<PAGE> 1
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Duramed Pharmaceuticals, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[X] 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:
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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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<PAGE> 2
DURAMED PHARMACEUTICALS, INC.
7155 EAST KEMPER ROAD
CINCINNATI, OHIO 45249
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Dear Stockholder:
We are pleased to invite you to attend a Special Meeting of
Stockholders of Duramed Pharmaceuticals, Inc., to be held at 11461 Northlake
Drive, Cincinnati, Ohio 45249 at 9:00 a.m. (EST), on January 24, 1996 for the
purpose of considering and acting upon the following:
1. A proposal to issue 120,000 additional shares of the Company's 8%
Cumulative Convertible Preferred Stock, Series C (the "Series C
Stock"), with the effect that, upon conversion of all shares of Series
C Stock, the holders of the Series C Stock could own in excess of 20%
of the number of shares of the Company's common stock outstanding
prior to the issuance of the Series C Stock.
2. Such other matters as may properly come before the meeting.
Only stockholders of record at the close of business on December 14,
1995 are entitled to receive notice of, and to vote at, the meeting.
By Order of The Board of Directors
E. THOMAS ARINGTON
President and Chief Executive Officer
Cincinnati, Ohio
December 22, 1995
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES OR CANADA. PROXIES
MAY BE REVOKED BY WRITTEN NOTICE OF REVOCATION, THE SUBMISSION OF A LATER DATED
PROXY, OR ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE> 3
DURAMED PHARMACEUTICALS, INC.
7155 EAST KEMPER ROAD
CINCINNATI, OHIO 45249
(513) 731-9900
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Duramed Pharmaceuticals, Inc. (the "Company") of
proxies to be voted at a Special Meeting of Stockholders to be held on January
24, 1996. This Proxy Statement and the accompanying Proxy card are first being
mailed to stockholders of the Company on or about December 22, 1995.
OUTSTANDING VOTING SECURITIES
The number of voting securities of the Company outstanding on December
14, 1995, the record date for the meeting, was 8,074,279 shares of common
stock, $.01 par value (the "Common Stock"), all of one class and each entitled
to one vote, owned by 1,026 stockholders of record. A list of stockholders of
the Company may be examined at the offices of the Company at the address given
above.
PROXIES AND VOTING
The persons named as proxies were selected by the Board of Directors
of the Company and are directors or officers of the Company.
When the enclosed form of proxy is properly executed and returned, the
shares it represents will be voted as specified at the meeting. Any
stockholder giving a proxy has the power to revoke it at any time before it is
voted by giving written notice to the Company, by giving a later dated proxy
indicating a desire to vote differently or by appearing at the meeting and
casting a ballot. There are no rights of appraisal or similar rights of
dissenting stockholders with respect to any matter to be acted upon at the
Special Meeting.
The cost of solicitation of proxies will be paid by the Company. In
addition to the solicitation of proxies by use of the mails, solicitation may
be made by officers and regular employees of the Company by personal interview,
telephone and telegraph. Banks, brokerage houses and other custodians,
nominees or fiduciaries will be reimbursed for their reasonable expenses
incurred in forwarding soliciting material to their principals and in obtaining
authorizations for the execution of the proxies.
In accordance with the General Corporation Law of the State of
Delaware, the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote on the matter, will
be sufficient to approve the proposal to be presented at the Special Meeting.
Abstentions will have the effect of negative votes, and broker non-votes will
be deemed to be absent shares. Votes at the meeting will be tabulated by
financial management employees of the Company. The Company has not established
a procedure for confidential voting.
<PAGE> 4
THE PROPOSAL
GENERAL
In November 1995, the Company entered into a private placement
agreement for the sale of up to 250,000 shares of 8% Cumulative Convertible
Preferred Stock, Series C. Between November 14 and November 16, 1995, seven
institutional investors purchased 120,000 shares of Series C Stock at a price
of $100 per share, for a total purchase price of $12,000,000. The purpose of
the Special Meeting is to obtain stockholder approval of the proposal (the
"Proposal") to issue to eight other institutional investors (each of whom has
executed a purchase contract) 120,000 additional shares of Series C Stock, also
at a price of $100 per share. The existing and proposed purchasers of the
Series C Stock are hereinafter referred to as the "Investors." (See "Principal
Stockholders and Holdings of Management.") The Company's Board of Directors
unanimously recommends that stockholders vote "FOR" the Proposal.
