As filed with the Securities and Exchange Commission on December __, 1995
Registration No. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
BELMAC CORPORATION
---------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida 2834 59-1513162
- ---------------------------- ------------------- -----------------
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation Classification Code Number) Identification No.)
or Organization)
One Urban Centre
Suite 550
4830 West Kennedy Blvd.
Tampa, Florida 33609
(813) 286-4401
------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Mr. James R. Murphy
Belmac Corporation
One Urban Centre
Suite 550
4830 West Kennedy Blvd.
Tampa, Florida 33609
(813) 286-4401
------------------------------------------------------
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
------------------
Copies to:
Mark S. Hirsch, Esq. Bruce A. Rich, Esq. Barry B. Feiner, Esq.
Parker Chapin Flattau Reid & Priest, LLP 745 Fifth Avenue, Suite 1701
& Klimpl, LLP 40 West 57th Street New York, New York 10151
1211 Avenue of the Americas New York, New York 10019 Telephone:(212) 223-1856
New York, New York 10036 Telephone:(212) 603-6780 Telecopy: (212) 688-3043
Telephone: (212) 704-6105 Telecopy:(212) 603-2298
Telecopy: (212) 704-6288
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
(Facing page continued on the following page)
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================
Proposed Proposed
Title of Maximum Maximum Amount
Each Class of Amount Offering Aggregate of Regis-
Securities to to be Price Offering tration
be Registered Registered Per Security(1) Price (1) Fee
- ------------- ---------- --------------- --------- ---------
<S> <C> <C> <C> <C>
Units(2)................... 6,900 Units(3) $1,000 $6,900,000 $ 1,380
Debentures included
in the Units............... 6,900 Debentures(3)
Redeemable Class A
Warrants included in 6,900,000 Warrants(3)
the Units..................
=========================== ======================= =============== =============== ==================
Common Stock, 2,300,000 Shares(3) $3.00 $6,900,000 $ 1,380
$.02 par value(4)(5)
=========================== ======================= =============== =============== ==================
Common Stock, 6,900,000 Shares(3) $3.00 $20,700,000 $ 4,140
$.02 par value and
Class B
Warrants(5)(6)
=========================== ======================= =============== =============== ==================
Common Stock, 3,450,000 Shares(3) $5.00 $17,250,000 $ 3,450
$.02 par value(5)(7)
=========================== ======================= =============== =============== ==================
Underwriter 600 Warrants $.001 $0.60 $ 0
Warrants
=========================== ======================= =============== =============== ==================
Underwriter's $1,200 $720,000 $ 144
Units(8)................... 600 Units
Debentures included
in the Units............... 600 Debentures
Redeemable Class A
Warrants included in
the Units.................. 600,000 Warrants
=========================== ======================= =============== ================ =================
Common Stock, 200,000 Shares $3.00 $600,000 $ 120
$.02 par value(5)(9)
=========================== ======================= =============== ================ =================
Common Stock, 600,000 Shares $3.00 $1,800,000 $ 360
$.02 par value and
Class B
Warrants(5)(10)
=========================== ======================= =============== ================ =================
(Continued)
<PAGE>
=========================== ======================= =============== ================= ================
Common Stock, 300,000 Shares $5.00 $1,500,000 $ 300
$.02 par
value(5)(11)
=========================== ======================= =============== ================= ================
Common Stock, 491,250 Shares $2.44 $1,198,650 $ 240
$.02 par value(12)
=========================== ======================= =============== ================= ================
Total $ 11,514
=========================== ======================= =============== ================= ================
</TABLE>
(1) Calculated solely on the basis of the proposed offering price of the
Units in accordance with Rule 457(i).
(2) An aggregate of 6,000 $1,000 Principal Amount Convertible Senior
Subordinated Debentures Due January __, 2006 and 6,000,000 Class A
Redeemable Warrants each to purchase one share of Common Stock and
one Class B Redeemable Warrant will be offered in 6,000 Units, each
Unit to consist of one Debenture and 1,000 Class A Redeemable
Warrants.
(3) Includes 900 additional Units which the Underwriter has the option to
purchase to cover over-allotments.
(4) Issuable upon conversion of the Debentures contained in the Units.
(5) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, this Registration Statement covers such indeterminable
additional shares of Common Stock as may become issuable as a result
of any future anti-dilution adjustment in accordance with the terms
of the Debentures and the Redeemable Warrants as described in the
Prospectus.
(6) Issuable upon exercise of the Class A Redeemable Warrants contained
in the Units.
(7) Issuable upon exercise of the Class B Redeemable Warrants contained
in the Class A Redeemable Warrants.
(8) Issuable upon exercise of the Underwriter Warrants.
(9) Issuable upon conversion of the Debentures included in the Units
issuable upon exercise of the Underwriter Warrants.
(10) Issuable upon exercise of the Class A Redeemable Warrants included in
the Units issuable upon exercise of the Underwriter Warrants.
(11) Issuable upon exercise of the Class B Redeemable Warrants contained
in the Class A Redeemable Warrants included in the Units issuable
upon exercise of the Underwriter Warrants.
(12) Shares of Common Stock to be sold by Selling Stockholders. Calculated
on the basis of a share price of $2.44 per share, the closing price
of the Common Stock on the American Stock Exchange on December 14,
1995.
- --------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
BELMAC CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Referencing Items in Part I of Form S-1 to the Prospectus
Item of Form S-1 Location in Prospectus
---------------- ----------------------
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus................... Facing Sheet of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Available Information; Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; Risk Factors
4. Use of Proceeds...................... Use of Proceeds
5. Determination of Offering Price...... Underwriting
6. Dilution............................. *
7. Selling Security Holders............. Selling Shareholders and Plan of
Distribution (alternate pages for
Selling Shareholder Prospectus)
8. Plan of Distribution................. Underwriting; Selling Shareholders and
Plan of Distribution (alternate pages
for Selling Shareholder Prospectus)
9. Description of Securities to be
Registered........................... Description of Securities; Description
of Debentures; Certain Federal Income
Tax Considerations
10.Interests of Named Experts and
Counsel.............................. *
11.Information With Respect to the
Registrant........................... Business; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Legal Proceedings; Manage-
ment; Principal Stockholders
12.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... *
- --------------------------------
* Item is omitted because it is inapplicable or answer is negative.
<PAGE>
********************************************************************************
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these Securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
********************************************************************************
Subject to Completion, Dated December 18, 1995
PROSPECTUS
BELMAC CORPORATION
6,000 UNITS
EACH CONSISTING OF ONE THOUSAND DOLLARS ($1,000) PRINCIPAL
AMOUNT 12% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE JANUARY __, 2006
AND
1,000 CLASS A REDEEMABLE WARRANTS EACH TO PURCHASE
ONE SHARE OF COMMON STOCK AND ONE CLASS B REDEEMABLE WARRANT
------------------------------------
The Debentures, which are unsecured, are convertible prior to
maturity, unless previously redeemed, at any time commencing twelve months after
the date hereof (the "Anniversary Date") or immediately following a notice of
redemption (as discussed below), into shares of the common stock of Belmac
Corporation (the "Company"), par value $.02 per share (the "Common Stock"), at a
conversion price per share of the lesser of $3.00 or 80% of the average closing
price of the Common Stock on the American Stock Exchange for the 20 consecutive
trading days immediately preceding the Anniversary Date, or earlier upon a
notice of redemption. Interest is payable quarterly. Commencing six months after
the date hereof, the Company may, on 30 days prior written notice redeem the
Debentures, in whole or in part, if the closing price of the Common Stock on the
American Stock Exchange for each of the 20 consecutive trading days immediately
preceding the record date for redemption equals or exceeds $7.00 per share. The
redemption price will be 105% of the principal amount of the Debentures or
$1,050 per Debenture plus accrued interest through the date of redemption and
the conversion price per share during the period following the notice of
redemption, if prior to the Anniversary Date, will be the lesser of $3.00 or 80%
of the average closing price of the Common Stock on the American Stock Exchange
for the 20 consecutive trading days immediately preceding the record date for
redemption. See "Description of Debentures."
Each Class A Redeemable Warrant entitles the holder, for a period of
three years, to purchase one share of Common Stock and one Class B Redeemable
Warrant at a price of $3.00 per share. On 30 days prior written notice, the
Company may redeem all of the Class A Redeemable Warrants for $.05 per Warrant
if the per share closing price for the underlying Common Stock on the American
Stock Exchange for each of the 20 consecutive trading days immediately preceding
the record date for redemption equals or exceeds 150% of the then exercise
price. Two Class B Redeemable Warrants, together, entitle a holder, for a period
of five years, to purchase one share of Common Stock at a price of $5.00 per
share. On 30 days prior written notice, the Company may redeem all of the Class
B Redeemable Warrants for $.05 per Warrant if the per share closing price for
the underlying Common Stock on the American Stock Exchange for each of the 20
consecutive trading days immediately preceding the record date for redemption
equals or exceeds 130% of the then exercise price. See "Description of
Securities -- Redeemable Warrants."
The conversion price of the Debentures and the exercise price of the
Redeemable Warrants are subject to adjustment under certain circumstances. The
Debentures and the Redeemable Warrants may not be detached for six months after
their issuance without the prior written consent of Coleman and Company
Securities, Inc. (the "Underwriter") after which the Debentures and the
Redeemable Warrants shall be separately transferable.
Concurrently with this offering (the "Offering"), the Company is
registering 491,250 shares of Common Stock for concurrent or future sales by
certain shareholders of the Company. See "Concurrent Offering."
Prior to this Offering there has been no public market for the Units,
Debentures or Redeemable Warrants and there is no assurance that one will
develop. It is anticipated that the Units, the Debentures and the Class A
Redeemable Warrants will be listed on the American Stock Exchange under the
symbols "BLMU," "BLMD" and "BLMA," respectively, of which there can be no
assurance. Once a sufficient number of Class B Redeemable Warrants are
outstanding, it is anticipated that they will be listed on the American Stock
Exchange under the symbol "BLMB." See "Prospectus Summary -- The Offering."
<PAGE>
The Company's Common Stock is traded on the American Stock Exchange
under the symbol "BLM." The last reported sale price of the Company's Common
Stock on the American Stock Exchange on December 14, 1995 was $2.44 per share.
See "Price Range of Common Stock and Dividend Policy."
------------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS SPECIFIED
UNDER THE CAPTION "RISK FACTORS" LOCATED ON PAGE 8 OF THIS
PROSPECTUS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
Price Underwriting Discounts Proceeds to the
to Public and Commissions(1) Company (2)
--------- ---------------------- ---------------
Per Unit.......... $ 1,000 $ 100 $ 900
Total(3).......... $ 6,000,000 $600,000 $5,400,000
(1) Does not include additional compensation to the Underwriter in the form of
a non-accountable expense allowance. The Company has agreed to indemnify
the Underwriter against certain civil liabilities including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of this Offering, estimated at $250,000, which
are payable by the Company.
(3) The Company has granted the Underwriter an option exercisable for a period
of 45 days from the date hereof to purchase up to an additional 900 Units
to cover over-allotments, if any. Unless otherwise indicated, the
information contained in this Prospectus assumes that this option will not
be exercised. If all of the Units covered by the option are sold to the
Underwriter, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $6,900,000, $690,000 and
$6,210,000, respectively. See "Underwriting."
------------------------------
The Units, Debentures and Warrants are offered subject to prior sale, when,
as and if issued to and accepted by the Underwriter, subject to approval of
certain legal matters by counsel for the Underwriter, and subject to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify the Offering and to reject any order, in whole or in part. It is expected
that delivery of the Units will be made in New York, New York against payment
therefor on or about January ___, 1996.
------------------------------
COLEMAN AND COMPANY SECURITIES, INC.
The date of this Prospectus is January __, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices
of the Commission: Northeast Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048; and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
reports, proxy statements and other information can also be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006 on which the Company's Common Stock is listed.
This Prospectus does not contain all the information set forth in the
Form S-1 Registration Statement (No. 33-____) (the "Registration Statement") of
which this Prospectus is a part, including exhibits relating thereto, which has
been filed with the Commission in Washington, D.C. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and in each instance reference is hereby made to the copy
of the contract or other document filed as an exhibit to the Registration
Statement for a full statement of the provisions thereof, and each such
statement in this Prospectus is qualified in all respects by such reference.
Copies of the Registration Statement and the exhibits thereto may be obtained,
upon payment of the fee prescribed by the Commission, or may be examined without
charge, at the office of the Commission.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document incorporated by reference in this Prospectus
(other than exhibits unless such exhibits are expressly incorporated by
reference in such documents). Requests should be directed to Belmac Corporation,
One Urban Centre, Suite 550, 4830 West Kennedy Boulevard, Tampa, Florida 33609,
(813) 286- 4401, Attention: Michael D. Price, Chief Financial Officer.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS
AND THE UNDERLYING SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and consolidated financial statements (including the notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus is based on the assumption that the Underwriter's
option to purchase Units from the Company to cover over-allotments is not
exercised and that all share and per share information has been adjusted to give
retroactive effect to a one-for-ten reverse stock split of the Company's Common
Stock effected on July 25, 1995. At a Special Meeting of Shareholders held on
December 8, 1995, the shareholders of the Company approved proposals to increase
the number of authorized shares of Common Stock from 5,000,000 to 20,000,000 and
to change the name of the Company to Bentley Pharmaceuticals, Inc. As neither of
these proposals have been effected by the filing of an amendment to the
Company's Articles of Incorporation, all information in the Preliminary
Prospectus does not reflect either of such proposals. The Company intends to
amend this Preliminary Prospectus to give effect to such decisions prior to
effectiveness. As used in this Prospectus, the terms "Company" and "Belmac"
refer to Belmac Corporation unless otherwise indicated by the context.
THE COMPANY
The Company is an international pharmaceutical and health care
company engaged primarily in the manufacturing, marketing and distribution of
pharmaceutical products in France and Spain, with limited distribution of health
care products and research and development activities in the United States. The
Company's operations in France consist of the brokerage of fine chemicals and
the marketing of the drug Ceredase, manufactured by Genzyme Corporation and used
in the treatment of Gaucher's Disease. In Spain, the Company manufactures,
packages and distributes both its own and other companies' pharmaceutical
products and has recently begun to manufacture pharmaceuticals under contract.
In the United States, the Company markets disposable linens to emergency health
services which are manufactured under contract. The percentage of the Company's
total revenues for the nine months ended September 30, 1995 which are
attributable to its operations in France, Spain and the United States are
approximately 82%, 17% and 1%, respectively. Limited research and development
activities are conducted both in the United States and Europe and the Company
has several products under development. The Company's chemical and
pharmaceutical operations in France and Spain are a result of its 1991
acquisition of Chimos S.A. and the establishment of a pharmaceutical subsidiary
in France, Laboratoires Belmac S.A. (these two entities in France have since
been merged into one entity named and referred to herein as Chimos/LBF S.A.) and
the 1992 acquisition of Rimafar S.A. (subsequently renamed and referred to
herein as Laboratorios Belmac S.A.), respectively.
The strategic focus of the Company has shifted in response to the
evolution of the global health care environment. The Company has moved from a
research and development-oriented pharmaceutical company, developing products
from the chemistry laboratory through marketing, to a company seeking to acquire
late-stage development compounds that can be marketed within one or two years,
and currently marketed products. As a result of this transition, the Company has
decreased its research and development expenses dramatically over the past few
years as well as implemented cost-cutting measures throughout the Company's
operations. The Company emphasizes product distribution in France and Spain,
strategic alliances and product acquisitions, which management of the Company
expects will move the Company closer to profitability in the near future.
Throughout its history, the Company has experienced negative cash
flows from operations, which have been reduced in the past three years as a
result of the shift in the Company's strategic focus. The Company has funded its
operations primarily from financing activities and the sale of rights to certain
of its pharmaceutical products. In October 1995 the Company completed private
placements of debt and equity securities, of which $1,770,000 of the debt must
be repaid from the proceeds of this Offering. A portion of the proceeds of this
Offering will be utilized for such payment.
The address and telephone number of the Company's principal executive
offices are 4830 West Kennedy Boulevard, One Urban Centre, Suite 550, Tampa,
Florida 33609, (813) 286-4401. The Company was organized under the laws of the
State of Florida in February 1974.
