<PAGE>
================================================================================
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [X] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHANTAL PHARMACEUTICAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
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(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:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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Notes:
<PAGE>
CONFIDENTIAL -- FOR USE OF THE COMMISSION ONLY
PRELIMINARY PROXY STATEMENT
CHANTAL PHARMACEUTICAL CORPORATION
12121 WILSHIRE BOULEVARD
LOS ANGELES, CA 90025
Dear Fellow Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Stockholders to be held on Tuesday, June 17, 1997, at 10:00
A.M., at The Sheraton Gateway Hotel, 6101 West Century Boulevard, Los Angeles,
California 90045.
The following proposals of the Board of Directors will be considered and
acted on at the Special Meeting: (1) election of directors; and (2) approve an
Amendment to the Company's Certificate of Incorporation to increase the number
of shares of Common Stock authorized for issuance from 20,000,000 to 50,000,000.
For the reasons set forth in the accompanying proxy statement, your Board
of Directors unanimously recommends that you vote for the Board of Directors'
nominees and in favor of the proposal.
In order to ensure that your shares are represented at the Special Meeting,
I urge you to promptly sign, date and return the enclosed proxy in the envelope
provided for that purpose which requires no postage if mailed in the United
States. The proxy may be withdrawn or revoked by the person who executed it at
any time prior to the Special Meeting.
Very truly yours,
Chantal Burnison,
Chairman of the Board
Dated: May 19, 1997
<PAGE>
CHANTAL PHARMACEUTICAL CORPORATION
_______________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1997
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of Chantal
Pharmaceutical Corporation will be held on Tuesday, June 17, 1997, at 10:00 A.M.
at The Sheraton Gateway Hotel, 6101 West Century Boulevard, Los Angeles,
California, 90045 for the purpose of considering and voting upon:
1. The election of directors.
2. Approval of an Amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock
authorized for issuance from 20,000,000 to 50,000,000.
3. Such other business as may properly come before the meeting.
The close of business on May 16, 1997, has been fixed as the record date
for determining the stockholders entitled to notice of and to vote at this
Special Meeting and any adjournment thereof, and only stockholders of record on
such date shall be entitled to notice of and to vote at the meeting.
Please promptly date, sign and mail the enclosed proxy using the enclosed
addressed envelope which needs no postage if mailed within the United States.
By Order of the Board of Directors,
Chantal Burnison,
Chairman of the Board
Dated: May 19, 1997
<PAGE>
PROXY STATEMENT
CHANTAL PHARMACEUTICAL CORPORATION
12121 WILSHIRE BOULEVARD
LOS ANGELES, CA 90025
SPECIAL MEETING OF STOCKHOLDERS
This proxy statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of Chantal Pharmaceutical Corporation
(the "Company") of proxies to be voted at the Special Meeting of Stockholders of
the Company to be held on June 17, 1997, at 10:00 a.m., and at any adjournment
thereof. This proxy statement and the proxies solicited hereby are first being
sent or delivered to stockholders on or about May 19, 1997.
The Special Meeting has been called for the following purposes: (1)
election of directors; and (2) approve an Amendment to the Company's Certificate
of Incorporation to increase the number of shares of Common Stock, $.01 par
value (the "Common Stock") authorized for issuance from 20,000,000 to 50,000,000
(the "Amendment").
VOTING
All proxies delivered pursuant to this solicitation may be revoked by the
stockholder at any time prior to its use by voting in person at the Special
Meeting, by executing a later proxy, or by submitting a written notice of
revocation to the Secretary of the Company at the Company's office or at the
Special Meeting. If the proxy is signed properly by the stockholder and is not
revoked, it will be voted at the Special Meeting. If a stockholder specifies
how the proxy is to be voted, the proxy will be voted in accordance with such
specification.
If no specification is indicated on the proxy, the voting rights
represented thereby will be voted to (1) elect the Board's nominees for
director; (2) approve the Amendment; (3) transact such other business as may
properly come before the Special Meeting.
Holders of record of shares of Common Stock, $.10 par value (the "Series B
Preferred Stock) and Series C Voting Convertible Preferred Stock, $.10 par value
(the "Series C Preferred Stock") at the close of business on May 16, 1997 (the
"Record Date"), are entitled to notice of and to vote at the Special Meeting.