The Proposal is necessary in order for the Company to comply with the
requirements of the Nasdaq National Market, on which the Company's Common Stock
is traded. Neither the Delaware General Corporation Law nor the Company's
Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), requires stockholder approval for the issuance of the Series C
Stock or the Common Stock into which it is convertible. However, because the
Series C Stock is potentially convertible, at a discount from the Common
Stock's market value, into an aggregate number of shares of Common Stock equal
to more than 20% of the number of shares of Common Stock outstanding before the
issuance of the Series C Stock, stockholder approval of the portion of the
issuance which may cause the 20% limit to be exceeded is required to maintain
the Common Stock's listing on the Nasdaq National Market.
Each share of Series C Stock is convertible, at a 15% discount from
the market value of the Company's Common Stock on the date of conversion, into
a minimum of five and a maximum of 13.33 shares of Common Stock. See "The
Series C Stock - Conversion." As of November 14, 1995, the Company had
8,068,969 shares of Common Stock outstanding. The 120,000 shares of Series C
Stock issued between November 14 and November 16, 1995 are convertible into a
minimum of 600,000 shares and a maximum of 1,600,000 shares of Common Stock,
representing 7.4% and 19.8%, respectively, of the Common Stock outstanding on
November 14, 1995. The issuance and conversion of the additional 120,000
shares of Series C Stock which are the subject of the Proposal also will result
in the issuance of between 600,000 and 1,600,000 additional shares of Common
Stock. The aggregate number of shares of Common Stock issuable upon conversion
of the Series C Stock will be between 1,200,000 and 3,200,000 shares,
representing approximately 14.9% and 39.6% of the Common Stock outstanding on
November 14, 1995 before giving effect to the conversion of the Series C Stock.
REASONS FOR THE PROPOSAL
The Company's Board of Directors believes that approval of the
Proposal is in the best interests of both the Company and its stockholders.
The $12,000,000 to be received from the sale of the additional shares of Series
C Stock will be of substantial assistance to the Company in its efforts to
implement its operating plan and to achieve the growth necessary for long-term
profitability.
As stockholders of the Company are aware, in 1991 the Company's
financial base was nearly exhausted as a result of charges incurred in 1990 due
to product recalls and related inventory write-offs and as a result of
substantially reduced revenue levels in 1991 due to the withdrawal of all
Abbreviated New Drug Applications ("ANDAs") except those for two of the
Company's products. From that time and through much of 1993, the Company's
efforts were focused on three primary pursuits: continued execution of a plan
to, at a minimum, generate sufficient cash flows to meet current obligations
exclusive of bank debt and related interest; seeking other sources of revenue;
and continuing discussions with potential sources of capital in an effort to
secure the resources needed to fund the Company's recovery.
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<PAGE> 5
Additionally, the Company's product development efforts were focused primarily
on development of a new formulation for conjugated estrogens products under an
agreement with Schein Pharmaceutical, Inc.
With improving sales and operating results commencing in 1993, the
Company's operating plan was modified to begin to address the expanded product
development, sales and marketing, and general corporate activities required for
long-term success. Necessarily, however, the Company also continued
discussions regarding potential sources of capital in an effort to secure
resources for its operating plan.
The Company believes it has made significant progress over the last
four years. Pursuant to a 1992 agreement with Schein Pharmaceutical, Inc., the
Company has developed a new formulation for conjugated estrogens tablets,
designed to meet the bioequivalence guidance established by the federal Food
and Drug Administration ("FDA") in 1991, and has filed an ANDA with the FDA for
the .625 mg strength conjugated estrogens tablets. In 1994 the Company entered
into agreements with Ortho-McNeil Pharmaceutical Corporation ("Ortho-McNeil")
pursuant to which the Company received non-exclusive distribution rights to
certain Ortho-McNeil products and Ortho-McNeil and its parent, Johnson &
Johnson, provided substantial financial assistance and guarantees for the
construction of the Company's new hormone replacement therapy facility. The
Company's financial position has improved from a capital deficiency of $14.9
million at December 31, 1992 to a positive stockholders' equity of $1.1 million
at September 30, 1995, and the Company has made substantial progress in
reducing its debt to its unsecured creditors.