RISK FACTORS
Investment in the Company involves certain risks. Risk factors
include, among others, the following: (i) the Company has a history of operating
losses and accumulated operating deficits; (ii) the Company has a negative cash
flow from operating activities and may not be able to fund current operations;
and (iii) these matters may indicate that there is substantial doubt about the
Company's ability to continue as a going concern. See "Risk Factors."
-3-
<PAGE>
USE OF PROCEEDS
It is anticipated that the net proceeds of this offering will be used
for retirement of debt, possible acquisitions, research and development and
working capital.
THE OFFERING
Securities Offered by the Company 6,000 Units
Offering Price per Unit $1,000
Units Comprising 12% Convertible Senior
Subordinated $1,000 Principal Amount
Unsecured Ten Year Debenture due
January__, 2006 6,000
Class A Redeemable Warrants 6,000,000
Class B Redeemable Warrants 6,000,000
Debenture Interest Payment Dates Quarterly on January 1, April 1,
July 1, and October 1, commencing
April 1, 1996.
Debenture Covenants Restrictions on cash dividends and
other cash distributions to stock-
holders as well as limitations on
certain dealings with its officers
and directors under certain circum-
stances.
Debenture Conversion Rights Commencing twelve months after the
date hereof or earlier upon a notice
of redemption (as discussed below)
at the lesser of $3.00 per share of
Common Stock or 80% of the average
closing price of the Common Stock on
the American Stock Exchange for the
20 consecutive trading days immedia-
tely preceding the first anniversary
of the issuance of the Debentures.
Debenture Redemption Commencing six months after the date
hereof, the Company may, on 30 days
prior written notice, redeem the
Debentures, in whole or in part, if
the closing price of the Common
Stock on the American Stock Exchange
for each of the 20 consecutive
trading days immediately preceding
the record date for redemption
equals or exceeds $7.00 per share.
The redemption price will be 105%
plus accrued interest through the
date of redemption and the conver-
sion price per share during the pe-
riod following the notice of redemp-
tion will be the lesser of $3.00 or
80% of the average closing price of
the Common Stock on the American
Stock Exchange for the 20 consecu-
tive trading days immediately prece-
ding the record date for redemption.
Debenture Subordination; Subordinated to all Senior Debt, as
No Sinking Fund, Other defined in the Indenture, which as
Security or Guarantees of September 30, 1995 aggregated
$1,220,000. Senior or pari passu
with all other series of debentures.
Debenture holders may recover less
ratably than holders of Senior Debt.
The Debentures will not be secured
by a sinking fund or otherwise will
not be guaranteed. The Indenture
does not limit the amount the Com-
pany may borrow. The Indenture pro-
hibits subsidiaries of the Company
from placing any limitations on
paying their profits or making loans
to the Company.
-4-
<PAGE>
Redeemable Warrant Exercise Rights For Class A Redeemable Warrants,
commencing immediately for three
years from the date hereof at $3.00
per share, subject to change under
certain conditions. For Class B Re-
deemable Warrants, commencing upon
issuance thereof for five years from
the date hereof at $5.00 per share,
subject to change under certain con-
ditions. See "Risk Factors -- Deter-
mination of Warrant Exercise Price."
Redeemable Warrant Redemption The Company may, on 30 days prior
written notice redeem all of the
Class A or Class B Redeemable
Warrants for $.05 per Warrant if the
per share closing price of the
underlying Common Stock on the
American Stock Exchange for each of
the 20 consecutive trading days
immediately preceding the record
date for redemption equals or ex-
ceeds 150% or 130%, respectively, of
the then exercise price.
Estimated Net Proceeds to the Company (1) $4,970,000
Percentage of Proceeds to be Used
to Repay Indebtedness 35.6%
Percentage of Proceeds to be Used
to Repay Related Party Debt None
Common Stock Outstanding Prior to the
Offering 3,330,484
Common Stock Outstanding After
the Offering(2) 3,330,484
American Stock Exchange Symbol
for Common Stock BLM
for Units BLMU
for Debentures BLMD
for Class A Redeemable Warrants BLMA
for Class B Redeemable Warrants(3) BLMB
- --------------------------
(1) After deducting $1,030,000 for underwriting discounts and the other
expenses of this Offering payable by the Company, including the
non-accountable expense allowance payable to the Underwriter. See "Use of
Proceeds" and "Underwriting."
(2) Excludes (i) an aggregate of 13,750,000 shares of Common Stock reserved for
issuance upon conversion of the Debentures and exercise of the Redeemable
Warrants and the warrants granted by the Company to the Underwriter (the
"Underwriter Warrants") to purchase 600 Units (or such number of shares of
Common Stock into which such Units are convertible) at a price of $.001 per
Underwriter Warrant; (ii) 576,841 shares of Common Stock reserved for
issuance upon exercise of outstanding stock purchase warrants; (iii)
260,542 shares of Common Stock reserved for issuance upon exercise of stock
options; (iv) 240,000 shares of Common Stock reserved for issuance upon
conversion of certain notes payable issued in a private placement in
October 1995; (v) 14,960 shares of Common Stock reserved for issuance upon
conversion of the Series A Preferred Stock or upon conversion of 9%
Convertible Debentures due 2016 into which the Series A Preferred Stock is
exchangeable; and (vi) 3,183 shares of Common Stock reserved for issuance
to current or former members of the Board of Directors of the Company and
others as compensation. See Note 12 of Notes to Consolidated Financial
Statements, "Management -- Executive Compensation," "Principal
Stockholders," "Description of Debentures -- Conversion" and "Description
of Securities -- Redeemable Warrants."
(3) The Class B Redeemable Warrants will not be listed on the American Stock
Exchange until a sufficient number of Class A Redeemable Warrants have been
exercised.
-5-
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
The summary consolidated financial information for the fiscal year
ended June 30, 1992, the six month period ended December 31, 1992, the fiscal
years ended December 31, 1993 and 1994 and the nine month period ended September
30, 1995 set forth below is derived from and should be read in conjunction with
the Company's consolidated financial statements and accompanying notes appearing
elsewhere in this Prospectus. The data for the nine month period ended September
30, 1994 are derived from and qualified by reference to the Company's
consolidated financial statements appearing elsewhere herein and, in the opinion
of management of the Company, includes all adjustments that are of a normal
recurring nature and necessary for a fair presentation. The statement of
operations data for the nine month periods ended September 30, 1994 and 1995 are
not necessarily indicative of results for a full year.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
For the Six For the For the
For the Year Months Ended Year Ended Nine Months Ended
Ended June 30, December 31, December 31, September 30,
-------------- ------------ -------------- --------------
1992 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 13,138 $ 9,708 $ 19,849 $ 26,284 $ 19,676 $ 23,583
Cost of Sales 8,871 5,899 15,100 21,464 15,940 19,523
Operating Expenses 14,758 23,493(1) 14,722(2) 9,050 7,413 6,265
Operating Income
(Loss) (10,491) (19,684) (9,973) (4,230) (3,677) (2,205)
Net Other (Income)
Expense 320 (153) 263 (652)(3) (26) (686)(3)
Net Income (Loss) (10,811) (19,531) (10,236) (3,578) (3,651) (1,519)
Net Income (Loss) Per
Common Share (11.12) (16.60) (6.32) (1.56) (1.67) (.55)
Weighted Average
Shares of Common
Stock Outstanding 997 1,203 1,655 2,395 2,257 2,978
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31, September 30, 1995
-------------- -------------------
1993 1994 Actual As Adjusted (4)
---- ---- ------ ---------------
<S> <C> <C> <C> <C>
Working Capital.................................. $ 2,043 $ 1,928 $ 1,779 $ 8,277
Non-Current Assets............................... 5,937 5,644 5,960 7,275
Total Assets..................................... 16,160 16,332 16,170 23,983
Non-Current Liabilities less Current Portion..... 2,821 336 500 8,500
Redeemable Preferred Stock....................... 2,218 2,256 2,374 2,374
Common Stockholders' Equity...................... 2,941 4,980 4,865 4,678
</TABLE>
(footnotes on next page)
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
Earnings are inadequate to cover fixed charges. The resultant defi-
ciency was $2,493,000, $2,476,000, $10,468,000, $19,531,000, $10,236,000,
$3,578,000, and $1,519,000 for the years ended June 30, 1990, 1991 and 1992, for
the six month period ended December 31, 1992, for the years ended December 31,
1993 and 1994, and for the nine month period ended September 30, 1995,
respectively.
If the Debentures included in this Offering had been outstanding
since January 1, 1994, the result would have been an increase in the Company's
net loss of approximately $823,000 and $617,000 for the year ended December 31,
1994 and for the nine month period ended September 30, 1995, respectively.
Consequently, on a pro forma basis, the resultant deficiency, for the year ended
December 31, 1994 and for the nine month period ended September 30, 1995, would
have been $4,401,000 and $2,136,000, respectively. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
- -----------------------------
(1) The Company changed its fiscal year end to December 31 effective December
31, 1992 and sold its French marketing rights to Amodex(R) on January 20,
1993. The six months ended December 31, 1992 include other non-recurring
charges totaling $9,321,000. See Note 4 of Notes to Consolidated Financial
Statements.
(2) Includes $2,241,000 related to the write-off of capitalized costs with
respect to the sachet formulation of Biolid(R) and related costs and
$1,000,000 related to settlement of litigation.
(3) The Company sold its Spanish marketing rights to its ciprofloxacin
antibiotic, Belmacina(R), in 1994 and included the gain thereon
(approximately $884,000) in Other (Income) Expense in the year ended
December 31, 1994 and recorded the anticipated gain on sale of the related
trademark of $380,000 as deferred revenue as of December 31, 1994. Such
deferred revenue was recognized as income in the nine month period ended
September 30, 1995. See Note 8 of Notes to Consolidated Financial
Statements.
(4) Adjusted to give effect to the receipt of proceeds from private placements
in October 1994 and the sale of the 6,000 Units offered hereby and the use
of the estimated net proceeds thereof. See "Use of Proceeds."
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<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a
substantial degree of risk. Prior to making an investment decision, prospective
investors should give careful consideration to, among other items, the following
factors:
FINANCIAL RISKS
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF
FUTURE FINANCIAL RESULTS. As of September 30, 1995, the Company had a cumulative
deficit of approximately $63,441,000. The Company has realized significant
losses in the past and could have quarterly and annual losses in the future. The
Company has not generated any profits from operations. The Company has realized
quarter to quarter fluctuations in its results in the past and, although such
fluctuations have been minimal in recent quarters, they may be significant in
the future. Consequently, the Company may continue to operate at a loss for the
foreseeable future and there can be no assurance that the Company's business
will operate on a profitable basis. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
NEGATIVE CASH FLOW FROM OPERATING ACTIVITIES. The Company is
experiencing negative cash flow from operations resulting in the need to fund
ongoing operations from financing activities. In October 1995 the Company
completed two private placements resulting in net proceeds to the Company of
approximately $1,590,000, all of which is being used for working capital
purposes. A substantial portion of the proceeds of this Offering will be used to
repay the debt incurred in the private placements to the extent such debt has
not been converted to equity by the holders thereof. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Private Placements." The future
existence and profitability of the Company is dependent upon its ability to
obtain additional funds such as the net proceeds of this Offering to finance
operations and expand operations in an effort to achieve profitability from
operations. No assurance can be given that the Company's business will
ultimately generate sufficient revenue to fund the Company's operations on a
continuing basis. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
LIMITED REVENUES. Although the Company was founded in 1974, it has
only generated revenue from product-related sales since August 1991. The Company
has used cash from financing activities to fund its operations. The Company has
made progress toward commercialization of specific products and has commenced
commercialization of others. The Company is now generating revenues from sales
of products of its subsidiaries Chimos/LBF, S.A., a company based in France
which distributes specialty pharmaceutical products and chemicals in France
("Chimos"), and Laboratorios Belmac, S.A., a pharmaceutical manufacturer located
in Spain ("Laboratorios Belmac"). Chimos and Laboratorios Belmac were acquired
by the Company in August 1991 and February 1992, respectively. Substantial
amounts of time and financial and other resources will be required to complete
the development and clinical testing of the Company's products currently under
development. Although over the last several months the Company has continued its
existing limited research and development program, due to its limited cash
resources, it has suspended additional research and development activities
during such period pending the selection of strategic partners for development
and marketing. There is no assurance that the Company will receive additional
funding necessary to commence full research and development activities or that
it will otherwise succeed in developing any additional products with
commercially valuable applications.
ADDITIONAL FINANCING REQUIREMENTS. The Company believes that its
emphasis on product distribution in France and Spain, strategic alliances and
product acquisitions together with careful management of its research and
development activities and the net proceeds from this Offering, should provide
sufficient liquidity to enable it to conduct its existing operations through the
end of 1996, of which there can be no assurance. However, the Company's
pharmaceutical products being developed and which may be developed will require
the investment of substantial additional time as well as financial and other
resources in order to become commercially successful. Following the development
period, the Company's products will generally be required to go through lengthy
governmental approval processes, including extensive clinical testing, followed
by market development. The Company's operating revenues and cash resources may
not be sufficient over the next several years for the commercialization by
itself of any of the products currently in development. Consequently, the
Company may require additional licensees or partners and/or additional
financing. There can be no assurance, however, that the Company can conclude
such commercial arrangements or obtain additional capital when needed on
acceptable terms, if at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
-8-
<PAGE>
INDEPENDENT AUDITORS' REPORT. The report of the Company's independent
auditors with respect to the audited consolidated financial statements of the
Company included elsewhere herein expresses an unqualified opinion that includes
an explanatory paragraph referring to the Company's recurring losses from
operations as well as negative operating cash flows, which raise substantial
doubt about the Company's ability to continue as a going concern. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and the
notes thereto and the Report of Independent Auditors included herein.
POSSIBLE RESTRICTION ON ABILITY TO UTILIZE NET OPERATING LOSS CARRY
FORWARDS RESULTING FROM CHANGE IN EQUITY OWNERSHIP. At December 31, 1994 and
September 30, 1995, the Company had net operating loss ("NOL") carry forwards
of approximately $34,000,000 and $35,000,000, respectively, available to offset
United States taxable income. The NOL carry forwards will expire in tax years
1996 through 2010. The amount of these loss carry forwards which can be used to
reduce future taxable income, if any, may be reduced by, among other things,
future changes in the ownership of the Company's Common Stock. Internal Revenue
Code Section 382 would limit the amount of future taxable income, if any, that
could be offset by the NOL carry forwards if, at any time, the percentage of the
stock of the Company owned by one or more 5% shareholders increases by more than
50% over the lowest percent of the Company's stock owned by such shareholders
during the preceding three year period. The Company's subsidiaries in France and
Spain have NOL carry forwards of approximately $14,000,000 and $3,000,000,
respectively. These will expire in various years ending in 1999. See Note 13 of
Notes to Consolidated Financial Statements.
BUSINESS RISKS
NO ASSURANCE OF SUCCESSFUL AND TIMELY DEVELOPMENT OF NEW PRODUCTS.
Although the Company has a limited number of products in various stages of
development, including pre-clinical testing and clinical trials, the Company has
not yet substantially marketed any of these products other than Biolid(R) (the
Company's macrolide antibiotic) in France, the marketing of which has since been
suspended (see "Dependence on Regulatory Approvals" below). There can be no
assurance that the Company will be able to develop large scale production of any
particular product for clinical trials or eventual commercial production. The
marketing of certain of the Company's products could be adversely affected by
delays in developing large-scale production processes, developing or acquiring
production facilities or obtaining regulatory approval for such processes or
facilities.
RISKS INHERENT IN PHARMACEUTICAL DEVELOPMENT; DEPENDENCE ON
REGULATORY APPROVALS. The process of creating, scaling-up, manufacturing and
marketing any new human pharmaceutical product is inherently risky. There can be
no assurance that any drug under development will be safe and effective.
Moreover, pharmaceutical products are subject to significant regulation. Any
human pharmaceutical product developed by the Company would require clearance by
Spain's Ministry of Health for sales in Spain, France's Ministry of Health for
sales in France, the U.S. Food and Drug Administration ("FDA") for sales in the
United States and similar agencies in other countries. The process of obtaining
these approvals is costly and time-consuming, and there can be no assurance that
such approvals will be granted. In general, only a small percentage of new
pharmaceutical products achieve commercial success. Such governmental regulation
may prevent or substantially delay the marketing of the Company's products and
may cause the Company to undertake costly procedures with respect to its
research and development and clinical testing operations which may furnish a
competitive advantage to more substantially capitalized companies which compete
with the Company. In addition, the Company is required, in connection with its
activities, to comply with good manufacturing practices (GMPs) and local, state
and federal regulations. Noncompliance with these regulations could have a
material adverse effect on the Company and/or prevent the commercialization of
the Company's products. See "Business -- Regulation."