Each share of Common Stock and Series C Preferred Stock entitles the holder to
one vote per share on each matter to be acted upon by the stockholders of the
Company. On the Record Date, there were [18,190,516] shares of Common Stock;
and 500,000 shares of Series C Preferred Stock, issued and outstanding.
Accordingly, the total number of votes possible to be cast at the Special
Meeting is [18,690,516].
The presence at the meeting in person or by proxy of stockholders entitled
to cast a majority of the votes at the Special Meeting constitutes a quorum.
The approval of the Amendment requires the affirmative vote of the holders of a
majority of the shares of Common Stock and Series C Preferred
1
<PAGE>
present in person or by proxy at the Special Meeting and entitled to vote,
voting together as a class. Abstentions have the same legal effect as a vote
against the Amendment.
PROPOSAL NUMBER 1 - ELECTION OF DIRECTORS
The Company's Board of Directors has nominated four persons to be elected
at the Special Meeting to serve as directors of the Company until the next
annual meeting of stockholders and until their respective successors shall have
been elected and shall have qualified. Four of the nominees currently serve as
directors of the Company. It is the intention of the persons named in the proxy
to vote for the election of the persons named below. If any nominee is unable
or unwilling to serve, which the Board of Directors does not anticipate, the
persons named in the proxy will vote for another person in accordance with their
judgment.
The following information is supplied with respect to each person nominated
and recommended to be elected by the Board of Directors of the Company and is
based upon the records of the Company and information furnished to it by the
nominees. Reference is made to "Security Ownership of Certain Beneficial
Owners" for information pertaining to stock ownership by the nominees.
<TABLE>
<CAPTION>
Other Positions with
the Company and Has served as
Name Age Principal Occupation director since
- ---- --- --------------------- --------------
<S> <C> <C> <C>
Chantal Burnison 46 Chairman of the Board May 1982
and Chief Executive Officer
Dr. Norman Estrin 57 Director June 1996
Dr. George Goldstein 63 Director June 1996
Robert Pinco 52 Director April 1992
</TABLE>
Chantal Burnison is Chief Executive Officer and Chairman of the Board of
Directors of the Company and Chantal Skin Care Corporation ("Chantal Skin
Care"). She has served as Chairman of the Board and Chief Executive Officer of
the Company since May 1982, at which date the Company acquired from CBD
Pharmaceutical Corporation ("CBD"), a company controlled by her and her family,
the licensing rights to the patents and safety and efficacy test data conducted
to such date for the X-Andron synthetic anti-androgen compounds (including
Cyoctol and Ethocyn) and the Metcyclor family of cancercidal compounds. In May
1994, she became Chairman of the Board and Chief Executive Officer of the
Company's 90% owned Chantal Skin Care subsidiary. In addition to being a
corporate executive, Chantal Burnison is a chemist, biologist and attorney.
2
<PAGE>
She is co-inventor on the patents and patent applications relating to the
compounds which are licensed from CBD and has co-authored numerous scientific
medical publications. Prior to joining the Company, her employment experience
included serving as a vice president and general legal counsel to a steel
company, a partner in a Los Angeles based law firm specializing in corporate and
commercial property law and as a chemist in plastics in private industry. She
has, and continues to, serve as a director on the boards of several privately-
held corporations. Since 1980, Ms. Burnison has served as president of CBD which
is engaged in the development and marketing of products unrelated and not in
competition with the business of the Company. See "Certain Relationships and
Related Transactions."
Dr. Norman Estrin became a director in June 1996. Dr. Estrin also serves as a
consultant to the Company with respect to the Pacific Rim launch. Dr. Estrin is
a 25 year veteran of the cosmetic industry. Dr. Estrin assists pharmaceutical,
cosmetic and other companies in executing international marketing and
distribution programs. In addition, he serves as a consultant to government
agencies, medical conference planning organizations and an international
marketing management company. Dr. Estrin was Senior Vice President - Science,
at the Cosmetic, Toiletry and Fragrance Association from 1968 through 1985. Dr.
Estrin left [CTFA] in 1985 to assume the position of Vice President - Science
and Technology at the Health Industry Manufacturers Association, where he
developed a number of international and domestic programs relating to the
medical device industry.
Dr. George Goldstein became a director in June 1996. Dr. Goldstein has served
as a consultant to major pharmaceutical companies that include Aprex
Corporation, Church and Dwight, Inc., Johnson and Johnson, Sterling Drug, Inc.,
Proctor and Gamble, Glaxo, Fisens, Smith Kline Beecham, and others. Dr.