Despite these accomplishments, the Company has remained in need of
additional capital. Its growth since 1993 has been financed largely by debt,
with total indebtedness increasing from $19.4 million at December 31, 1992 to
$32.0 million at September 30, 1995. Furthermore, its current product line has
been limited and its current operating results have been heavily dependent on
the performance of its Methylprednisolone product. FDA approval of the
Company's ANDA for conjugated estrogens has not yet been received. The
Company's future profitability is dependent in great part upon its ability to
develop internally, or acquire through joint ventures or otherwise, new generic
products.
To address this situation, the Company is expanding its internal
research and development activities and has entered into several joint
marketing and distribution arrangements. However, as the Company has noted in
its public filings, it will need additional resources to carry out its plans
for substantial expansion of its research and development capabilities and to
pursue other planned corporate projects designed to foster long-term growth.
While it is possible that the Company's capital needs could be met from new
product revenues, this is not certain. Accordingly, the Company has sought to
obtain the additional capital required to execute the Company's business plan
from other sources. The sale of the 240,000 shares of Series C Stock follows
from this effort. Although the net proceeds from the sale of the Series C
Shares initially will be applied to the Company's indebtedness (see "Unaudited
Pro Forma Financial Information"), the Company anticipates that the ultimate
application of the net proceeds will be approximately as follows: debt
reduction, $5 million, product development, $5 million, capital expenditures,
$2 million and working capital, $10 million. The actual allocation of proceeds
will be dependent upon a number of factors which are still being defined,
including (i) the total amount of proceeds available to the Company (in
particular, whether the Proposal is approved), (ii) the outcome of discussions
currently in process between the Company and its bank relating to the schedule
for repayment of certain of the Company's indebtedness, (iii) ongoing
discussions between the Company and certain of its joint venture partners
regarding product development efforts and (iv) the Company's ability to
negotiate strategic alliances or acquisitions on acceptable terms. While the
Company in the future may seek additional capital to support its growth as
market conditions and its business may warrant, the Company believes that the
proceeds from the sale of the 240,000 shares of Series C Stock will provide the
funding needed to satisfy the most significant aspects of its business plans
for the remainder of 1995 and for 1996.
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<PAGE> 6
ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL.
As discussed above under "Reasons for the Proposal," the Company
believes that approval of the Proposal is in the best interests of the Company
and its stockholders. In reaching this conclusion, the Board of Directors of
the Company noted that there are advantages and disadvantages to the Proposal.
The principal advantage is that the sale of the 120,000 additional
shares of Series C Stock, which is expected to be completed if the Proposal is
approved, will provide the Company with additional capital needed to carry out
its business plan and other projects designed to promote long-term growth. The
Board of Directors also noted that the terms of the Series C Stock do not
include any covenants which would restrict the future business activities of
the Company. Finally, the Board noted that the sale of the shares of Series C
Stock will result in an increase in the book value per share of the Company's
Common Stock on a pro forma basis. See "Unaudited Pro Forma Financial
Information."
The disadvantages noted by the Board of Directors include the fact
that, while the sale of the Series C Stock and its subsequent conversion into
Common Stock of the Company will not be dilutive from a book value per share
point of view on a pro forma basis, the effect will be to reduce the percentage
ownership of the current stockholders in the Company, which means that they
will share to a lesser extent in any future success of the Company. If the
Company is not able to obtain the anticipated long-term benefits from the
capital infusion provided by the sale of the Series C Stock, the Company's
current stockholders would have suffered a dilution in their percentage
ownership of the Company without an offsetting increase in Company value. In
addition, the Common Stock into which the Series C Stock may be converted will
be freely tradeable upon conversion. Sales of such Common Stock in the open
market from time to time could have a negative effect upon the trading price of
the Company's Common Stock.
After a review of all of these points, the Board of Directors of the
Company decided that approval of the Proposal was in the best interests of the
Company's stockholders.
THE SERIES C STOCK
The Company's Certificate of Incorporation authorizes the Board of
Directors (the "Board"), without further stockholder action, to provide for the
issuance of up to 500,000 shares of Preferred Stock, par value $.001 per share,
in one or more series, with such designated preferences, rights,
qualifications, powers, restrictions and limitations as may be determined by
the Board. In accordance with this authority the Board authorized the issuance
of up to 250,000 shares of Series C Stock, having a stated value of $100 per
share, and established the terms and conditions of those shares described
below.
Shares of Series C Stock are or, when issued, will be fully paid and
nonassessable. The Series C Stock is not redeemable, and there is no
redemption or sinking fund obligation with respect to the Series C Stock.