DEPENDENCY ON OTHERS; POSSIBLE DISCONTINUATION OF CERTAIN MARKETING
ACTIVITIES. The Company relies on outside contractors for manufacturing of the
products it distributes in France, including Ceredase, a drug used in the
treatment of Gaucher's Disease, which currently represents approximately 60% of
the Company's revenues. The Company also relies on sales of Ceredase and other
products by Chimos to Pharmacie Centrale des Hopitaux, which accounted for
approximately 30% and 26% of the Company's sales for the year ended December 31,
1994 and the nine months ended September 30, 1995, respectively. Chimos, a
distributor authorized by France's Ministry of Health, distributes Ceredase
pursuant to an agreement of limited duration with Genzyme Corporation, the
manufacturer of Ceredase. The most recent extension of this agreement terminates
on March 31, 1996. There can be no assurance that the relationship between
Genzyme and Chimos
-9-
<PAGE>
will continue. The Company continues to assess the importance of Ceredase to its
operation since, notwithstanding the relative significance of its sales volume,
its gross margins as a percentage of sales are minimal. See "Business -- Product
Lines -- Pharmaceutical Marketing and Sales in France."
UNCERTAINTY OF PHARMACEUTICAL PRICING, PROFITABILITY AND RELATED
MATTERS. The levels of revenues and profitability of pharmaceutical companies
may be affected by the continuing efforts of governmental and third party payers
to contain or reduce the costs of health care through various means. For
example, in certain foreign markets, including Spain and France, pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the adoption of such
proposals could have a material adverse effect on the Company's business,
financial condition and profitability. In addition, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third party payers, such as government and private insurance
plans. Third party payers are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in bringing one or more
products to the market, there can be no assurance that these products will be
considered cost effective and that reimbursement to the consumer will be
available or will be sufficient to allow the Company to sell its products on a
competitive basis. See "Business -- Sales and Marketing."
UNPREDICTABILITY OF PATENT PROTECTION; PROPRIETARY TECHNOLOGY. The
Company has filed numerous patent applications and has been granted a number of
patents. However, there can be no assurance that its pending applications will
be issued as patents or that any of its issued patents will afford adequate
protection to the Company or its licensees. Other private and public entities
have also filed applications for, or have been issued, patents and are expected
to obtain patents and other proprietary rights to technology which may be
harmful to the commercialization of the Company's products. The ultimate scope
and validity of patents which are now owned by or may be granted to third
parties in the future, the extent to which the Company may wish or be required
to acquire rights under such patents, and the cost or availability of such
rights cannot be determined by the Company at this time. In addition, the
Company also relies on unpatented proprietary technology in the development and
commercialization of its products. There is no assurance that others may not
independently develop the same or similar technology or obtain access to the
Company's proprietary technology.
The Company also relies upon trade secrets, unpatented proprietary
know-how and continuing technological innovations to develop its competitive
position. All of the Company's employees with access to the Company's
proprietary information have entered into confidentiality agreements and have
agreed to assign to the Company any inventions relating to the Company's
business made by them while in the Company's employ. However, there can be no
assurance that others may not acquire or independently develop similar
technology or, if patents in all major countries are not issued with respect to
the Company's products, that the Company will be able to maintain information
pertinent to such research as proprietary technology or trade secrets.
RAPID TECHNOLOGICAL CHANGE. The pharmaceutical industry has undergone
rapid and significant technological change. The Company expects the technology
to continue to develop rapidly, and the Company's success will depend
significantly on its ability to maintain a competitive position. The Company has
recently shifted its strategic focus so that it does not rely on research and
development of pharmaceuticals from concept through marketing. Instead, it seeks
to acquire late-stage development compounds that can be marketed within one or
two years and currently-marketed products. Rapid technological development may
result in actual and proposed products or processes becoming obsolete before the
Company recoups a significant portion of related research and development,
acquisition and commercialization costs. See "Business -- Products Under
Development."
COMPETITION. The Company is in competition with other pharmaceutical
companies, biotechnology firms and chemical companies, many of which have
substantially greater financial, marketing and human resources than those of the
Company (including, in some cases, substantially greater experience in clinical
testing, production and marketing of pharmaceutical products). The Company also
experiences competition in the development of its products and processes from
individual scientists, hospitals, universities and other research institutions
and, in some instances, competes with others in acquiring technology from these
sources. See "Business -- Competition."
UNCERTAINTY OF ORPHAN DRUG DESIGNATION. An Orphan Drug is a product
or products used to treat a rare disease or condition, which, as defined under
United States law, is a disease or condition that affects populations of less
than 200,000 individuals or, if victims of a disease number more than 200,000,
the sponsor establishes that it does not realistically anticipate its product
sales will be sufficient to recover its costs. If a product is designated an
Orphan Drug, then the sponsor
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<PAGE>
is entitled to receive certain incentives to undertake the development and
marketing of the product. In Spain, Orphan Drugs are given a preference in the
pharmaceutical review process by Spain's Ministry of Health if it can be shown
that the product is an important therapeutic agent and there is unequivocal data
supporting its efficacy. The Ministry of Health has the authority to require
pharmaceutical manufacturers to continue to produce products which are Orphan
Drugs regardless of their commercial potential. As required by the Ministry of
Health, Laboratorios Belmac currently manufactures and distributes one Orphan
Drug, Anacalcit, which is used in the treatment of nephrolithiasis. In France,
Orphan Drug status is granted by France's Ministry of Health. Chimos does not
currently own in its portfolio any Orphan Drugs, but does act as a distributor
for other companies who have Orphan Drug status in France, such as Ceredase, an
Orphan Drug produced by Genzyme Corporation. The Company does not currently
market any Orphan Drugs in the United States. See "Business -- Regulation."
ATTRACTION AND RETENTION OF KEY PERSONNEL. The Company believes that
it has been successful in attracting skilled and experienced management and
scientific personnel. There can be no assurance, however, that the Company will
continue to attract and retain personnel of high caliber. Since 1992, five
individuals have served as the Company's chief executive officer. This
instability in the Company's management in the recent past has hampered the
Company's growth. While the Company believes that it has assembled an effective
management team, the loss of several individuals who are considered key
management or scientific personnel of the Company could have an adverse impact
on the Company. Although all discoveries and research of each employee made
during employment remains the property of the Company, the Company has not
entered into noncompetition agreements with its key employees and such employees
would therefore be able to leave and compete with the Company.
RISK OF PRODUCT LIABILITY. The Company faces an inherent business
risk of exposure to product liability claims in the event that the use of its
technology or prospective products is alleged to have resulted in adverse
effects. While the Company has taken, and will continue to take, what it
believes are appropriate precautions, there can be no assurance that it will
avoid significant liability exposure. The Company maintains product liability
insurance in the amount of $5 million. However, there is no assurance that this
coverage will be adequate in terms and scope to protect the Company in the event
of a product liability claim. In connection with the Company's clinical testing
activities, the Company may, in the ordinary course of business, be subject to
substantial claims by, and liability to, subjects who participate in its
studies.
BROAD DISCRETION IN APPLICATION OF PROCEEDS. Approximately $1,700,000
(34.2%) of the estimated net proceeds from this Offering has been allocated to
working capital. Accordingly, the Company's management will have broad
discretion as to the application of such proceeds.
RISK OF DOING BUSINESS OUTSIDE THE UNITED STATES. Nearly all of the
Company's revenues during 1994 and the first nine months of 1995 have been
generated outside the United States, from the Company's subsidiaries in France
and Spain. There are risks in operation outside the United States, including,
among others, the difficulty of administering businesses abroad, exposure to
foreign currency fluctuations and devaluations or restrictions on money
supplies, foreign and domestic export law and regulations, taxation, tariffs,
import quotas and restrictions and other political and economic events beyond
the Company's control. The Company has not experienced any material effects of
these risks as of yet, however there can be no assurance that they will not have
such an effect in the future.
CERTAIN FLORIDA LEGISLATION. The State of Florida has enacted
legislation that may deter or frustrate takeovers of Florida corporations. The
Florida Control Share Act generally provides that shares acquired in excess of
certain specified thresholds will not possess any voting rights unless such
voting rights are approved by a majority vote of a corporation's disinterested
shareholders. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested shareholders of certain specified
transactions between a public corporation and holders of more than 10% of the
outstanding voting shares of the corporation (or their affiliates). Florida law
also authorizes the Company to indemnify the Company's directors, officers,
employees and agents. The Company has adopted a by-law with such an indemnity.
MARKET RISKS
RISK OF LOSS OF ENTIRE INVESTMENT. Because of the Company's history
of losses and negative cash flow from operations as well as the other risk
factors referred to in this section and elsewhere in this Prospectus, a
prospective investor should not purchase Units unless he is prepared to risk the
loss of his entire investment.
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<PAGE>
VOLATILITY OF SHARE PRICE. The market price of the Company's shares
since its initial public offering in February 1988 has been volatile. In July
1995 the Company effected a one-for-ten reverse stock split. As recently as the
first quarter of 1993, the market price of the Company's Common Stock was $63.75
(giving retroactive effect to the reverse stock split). Factors such as
announcements of technological innovations or new commercial products by the
Company or its competitors, the results of clinical testing, patent or
proprietary rights, developments or other matters may have a significant impact
on the market price of the Common Stock. See "Price Range of Common Stock and
Dividend Policy."
POSSIBLE DELISTING OF COMMON STOCK FROM AMERICAN STOCK EXCHANGE. The
Company currently does not satisfy some of the American Stock Exchange's
financial guidelines for continued listing of its Common Stock. While there can
be no assurance that listing on the American Stock Exchange will be continued,
management of the Company believes that its business prospects are improving and
that it will be able to maintain continued listing. See "Description of
Securities -- Listing on AMEX." If the Common Stock were delisted, an investor
could find it more difficult to dispose of or to obtain accurate quotations as
to the price of the Common Stock.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of
Incorporation authorize the issuance of 2,000,000 shares of "blank check"
preferred stock (the "Preferred Stock") with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue Preferred Stock with dividend, liquidation, conversion or other rights
which could adversely affect the voting power or other rights of the holders of
the Common Stock. In the event of issuance, the Preferred Stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change of control of the Company. There are currently 60,000 shares
of Series A Convertible Exchangeable Preferred Stock outstanding. The Company
has no current plans to issue any additional shares of Preferred Stock; however,
there can be no assurance that the Company's Board of Directors will not do so
at some time in the future. See "Description of Securities -- Preferred Stock."
NO ASSURANCE OF PUBLIC MARKET. Prior to this Offering, there has been
no public trading market for the Units, the Debentures or the Redeemable
Warrants. Although application has been made to list them on the American Stock
Exchange, there is no assurance that a regular trading market will develop after
this Offering or that, if developed, it will be sustained. Since the Class B
Redeemable Warrants will not be outstanding until the Class A Redeemable
Warrants are exercised, they will not be publicly traded until a sufficient
number are outstanding, thereby limiting the ability of a holder to sell them.
Since the Company will not issue fractional shares, holders will only be
permitted to trade the Class B Redeemable Warrants in multiples of two.
UNDERWRITER WARRANTS AND OUTSTANDING CONVERTIBLE SECURITIES. The
Company will sell to the Underwriter, for nominal consideration, warrants to
purchase up to 600 Units (or such number of shares of Common Stock into which
such Units are convertible) exercisable for a period of four years, commencing
one year from the date hereof, at an exercise price of $1,200 per Unit. The
Company currently has outstanding 837,383 options and warrants to purchase
Common Stock at exercise prices ranging from $2.50 to $177.50. The holders of
the Underwriter Warrants and of the warrants and options are likely to exercise
or convert them at a time when the Company would be able to obtain additional
equity capital on terms more favorable than those provided by such warrants,
options and Underwriter Warrants. The Underwriter Warrants and certain other
warrants and options also grant to the holders certain demand registration
rights and "piggy back" registration rights. These obligations may hinder the
Company's ability to obtain future financing. See "Underwriting."
SUBORDINATION OF DEBENTURES. The Debentures are subordinated to all
existing and future Senior Debt (as defined in the Indenture) of the Company and
will be effectively subordinated to all indebtedness and other liabilities of
any subsidiaries of the Company that may subsequently be formed. Moreover, the
Indenture governing the Debentures does not restrict the ability to incur Senior
Debt or other indebtedness by the Company. As a result of such subordination,
Debenture holders will be dependent upon the Company's ability to generate
sufficient revenue from operations to satisfy all of its obligations, including
the Senior Debt and the payments related to the Debentures. Moreover, in the
event of insolvency of the Company, holders of Senior Debt will be entitled to
be paid in full prior to any payment to the holders of the Debentures, and other
creditors of the Company also may recover more, ratably, than the holders of the
Debentures. In addition, an event of default under the Indenture governing the
Debentures may trigger defaults under Senior Debt of the Company, in which case
the holders of such Senior Debt will have the power to demand payment in full
and to be paid prior to any payment to the holders of the Debentures. In
addition, the absence of limitations in the Indenture on the issuance of Senior
Debt could increase the risk that sufficient funds will not be available to pay
holders of the Debentures after payment of amounts due to the holders of Senior
Debt. There can be no assurance that the Company will be able to service the
Debentures in accordance with their terms. In addition, if a default were to
occur, there is no assurance that Debenture
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<PAGE>
holders would be able to obtain repayment of the sums then due under their
Debentures. See "Description of Debentures -- Subordination of Debentures."
CURRENT PROSPECTUS AND STATE SECURITIES LAW QUALIFICATION REQUIRED TO
EXERCISE THE REDEEMABLE WARRANTS. A purchaser of Units will have the right to
exercise the Redeemable Warrants included therein only if a current prospectus
relating to the underlying shares is then in effect and such shares are
qualified for sale or exempt from such qualification under the securities laws
of the state in which he resides. The Company has registered these shares
together with the Units offered hereby, and has qualified them in the states
where it plans to sell the Units unless such qualification has not been
required. It has also filed an undertaking with the Commission to maintain a
current prospectus relating to such shares until the expiration of the Warrants.
However, there is no assurance that it will be able to satisfy this undertaking.
Accordingly, the Warrants may be deprived of any value if a current prospectus
is not kept effective or if such shares are not qualified or exempt in the
states in which exercising Warrant holders reside. See "Description of
Securities -- Redeemable Warrants."
POTENTIAL ADVERSE EFFECT OF WARRANT REDEMPTION. The Company may, on
30 days prior written notice, redeem all of the Class A or Class B Redeemable
Warrants for $.05 per Warrant if the per share closing price of the underlying
Common Stock for each of the 20 consecutive trading days immediately preceding
the record date for redemption equals or exceeds 150% or 130%, respectively, of
the then exercise price. If the Company calls for such redemption, then all of
such class of Redeemable Warrants remaining unexercised at the end of the
redemption period must be redeemed. Accordingly, to the extent that such class
of Redeemable Warrants are redeemed, the Warrant holders will lose their rights
to purchase Common Stock pursuant to such Warrants. Furthermore, the threat of
redemption could force the Warrant holders to exercise the Warrants at a time
when it may be disadvantageous for them to do so, to sell the Warrants at the
then current market price when they might otherwise wish to hold them, or to
accept the redemption price which will be substantially less than the market
value of the Warrants at the time of redemption. See "Description of Securities
- -- Redeemable Warrants."
DETERMINATION OF WARRANT EXERCISE PRICE. The exercise prices of each
class of Redeemable Warrants was determined by negotiation between the Company
and the Underwriter and bears no relationship to the Company's net worth, book
value, results of operations or any other recognized criteria of value.
Accordingly, there is no assurance that the Warrants will have any value.
LACK OF DIVIDENDS; INABILITY TO FUND DIVIDEND PAYMENTS. The Company
has not paid dividends on its Common Stock since its inception and does not
intend to pay any dividends on its Common Stock in the foreseeable future. The
holders of the Company's outstanding Series A Preferred Stock have been entitled
to receive cumulative dividends, payable annually on October 15, since 1992, out
of funds legally available therefor at the rate of $2.25 per year on each share
of Series A Preferred Stock. The Company exercised its right to adjust the
conversion ratio of the Series A Preferred Stock rather than pay the dividend
payments due on October 15, 1992 and 1993 and has not paid dividends of an
aggregate of approximately $270,000 to holders of Series A Preferred Stock which
were due on October 15, 1994 and 1995. These arrearages currently have the
effect of limiting the payment of cash dividends to holders of Common Stock and
giving the Preferred Stockholders, as a class, the right to designate two
directors. There can be no assurance that cash flow from the future operations
of the Company will be sufficient to meet these obligations. Under the terms of
the Indenture, the Company is restricted from paying cash dividends. See "Price
Range of Common Stock and Dividend Policy" and "Description of Securities --
Preferred Stock."