Goldstein presently is the President, Director and Co-founder of Pharmaceutical
Discovery Corporation. For fifteen years prior to the formation of
Pharmaceutical Discovery Corporation, he held several positions, including
Corporate Vice President, Worldwide Medical and Regulatory Affairs, at Sterling
Drug Inc., of New York, New York.
Mr. Robert Pinco became a director in April 1992 and also serves as a director
of Chantal Skin Care. Mr. Pinco is an attorney and licensed pharmacist. He is
a partner and director of the Food and Drug Group of the Washington, D.C. office
of Akin, Gump, Strauss, Hauer & Feld. Additionally, Mr. Pinco serves as an
Adjunct Professor of Pharmacy Practice and Administrative Sciences at the
University of Maryland. Between 1974-1977, Mr. Pinco was the Director of the
Over-the-Counter Drug Evaluation Division of the United States Food and Drug
Administration ("FDA"). Prior thereto, from 1972-1974, Mr. Pinco was an
Assistant General Counsel with the White House Special Action Office for Drug
Abuse Prevention and between 1969-1972 served as an attorney with the Office of
Chief Counsel, Bureau of Narcotics and Dangerous Drugs (now the Drug Enforcement
Agency) of the Department of Justice. Akin, Gump, Strauss, Hauer & Feld serves
as FDA legal counsel to the Company.
3
<PAGE>
COMPENSATION OF DIRECTORS
In June 1996, the Company granted Dr. Estrin options for the purchase of
45,000 shares at an exercise price of $7.50 per share, which exercise price was
reduced to 1 5/16 in April, 1997, of which 25,000 were granted in connection
with a consulting agreement and 20,000 for serving as a director. The 25,000
shares become exercisable subject to certain performance criteria. Of the
20,000 shares, 10,000 are immediately exercisable and the remaining 10,000
become exercisable upon re-election to the Board at the Annual Meeting following
the first anniversary of service as a director.
In June 1996, the Company granted Dr. Goldstein options for the purchase of
40,000 shares at an exercise price of $7.00 per share, which exercise price was
reduced to 1 5/16 in April, 1997, of which 20,000 are immediately exercisable
and the remaining 20,000 become exercisable upon re-election to the Board at the
Annual Meeting following the first anniversary of service as a director.
MEETINGS OF THE BOARD OF DIRECTORS
During fiscal year ended June 30, 1996, there were four meetings of the
Board of Directors. Currently, the Board of Directors has no audit, nominating
or compensation committees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 31, 1997,
pertaining to ownership of the Company's Common Stock and Series C Preferred
Stock determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, by (i) persons known to the Company to own 5% or more of the Company's
Common Stock and Series C Preferred Stock, (ii) each director, (iii) executive
officers named in the compensation table below, and (iv) directors and officers
of the Company as a group.
The information contained herein has been obtained from the Company's
records, or from information furnished directly by the individual or entity to
the Company.
<TABLE>
<CAPTION>
Name and Address Number of Shares Owned Percentage of Class
- ---------------- ----------------------- --------------------
<S> <C> <C>
Chantal Burnison* 1,312,103 (1) 7.2
Robert Pinco* - -
Norman Estrin* 10,100 (3) (2)
George Goldstein 22,000 (3) (2)
CBD Pharmaceutical Corporation
</TABLE>
4
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<TABLE>
<S> <C> <C>
147 E. Liberty Street
Reno, NV 89501 1,209,503 (1) 6.6
All Directors and Officers
as a group (8 persons) 1,345,203 (1) 7.4
</TABLE>
- -----------------------
* The address of each director is c/o Chantal Pharmaceutical Corporation,
12901 West Jefferson Boulevard, Los Angeles, California 90066.
(1) Includes, 1,209,503 shares owned by CBD, which is owned by Ms. Burnison
and certain members of her family.
(2) Less than one percent.