There also are no restrictions on transferability of the Series C Stock The
holders of shares of Series C Stock have no preemptive rights with respect to
any securities of the Company. In addition to the Series C Stock, the Company
has issued and outstanding 74,659 shares of Series B Non-Voting Convertible
Preferred Stock (the "Series B Stock") and has authorized the issuance of
100,000 shares of Series A Preferred Stock (the "Series A Stock"), none of
which has been issued. The Series B Stock and, if issued, the Series A Stock
rank on a parity as to dividends and upon liquidation with the Series C Stock.
The Company also currently has authorized 75,341 shares of undesignated
Preferred Stock which could be issued in the future in one or more series and
which could be designated as senior to, on a parity with or junior to the
Series C Stock as to dividends and/or upon liquidation.
The following description summarizes certain terms of the Series C
Stock contained in the Certificate of Designation, Preferences and Rights for
the Series C Stock which has been filed with the Secretary of State of
Delaware. This description is qualified in its entirety by reference to the
Certificate of Designation, Preferences and Rights, a copy of which has been
filed as an exhibit to the Company's
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<PAGE> 7
Registration Statement on Form S-3 (No. 33-64561). The Company will furnish a
copy of the Certificate of Designation, Preferences and Rights to any
stockholder on written or oral request, directed to Timothy J. Holt, Senior
Vice President - Finance and Administration, at the address and telephone
number given on page 1 of this Proxy Statement.
Dividends. Holders of shares of Series C Stock are entitled to
receive, when and as declared by the Board out of funds legally available
therefor, an annual cash dividend at the rate of 8% per share. Dividends on
the Series C Stock are payable quarterly in arrears on the fifteenth day of
each January, April, July and October, commencing January 15, 1996, and accrue
and are cumulative from the initial date of issuance, with appropriate
proration for any partial dividend period. No dividend may be declared or set
apart for any shares of Series C Stock unless a like dividend is declared or
set apart for all outstanding shares of Series C Stock. Further, so long as
any shares of Series C Stock are outstanding, no dividend may be paid on the
Company's Common Stock, or on any other class of stock ranking junior to the
Series C Stock in either payment of dividends or liquidation (the "Junior
Stock"), unless all dividends on the Series C Stock have been paid in full for
past dividend periods and dividends for the current period have been paid or
have been declared and set apart.
Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the Company, the holders of shares of Series C Stock are
entitled to receive (after payment of all debts and other liabilities of the
Company), out of the assets available for distribution, all accumulated and
unpaid dividends on the Series C Stock before any distribution may be made to
holders of Common Stock or any Junior Stock. Thereafter, the Series C Stock
will share with the Company's other outstanding classes of capital stock the
remaining assets to be distributed, with the Series C Stock receiving an amount
per share equal to the amount to be distributed on each share of Common Stock
multiplied by a fraction the numerator of which is $100 and the denominator of
which is the Conversion Price (as defined under "Conversion" below). The
holders of Series C Stock and all series or classes of the Company's capital
stock that rank on a parity upon liquidation with the Series C Stock are
entitled to share ratably in any distribution which is not sufficient to pay in
full the aggregate amounts payable thereon. Neither the merger or
consolidation of the Company with another corporation nor the sale or lease of
all or substantially all of the Company's assets will be considered a
liquidation, dissolution or winding up of the Company.
Conversion. Each share of Series C Stock is convertible at the option
of the holder, with respect to its stated value of $100, into shares of the
Company's Common Stock at a price (the "Conversion Price") equal to 85% of the
Market Price of the Common Stock on the date of conversion, except that the
Conversion Price may not be less than $7.50 (the "Minimum Price") or more than
$20.00 (the "Maximum Price"). The per share Market Price of the Common Stock
on any date is the average of the reported daily closing prices of the Common
Stock for the 10 consecutive trading days commencing 12 trading days before
that date. A holder's option to convert the holder's shares of Series C Stock
may be exercised on or after February 12, 1996 as to 50% of the shares acquired
by the holder and on or after March 13, 1996 with respect to the remaining
shares acquired. Any shares of Series C Stock which have not previously been
converted will convert automatically into shares of Common Stock on November
14, 1997. No fractional shares of Common Stock will be issued upon any
conversion of shares of Series C Stock; in lieu thereof, the Company will pay a
cash adjustment based on the then current fair market value of the Common
Stock, as determined by the Company's Board of Directors.