-13-
<PAGE>
USE OF PROCEEDS
The estimated net proceeds to the Company, after deducting
underwriting commissions and the other expenses of this Offering, will be
approximately $4,970,000 (or $5,960,000 if the Underwriter's over-allotment
option is exercised in full). The Company expects to apply these proceeds
approximately as follows:
<TABLE>
<CAPTION>
Application Amount Percentage
------------- ------ ----------
<S> <C> <C>
Repayment of working capital indebtedness (1) $1,770,000 35.6%
Acquisition of complementary products, technologies and/or
businesses (2) 1,000,000 20.1
Research and development (3) 500,000 10.1
Working capital 1,700,000 34.2
----------- -----
$4,970,000 100.0%
=========== =====
</TABLE>
- ------------------
(1) The indebtedness was incurred in October 1995 and bears interest at the
rate of 12% per annum. Of this amount, $720,000 is due on July 31 and
$1,050,000 is due on September 30, 1996, or upon consummation of a public
offering such as the Offering. The debt was incurred for general working
capital purposes and was incurred in private placements placed by the
Underwriter. Purchasers of this debt may use their debt to purchase the
Units offered hereby, causing a reduction in the cash net proceeds to the
Company and an equivalent reduction in the amount to be repaid to them. To
the extent any holders of the debt convert their debt to equity prior to
the date hereof, the proceeds will be reallocated to acquisitions.
Concurrent with this payment, the Company will pay holders all accrued and
unpaid interest, which amount is not expected to be material. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Private Placements,"
"Underwriting -- Private Placements" and "Concurrent Offering."
(2) The Company intends to seek to acquire products, technologies and/or
businesses which complement the Company's current activities, are
consistent with the Company's strategic focus and contribute toward making
the Company profitable.
(3) Includes additional work to complete the clinical trials of the
tablet formulation of Biolid. See "Business -- Products under Development
-- Biolid."
The foregoing represents the Company's best estimate of its
allocation of the proceeds of this Offering based upon its current plans and
certain assumptions regarding general economic and industry conditions, market
factors and the Company's future revenues and expenditures. If any of these
factors change, the Company may find it necessary or advisable to reallocate
some of the proceeds within the above-described categories or to use portions
thereof for other purposes. Management believes that the net proceeds of this
Offering, together with any internally generated funds, should be sufficient to
finance the Company's intended level of operations as set forth herein through
the end of 1996. There can be no assurance that additional funds will not be
required earlier than anticipated or that the Company will be able to obtain
such funds, if at all, on a basis deemed acceptable to it. The Company currently
has no commitments to obtain any such financing. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The proceeds, if any, from the exercise of the Underwriter's
over-allotment option and the Redeemable Warrants will be used for the
acquisition of complementary products, technologies and/or businesses, and/or
general working capital purposes.
-14-
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
On July 31, 1990, the Company's Common Stock began trading on the
American Stock Exchange under the symbol BLM. The following table sets forth the
high and low sales prices for the Common Stock as reported on the American Stock
Exchange for the Company's last two fiscal years ended December 31, 1993 and
December 31, 1994, respectively, and for the interim period indicated. All
prices for the period prior to July 25, 1995 have been restated to reflect the
one-for-ten reverse stock split.
<TABLE>
High Sales Price Low Sales Price
--------------- ---------------
<S> <C> <C>
1993
First Quarter............................. $63.75 $27.50
Second Quarter............................ 36.25 16.25
Third Quarter............................. 31.25 16.25
Fourth Quarter............................ 33.13 21.25
1994
First Quarter............................. 28.75 16.25
Second Quarter............................ 18.75 9.38
Third Quarter............................. 11.88 10.63
Fourth Quarter............................ 9.38 5.00
1995
First Quarter............................. 7.50 3.13
Second Quarter............................ 9.38 3.75
Third Quarter............................. 8.63 4.13
Fourth Quarter (through
December 14, 1995)...................... 4.63 2.44
</TABLE>
As of December 14, 1995 there were 2,270 holders of record of the
Common Stock. The closing price of the Company's Common Stock on December 14,
1995 was $2.44 per share.
DIVIDEND POLICY
The Company has never paid any dividends on its Common Stock. The
current policy of the Board of Directors is to retain earnings to finance the
operation of the Company's business. Accordingly, it is anticipated that no cash
dividends will be paid to the holders of the Common Stock in the foreseeable
future. Under the terms of the Series A Preferred Stock, the Company is
restricted from paying dividends on its Common Stock so long as there are
arrearages on dividend payments on the Series A Preferred Stock. There currently
are such arrearages. Under the terms of the Debentures, the Company is subject
to certain restrictions which prohibit the payment of cash dividends.
-15-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1995 and as adjusted to give effect to the sale of the Units
offered hereby and the application of the estimated net proceeds (in thousands
except share data):
<TABLE>
<CAPTION>
As of September 30, 1995
---------------------------------
Actual As Adjusted(1)
------ -------------
<S> <C> <C>
Accounts payable and accrued expenses................................... $ 7,211 $ 7,211
Current portion of long-term debt....................................... 1,220 1,220
Non-current liabilities, less current portion........................... 500 500
12% Convertible Debentures.............................................. ----- 6,000(2)
--------- ---------
Total non-current liabilities..................................... 500 6,500
Redeemable preferred stock, $1.00 par value; authorized 2,000,000
shares; Series A issued and outstanding 70,000,000 shares.... 2,374 2,374
Common Stockholders' Equity:
Common Stock, $.02 par value; authorized 5,000,000
shares; issued and outstanding 2,978,000 shares(3)........... 60 65
Paid in capital in excess of par value............................ 69,009 69,393
Stock subscriptions receivable.................................... (105) (105)
Retained earnings (deficit)....................................... (63,441) (64,017)
Cumulative foreign currency translation adjustment................ (658) (658)
--------- ---------
Total Common Stockholder's Equity ........................... 4,865 4,678
--------- ---------
Total Liabilities and Capitalization.........................$ 16,170 $ 21,983
========= =========
</TABLE>
- --------------------------------------
(1) Adjustments include the effect of accounting for receipt of proceeds from
private placements in October 1995 and the application of the proceeds from
this Offering to pay the debt incurred in such private placements.
(2) An allocation of the proceeds between the Debentures and the Redeemable
Warrants will be made on the basis of their respective market values after
the date of issuance.
(3) Excludes (i) an aggregate of 13,750,000 shares of Common Stock reserved for
issuance upon conversion of the Debentures and exercise of the Redeemable
Warrants and Underwriter Warrants; (ii) 576,841 shares of Common Stock
reserved for issuance upon exercise of outstanding stock purchase warrants;
(iii) 260,542 shares of Common Stock reserved for issuance upon exercise of
stock options; (iv) 240,000 shares of Common Stock reserved for issuance
upon conversion of certain notes payable issued in a private placement in
October 1995; (v) 14,960 shares of Common Stock reserved for issuance upon
conversion of the Series A Preferred Stock or upon conversion of 9%
Convertible Debentures due 2016 into which the Series A Preferred Stock is
exchangeable; (vi) 3,183 shares of Common Stock reserved for issuance to
current or former members of the Board of Directors of the Company and
others as compensation; and (vii) 349,500 shares of Common Stock issued
subsequent to September 30, 1995. See Note 12 of Notes to Consolidated
Financial Statements, "Management -- Executive Compensation," "Principal
Stockholders," "Description of Debentures -- Conversion" and "Description
of Securities -- Redeemable Warrants."
-16-
<PAGE>
SELECTED FINANCIAL DATA
The selected consolidated financial information for the fiscal years
ended June 30, 1990, 1991 and 1992, the six month period ended December 31,
1992, the fiscal years ended December 31, 1993 and 1994 and the nine month
period ended September 30, 1995 set forth below is derived from and should be
read in conjunction with the Company's consolidated financial statements and
accompanying notes appearing elsewhere in this Prospectus. The data for the nine
month period ended September 30, 1994 are derived from and qualified by
reference to the Company's consolidated financial statements appearing elsewhere
herein and, in the opinion of management of the Company, includes all
adjustments that are of a normal recurring nature and necessary for a fair
presentation. The statement of operations data for the nine month period ended
September 30, 1994 and 1995 are not necessarily indicative of results for a full
year.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
For the For the For the
For the Fiscal Year Six Months Fiscal Year Nine Months
Ended Ended Ended Ended
June 30 December 31 December 31, September 30,
------------------------------- --------- --------------------- ----------------------
1990 1991 1992(1) 1992(2) 1993(3) 1994(4) 1994 1995(4)
-------- --------- --------- --------- ---------- --------- ---------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $ 21 $ -- $13,138 $9,708 $19,849 $26,284 $19,676 $23,583
Cost of sales........... 7 -- 8,871 5,899 15,100 21,464 15,940 19,523
-------- --------- --------- --------- ---------- --------- ---------- ---------
Gross margin............ 14 -- 4,267 3,809 4,749 4,820 3,736 4,060
Operating expenses...... 2,529 2,506 14,758 23,493 14,722 9,050 7,413 6,265
-------- --------- --------- --------- ---------- --------- ---------- ---------
Operating income
(loss).................. (2,515) (2,506) (10,491) (19,684) (9,973) (4,230) (3,677) (2,205)
Other (income)
expense................. (22) (30) 320 (153) 263 (652) (26) (686)
-------- --------- --------- --------- ---------- --------- ---------- ---------
Net income (loss)....... $(2,493) $(2,476) $(10,811) $(19,531) $(10,236) $(3,578) $(3,651) $(1,519)
======== ========= ========= ========= ========== ========= ========== =========
Net income (loss) per
Common Share.......... $ (5.07) $ (3.56) $ (11.12) $ (16.60) $ (6.32) $ (1.56) $ (1.67) $ (.55)
======== ========= ========= ========= ========== ========= ========== =========
Weighted average
number of Common
Shares outstanding... 492 695 997 1,203 1,655 2,395 2,257 2,978
======== ========= ========= ========= ========== ========= ========== =========
</TABLE>
BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
At June 30, At December 31,
----------------------------- ------------------------------ At September 30,
1990 1991 1992(1) 1992(2) 1993(3) 1994(4) 1995
---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital
(deficiency)............... $1,202 $(631) $8,449 $(3,842) $2,043 $1,928 $1,779
Non-current assets......... 596 2,955 18,643 13,497 5,937 5,644 5,960
Total assets............... 2,216 3,244 38,753 21,953 16,160 16,332 16,170
Long term obligations...... 25 93 2,626 2,349 2,821 336 500
Redeemable Preferred
Stock.................. -- -- 7,164 7,401 2,218 2,256 2,374
Common Stockholders'
equity (deficit)....... 1,773 2,231 17,352 (95) 2,941 4,980 4,865
</TABLE>
-17-
<PAGE>
- ---------------
(1) The Company acquired 100% of the shares of Chimos in August 1991 and,
accordingly, for accounting purposes, was no longer considered in the
development stage of operations. The Company also acquired 100% of
the shares of Laboratorios Belmac in February 1992, as well as
Amodex(R) trademark and licensing rights in France in December 1991.
See Notes 3 and 8 of Notes to Consolidated Financial Statements.
(2) The Company changed its fiscal year end to December 31 effective
December 31, 1992 and sold its marketing rights in France to
Amodex(R) on January 20, 1993. The six months ended December 31, 1992
include other non-recurring charges totaling $9,321,000. See Note 4
of Notes to Consolidated Financial Statements.
(3) The year ended December 31, 1993 includes the effects of writing off
capitalized costs with respect to the sachet formulation of Biolid,
its noncrystalline form of erythromycin and a charge to earnings for
the settlement of class action litigation.
(4) The Company sold its Spanish marketing rights to its ciprofloxacin
antibiotic, Belmacina(R), in 1994 and included the gain thereon
(approximately $884,000) in Other (Income) Expense in the year ended
December 31, 1994 and recorded the anticipated gain on sale of the
related trademark of $380,000 as deferred revenue as of December 31,
1994. Such deferred revenue was recognized as income in the nine
months ended September 30, 1995. See Note 8 of Notes to Consolidated
Financial Statements.
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is an international pharmaceutical and health care
company with its primary focus on the development and marketing of
pharmaceutical and health care products. Substantially all of its revenues have
come from its operations in France and Spain; however, the Company began limited
marketing of health care products in the United States in 1994.
Effective December 31, 1992, the Company changed its fiscal year end
from June 30 to December 31. The Company incurred a net loss of $3,578,000 and
$1,519,000 for the year ended December 31, 1994 and the nine months ended
September 30, 1995, respectively. The Company intends to continue to focus its
efforts on business activities which management believes should result in
operating profits in the future, of which there can be no assurance. To improve
its results, the Company's management will focus on increasing higher margin
pharmaceutical and health care product sales, controlling expenses through its
austerity program, careful prioritization of research and development projects
resulting in continued low overall research and development expenditures, and
potentially acquiring marketable products or profitable companies in the United
States or Europe that are compatible with the Company's strategy for growth. See
"-- Liquidity and Capital Resources." Currently, the profit margins for the
products sold by the Company's subsidiary in Spain are significantly higher than
those generated by the Company's subsidiary in France. For business segment
information on the Company's operations outside the United States, see Note 14
of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1994
The Company reported revenues of $23,583,000 and a net loss of
$1,519,000 or $.55 per share for the nine months ended September 30, 1995
compared to revenues of $19,676,000 and a net loss of $3,651,000 or $1.67 per
share for the same period in the prior year.
Sales and Cost of Sales. The 20% increase in revenues is primarily
attributable to an increase in sales by the Company's subsidiary in France,
Chimos/LBF S.A., which distributes specialty pharmaceutical products and fine
chemicals in France. Consolidated gross margins for the nine months ended
September 30, 1995 remained consistent at 19% when compared to the comparable
period of the prior year, excluding the effect of the $423,000 charge to cost of
sales in the third quarter of 1995, representing an increase in the Company's
reserves for slow moving or obsolete inventory in Spain. The Company's
distribution operations in France (Chimos/LBF S.A.) generate relatively low
gross margins as opposed to the Company's Spanish subsidiary, Laboratorios
Belmac S.A., which is experiencing substantially higher margins.
Operating Expenses. Selling, general and administrative expenses were
$5,516,000 for the nine months ended September 30, 1995 compared to $6,428,000
for the same period in the prior year. The 14% decrease is primarily
attributable to cost control measures implemented by the Company. The Company
intends to continue its efforts to control general and administrative expenses
as part of its austerity program in its effort to reach and maintain
profitability.
Research and development expenses were $341,000 for the nine months
ended September 30, 1995 compared to $608,000 for the same period of the prior
year. The 44% decrease reflects the results of a thorough review of all research
and development activities and the establishment of priorities based upon both
technical and commercial criteria. During this period, the Company did not
commence any new research and development programs. The Company intends to
continue to carefully manage its research and development expenditures in the
future in view of its limited resources.
Other Income/Expense. Interest expense was $215,000 for the nine
months ended September 30, 1995 compared to $140,000 for the same period in the
prior year. The 54% increase reflects interest cost on higher average
outstanding balances on revolving lines of credit, which are used to finance
working capital needs. Other income/expense of $900,000 for the nine months
ended September 30, 1995 is primarily comprised of $360,000 related to a
settlement of litigation (see Notes 15 and 17 of Notes to Consolidated Financial
Statements) and the $380,000 gain recognized upon the sale of the Company's
Belmacina trademark in Spain, which was previously reflected in the Company's
consolidated financial statements as deferred revenue as of December 31, 1994.