(3) Includes shares issuable upon exercise of currently exercisable options.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer and as to each
of the other two most highly compensated executive officers whose salary plus
bonus exceeded $100,000 during the last fiscal year, information concerning all
compensation paid for services to the Company in all capacities during the last
three fiscal years.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------------------------------- ---------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary Bonus Compensation Options/SARS (1)
--------------------------- ---- ------- ------ ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Chantal Burnison 1996 266,997 (2) 5,000
Chief Executive Officer 1995 200,769 (2)
1994 186,747 (2)
Marc Dworkin (3) 1996 153,946 25,000 18,000 500,000 shares
President 1995
1994
Rino Gemelli (4) 1996 112,518 33,376
Vice President and Director of 1995 65,141
Product Production 1994 48,698
</TABLE>
(1) All numbers reflect the number of shares of Common Stock subject to options
granted during the fiscal year.
(2) Includes $107,692, $90,000 and $21,000 received as compensation from
Chantal Skin Care Corporation.
(3) Mr. Dworkin provided consulting services in early fiscal 1996 and then
joined the Company as an officer in August 1995.
(4) Mr. Gemelli is also an officer and director of the Company's 90% owned
subsidiary, Chantal Skin Care Corporation.
The amount of compensation paid or distributed during the last fiscal year
and not described above with respect to any individual named in the Summary
Compensation Table did not exceed the lesser of $25,000 or 10% of the
compensation table for such person.
6
<PAGE>
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended June 30, 1996 to the executive
officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of
Total Options
Number of Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year Per Share Date
- --------------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
Marc Dworkin (1) 500,000 100% 5.00 (1) 6/30/02
</TABLE>
(1) In July 1995, Mr. Dworkin was granted options to purchase an aggregate of
500,000 shares of Common Stock of the Company at a purchase price of $5.00
per share. The right to exercise such options vests in installments of
100,000 each as follows: The first installment of 100,000 options vests if
earnings per share of the Company are at least $.25 for two consecutive
quarters prior to June 30, 1996; the second, if earnings per share of the
Company are at least $1.50 for the fiscal year ending June 30, 1996, the
third if earnings per share of the Company are at least $4.00 for the
fiscal year ending June 30, 1997, the fourth if earnings per share of the
Company are at least $5.00 for the fiscal year ending June 30, 1998, and
the last if earnings per share of the Company are at least $6.00 for the
fiscal year ending June 30, 1999. The options vest only if Mr. Dworkin is,
at the vesting date, an employee of the Company and expire three years from
the date they vest. Per Mr. Dworkin's option agreement, 200,000 of the
options granted to him in fiscal 1996 terminated.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number of Value of All Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year-End at Fiscal Year End (1)
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- --------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Marc Dworkin - - 0/300,000 $0/$0
</TABLE>
7
<PAGE>
(1) Based upon the last reported sale price of the Common Stock on NASDAQ
National Market System on June 30, 1996.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
No directors, officers or beneficial owners of more than 10% of the
Company's Common Stock failed to file on a timely basis reports required by
Section 16(a) of the Securities and Exchange Act of 1934, except for the filings
of an Initial Statement of Beneficial Ownership on Form 3 by each of Drs. Estrin
and Goldstein and the filing by Dr. Goldstein of the Statement of Change of
Beneficial Ownership on Form 4 for July and August 1996, each of which were
filed on __________ 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1982, the Company acquired a license for the exclusive manufacturing
and marketing rights to the X-Andron Series compounds (including Ethocyn and
Cyoctol) and Metcyclor compounds and all derivatives and isometric families
thereof from CBD Pharmaceutical Corporation, which is controlled by Chantal
Burnison and certain members of her family, in exchange for 2,614,500 shares of
the Company's Common Stock and an agreement to pay an aggregate royalty of (i)
8% of the wholesale price of all licensed compounds and products containing
licensed compounds manufactured and sold directly by the Company to the
wholesale or retail markets; and (ii) 8% of all revenues derived by the Company
from royalty or other sales-based compensation pursuant to any sublicense, joint
venture or other marketing or development agreement between the Company and any
other party with respect to the licensed compounds. The term of the Company's
license from CBD Pharmaceutical Corporation is equal to the period during which
any of such compounds are protected under any patent rights which may issue from
the United States Patent Office. Total royalty expense under such royalty
arrangement with CBD was $414 for the year ended June 30, 1993. No royalty
expense was recorded for the years ended June 30, 1994 and 1995. As of June 30,
1993, the Company had accrued liabilities of $19,159 for unpaid royalties
pursuant to this agreement. The obligation to make payments to CBD
Pharmaceutical Corporation with respect to Ethocyn-based cosmetics products was
assumed by Chantal Skin Care in connection with the License Agreement between
the Company and Chantal Skin Care. In July 1994 and in conjunction with Ethocyn
U.S. and international marketing negotiations then in progress, CBD
Pharmaceutical Corporation agreed with the Company and Chantal Skin Care to
terminate the 8% royalty obligation, effective August 1, 1994, and in lieu
thereof, to accept from the Company 300,000 shares of its Common Stock and from
Chantal Skin Care 300,000 shares of its Common Stock.