The Minimum and Maximum Prices are subject to adjustment in the event
of the issuance of Common Stock as a dividend or distribution on the Common
Stock or in the event of a combination, subdivision or reclassification of the
Common Stock. Additionally, if the Company distributes to all or substantially
all holders of its Common Stock evidences of indebtedness, assets or any other
securities, or rights, warrants or options to acquire other securities, of the
Company, it also must distribute these to the holders of Series C Stock or must
reserve them for the benefit of the holders of Series C Stock, together with
any interest, dividends or other property payable thereon.
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<PAGE> 8
In the event of a merger or consolidation of the Company with or into
another corporation, or the sale or transfer of all or substantially all the
property or assets of the Company, the holders of shares of Series C Stock have
the right to convert those shares into the kind and amount of shares or other
securities or property which they would have received had all shares of Series
C Stock been converted to shares of Common Stock immediately prior to such
merger, consolidation or sale.
The Company is required at all times to reserve sufficient shares of
Common Stock to permit the conversion of all outstanding shares of Series C
Stock.
Voting Rights. So long as any Series C Stock is outstanding, the
Company's Certificate of Incorporation may not be amended in any manner which
would materially alter or change the powers, preferences or rights of the
Series C Stock so as to affect them adversely without the affirmative vote of
the holders of a majority of the outstanding shares of Series C Stock voting
separately as a class. The holders of the Series C Stock have no other voting
rights except as required by law.
Change in Control Provisions. The Company's Certificate of
Incorporation contains certain provisions which could have the effect of
delaying, deferring or preventing a change in control of the Company. The
Certificate of Incorporation requires the affirmative vote of holders of
two-thirds of the Company's voting securities in order to approve a merger or
consolidation with, a sale of all or substantially all of the Company's assets
to, or similar specified transactions with, the beneficial owner of 15% or more
of the Company's voting securities, unless the Company's Board of Directors
approves the transaction prior to the person having become a 15% or greater
beneficial owner. For purposes of this provision the Company's Common Stock
currently is its only class of voting securities. Additionally, the
affirmative vote of at least two-thirds of the Company's outstanding shares of
Common Stock is required to amend the Certificate of Incorporation.
AGREEMENTS RELATING TO THE SALE OF THE SERIES C STOCK
In connection with the sale of the Series C Stock, the Company entered
into Registration Rights Agreements pursuant to which it agreed to register
under the Securities Act of 1933 (the "Act"), at its expense, the resale by the
Investors of all shares of Common Stock into which the Series C Stock is
convertible. The Company has filed such a registration statement with the
Securities and Exchange Commission and is awaiting its effectiveness. If
effectiveness has not been obtained by February 12, 1996, the Company must make
monthly payments to the Investors equal to 3% of the price paid by the
Investors for the Series C Stock until effectiveness is obtained. No payment
is required for any period in respect of which the Company obtains a court
judgment that the failure to have the registration statement declared effective
is due to causes beyond the Company's control. Once effectiveness has been
obtained, the Company is obligated to maintain that effectiveness for three
years or until such earlier time as the Investors may sell all unsold shares
during a three-month period pursuant to Rule 144 under the Act. The Company
and the Investors have agreed to indemnify each other against certain
liabilities in connection with the registration statement, including
liabilities under the Act.
The Company also has agreed not to offer any shares of its Common
Stock, or securities convertible into Common Stock, in a discounted transaction
prior to February 7, 1996.
Dean Witter Reynolds, Inc. ("Dean Witter"), Dillon, Read & Co., Inc.
("Dillon Read") and Shoreline Pacific, Institutional Finance Division of
Financial West Group ("Shoreline Pacific") have acted as placement agents (the
"Placement Agents") for the Company in connection with the sale of the Series C
Stock. The Company has agreed to pay Dean Witter and Dillon Read an aggregate
commission of 7% on the first $15,000,000 of Series C Stock sold and a
commission of 2% of the value of any additional shares of Series C Stock sold.
The Company is obligated to pay Shoreline Pacific a commission of 4% of the
total value of the Series C Stock sold to the Investors. The Company also has
agreed to indemnify Dean Witter, Dillon Read and Shoreline Pacific against
certain liabilities relating to the sale of the Series C Stock.
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<PAGE> 9
OTHER INFORMATION
The Investors are unaffiliated with the Company. No director or
officer of the Company, or any of their associates, has any direct or indirect
interest in the transactions which are the subject of the Proposal. The $100
per share stated value, the Conversion Price and the other terms of the Series
C Stock were determined by negotiation between the Company and the Placement
Agents and an assessment of the terms necessary to attract the investment
capital sought by the Company.