The Company has since transferred the trademark to the purchaser and collected
the balance of the related receivable in the fourth quarter of 1995. Also
included, is income from the Company's contract manufacturing arrangements with
several pharmaceutical concerns, offset by a charge for
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<PAGE>
cancellation of the stock subscription receivable and related interest from a
former officer of the Company. One-half of the loss (approximately $37,000)
incurred by Maximed Pharmaceuticals, the Company's partnership with Maximed
Corporation, is also included in other income/expense in the nine months ended
September 30, 1995. Although the Company is in a dispute with, and has filed an
action against, its partner, and has ceased funding the partnership's activities
until such dispute is resolved, appropriate operating costs have been accrued
and charged to operations during the nine months ended September 30, 1995. See
"Business -- Legal Proceedings".
FISCAL YEAR ENDED DECEMBER 31, 1994 VERSUS FISCAL YEAR ENDED DECEMBER 31, 1993
The Company reported sales of $26,284,000 and a net loss of
$3,578,000 or $1.56 per share for the fiscal year ended December 31, 1994,
compared to sales of $19,849,000 and a net loss of $10,236,000 or $6.32 per
share for the prior year.
Sales and Cost of Sales. The 32% increase in sales is primarily a
result of increased sales by the Company's subsidiary in France, Chimos/LBF.
Gross margins for the year ended December 31, 1994 averaged 18% compared with
24% in the prior year. The lower margins are primarily a result of the lower
gross margins experienced by Chimos/LBF's distribution operations, whose sales
accounted for approximately 77% of revenues, compared with 68% in the prior
year. The lower gross margins experienced by the Company in France were only
partially offset in Spain, where Laboratorios Belmac is experiencing margins
substantially higher than those in France.
Operating Expenses. Selling, general and administrative expenses were
$7,716,000 for the year ended December 31, 1994 compared with $9,170,000 for the
prior year. The 16% decrease is primarily attributable to cost control measures
implemented by the Company and reduced marketing costs in France due to the
suspension of marketing of Biolid during the fourth quarter of 1993.
Notwithstanding these efforts, selling and marketing costs continue to be
significant and necessary expenses in connection with the Company's plans to
increase market share in Spain. To the extent practical, however, the Company
intends to continue its efforts to control general and administration expenses
as part of its austerity program.
Research and development expenses were $759,000 for the year ended
December 31, 1994 compared to $1,555,000 in the prior year. The 51% decrease
reflects the results of a thorough review of all research and development
activities and the establishment of priorities based upon both technical and
commercial criteria. During 1994, the Company did not commence any new research
and development programs. It did, however, continue certain programs already in
progress, including a Biolid pharmacokinetics trial. The Company intends to
continue to carefully manage its research and development expenditures in the
future in view of its limited resources.
Depreciation and amortization expenses were $575,000 for the year
ended December 31, 1994 compared to $756,000 for the prior year. The 24%
decrease is primarily attributable to the write-off of Drug Licenses and Product
Rights as of December 31, 1993, and the 1994 sale of its Spanish ciprofloxacin
antibiotic, Belmacina(R), resulting in reduced amortization charges.
Other Income/Expense. Other income/expense for the year ended
December 31, 1994 included the gain recognized upon the 1994 sale of the
Company's Spanish rights to its ciprofloxacin antibiotic, Belmacina(R), of
approximately $884,000.
FISCAL YEAR ENDED DECEMBER 31, 1993 VERSUS TWELVE MONTHS ENDED DECEMBER 31, 1992
The Company reported revenues of $19,849,000 and a net loss of
$10,236,000 or $6.32 per share for the year ended December 31, 1993, compared to
revenues of $19,217,000 and a net loss of $27,023,000 or $23.70 per share for
the same period in the prior year.
Sales and Cost of Sales. While 1993 revenues increased slightly,
their composition changed significantly. Sharply reduced sales at Laboratoires
Belmac due to its divestiture of Amodex(R) and decreased promotion and the
resulting reduction in sales of its sachet formulation of Biolid were more than
offset by increases in sales generated by Chimos. Gross margins for the year
ended December 31, 1993 averaged 24% compared to 37% in the comparable period of
the prior year. The lower margins were primarily a result of the lower gross
margins experienced by Chimos' distribution operations, whose sales accounted
for approximately 68% of revenues, as compared to 52% in the comparable period
of the prior year and to
-20-
<PAGE>
low gross margin contributions from Laboratoires Belmac's sales due to the fact
that Amodex(R) and Biolid inventories were adjusted downward to net realizable
value as of December 31, 1992. The lower gross margins experienced by the
Company in France were only partially offset in Spain, where Laboratorios Belmac
experienced margins substantially higher than those in France.
Operating Expenses. Selling, general and administrative expenses were
$9,170,000 for the year ended December 31, 1993 compared to $15,724,000 for the
same period in the prior year. The decrease was primarily attributable to cost
control measures implemented by the Company and reduced marketing costs in
France due to the divestiture of Amodex(R) and the decreased promotion of its
sachet formulation of Biolid.
Research and development expenses were $1,555,000 for the year ended
December 31, 1993 compared to $7,339,000 in the comparable period of the prior
year. The decrease reflected the results of a thorough review of all research
and development activities, and the establishment of priorities based upon both
technical and commercial criteria. Biolid (tablet formulation) was the primary
focus in research and development.
Depreciation and amortization expenses were $756,000 for the year
ended December 31, 1993 compared to $1,497,000 for the same period in the prior
year. The decrease was primarily attributable to the write-down of drug licenses
and product rights and to the divestiture of Amodex(R).
As a result of the decision to withdraw the sachet formulation of
Biolid from the French market, the Company recorded an expense of $2,241,000 in
the fourth quarter of 1993, reflecting the write-off of the capitalized costs
with respect to the sachet formulation of Biolid, Biolid sachet inventories, and
costs associated with refunding certain costs to the potential buyer of these
rights. See "Business -- Products-Biolid(R)."
The Company agreed in 1993 to issue to plaintiffs in class action
litigation, shares of its Common Stock with a market value of $1,000,000. The
Company accrued this amount as a non-current liability as of December 31, 1993.
Other Income/Expense. The provision for income taxes of $343,000 for
the twelve months ended December 31, 1992 was a result of foreign taxes on
profits generated by Chimos in 1992. Chimos was not eligible to file a
consolidated income tax return with Laboratoires Belmac in France until 1993;
therefore, the Laboratoires Belmac losses were not available to offset Chimos'
taxable profits in 1992. No such provision was required for the year ended
December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Total assets decreased from $16,332,000 at December 31, 1994 to
$16,170,000 at September 30, 1995, while Common Stockholders' Equity decreased
from $4,980,000 at December 31, 1994 to $4,865,000 at September 30, 1995. The
decrease in Common Stockholders' Equity reflects primarily the loss incurred by
the Company for the period which was partially offset by $562,000 received from
a stock subscription receivable and fluctuation in the exchange rates of
European currencies compared to the U.S. Dollar.
The Company's working capital decreased from $1,928,000 at December
31, 1994 to $1,779,000 at September 30, 1995. Receivables increased from
$7,609,000 at December 31, 1994 to $8,268,000 at September 30, 1995 due
primarily to the continued growth in sales volume at the Company's subsidiary in
France, Chimos/LBF. During the period, the Company collected approximately
$922,000 of the $1,140,000 receivable due at December 31, 1994 from the sale of
its ciprofloxacin antibiotic, Belmacina, in Spain. Inventories decreased from
$1,247,000 at December 31, 1994 to $1,000,000 at September 30, 1995 primarily
due to an increase in the Company's reserves for slow-moving or obsolete
inventory in Spain of $423,000. The combined total of accounts payable and
accrued expenses also remained relatively unchanged at September 30, 1995 as
compared to December 31, 1994, decreasing $445,000 or less tha 6%. Short term
debt increased from $724,000 at December 31, 1994 to $1,220,000 at September 30,
1995 due to higher balances on revolving lines of credit used for working
capital purposes (primarily the purchase of inventories in France).
Investing activities, including the collection of approximately
$922,000 from the 1994 sale of Belmacina, proceeds from the sale of investments
available for sale of $214,000, an investment in the Company's Spanish
manufacturing facilities of approximately $507,000 and in the Belmac/Maximed
Partnership (see "Business -- Legal Proceedings") of $13,000, provided net cash
of $616,000 during the nine months ended September 30, 1995. Financing
activities (primarily collection of a stock subscription receivable and proceeds
from borrowings on lines of credit) provided net proceeds of $925,000 for
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<PAGE>
the nine months ended September 30, 1995. Operating activities for the nine
months ended September 30, 1995 required net cash of $2,422,000.
Total assets increased from $16,160,000 at December 31, 1993 to
$16,332,000 at December 31, 1994, while Common Stockholders' Equity increased
from $2,941,000 at December 31, 1993 to $4,980,000 at December 31, 1994. The
increase in Common Stockholders' Equity is primarily a result of net proceeds of
approximately $3,384,000 received from private placements of Common Stock and
warrants and approximately $693,000 received from stock subscriptions
receivable, offset by losses incurred by the Company for the period. Common
Stockholders' Equity also increased by $1,000,000 as a result of the issuance of
the Common Stock to settle a class action litigation.
The Company's working capital was $1,928,000 at December 31, 1994
compared to $2,043,000 at December 31, 1993. Marketable securities were
liquidated during 1994 to satisfy liabilities of the Company. Receivables
increased as a result of the growth in the Company's business as well as
including the $1,140,000 receivable from the sale in Spain of its ciprofloxacin
antibiotic, Belmacina(R), which has been received subsequent to year end.
Accounts payable increased in part due to the increased level of business and in
part due to the Company's careful management of its limited liquid resources.
Investing activities provided net cash of $134,000 for the year ended
December 31, 1994, including proceeds from the sale of the Company's
ciprofloxacin antibiotic, Belmacina(R) in Spain, which was sold for $1,556,000
and generated a gain of $884,000. See Note 8 of Notes to Consolidated Financial
Statements. The Company also sold certain investments during 1994 generating
proceeds of $1,040,000. The Company invested $648,000 in its partnership with
Maximed Corporation (named Maximed Pharmaceuticals) for development of hydrogel
based feminine health care products. Management believes that it is possible to
introduce its first product to the market in 1996 if a dispute with its partner
can be resolved and product development progresses as planned. Investing
activities also included a repayment to Evans Medical S.A. of $793,000 for
amounts due relating to the cancellation of the proposed sale of the marketing
rights to the sachet formulation of Biolid in France in 1993.
Financing activities (primarily receipt of proceeds from private
placements and from stock subscriptions receivable) provided net proceeds of
$3,439,000 for the year ended December 31, 1994, while operating activities for
the year ended December 31, 1994 required net cash of $3,415,000.
The Company continues to experience negative cash flows from
operating activities, and completed private placements of its securities
totaling $1,770,000 during October 1995 in order to fund its operations and is
pursuing this Offering to provide further liquidity. See "-- Private Placements"
below and Note 17 of Notes to Consolidated Financial Statements. The Company may
seek to enter into a partnership or other collaborative funding arrangement with
respect to future clinical trials of its products under development. The
Company, however, continues to explore alternative sources for financing its
business. In appropriate situations, that will be strategically determined, the
Company may seek financial assistance from other sources, including contribution
by others to joint ventures and other collaborative or licensing arrangements
for the development, testing, manufacturing and marketing of products and the
sale of a minority interest in, or certain of the assets of, one or more of its
subsidiaries. Management expects that by carefully prioritizing research and
development activities and continuing its austerity program, upon consummation
of this Offering, the Company should have sufficient liquidity to fund
operations through the end of 1996.
Seasonality. In the past, the Company has experienced lower sales in
the fourth calendar quarter of each year. More recently, such fluctuations have
not been material and management does not expect them to occur in the future.
However, should the Company begin large sales of a pharmaceutical product whose
sales are seasonal, its sales may become seasonal as well.
Currency. A substantial amount of the Company's business is conducted
in France and Spain and is therefore influenced by the extent to which there are
fluctuations in the dollar's value against such countries' currencies. The
effect of foreign currency fluctuations on long lived assets for the nine months
ended September 30, 1995 and for the year ended December 31, 1994 was an
increase of $443,000 and $289,000, respectively, and the cumulative historical
effect at September 30, 1995 and December 31, 1994 was a decrease of $658,000
and $1,101,000, respectively, as reflected in the Company's Consolidated Balance
Sheets in the "Liabilities and Stockholders' Equity" section. Although exchange
rates fluctuated significantly in recent months, the Company does not believe
that the effect of foreign currency fluctuation is material to the Company's
results of operations as the expenses related to much of the Company's foreign
currency revenues
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are in the same currency as such revenues. Accordingly, the Company does not
anticipate altering its business plans and practices to compensate for future
currency fluctuations.
Private Placements. To finance its operations, in October 1995 the
Company conducted two private placements of its securities. In the first
placement, the Company sold to certain purchasers for an aggregate purchase
price of $720,000, 120,000 shares of the Company's Common Stock and 12%
promissory notes in the aggregate principal amount of $720,000 (the "Notes")
which become payable in full upon the earlier of July 31, 1996 or the closing of
a public offering of the Company's securities (a "Public Offering"). The Notes
are convertible into shares of Common Stock, at the option of the holders
thereof, at a conversion price of the lower of $3.00 per share or 80% of the
current market price, for an aggregate of 240,000 shares of Common Stock,
subject to anti-dilution provisions. The Notes are subject to mandatory
conversion at a conversion price of $3.00 per share if no Public Offering is
completed by July 31, 1996.
In the second placement, the Company sold to certain purchasers for
an aggregate purchase price of $1,050,000, 131,250 shares of Common Stock and
12% promissory notes in the aggregate principal amount of $1,050,000 (the "A
Notes") which become payable in full upon the earlier of September 30, 1996 or
the completion of a Public Offering. The A Notes are subject to mandatory
conversion, at a conversion price equal to the average closing price for the
Common Stock quoted on the American Stock Exchange for the five trading days
immediately preceding September 30, 1996, if no Public Offering is completed by
September 30, 1996.
As required by the terms of the placements, the Company will utilize
a portion of the proceeds of this Offering to repay the Notes and the A Notes.
See "Use of Proceeds." The Underwriter served as placement agent for the
placements. See "Underwriting -- Private Placements." The shares of Common Stock
sold in the placements and the shares of Common Stock issuable upon conversion
of the Notes which have been converted prior to the date hereof and,
consequently, will not be repaid, have been registered for resale. See
"Concurrent Offering."
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BUSINESS
General
The Company is an international pharmaceutical and health care
company engaged primarily in the manufacturing, marketing and distribution of
pharmaceutical products in France and Spain, with limited distribution of health
care products and research and development activities in the United States. The
Company's operations in France consist of the brokerage of fine chemicals and
the marketing of the drug Ceredase, manufactured by Genzyme Corporation and used
in the treatment of Gaucher's Disease. In Spain, the Company manufactures,
packages and distributes both its own and other companies' pharmaceutical
products and has recently begun to manufacture pharmaceuticals under contract.
In the United States, the Company markets disposable linens to emergency health
services which are manufactured under contract. The percentage of the Company's
total revenues for the nine months ended September 30, 1995 which are
attributable to its operations in France, Spain and the United States are
approximately 82%, 17% and 1 %, respectively. Limited research and development
activities are conducted both in the United States and Europe and the Company
has several products under development. The Company's chemical and
pharmaceutical operations in France and Spain are a result of its 1991
acquisition of Chimos S.A. and the establishment of a pharmaceutical subsidiary
in France, Laboratoires Belmac S.A. (these two entities in France have since
been merged into one entity named and referred to herein as Chimos/LBF S.A.) and
the 1992 acquisition of Rimafar S.A. (subsequently renamed and referred to
herein as Laboratorios Belmac S.A.), respectively.
The strategic focus of the Company has shifted in response to the
evolution of the global health care environment. The Company has moved from a
research and development-oriented pharmaceutical company, developing products
from the chemistry laboratory through marketing to a company seeking to acquire
late-stage development compounds that can be marketed within one or two years,
and currently marketed products. As a result of this transition, the Company has
decreased its research and development expenses dramatically over the past few
years as well as implemented cost-cutting measures throughout the Company's
operations. The Company emphasizes product distribution in France and Spain,
strategic alliances and product acquisitions, which management of the Company
expects will move the Company closer to profitability in the near future.
The Company's sales by its primary product lines are as follows (in
thousands):
<TABLE>
<CAPTION>
For the For the
Year Ended Nine Months
December 31, Ended September 30,
------------ -------------------
1993 1994 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pharmaceutical and consumer health care products $19,483 $26,100 $19,560 $23,429
Disposable linen products 56 184 116 154
Other 310 -- -- --
---------- ---------- ---------- ----------
Total $19,849 $26,284 $19,676 $23,583
========== ========== ========== ==========
</TABLE>
PRODUCT LINES
The Company currently manufactures, markets and sells pharmaceutical
products in Spain, distributes pharmaceutical and biotechnology products and
brokers fine chemicals in France, and markets and sells disposable linens in the
United States.