Since May 1984, the law firm of Staubach Teich & Partner, of which Dr.
Rainer Staubach is a partner, has served as European legal and regulatory
counsel to the Company. Dr. Staubach, a former director and officer of the
Company, is the husband of Chantal Burnison, Chairman of Board and Chief
Executive Officer of the Company.
8
<PAGE>
In June 1993, CBD Pharmaceutical Corporation agreed to invest $150,000 of
royalties owed it by acquiring Units, each Unit consisting of one share of the
Company's Series B Convertible Preferred Stock and five Common Stock purchase
warrants, for $5.00 per Unit, all on the same terms and conditions as other
unrelated investors in the Company's June 1993 private placement. The warrants
expired in April 1994 unexercised. At June 30, 1996, the 30,000 shares of
Series B Convertible Preferred Stock were automatically converted in accordance
with the terms thereof into 240,000 shares of Common Stock of the Company.
On March 15, 1994, the Company entered into a License agreement (the
"License") with Cyto Skin Care Corporation ("Cyto Skin Care") pursuant to which
the Company [licensed] to Cyto Skin Care the rights to distribute and sell
Ethocyn-based cosmetics and skin care products (i.e. non-pharmaceutical
products) in the United States, Canada, Mexico and the Caribbean. Cyto Skin
Care issued to the Company in consideration for the License, 10,910,812 shares
of its Common Stock. Under the License, Cyto Skin Care was obliged to use its
best efforts to expeditiously launch the marketing and sale of Ethocyn-based
cosmetic skin care products (the "Chantal Line") by September 30, 1994, but in
no event later than December 31, 1994. In August of 1994, Cyto Skin Care
changed its name to Chantal Skin Care Corporation ("Chantal Skin Care"). The
License is terminable at the option of the Company if during the term of the
License Chantal Skin Care does not achieve sales of the Chantal Line of at least
$5,000,000 in the initial nine months following execution of the License;
$20,000,000 during calendar 1995; and $50,000,000 in calendar 1996. Although
Chantal Skin Care did not achieve the requisite product sales, the Company does
not intend to exercise its termination rights
On February 24, 1995, the Company announced that it had decided to seek to
acquire the shares of Chantal Skin Care which the Company did not then own. In
furtherance thereof, on March 9, 1995, the Company commenced an exchange offer
seeking to acquire the shares of Chantal Skin Care owned by shareholders located
outside the United States, through the exchange of one (1) share of Common Stock
of the Company for one share of Common Stock of Chantal Skin Care. On June 16,
1995, the Company accepted for exchange 1,780,000 shares of Chantal Skin Care
Common Stock. Accordingly, the Company now owns 12,690,812 shares of Chantal
Skin Care or 90% of the outstanding Chantal Skin Care shares. The Company
intends to effect a merger of Chantal Skin Care with and into a newly formed
wholly owned subsidiary of the Company on the same basis as the exchange for the
shares owned by persons outside the United States.
9
<PAGE>
PROPOSAL NUMBER 2 - PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
On March 21, 1997, the Board of Directors unanimously adopted
resolutions, subject to the approval of stockholders, approving an amendment to
the Company's Certificate of Incorporation to increase the number of shares of
Common Stock, $.01 par value per share, authorized for issuance from 20,000,000
to 50,000,000. The Amendment to the Certificate of Incorporation is set for as
Exhibit A to this Proxy Statement.
The holders of Common Stock have equal ratable rights to dividends from
funds legally available therefor, when, as and if declared by the Board of
Directors and are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon the liquidation,
dissolution or winding up of the affairs of the Company. Holders of Common
Stock do not have preemptive, subscription or conversion rights. There are no
redemption or sinking fund provisions in the Company's Certificate of
Incorporation. Holders of Common Stock are entitled to one vote per share on
all matters which stockholders are entitled to vote upon at all meetings of
stockholders.