UNAUDITED PRO FORMA
FINANCIAL INFORMATION
The following unaudited pro forma Balance Sheet and calculation of
book value per share at September 30, 1995 and earnings per share for the three
and nine month periods ended September 30, 1995 were prepared assuming, on
September 30, 1995, (i) the issuance of 120,000 shares of Series C Stock and
the conversion of those shares of Series C Stock into a minimum of 600,000 and
a maximum of 1,600,000 shares of Common Stock and (ii) the issuance and
conversion of an additional 120,000 shares of Series C Stock, resulting in an
aggregate minimum of 1,200,000 and maximum of 3,200,000 shares of Common Stock
issued.
The unaudited pro forma earnings per share are not necessarily
indicative of the future results of operations of the Company.
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<PAGE> 10
<TABLE>
Unaudited
Pro Forma Balance Sheet and Book Value per Common & Common Equivalent Share as of September 30, 1995:
<CAPTION>
Proposed Use of
Use of Proceeds from the
Proceeds from Issuance of an
the Issuance of Additional
120,000 Shares Pro Forma 120,000 Shares of Adjusted Pro Forma
As Reported of Series C Stock Balance Sheet Series C Stock Balance Sheet
------------- ----------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Current Assets $23,097,080 $ - $23,097,080 $4,074,601 $27,171,681
Other Assets 23,034,243 - 23,034,243 - 23,034,243
------------- ----------------- -------------- ----------------- -------------------
Total Assets $46,131,323 $ - $46,131,323 $4,074,601 $50,205,924
============= ================= ============== ================= ===================
Current Liabilities $20,707,278 ($1,750,000) $18,957,278 ($4,000,000) $14,957,278
Revolving Credit Facility 11,985,399 (8,930,000) 3,055,399 (3,055,399) -
Other Long-Term Liabilities 12,331,693 - 12,331,693 - 12,331,693
------------- ----------------- -------------- ----------------- -------------------
Total Liabilities 45,024,370 (10,680,000) 34,344,370 (7,055,399) 27,288,971
------------- ----------------- -------------- ----------------- -------------------
Stockholders' Equity 1,106,953 10,680,000 11,786,953 11,130,000 22,916,953
------------- ----------------- -------------- ----------------- -------------------
Total Liabilities &
Stockholders' Equity $46,131,323 $ - $46,131,323 $4,074,601 $50,205,924
============= ================= ============== ================= ===================
Book value per common and
common equivalent share on
an as if converted basis:
As Reported - Fully Diluted $0.10
=============
If Converted @ $20.00 $1.04 $1.93
============== ===================
If Converted @ $ 7.50 $0.96 $1.65
============== ===================
</TABLE>
In November 1995, the Company received $10,680,000 from the sale of 120,000
shares of Series C Stock net of transaction related expenses of $1,320,000.
The Company used the funds received to pay down $1,750,000 borrowed under a
revolving term note which carries a prime plus 2% interest rate and applied the
$8,930,000 balance against its revolving credit facility which carries a
prime plus 1% interest rate. After giving effect to these principal payments,
the Company had $12,049,769 in borrowing capacity under these facilities based
on its existing banking arrangements and collateral position as of September
30, 1995. The proposed sale of an additional 120,000 shares of Series C Stock
would result in net proceeds of $11,130,000 after paying transaction expenses
of $870,000. Based upon the terms of banking arrangements existing as of
September 30, 1995 the Company would utilize $4,000,000 of the proceeds to make
principal payments on bank term notes, $3,055,399 to pay down the revolving
credit facility and the remaining $4,074,601 would initially be deposited in to
an interest bearing account. On an adjusted pro forma basis, the Company would
have $15,105,168 in borrowing capacity based upon its current borrowing
arrangements and collateral position as of September 30, 1995. The Company
intends to ultimately use the resulting cash and borrowing capacity from the
sale of the 240,000 shares of Series C Stock to execute its business plan
which calls for investment in product development, capital expenditures and
other projects designed to promote long-term growth. See "The Proposal-Reasons
for the Proposal" for a discussion of the ultimate use of proceeds.