PHARMACEUTICAL MANUFACTURING AND MARKETING IN SPAIN
Laboratorios Belmac S.A., the Company's subsidiary in Spain
("Laboratorios Belmac"), manufactures, markets and sells pharmaceutical products
whose four primary categories are cardiovascular, neurological, gastrointestinal
and antibiotic. The Company manufactures over 30 types of pharmaceuticals in its
facility in Zaragoza, Spain both for its own sales and, on occasion, under
contract for others. The manufacturing facility was recently renovated and
brought into full compliance
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with European Union Good Manufacturing Practices (GMPs). Among the products
Laboratorios Belmac manufactures, each of which is registered with Spain's
Ministry of Health, are:
Controlvas(R). Controlvas, whose generic name is enalapril, is an
angiotensin converting enzyme inhibitor useful in the treatment of
hypertension and congestive heart failure. Enalapril is marketed in the
United States by Merck & Company.
Belmazol(R). Belmazol, whose generic name is omeprazole, is used
primarily for hyperacidity problems related to ulcers and, secondarily, for
the treatment of gastroesophageal reflux disease. Omeprozole is a proton
pump inhibitor which inhibits the hydrogen/potassium ATPase enzyme system
at the secretory surface of the gastric parietal cell. Because this enzyme
system is regarded as an acid pump within the gastric mucosa, it has been
characterized as a gastric acid pump inhibitor in that it blocks the final
step of acid production. This compound has been used in combination with
antibiotics for the treatment of ulcers when it is suspected that
Helicobacter pylori, a bacteria, is the etiologic agent.
Lopermida(R). Lopermida, whose generic name is loperamide
hydrochloride, a product launched by the Company in Spain in March 1995, is
a compound that inhibits gastrointestinal motility and is useful in the
treatment of diarrheal conditions and colitis. Loperamide hydrochloride is
marketed in the United States by several drug companies, including McNeil,
Proctor & Gamble, Novo Pharm and Geneva.
Ergodavur(R), Neurodavur(R) and Neurodavur Plus(R). Ergodavur,
Neurodavur and Neurodavur Plus are compounds used for the enhancement of
activity in the central and peripheral nervous systems.
Diflamil(R). Diflamil is an anti-inflammatory analgesic used in the
treatment of arthritis.
Resorborina(R). Resorborina is a compound that has local anesthetic
and anti-inflammatory properties for the treatment of pharyngitis and mouth
infections.
Onico-Fitex(R) and Fitex E(R). Onico-Fitex and Fitex E are compounds
used to treat local fungal infections, especially around the nails.
Otogen(R). Otogen is a product used for the treatment of ear
infections and ear pain.
Spirometon(R). Spirometon is a combination of spironolactone and
bendroflumethazide useful in the treatment of congestive heart failure,
hypertension and edema. (Spirometon is a diuretic that preserves the body's
supply of potassium).
Anacalcit(R). Anacalcit is a calcium binding product used for the
treatment of kidney stones. The Spanish government has specifically
requested that Laboratorios Belmac continue to manufacture this product, as
Laboratorios Belmac is the only supplier of this type of product in Spain.
Biolid(R). Biolid is a non-crystalline form of erythromycin with a
potential for enhanced bioavailability. Plans are underway for developing
manufacturing capabilities for Biolid in Spain. Laboratorios Belmac will
perform an additional clinical study in Spain once the production of the
sachet formulation has been completed and prior to the commencement of
marketing. See "-- Products under Development -- Biolid -- Spain."
Belmacina(R). Belmacina is a ciprofloxacin antibiotic. The Company
sold its Spanish marketing rights to Belmacina to CEPA, a Spanish company,
in 1994 for 200 million Spanish Pesetas (approximately $1,556,000) and the
related trademark to CEPA for 50 million Spanish Pesetas (approximately
$380,000) in 1995. The Company maintains the right to manufacture and
export this product. Belmacina was acquired by the Company in September
1992 for approximately $577,000. The gain on sale of the marketing rights
(approximately $884,000) was
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included in the Company's income for the year ended December 31, 1994. The
Company recorded the gain on the sale of the related trademark
(approximately $380,000) as deferred revenue in its consolidated financial
statements for the year ended December 31, 1994, and recognized such
revenue in 1995. See Note 8 of Notes to Consolidated Financial Statements.
Rimafungol(R). Rimafungol is the Company's form of cyclopiroxolamine,
a broad- spectrum antifungal product for treating fungal infections of the
skin and vagina.
Rofanten(R). Rofanten is the Company's formulation of naproxen sodium,
an anti- inflammatory/analgesic.
Generic Antibiotics. Laboratorios Belmac produces, directly or by
contract to others, various other types of generic antibiotics for which
patent protection no longer exists, such as amoxicillin, ampicillin
(Bactosone Retard(R)) and injectable forms of penicillin.
Controlvas and Belmazol, together, represent approximately 70% of the
sales of Laboratorios Belmac.
As the Spanish government did not provide any patent protection for
pharmaceutical products until 1992, the Company, while owning the right to
manufacture the drugs described above as well as other pharmaceuticals, will
often be one of several companies which has the right to manufacture and sell
substantially similar products. The Spanish regulatory authorities specify the
amounts each company can charge for its products. Therefore, the Company's
competitors may sell similar products at the same, higher or lower prices. Many
of these competitors are larger, better capitalized and have more developed
sales networks than the Company.
The Company maintains an internal marketing and sales staff of
approximately 50, including both employees and independent sales representatives
working on commission in Spain to market the pharmaceuticals it produces. The
Company's sales force competes by emphasizing highly individualized customer
service.
In 1995, the Company commenced the export of pharmaceuticals
manufactured by Laboratorios Belmac outside Spain through local distributors,
particularly in Eastern Europe and South America.
CONTRACT MANUFACTURING. Since Laboratorios Belmac currently utilizes
less than 100% of its plant capacity to manufacture its own products,
Laboratorios Belmac has begun to act as a contract manufacturer of
pharmaceuticals owned by other companies such as Rhone-Poulenc's subsidiary
Natterman S.A., Ciba Geigy's subsidiary Zyma, Fournier, Italpharmaco, Beijing
Pharmaceutical, Instituto Llorente and Laboratorios Juventus, S.A.. Other
contracts are contemplated in the near future. The Company manufactures these
pharmaceuticals to its customers' specifications, packaging them with the
customers' labels. Occasionally, to assure product uniformity and quality,
employees of these customers will work at the Company's manufacturing facility.
As a result of Spain's entry into the European Union, Spain
implemented new pharmaceutical manufacturing standards and the Company was
required to modify its facility to comply with these regulations. Such
renovations were accomplished by Laboratorios Belmac without interruption of
sales or distribution. After an inspection, in July 1995 the facility was
determined to be in compliance with European Good Manufacturing Practices
("GMPs") by Spain's Ministry of Health.
PHARMACEUTICAL MARKETING AND SALES IN FRANCE
Chimos/LBF S.A., the Company's subsidiary in France ("Chimos"), is
engaged in the import and distribution of specialty pharmaceutical products to
hospitals and others in France. Chimos concentrates on the sale of "Orphan
Drugs" (drugs used for the treatment of rare diseases). The Company markets,
throughout France, over 26 pharmaceutical products from Europe and the United
States.
Among the products Chimos currently markets are Ceredase, a drug used
in the treatment of Gaucher's Disease, and Dysport, a drug used to treat certain
muscle disorders. Chimos has been marketing Ceredase in France since the drug
became available, approximately five years ago. Chimos is able to market these
drugs because it has been authorized as a distributor by France's Ministry of
Health. The primary customer of Chimos is Pharmacie Centrale des Hopitaux, which
purchases Ceredase from Chimos. Since Ceredase treats a rare disease, this
hospital buys and controls
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<PAGE>
distribution of this product to other hospitals in France. Ceredase is
manufactured by Genzyme Corporation of Boston, Massachusetts, which contracts
with Chimos to distribute it in France. The contracts with Genzyme have recently
had limited terms; the most recent three-month extension terminates on March 31,
1996. There can be no assurance that Chimos will continue to market Ceredase or
that the relationship between Chimos and Genzyme will continue. The Company
continues to assess the importance of Ceredase to its operation because,
notwithstanding the relative significance of its sales volume, its gross margins
as a percentage of sales are minimal.
Chimos, as one of the authorized distributors of Orphan Drugs in
France, is occasionally contacted by manufacturers of such products outside of
France to act as their distributor. In addition, the Company from time to time
supplies Chimos with a list of Orphan Drugs approved by the FDA in the United
States and Chimos contacts their manufacturers to seek becoming their
distributor in France.
CHEMICAL BROKERAGE. Chimos is engaged in the import and supply in
France of approximately 39 fine chemicals, such as furosemide, phenobarbital and
trihexyphenidyl HCl, used in the manufacture of pharmaceuticals, from countries
such as Japan, Taiwan, China, Pakistan and several European countries. The
brokerage of fine chemicals by Chimos provides a necessary link between the
manufacturer and end-user. The manufacturer produces the chemicals to meet
product specifications and provides a certificate of analysis as to the purity
of the chemicals. The products are provided to the end-user, which generally
verifies the analysis with its own quality control procedures. Chimos generally
acts as agent for the manufacturer, arranging for shipping, import and customs
documentation, invoicing and collection of payments. Chimos also acts on
occasion on behalf of the end-user, which requests that Chimos source a
particular product from one of its sources or conduct a world-wide search for
the product.
MARKETING AND DISTRIBUTION OF DISPOSABLE LINENS IN THE UNITED STATES
The Company markets and distributes disposable linen products to the
emergency health care industry in the United States through Belmac Healthcare
Corporation, one of the Company's U.S. subsidiaries ("Healthcare"). These
disposable linens include products such as blankets, sheets and pillowcases.
Customers for these products include distributors to entities which are engaged
in the provision of emergency health care services, such as emergency rooms and
ambulance services, located primarily in the southwestern and northeastern
regions of the United States.
Healthcare receives orders for these products at the Company's
headquarters in Tampa, Florida. Healthcare subcontracts the manufacturing of the
disposable linens in accordance with Healthcare's specifications. The raw
materials for these products are provided by Healthcare and stored with one of
the manufacturers until needed. Once produced, the products are shipped directly
to the customer from the manufacturer or held in inventory in anticipation of
customer demand.
The supply of disposable linens to health care providers in the
United States is a highly competitive business. Large companies with
significantly greater resources than the Company, such as Kimberly-Clark
Corporation, Minnesota Mining & Mfg. Co., Johnson & Johnson, Owens & Minor Inc.,
General Medical Corp. and Baxter International Inc., dominate the market. The
Company concentrates its marketing on the emergency services segment of the
health care market, an area which demands greater individual attention.
Healthcare believes that it competes on the basis of customer service.
Healthcare advertises this service nationwide through several
mediums, such as print advertisements, trade shows and direct mail (sales
brochures). Sales from disposable linens increased from $56,000 in 1993 to
$184,000 in 1994 and to $154,000 during the first nine months of 1995. The
manufacture and sale of disposable linens is subject to regulation by the FDA.
The FDA monitors the composition and labeling of health care products, such as
disposable linens.
PRODUCTS UNDER DEVELOPMENT
Although the Company significantly reduced its research and
development activities when it implemented its austerity program in 1993, the
Company has maintained its rights to a number of selected products. There can be
no assurance that the Company will have the resources to bring any of these
products to market or, if such resources are available, that the products can be
successfully developed, manufactured or marketed.
Due to the expense and time commitment required to bring a
pharmaceutical product to market, the Company is seeking co-marketing, licensing
and promotional arrangements and other collaborations with other international
or national pharmaceutical companies. Generally, management believes that the
Company can compete more effectively in certain
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markets through collaborative arrangements with companies that have an
established presence in a particular geographic area and greater resources than
those of the Company. The Company is currently seeking partners to assist in the
further development and marketing of Biolid and Alphanon(R).
BIOLID(R)
Biolid is a non-crystalline form of erythromycin with a potential for
enhanced bioavailability (quantity absorbed in blood over time compared to dose
received). Initially, Biolid was produced in Europe in a sachet formulation,
which is a powder formulation contained in a packet, which is mixed with water
prior to oral administration. This formulation for drugs is more popular in
Europe than in the United States, necessitating the Company's development of a
tablet formulation for marketing in the United States. The Company was granted a
United States patent for Biolid in June 1992. An international patent
application covering ten additional countries was granted in January 1994.
Regulatory approval is pending in Mexico. Regulatory approval was recently
received in Spain and an Investigational New Drug Application ("IND") is on file
with the FDA.
Initial Sachet Formulation Studies. Five double blind clinical
studies of Biolid, using its sachet formulation, were completed in 1992 in a
total of 612 patients in France, Germany, Belgium and Holland. Four studies used
roxithromycin (Rulid, Hoescht-Roussel) as a reference drug, and Biolid showed
equal efficacy and tolerance in both lower and upper respiratory tract
infections in three of the four studies. In the fifth study, Biolid was compared
to a third generation oral cephalosporin, cefpodoxime (Cefodox,
Hoescht-Roussel), in upper respiratory tract infections, and again, equal
efficacy and tolerance were observed.
France. The Company began marketing the sachet formulation of Biolid
in France in 1992 after its approval by France's Ministry of Health. During a
periodic review of the dossier of Biolid by the Ministry which was at the same
time the Company had negotiated the sale of the Company's rights to the sachet
formulation in France, the Ministry required the suspension of marketing of
Biolid pending the provision by the Company of additional clinical data
regarding the mechanisms for the comparatively enhanced absorption of the Biolid
sachet. This suspension was unrelated to its safety or efficacy issues. The sale
of the rights to Biolid did not occur. The Company believes that once the
additional technical information requested has been provided to the French
regulators, the regulators should agree to the continued marketing of the sachet
formulation. However, due to the cost of such a study, at this time the Company
will not fund additional clinical studies of the sachet formulation in France
without a collaborative partner. The Company believes that the likelihood of
obtaining a partner in France is currently remote. See Notes 4 and 8 of Notes to
Consolidated Financial Statements.
Spain. The Company received approval by Spain's Ministry of Health in
1994 for marketing the sachet formulation of Biolid in Spain at a price lower
than that requested by the Company. In 1995, the Ministry approved a higher
price level, pending delivery of the results of a further clinical study
demonstrating enhanced bioavailability of Biolid. In addition, once the initial
production of a quantity of Biolid has been produced by Laboratorios Belmac in
Spain, which will be done using raw materials supplied to Laboratorios Belmac
from Chimos, Laboratorios Belmac will use the same clinical study to demonstrate
that the manufacturing process used in Spain is substantially similar to that
which was successfully used in France and that the formulation produced in Spain
yields a final product which meets all regulatory standards. The Company
currently expects that the clinical study will be performed in two phases.
First, a pilot study of six persons will be performed and then, if the results
of the pilot study are positive, a larger population will be tested in
compliance with the requirements of the Ministry. There can be no assurance that
either the pilot study or, if the pilot study is successful, the full study will
demonstrate either enhanced bioavailability or substantial similarity.
Management of the Company does not have sufficient data to be able to accurately
predict the outcome of these studies at this time. These studies would be funded
by the operations of Laboratorios Belmac and a portion of the proceeds of this
Offering.
United States. The Company has determined to direct its marketing
efforts for Biolid in the United States to the twice-a-day tablet formulation
rather than the sachet formulation. The Company has performed several pilot
studies between 1992 and 1994, the most recent of which indicated that the
tablet, given with a high fat meal, had bioavailability which was approximately
25% better when compared on a milligram for milligram basis with a competitive
U.S. tablet of erythromycin. These results did not achieve the same level of
bioavailability as the initial studies of the sachet formulation. Because of
wide variations in the data, an additional study with a larger number of
subjects will be required to definitively determine the relative bioavailability
of the tablet formulation as compared to standard erythromycin. A study plan was
reviewed by the FDA. There can be no assurance that this study will demonstrate
enhanced bioavailability. Management of the Company does not have sufficient
data to be able to accurately predict the outcome of the studies at this time. A
portion of the proceeds
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of this Offering may be used to fund this study. Should this study be
successful, the Company intends to seek collaborative partners to assist in
further development and marketing of this product.