The Board of Directors has deemed it in the best interests of the Company
to increase the number of authorized shares. Management believes that it is
necessary to have such shares available for potential issuances in order to
afford the Company greater flexibility in meeting any future capital
requirements of the Company and for other corporate needs which may arise.
The Company is currently subject to certain obligations to issue shares of
Common Stock pursuant to the exercise of outstanding options and warrants and
upon conversion of the Company's Series C Preferred Stock, as described below.
Of the 20,000,000 currently authorized shares, at April 30, 1997, [18, 190,516]
shares were issued and outstanding and an aggregate of [1,135,000] shares were
reserved for issuance as follows: (i) an aggregate of [635,000] shares issuable
upon exercise of various outstanding options; and (ii) 500,000 shares issuable
upon conversion of the Series C Preferred Stock.
All outstanding shares of Series C Preferred Stock shall be automatically
converted on the later of (i) the date the Certificate of Incorporation is
amended to increase the number of authorized shares of Common Stock to at least
30,000,000 and (ii) the date a registration statement with respect to the Common
Stock issuable upon conversion of shares of Series C Preferred Stock is declared
effective by the Securities and Exchange Commission.
The Company has previously announced that it had decided to seek to
acquire the shares of Chantal Skin Care Corporation, a 90% owned subsidiary of
the Company, through the merger of Chantal Skin Care Corporation with and into a
newly formed wholly-owned subsidiary of the Company on the basis of one share of
the Company for each share of Chantal Skin Care Corporation. The Company will be
required to issue [1,409,193] shares of Common Stock pursuant to the proposed
10
<PAGE>
merger. An additional [852,000] shares of Common Stock will be reserved for
issuance upon exercise of currently outstanding options to purchase shares of
Chantal Skin Care Corporation, which by virtue of the merger are expected to
become options to purchase Common Stock of the Company.
The Company has an option to acquire its U.S. distributor, Stanson
Marketing, Inc., under the terms of the Marketing Agreement, dated as of June
29, 1995, as amended. The purchase price is payable in the number of shares of
the Company's Common Stock computed by dividing three times Stanson's annualized
net earnings by the lesser of (i) $10.00 or (ii) 80% of the 10 day average
closing bid of the Company's Common Stock prior to the notice of exercise of
such option. While the Company is exploring whether the acquisition of Stanson
pursuant to the option would be a prudent investment for the Company, the
Company has not determined if or when it will exercise the option. In the event
that it determines to exercise the option, a portion of the shares of Common
Stock being authorized would be used for this purpose.
The Company issued in April 1997, convertible debentures in the aggregate
principal amount of $6,562,500, which debentures are convertible into Common
Stock of the Company pursuant to a formula based on a discount to the market
price of the Company's Common Stock at the time of conversion. These debentures
were issued in connection with the restructuring of the Company's financing of
October 1996 made under Regulation S. A portion of the shares of Common Stock
being authorized will be issued upon conversion of the 1997 debentures. The
exact number of such shares cannot be determined at this time. However, if the
1997 debentures had been converted on __________, 1997, _____ shares would have
been issuable based on the five day average stock price of $_____ for the five
trading days ending on that day.
As a result of the Amendment, there will be approximately [18,190,516]
shares of Common Stock outstanding, [__________] shares reserved for issuance
upon the conversion or exercise of the aforementioned securities and
[__________] authorized but unissued shares. The Amendment would create a
larger excess of authorized but unissued shares.
Other than as set forth above, the Board of Directors of the Company has
no plans, proposals, commitments, undertakings or arrangements which would
result in the issuance of any additional shares of Common Stock.
The affirmative vote of the holders of shares representing a majority of
the votes entitled to be cast at the Special Meeting is required to authorize
the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION.
SOLICITATION STATEMENT
11
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All expenses in connection with the solicitation of proxies will be borne
by the Company. In addition to the use of the mails, solicitations may be made
by regular employees of the Company by telephone, telegraph, or personal
contact, without additional compensation. The Company will, upon request,
reimburse brokerage houses and persons holding shares of Company Common Stock in
the name of their nominee for their actual out-of-pocket expenses in sending
solicited material to their principals.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 1996
Annual Meeting of Stockholders which the stockholder desires to be presented in
the Company's Proxy Statement with respect to such meeting should submit such
proposals to the Company at its principal place of business no later than
January 31, 1998.