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<PAGE> 11
<TABLE>
Pro Forma Earnings per Share as of September 30, 1995:
<CAPTION>
Pro Forma Adjusted Pro Forma
Conversion of 120,000 Conversion of 240,000
Shares of Series C Stock Shares of Series C Stock
-------------------------- ----------------------------
If Converted If Converted If Converted If Converted
As Reported @ $20.00 @ $7.50 @ $20.00 @ $7.50
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Three Months Ended:
Net Income $317,207 $317,207 $317,207 $317,207 $317,207
=========== ========================== ===========================
Earnings per average common
and common equivalent share outstanding -
fully diluted $0.03 $0.03 $0.03 $0.03 $0.02
=========== ========================== ===========================
Weighted average number of common
and common equivalent share outstanding -
fully diluted 10,682,257 11,282,257 12,282,257 11,882,257 13,882,257
=========== ========================== ===========================
Nine Months Ended:
Net Income $1,958,037 $1,958,037 $1,958,037 $1,958,037 $1,958,037
=========== ========================== ===========================
Earnings per average common
and common equivalent share outstanding -
fully diluted $0.18 $0.17 $0.16 $0.16 $0.14
=========== ========================== ===========================
Weighted average number of common
and common equivalent share outstanding -
fully diluted 10,696,225 11,296,225 12,296,225 11,896,225 13,896,225
=========== ========================== ===========================
</TABLE>
The above table reflects the pro forma earnings per share effects of the sales
of the Series C Stock on an "as if converted into common stock" basis
on September 30, 1995. Accordingly, net income has not been adjusted to reflect
the reduced interest cost resulting from the reduction in the Company's
borrowings, nor a dividend provision on the Series C Stock. The ultimate
number of common shares issued and the effect on the Company's earnings per
share will be dependent upon the conversion price on the date of conversion as
described in the Series C Stock section of this Proxy Statement.
-9-
<PAGE> 12
PRINCIPAL STOCKHOLDERS AND
HOLDINGS OF MANAGEMENT
The following table sets forth certain information with regard to the
beneficial ownership of the Company's Common Stock by (i) each director and
each executive officer named on the Summary Compensation Table contained in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders,
individually, (ii) all directors and executive officers of the Company as a
group, (iii) each of the Company's stockholders known to beneficially own more
than 5% of the outstanding shares of Common Stock and (iv) for informational
purposes only, all other Investors as a group. The left columns give effect to
the conversion of the 120,000 shares of Series C Stock now outstanding; the
right columns give effect to the further conversion of the 120,000 additional
Series C Shares which are the subject of the Proposal. The numbers of shares
outstanding after conversion are based upon 8,068,969 shares of Common Stock
outstanding at November 14, 1995 plus 1,600,000 and 3,200,000 shares of Common
Stock, respectively, issuable upon conversion of 120,000 and 240,000 shares of
Series C Stock at the assumed rate of 13.33 shares of Series C Stock per share
of Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership Assuming Beneficial Ownership Assuming
Conversion of 120,000 Shares of Conversion of 240,000 Shares of
Name Series C Stock Series C Stock
---- ------------------------------ -------------------------------
Number of Shares(1) Percent Number of Shares(1) Percent
------------------- ------- ------------------- -------
<S> <C> <C> <C> <C>
E. Thomas Arington 1,671,562 15.9% 1,671,562 13.8%
7155 East Kemper Road
Cincinnati, OH 45249
George W. Baughman 73,000 * 73,000 *
Doane F. Darling 66,253 * 66,253 *
Stanley L. Morgan 72,000 * 72,000 *
S. Sundararaman 229,216 2.4% 229,216 2.0%
Jeffrey T. Arington 127,709 1.3% 127,709 1.1%
Timothy J. Holt 106,038 1.1% 106,038 *
Ivan E. Pusecker 104,074 1.1% 104,074 *
All directors and 2,449,852 22.5% 2,449,852 19.6%
executive officers
as a group (8 persons)
Everest Capital Fund. L.P. 590,975 6.1% 590,975 5.2%
Corner House
20 Parliament Street
Hamilton, Bermuda HM12
Everest Capital International Ltd. 717,625 7.4% 717,625 6.4%
Corner House
20 Parliament Street
Hamilton, Bermuda HM12
</TABLE>
-10-
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
All Other Investors (2) 600,000 6.2% 2,200,000 19.5%
</TABLE>
*Less than one percent
_______________
(1) Assumes that all outstanding shares of Series C Stock are convertible
within 60 days after November 14, 1995. Otherwise, excludes shares
of Common Stock subject to options or warrants which cannot be
exercised within 60 days after November 14, 1995. Includes options,
warrants or arrangements to purchase the following numbers of shares:
Mr. E. Thomas Arington, 849,843 shares; Mr. Baughman, 37,000 shares;
Mr. Darling, 57,834 shares; Mr. Morgan, 21,000 shares; Mr.