ALPHANON(R)
Alphanon, the Company's original product, was designed for the
systemic treatment of hemorrhoids. The drug was originally developed as a liquid
formulation for intra-navel transdermal application. A double blind placebo
controlled study conducted in France in the late 1980's in 220 patients
demonstrated that Alphanon was effective in the treatment of hemorrhoids and
hemorrhoidal bleeding. This study was not conducted in complete compliance with
Good Clinical Practices.
A transdermal patch, a more convenient formulation, has been
developed with ALZA Corporation, and an IND is on file with the FDA. The Company
satisfactorily completed a Phase I clinical study in December 1992 and is
evaluating its alternatives which include continuing development, co-development
or divestiture. The Company has discontinued all sales and marketing efforts as
well as further research and development related to Alphanon pending a decision
regarding such alternatives.
OTHER PRODUCTS
Azaquinone Analogues. The development of the original azaquinone
compound was discontinued by the Company in 1994, however, numerous analogues
were synthesized by the Company as part of the development process. Initial in
vitro screening showed promising activity against Mycobacterium avium complex
(MAC). The Company plans to continue limited additional research on these
analogues. The Kuzell Institute in San Francisco, California, under a grant from
the National Institutes of Health, is currently conducting research into the
efficacy of azaquinone. Should the results of this testing show that an
azaquinone analogue has enough unique qualities to distinguish it from other
similar products, the Company plans to apply for a patent, and ultimately sell
the rights to this compound.
Phenantramine Analogue. Phenantramine analogue is a pre-clinical
stage antimalarial which has shown effectiveness against sensitive and resistant
strains of Plasmodium falciparum. It is currently being reviewed for possible
co-development by an unrelated third party. The Company is planning no
additional in-house research and development activity at this time with respect
to this compound.
PARTNERSHIP VENTURE
In March 1994, the Company formed a partnership, through Healthcare's
wholly-owned subsidiary, Belmac Hygiene, Inc., with a wholly-owned subsidiary of
Maximed Corporation, which is headquartered in New York City, and plans to
market, through this partnership, a range of hydrogel based feminine health care
products, including a contraceptive, an antiseptic, an antifungal and an
antibacterial. The Company believes that introduction of the first product, a
contraceptive, is possible in 1996, pending a conclusion to the Company's
dispute with its partner which includes the receipt by the Company of the rights
to such products. See "Legal Proceedings."
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company purchases, in the ordinary course of business, necessary
raw materials and supplies essential to the Company's operations from numerous
suppliers. There have been no availability problems or supply shortages nor are
any anticipated.
PATENTS, TRADEMARKS, LICENSES AND REGISTRATIONS
Although few of the products currently being sold by the Company are
protected by patents owned by the Company, the Company believes that patent and
trademark protection of the results of the Company's research and development
efforts will be an essential component to the future success of the Company.
Accordingly, where possible, patents and trademarks will be sought and obtained
in the United States and in all countries of principal market interest to the
Company.
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Patents for Biolid were granted in the U.S. in June 1992 and in the
following European countries in January 1994: Austria, Belgium, Italy,
Liechtenstein, Netherlands, Sweden, Switzerland, U.K., Germany and France. A
patent for Biolid in Venezuela was granted in September 1995. A U.S. patent for
Phenantramine was granted in October 1993. Trademarks for Biolid are currently
registered in France, Ireland, Portugal, Sweden and the U.K. Alphanon trademarks
are currently registered in the U.S. and Australia.
In addition, Laboratorios Belmac, owns 50 trademarks for pharmaceuti-
cal products and one patent for enalapril (which expires in 2005) which were
granted by Spain's Bureau of Patents and Trademarks. In Spain, patents expire
after 20 years and trademarks expire after 10 years, but can be renewed. All
prescription pharmaceutical products marketed by Laboratorios Belmac in Spain
have been registered with and approved by Spain's Ministry of Health. To
register a pharmaceutical with the Ministry requires the submission of a
registration dossier which includes all pre-clinical, clinical and manufacturing
information. The registration process generally takes approximately two years.
There can be no assurance that a competitor has not or will not submit
additional registrations for products substantially similar to those marketed by
Laboratorios Belmac.
COMPETITION
All of the Company's current and future products face competition
both from existing drugs and products and from new drugs and products being
developed by others. This competition potentially includes national and
multi-national pharmaceutical and health care companies of all sizes. Many of
these other pharmaceutical and health care concerns have greater financial
resources, technical staffs and manufacturing and marketing capabilities than
the Company. Acceptance by hospitals, physicians and patients is crucial to the
success of a pharmaceutical or health care product.
The Company competes primarily in France and Spain, which are large,
developed population centers in Europe with populations of approximately
58,000,000 and 39,000,000 people, respectively. In addition, since both
countries are members of the European Union, the Company expects to be able to
target the European Union's larger population of approximately 442,000,000 as
integration eliminates the barriers between countries.
Laboratorios Belmac competes with both large multinational companies
and local companies which produce most of the products Laboratorios Belmac
manufactures on the basis of service and its concentration on select product
lines. For example, there are currently 23 companies which market and sell
omeprazole, such as Schering-Plough, S.A. Similarly, 20 companies currently sell
enalapril, with Merck, Sharp & Dome de Espana, S.A. being the product leader.
Others of the products sold by Laboratorios Belmac, such as Onico-Fitex, are
more unusual and have fewer competitors. The contract manufacturing performed by
Laboratorios Belmac has a number of competitors, including Tadec Meiji Farma,
Bama Geve, ReigJofre, Aristegui, and Fournier, S.A.
Chimos, as a distributor and broker of fine chemicals, pharmaceutical
intermediates and biotechnology products, competes with numerous multinational
companies as well as companies in France, resulting in low product margins
despite high volume. Competition in the supply and distribution of
pharmaceutical intermediates is particularly strong from a large number of small
companies located in Italy, India, Pakistan and China. Certain large
multinational companies also compete in the distribution of fine chemicals
including Abbott Laboratories - Chemicals Division, The UpJohn Co. and Bayer
A.G. The biotechnology industry is currently less competitive as many of such
products are Orphan Drugs with low volumes.
CUSTOMERS
The incidence of certain infectious diseases which occur at various
times in different areas of the world affects the demand for the Company's
antibiotic products when they are marketed in each area. Orders for the
Company's products are generally filled on a current basis, and no order backlog
existed at September 30, 1995 or December 31, 1994. Sales of approximately
$6,024,000 and $8,000,000 to Pharmacie Centrale des Hopitaux accounted for
approximately 26% and 30%, of the Company's sales for the nine months ended
September 30, 1995 and for the year ended December 31, 1994, respectively. The
Company expects that the loss of this customer would have a material short-term
adverse effect on the Company's business. No material portion of the Company's
business is subject to renegotiation of profits or termination of contracts at
the election of any governmental authority.
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<PAGE>
RESEARCH AND DEVELOPMENT
In addition to various executive and administrative functions, the
Tampa, Florida headquarters of the Company serves as a site for limited research
and development activities. Research and development activities have also been
performed, under contract, by various universities and consulting research
laboratories. The Company has a research and development portfolio of four
pharmaceutical products, with a primary focus on anti-infectives. See "--
Products under Development." These products are protected by two patents and one
patent application in the United States. Patent and patent applications have
also been filed in other countries of marketing interest to the Company. INDs
are on file with the FDA for the macrolide antibiotic, Biolid, and the
transdermal anti-hemorrhoidal patch, Alphanon.
The Company spent $341,000 in the nine months ended September 30,
1995, $759,000 in the year ended December 31, 1994, $1,555,000 in the year ended
December 31, 1993, $3,599,000 in the six months ended December 31, 1992, and
$5,168,000 in the year ended June 30, 1992 on research and development to
discover and develop new products and processes and to improve existing products
and processes. Expenditures were concentrated in the development of products for
the treatment of infectious diseases. These decreases are a result of a thorough
review of research and development activities with the establishment of
priorities based on both technical and commercial criteria. The Company intends
to continue to carefully manage such expenditures in view of its limited
resources. A portion of the proceeds of this Offering is intended to be used for
further research and development activities. See "Use of Proceeds."
Laboratorios Belmac is engaged in limited research of drug delivery
systems ("DDS"), such as sustained release and time release formulations,
through a collaborative venture with a customer. Laboratorios Belmac plans to
commence clinical studies of the drug Cisapride, a motility product used for the
treatment of gastrointestinal disorders, in collaboration with another entity
and a study of the sachet formulation of Biolid in the next year.
REGULATION
The development, manufacture, sale, and distribution of the Company's
products are subject to comprehensive government regulation, and the general
trend is toward more stringent regulation. Government regulation, which includes
detailed inspection of and controls over research laboratory procedures,
clinical investigations, and manufacturing, marketing, and distribution
practices by various federal, state, and local agencies, substantially increases
the time, difficulty and cost incurred in obtaining and maintaining the approval
to market newly developed and existing products.
United States. The steps required before a pharmaceutical agent may
be marketed in the United States include (i) preclinical laboratory and animal
tests, (ii) the submission to the FDA of an IND, which must become effective
before human clinical trials may commence, (iii) adequate and well-controlled
human clinical trials to establish the safety and efficacy of the drug, (iv) the
submission of New Drug Application ("NDA") to the FDA, and (v) the FDA approval
of the NDA prior to any commercial sale or shipment of the drug. In addition to
obtaining FDA approval for each product, each domestic drug manufacturing
establishment must be registered with the FDA. Domestic manufacturing
establishments are subject to biennial inspections by the FDA and must comply
with current GMPs for drugs. To supply products for use in the United States,
foreign manufacturing establishments must comply with GMPs and are subject to
periodic inspection by the FDA or by regulatory authorities in such countries
under reciprocal agreements with the FDA.
Clinical trials are typically conducted in three sequential phases
that may overlap. In Phase I, the initial introduction of the pharmaceutical
into healthy human volunteers, the emphasis is on testing for safety (adverse
effects), dosage tolerance, metabolism, excretion and clinical pharmacology.
Phase II involves studies in a limited patient population to determine the
efficacy of the pharmaceutical for specific targeted indications, to determine
dosage tolerance and optimal dosage and to identify possible adverse side
effects and safety risks. Once a compound is found to be effective and to have
an acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to evaluate clinical efficacy further and to further test for safety
within an expanded patient population at multiple clinical study sites. The FDA
reviews both the clinical plans and the results of the trials and may
discontinue the trials at any time if there are significant safety issues.
The results of the preclinical and clinical trials are submitted to
the FDA in the form of a NDA for marketing approval. The approval process is
affected by a number of factors, including the severity of the disease, the
availability of alternative treatments and the risks and benefits demonstrated
in clinical trials. Additional animal studies or clinical trials may be
requested during the FDA review process and may delay marketing approval. After
FDA approval for the initial
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indications, further clinical trials would be necessary to gain approval for the
use of the product for any additional indications. The FDA may also require
post-marketing testing to monitor for adverse effects, which can involve
significant expense.
Under the Orphan Drug Act, the FDA may designate a product or
products as having Orphan Drug status to treat a "rare disease or condition,"
which is a disease or condition that affects populations of less than 200,000
individuals in the United States or, if victims of a disease number more than
200,000, the sponsor establishes that it does not realistically anticipate its
product sales will be sufficient to recover its costs. If a product is
designated an Orphan Drug, then the sponsor is entitled to recover its costs and
the sponsor is entitled to receive certain incentives to undertake the
development and marketing of the product, including limited tax credits and
high-priority FDA review of an NDA. In addition, the sponsor that obtains the
first marketing approval for a designated Orphan Drug for a given indication is
eligible to receive marketing exclusivity for a period of seven years.
Spain. As a manufacturer in Spain, which is a member of the European
Union, Laboratorios Belmac is subject to the regulations enacted by the European
Union. Prior to Spain's entry into the European Union in 1993, the
pharmaceutical regulations in Spain were less stringent and Laboratorios Belmac,
along with all Spanish companies, have had to modify their procedures to adapt
to the new regulations, which are nearly identical to the regulations
promulgated by the United States Food & Drug Administration discussed above. In
general, these regulations are consistent with the FDA and require a
manufacturer of a proposed pharmaceutical to show efficacy and safety. The
development process in Spain goes through the same phases (e.g. I, II, III) as
in the United States to assure their safety and efficacy. A dossier on each
pharmaceutical is prepared which takes approximately two years for review by the
Ministry of Health. They then can only be sold to the public with a prescription
from a medical doctor.
As most of the pharmaceuticals Laboratorios Belmac produces are
subject to this regulatory process, its business can be materially affected by
any change in existing regulations. Currently, Laboratorios Belmac has submitted
two products for regulatory review by the Spanish Ministry of Health, cisapride
and diclofenac, which will be marketed once approved. In addition, Laboratorios
Belmac markets 14 products and has two products which have been approved and are
in pre- marketing stages.
France. Most of the activities of Chimos are not regulated by
France's Ministry of Health, since pharmaceuticals in France are regulated at
the level of the manufacturer, as they produce the products, and pharmacists, as
they distribute the products to the public. Chimos' distribution activities are
not regulated. Chimos has had one regulatory submission at the Ministry of
Health for Biolid. See "-- Products under Development -- Biolid."
General. Continuing studies of the utilization, safety, and efficacy
of health care products and their components are being conducted by industry,
government agencies, and others. Such studies, which employ increasingly
sophisticated methods and techniques, can call into question the utilization,
safety, and efficacy of previously marketed products and in some cases have
resulted, and may in the future result, in the discontinuance of such products
and give rise to claims for damages from persons who believe they have been
injured as a result of their use. The Company has product liability insurance
for such potential claims, however, no such claims have ever been asserted
against the Company.
The cost of human health care continues to be a subject of
investigation and action by governmental agencies, legislative bodies, and
private organizations. In the United States, most states have enacted generic
substitution legislation requiring or permitting a dispensing pharmacist to
substitute a different manufacturer's version of a drug for the one prescribed.
Federal and state governments continue their efforts to reduce costs of
subsidized heath care programs, including restrictions on amounts agencies will
reimburse for the use of products. Efforts to reduce health care costs are also
being made in the private sector. Health care providers have responded by
instituting various cost reduction and containment measures of their own. It is
not possible to predict the extent to which the Company or the health care
industry in general might be affected by the matters discussed above.
Many countries, directly or indirectly through reimbursement
limitations, control the selling price of certain health care products.
Furthermore, many developing countries limit the importation of raw materials
and finished products. In western Europe, efforts are under way by the European
Union to harmonize technical standards for many products, including drugs and
medical devices, and to make more uniform the requirements for marketing
approval from the various ministries of health.
Although the Company recently began marketing disposable linen
products in the United States, the majority of the Company's sales are in France
and Spain. International operations are subject to certain additional risks
inherent in
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conducting business outside the United States, including price and currency
exchange controls, changes in currency exchange rates, limitations on foreign
participation in local enterprise, expropriation, nationalization, and other
governmental action.
To the best of its knowledge, the Company is presently in substantial
compliance with all existing applicable environmental laws and does not
anticipate that such compliance will have a material effect on its future
capital expenditures, earnings or competitive position with respect to any of
its operations.
EMPLOYEES
The Company and its subsidiaries employ approximately 82 people, 8 of
whom are employed in the United States, 5 in France and 69 in Spain as of
December 14, 1995. Of such employees, approximately 25 are principally engaged
in manufacturing activities, 38 in sales and marketing, 2 in research and
development and 17 in management and administration. In general, the Company
considers its relations with its employees to be good.
FACILITIES
UNITED STATES
The Company's corporate headquarters are located in Tampa, Florida
where the Company leases approximately 14,000 square feet of office space, which
leases expire in 1998.
SPAIN
Manufacturing is performed at the Company's facilities in Zaragoza,
Spain. These facilities have been renovated recently to comply with the
extremely stringent requirements for pharmaceutical manufacturing (GMPs). The
facilities, which are owned by the Company, consist of approximately 45,000
square feet located in a prime industrial park and seated on sufficient acreage
that would allow for future expansion. The manufacturing facility is capable of
producing tablets, capsules, suppositories, creams, ointments, lotions, liquids
and sachets, as well as microgranulated and microencapsulated products. The
facility also includes analytical chemistry, quality control and quality
assurance laboratories. The GMPs certification now allows the Company to
undertake contract manufacturing for a number of international pharmaceutical
companies either engaged in or contemplating emergence into the Spanish market.