INDEPENDENT AUDITORS
BDO Seidman L.L.P. has been selected to serve as independent auditors of
the Company for its fiscal year ending June 30, 1997. Representatives of BDO
Seidman are expected to be present at the meeting and will have the opportunity
to make a statement if they desire to do so and be available to respond to
appropriate questions. BDO Seidman served as the Company's independent auditors
for the fiscal year ending June 30, 1996.
THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K, EXCLUSIVE OF EXHIBITS, WILL
BE MAILED WITHOUT CHARGE TO ANY STOCKHOLDER ENTITLED TO VOTE AT THE MEETING,
UPON WRITTEN REQUEST TO: CHANTAL PHARMACEUTICAL CORPORATION, 12901 WEST
JEFFERSON BOULEVARD, LOS ANGELES, CALIFORNIA 90066, ATTENTION: INVESTOR
RELATIONS.
OTHER MATTERS
The Board of Directors did not know, a reasonable time before the
commencement of the solicitation, of any business constituting a proper subject
for action by the stockholders to be presented at the Special Meeting other than
as set forth in this Proxy Statement. However, if any such matter should
properly come before the meeting, the persons named in the enclosed proxy intend
to vote such proxy in accordance with their best judgment.
The proxies named in the enclosed form of proxy and their substitutes will
vote the shares represented by the enclosed form of proxy, if the proxy appears
to be valid on its face and a choice is specified on the form of proxy, the
shares will be voted in accordance with each specification so made.
12
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A list of stockholders of record of the Company as of May 16, 1997 will be
available for inspection by stockholders during normal business hours from 9:00
A.M. to 5:00 P.M. at the offices of the Company, 12901 West Jefferson Boulevard,
Los Angeles, California 90066.
INCORPORATION BY REFERENCE
In connection with the authorization of additional shares of Common Stock,
shareholders are referred to the financial information about the Company
contained in the Company's Annual Report on Form 10-K which accompany's this
Proxy Statement as the Company's Annual Report to Shareholders, including the
financial statements under Item 8, and Management's Discussion and Analysis of
Financial Condition and Results of Operation under Item 7.
By Order of the Board
Chantal Burnison
Chairman and Chief Executive Officer
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EXHIBIT A
---------
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CHANTAL PHARMACEUTICAL CORPORATION
(UNDER SECTION 242 OF THE GENERAL CORPORATION LAW)
CHANTAL PHARMACEUTICAL CORPORATION, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that:
FIRST: The name of the Corporation is Chantal Pharmaceutical
Corporation.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended by striking out the first sentence of Article "FOURTH" thereof and by
substituting in lieu of said sentence the following provisions:
"FOURTH: The aggregate number of shares which the Corporation is
authorized to issue is 51,000,000, divided into 1,000,000 shares of
Preferred Stock, par value $.10 per share, and 50,000,000 shares of Common
Stock, par value $.01 per share."
THIRD: The Amendment to the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
222 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
day of , 1997.
________________________________
Chantal Burnison, Chairman of
the Board and Chief Executive Officer
ATTEST:
_____________________________
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FRONT OF PROXY CARD
CHANTAL PHARMACEUTICAL CORPORATION
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS - JUNE 17, 1997
This Proxy is solicited on behalf of the Board of Directors. Unless otherwise
properly marked, this proxy will be voted for the nominees for directors and FOR
Proposal 2 as Recommended by the Board of Directors.
The undersigned hereby appoints Chantal Burnison and Yvette Lamprecht, and
each of them, each with full power to act without the other and with full power
of substitution, the attorneys and proxies of the undersigned and hereby
authorizes them to represent and to vote, all of the shares of Common Stock of
Chantal Pharmaceutical Corporation that the undersigned would be entitled to
vote, if personally present, at the Annual Meeting of Shareholders to be held on
Tuesday, June 17, 1997, at 10:00 A.M., local time, and at any adjournment
thereof, upon such business as may properly come before the meeting, including
the items set forth below:
(1) ELECTION OF DIRECTORS
Nominees: Chantal Burnison, Norman Estrin, George Goldstein and Robert
Pinco.
[ ] FOR all nominees [ ] AUTHORITY withheld as to all nominees
For, except authority withheld as to the following nominee(s):
(2) PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
INCREASE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
BACK OF PROXY CARD
(continued from Reverse Side)
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: , 1997
--------------------
--------------------------------
Signature
--------------------------------
Signature if held jointly
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PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
