse them for their
reasonable expenses incurred in connection therewith. The Company has also made
arrangements with MacKenzie Partners, Inc. to assist it in soliciting proxies
from banks, brokers and nominees, and has agreed to pay up to [$25,000 plus
expenses] for such services.
20
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders of the Company wishing to include proposals in the proxy
material in relation to the annual meeting of the Company to be held in 2000
must submit the same in writing so as to be received at the principal executive
office of the Company on or before December 31, 1999. Such proposals must also
meet the other requirements of the rules of the Securities and Exchange
Commission relating to stockholder proposals.
By Order of the Board of Directors,
Marvin M. Speiser
Chairman of the Board and President
New York, New York
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ADDITIONAL INFORMATION CONCERNING THIS
PROXY STATEMENT, PLEASE CONTACT MACKENZIE PARTNERS, INC. AT THE ADDRESS OR
TELEPHONE NUMBER SET FORTH BELOW. IF YOUR SHARES ARE HELD BY A BANK, BROKER OR
OTHER NOMINEE, ONLY IT CAN VOTE YOUR SHARES. ACCORDINGLY, PLEASE CONTACT THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE
COMPANY'S PROXY CARD.
Mackenzie Partners, Inc.
156 Fifth Avenue, 9th Floor
New York, NY 10010
` (212) 929-5500 (collect)
or
Call Toll-Free (800) 322-2885
21
<PAGE>
HEALTH-CHEM CORPORATION
Proxy Solicited by Board of Directors for the Annual Meeting
of Stockholders on December 1, 1999
The undersigned stockholder of HEALTH-CHEM CORPORATION hereby appoints
Marvin M. Speiser, Robert D. Speiser, and Bruce M. Schloss and each of them, the
attorneys and proxies of the undersigned, with full power of substitution, to
vote on behalf of the undersigned all the shares of common stock of HEALTH-CHEM
CORPORATION which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company, to be held at the Marriott Financial Center, 85
West Street, New York, New York, on December 1, 1999 at 10:00 A.M. (local time)
and at all adjournments thereof, hereby revoking any proxy heretofore given with
respect to such stock.
1. Election of Directors.
Nominees: Dr. Martin Benis, Dr. Matthew Goldstein, Eugene Roshwalb, Bruce M.
Schloss, Marvin M. Speiser, Robert D. Speiser
[_] FOR [_] WITHHELD [_] FOR ALL EXCEPT NOMINEE(S), WRITTEN BELOW.
___________________________________________________________________________
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
IMPORTANT--THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTION TO THE CONTRARY
IS INDICATED, THIS PROXY WILL BE VOTED FOR THE DIRECTORS NAMED IN PROPOSAL 1.
<PAGE>
IMPORTANT: Please sign your name or names exactly as shown
hereon and date your proxy in the blank space provided
below. For joint accounts, each joint owner must sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If the signer
is a corporation, please sign full corporate name by duly
authorized officer.
PLEASE SIGN HERE AND RETURN PROMPTLY
_____________________________________
(Signature)
_____________________________________
(Signature)
DATED: _______________________ , 1999