Sundararaman, 28,000 shares; Mr. Jeffrey T. Arington, 101,001 shares;
Mr. Holt, 77,734 shares; Mr. Pusecker, 60,600 shares; and all
directors and executive officers as a group, 1,228,012 shares.
(2) Provided for informational purposes only. To the best of the
Company's knowledge, no Investor in this group of Investors owns or
will own, singly or as part of a "group," in excess of 5% of the
Company's Common Stock.
In addition to the shares listed above, The Provident Bank, One East
Fourth Street, Cincinnati, Ohio (the "Bank"), owns 146,718 shares (1.8% of the
8,068,969 shares of Common Stock outstanding on November 14, 1995) of the
Company's Common Stock, 74,659 shares of the Company's Series B Non-Voting
Convertible Preferred Stock (the "Series B Preferred Stock") which are
convertible into 746,590 shares of Common Stock, and warrants exercisable at a
price of $18.125 per share for an additional 200,000 shares of Common Stock.
Because of regulatory requirements, the Series B Preferred Stock may not be
converted if, as a result, the Bank and certain of its affiliates would then
own in excess of 5.0% of any class of the Company's voting capital stock,
except that conversion is permitted immediately prior to and in conjunction
with certain transactions involving the sale of the underlying Common Stock.
-11-
<PAGE> 14
PROXY STATEMENT PROPOSALS
Stockholder proposals received by the Company before the close of
business on December 8, 1995 will be considered for inclusion in the Proxy
Statement for the 1996 Annual Meeting.
OTHER BUSINESS
The Company is not aware of any business or matter which may properly
be presented at the meeting other than as discussed herein. However, if any
other matters do come before the meeting, or an adjournment thereof, it is
intended that the proxies will vote thereon in accordance with the
recommendation of the Board of Directors.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, containing the Company's financial
statements, Management's Discussion and Analysis of Financial Condition and
Results of Operations and other information concerning the Company, are
incorporated herein by reference:
1. The Company's annual report on Form 10-K for the year ended
December 31, 1994.
2. The Company's quarterly reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1995.
3. The Company's Current Reports on Form 8-K dated April 5,
1995, October 12, 1995 and November 15, 1995.
4. All other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 prior to the date of the
Special Meeting or any adjournment thereof.
The Company will provide, without charge, to each stockholder to whom this
Proxy Statement is delivered, upon written or oral request of such person and
by first class mail or other equally prompt means within one business day of
receipt of such request, a copy of any or all of the information incorporated
by reference herein (not including exhibits unless such exhibits are
specifically incorporated by reference into the information that this Proxy
Statement incorporates). Any request should be made to the attention of
Timothy J. Holt, Senior Vice President - Finance and Administration, at the
address and telephone number given on page 1 of this Proxy Statement.
-12-
<PAGE> 15
DURAMED PHARMACEUTICALS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING
The undersigned hereby appoints E. Thomas Arington, and Doane F.
Darling, and each of them, attorneys with the powers which the undersigned
would possess if personally present, including the power of substitution, to
vote all shares of the undersigned at the Special Meeting of Stockholders of
Duramed Pharmaceuticals, Inc. to be held at 11461 Northlake Drive, Cincinnati,
Ohio 45249 on January 24, 1996, at 9:00 a.m. (EST), and at any adjournments
thereof:
1. / / FOR / / AGAINST / / ABSTAIN on the proposal to
issue 120,000 additional
shares of the Company's
Series C Convertible
Preferred Stock.
2. Upon such other business as may properly come before the meeting.
The proxy will be voted on the above as specified. IF NO SPECIFICATION IS
MADE, THE PROXY SHALL BE VOTED "FOR" THE PROPOSAL.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
As to any other matter which properly comes before the meeting, said
attorneys shall vote in accordance with their best judgment.
Please mark: I do / / do not / / plan to attend the meeting.
Dated_____________________________, 199_
________________________________________
________________________________________
(Signature of Stockholder)
IMPORTANT: Please date and sign
exactly as name appears
hereon. If shares are held
jointly, each stockholder
named should sign.
Executors, administrators,
trustees, etc. should so
indicate when signing. If
the signer is a corporation,
please sign full corporate
name by duly authorized
officer.