The Company's administrative offices in Spain are located in Madrid in
approximately 3,000 square feet of newly renovated, leased offices which leases
expire in 1998.
FRANCE
Chimos is located in Paris, France in leased office space of approxi-
mately 2,000 square feet which leases expire in 1998. Manufacturing is
contracted out to SPNE, a semiprivate/government organization, outside of Paris.
LEGAL PROCEEDINGS
Belmac Hygiene, Inc. ("Hygiene"), a subsidiary of the Company, filed
an action on December 9, 1994 in the United States District Court for the
Southern District of New York against Medstar, Inc. ("Medstar"), Maximed, Inc.
("Maximed") and Robert S. Cohen. The defendants are Hygiene's partners (or such
partner's control persons) in the Company's partnership with Maximed (the
"Partnership"), which was formed for the development and ultimate sale of
Maximed's intra-vaginal controlled release products. The action seeks (i) to
enjoin the defendants from interfering with the management of the Partnership by
Hygiene's representatives, and (ii) to recover damages as a result of
defendants' misrepresentations and breach of warranty in the Partnership
agreement. The defendants have filed a counterclaim against Hygiene. Medstar
also filed a separate action on May 4, 1995 in the United States District Court
for the Southern District of New York against the Company alleging that Hygiene
failed to fund the Partnership and seeking $10,000,000 from the Company pursuant
to its guaranty of Hygiene's obligations. Management of the Company views both
Medstar's claim and the counterclaim of Medstar, Maximed and Robert S. Cohen to
be frivolous and entirely without merit and is vigorously pursuing the Company's
claims and defending both Medstar's action and the counterclaim. The issues were
tried, without a jury, on August 21-23, 1995. Thereafter, post-trial briefs and
proposed findings of fact and conclusions of law were submitted, and argument
was heard on October 25, 1995. However, a decision has not yet been rendered.
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<PAGE>
Michael M. Harshbarger, a former member of the Company's Board of
Directors and its former President and Chief Executive Officer, filed a suit
against the Company in November 1993 in the Circuit Court of the Thirteenth
Judicial Circuit, State of Florida, Hillsborough County Civil Division alleging
wrongful termination. The plaintiff is seeking monetary damages in excess of
$1,400,000. The Company views his claim as meritless and intends to vigorously
oppose it. The Company has filed a counterclaim against Harshbarger for wrongful
conversion and civil theft, fraud and deceit, and breach of contract, seeking
the return of corporate assets removed by Harshbarger and for restitution
related to expenses of a personal nature that he charged to the Company's
accounts. The Company is currently amending its counterclaim to include breach
of fiduciary duty. The Company is seeking damages from Harshbarger relating to
its counterclaim in excess of $1,000,000.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY MANAGERS
The directors, executive officers and key managers of the Company are
as follows:
Class
Positions with of
Name Age the Company Director*
- ---- --- -------------- ---------
James R. Murphy 45 Chairman, President, Chief Executive III
Officer and Director
Robert M. Stote, M.D. 56 Senior Vice President, Chief III
Science Officer and Director
Michael D. Price 38 Vice President, Chief Financial II
Officer, Treasurer, Secretary
and Director
Randolph W. Arnegger 51 Director II
Charles L. Bolling 72 Director II
Doris E. Wardell 56 Director I
Denis Nicolas 75 President of Chimos
Clemente Gonzalez Azpeitia 55 General Manager of Laboratorios Belmac
Jose M. Esteve Serrano 59 Controller of Laboratorios Belmac
Set forth below is a biographical description of each executive
officer, director and key employee of the Company:
JAMES R. MURPHY became President and Chief Operating Officer of the
Company on September 7, 1994 and was named Chief Executive Officer effective
January 1, 1995 and became Chairman of the Board on June 9, 1995. Prior to
rejoining the Company, Mr. Murphy served as Vice President of Business
Development at MacroChem Corporation, a publicly owned pharmaceutical company,
from March 1993 through September 1994. From September 1992 until March 1993,
Mr. Murphy served as a Consultant to the pharmaceutical industry with his
primary efforts directed toward product licensing. Prior thereto, Mr. Murphy
served as Director - Worldwide Business Development and Strategic Planning of
the Company from December 1991 to September 1992. Mr. Murphy previously spent 14
years in basic pharmaceutical research and product development with SmithKline
Corporation and in business development with contract research laboratories. Mr.
Murphy received a B.A. in Biology from Millersville University. He has been a
Director of the Company since 1993.
ROBERT M. STOTE, M.D. became Senior Vice President and Chief Science
Officer of the Company in March 1992. Prior to joining Belmac Corporation, Dr.
Stote was employed for 20 years by SmithKline Beecham Corporation serving as
Senior Vice President and Medical Director, Worldwide Medical Affairs from 1989
to 1992, and Vice President-Clinical Pharmacology-Worldwide from 1987 to 1989.
From 1984 to 1987 Dr. Stote was Vice President-Phase I Clinical Research, North
America. Dr. Stote was Chief of Nephrology at Presbyterian Medical Center of
Philadelphia from 1972 to 1989 and was Clinical Professor of Medicine at the
University of Pennsylvania. Dr. Stote received a B.S. in Pharmacy from the
Albany College of Pharmacy, an M.D. from Albany Medical College and is Board
Certified in Internal Medicine and Nephrology.
- -------------------------
* The Company's Amended and Restated Articles of Incorporation and By-laws
provide for a classified Board of Directors. The Board is divided into
three classes designated Class I, Class II and Class III, with terms
expiring at the 1997, 1998 and 1996 annual meeting of stockholders,
respectively.
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<PAGE>
He was a Fellow in Nephrology and Internal Medicine at the Mayo Clinic and is
currently a Fellow of the American College of Physicians. He has been a Director
of the Company since 1993.
MICHAEL D. PRICE became Chief Financial Officer, Vice
President/Treasurer and Secretary of the Company in October 1993, April 1993 and
November 1992, respectively. He has served the Company in other capacities since
March 1992. Prior to joining the Company, Mr. Price was employed as a financial
and management consultant with Carr Financial Group in Tampa, Florida from March
1990 to March 1992. Prior thereto, he was employed as Vice President of Finance
with Premiere Group, Inc., a real estate developer in Tampa, Florida from June
1988 to February 1990. Prior thereto, Mr. Price was employed by Price Waterhouse
in Tampa, Florida from January 1982 to June 1988 where his last position with
that firm was as an Audit Manager. Mr. Price received a B.S. in Business
Administration with a concentration in Accounting from Auburn University and an
M.B.A. from Florida State University. Mr. Price is a Certified Public Accountant
in the State of Florida. He has been a Director of the Company since January
1995.
RANDOLPH W. ARNEGGER is the President of Vantage Point Marketing, a
developer and producer of continuing medical education programs, medically
oriented direct mail programs, and medical convention programs, a position he
has held since 1986. Prior thereto, Mr. Arnegger served as Vice President of
Account Services for Curtin & Pease/Peneco, a national direct mail firm, and
Vice President for Pro Clinica, a medical advertising agency in New York. He has
been a Director of the Company since 1994.
CHARLES L. BOLLING served from 1968 to 1973 as Vice President of
Product Management and Promotion (U.S.), from 1973 to 1977 as Vice President of
Commercial Development and from 1977 to 1986 as Director of Business Development
(International) at Smith Kline & French Laboratories. Mr. Bolling has been
retired since 1986. He has been a Director of the Company since 1991.
DORIS E. WARDELL has been Assistant Professor/Clinical Services
Coordinator at the University of Utah College of Nursing since April 1994, and
was previously involved in Integrated Care special projects at Allegheny General
Hospital, serving as Acting Vice President of Nursing at Allegheny General
Hospital from September 1992 to June 1994 and Assistant Vice President of
Nursing from December 1989 to September 1992. Prior thereto, Mrs. Wardell served
as Vice President of Administration at Beaver Medical Center from April 1987 to
November 1989. From March 1980 to April 1987, she was employed by Chestnut Hill
Hospital as Vice President of Nursing and Director of Nursing Services from
August 1978 to March 1980. She has been a Director of the Company since 1994.
DENIS NICOLAS has been the President of Chimos since he was one of
its founders in 1964. Mr. Nicolas' expertise is in the sourcing of fine
chemicals and pharmaceutical raw materials from manufacturers around the world.
CLEMENTE GONZALEZ AZPEITIA has been the General Manager of
Laboratorios Belmac since 1993. From 1987 through 1992, Mr. Gonzalez was a
business director and then a sales director of CEPA, a pharmaceutical company in
Spain. From 1969 to 1987, he was employed by the Berenguer-Beneyto Laboratory,
first as head of the research department and later as director of medicine and
director of marketing. Mr. Gonzalez received a medical degree from the
University of Madrid.
JOSE M. ESTEVE SERRANO has been the Controller of Laboratorios
Belmac since April 1995. From 1986 through that time he was the financial
director of Auto Suture Espana S.A., the subsidiary in Spain of U.S. Surgical
Corporation. From 1983 through 1986, Mr. Esteve was the Controller of Det Norske
Veritas Spain, a shipping services group in Madrid with headquarters in Norway.
Prior thereto he held a number of financial positions in businesses and banks in
New York and Madrid. Mr. Esteve has M.A. degrees in Law and in Economics from
the University of Madrid and an M.B.A. from New York University.
The Company is currently in arrears on two annual dividend payments
on its Series A Preferred Stock and therefore, the holders of the Series A
Preferred Stock have the right, as a class, to elect two additional members of
the Company's Board of Directors. As of the date hereof, the holders have not
exercised such right.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Com-
mittee. The Audit Committee recommends to the Board of Directors the appointment
of independent accountants to audit the Company's consolidated
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financial statements, reviews the Company's internal control procedures and
advises the Company on tax and other matters connected with the growth of the
Company. The Audit Committee also reviews with management the annual audit and
other work performed by the independent accountants. The Company's Compensation
Committee administers the Company's 1991 Stock Option Plan and reviews and
recommends to the Board of Directors the nature and amount of compensation to be
paid to the Company's executive officers. The Audit Committee consists of
Messrs. Arnegger, Bolling and Price. The Compensation Committee consists of Mrs.
Wardell and Messrs. Arnegger and Bolling.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation paid or accrued
by the Company to or for the account of the current Chief Executive Officer and
each person who served as Chief Executive Officer during 1994, and the executive
officers at December 31, 1994 whose total cash compensation for the year ended
December 31, 1994 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ----------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING LTIP ALL
NAME AND PRINCIPAL ANNUAL STOCK OPTIONS/ PAYOUTS OTHER
POSITION YEAR (1) SALARY ($) BONUS ($) COMP. ($) AWARDS ($) SARS (#) ($) COMP.(2)
- ------------------------------------------ ---------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
James R. Murphy (3) Y/E 12/31/94 $ 55,903 $ - $ - $ 685 - $ - $12,000
Chairman, President and
Chief Executive Officer
Robert M. Stote (4) Y/E 12/31/94 200,000 - - - - - -
Senior Vice President and Y/E 12/31/93 211,538 - - 2,375 20,000 - 14,854
Chief Science Officer Six months
ended 12/31/92 100,000 - - - - - 22,340
Y/E 6/30/92 66,667 27,000 - - 15,000 - -
Michael D. Price (5) Y/E 12/31/94 100,000 - - - - - -
Vice President, Chief Y/E 12/31/93 90,525 - - 2,375 9,000 - -
Financial Officer,
Treasurer and Secretary
Ranald Stewart, Jr. (6) Y/E 12/31/94 - - 162,000 157,500 20,000 - -
Former Chairman of the Y/E 12/31/93 - - 106,200 4,500 20,000 - -
Board, Former Chief
Executive Officer and
Director
Donald E. Boultbee (7) Y/E 12/31/94 166,667 - - 333 - - -
Former President and Former Y/E 12/31/93 83,333 - - - 10,000 - -
Chief Executive Officer
</TABLE>
- ----------------------------------------------
(1) The Company changed its fiscal year from June 30 to December 31
commencing with the six month transition period ended December 31,
1992.
(2) The value of perquisites provided to the named executive officers did
not exceed 10% of total compensation in any case.
(3) Mr. Murphy, Chairman, President and Chief Executive Officer, has been
employed by the Company since September 1994. Mr. Murphy's annual
salary is currently $225,000. During the year ended December 31, 1994,
Mr. Murphy was reimbursed $12,000 for costs related to his relocation
upon accepting employment with the Company. During the nine months
ended September 30, 1995, Mr. Murphy was awarded stock options to
purchase
(Footnotes continue on following page)
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<PAGE>
50,000 shares of Common Stock at $3.75 per share, 50% of which vest on
June 12, 1996 and the balance of which vest on June 12, 1997. During
the year ended December 31, 1994, Mr. Murphy was awarded stock options
to purchase 2,000 shares of Common Stock at $11.25 per share upon his
election to the Board of Directors on June 9, 1994. Of these options,
1,000 options vested on June 9, 1995 and the remaining 1,000 options
are scheduled to vest on June 9, 1996. Compensation for services
rendered in other capacities prior to becoming an executive officer of
the Company is excluded. Prior to becoming an executive officer, in
his capacity as an outside Director, Mr. Murphy was awarded 137 shares
of Common Stock for services rendered in 1994 as a Committee Member of
the Board of Directors.
(4) Dr. Stote, Senior Vice President and Chief Science Officer, has been
employed by the Company since March 1992. Dr. Stote's annual salary is
currently $215,000. During the nine months ended September 30, 1995,
Dr. Stote was awarded stock options to purchase 37,500 shares of
Common Stock at $3.75 per share, 50% of which vest on June 12, 1996
and the balance of which vest on June 12, 1997. During the year ended
December 31, 1993, Dr. Stote was awarded stock options to purchase
20,000 shares of Common Stock at $20.00 per share, all of which are
fully vested. Also during the year ended December 31, 1993, Dr. Stote
was awarded 100 shares of the Company's restricted Common Stock.
During the year ended June 30, 1992, Dr. Stote was awarded stock
options to purchase 15,000 shares of Common Stock at $142.50 per
share, as to which 11,250 have vested and 3,750 are scheduled to vest
on March 2, 1996. Dr. Stote was reimbursed $22,340 during the six
months ended December 31, 1992 and $14,854 during the year ended
December 31, 1993 for costs related to his relocation upon accepting
employment with the Company.
(5) Mr. Price, Vice President, Chief Financial Officer, Treasurer, and
Secretary has been employed by the Company since March 1992. Mr.
Price's annual salary is currently $115,000. During the nine months
ended September 30, 1995, Mr. Price was awarded stock options to
purchase 22,500 shares of Common Stock at $3.75 per share, 50% of
which vest on June 12, 1996 and the balance of which vest on June 12,
1997. During the year ended December 31, 1993, Mr. Price was awarded
stock options to purchase 9,000 shares of Common Stock at $20.00 per
share, all of which are fully vested. Also during the year ended
December 31, 1993, Mr. Price was awarded 100 shares of the Company's
restricted Common Stock. During the year ended June 30, 1992, Mr.
Price was awarded stock options to purchase 1,000 shares of Common
Stock at $145.00 per share, all of which are fully vested.
Compensation for services rendered in other capacities prior to
becoming an executive officer of the Company is excluded.
(6) Mr. Stewart was a Director of the Company from 1986 to June 1995 and
served as Chairman of the Board from February 26, 1993 until December
31, 1994. He served in the capacity of interim Chief Executive Officer
during the period July 15, 1993 through September 1, 1993 (the date
Mr. Boultbee was engaged as President and Chief Executive Officer) and
from September 1, 1994 (the date of Mr. Boultbee's resignation)
through December 31, 1994 (the date that Mr. Murphy was named Chief
Executive Officer). Mr. Stewart received a Chairman's fee of $162,000
in 1994 and also received 6,000 shares of Common Stock as compensation
for services rendered in 1993. Mr. Stewart was also awarded an
additional 6,000 shares of Common Stock in December 1995 as
compensation for serving as Chairman in 1994. Mr. Stewart was also
granted stock options in 1994 to purchase 20,000 shares of Common
Stock at $5.63 per share. Mr. Stewart received a Chairman's fee of
$106,200 in 1993. During the year ended December 31, 1993, Mr. Stewart
was granted stock options to purchase 20,000 shares of Common Stock at
$20.00 per share. In 1994, Mr. Stewart also received a grant of 200
shares of Common Stock, as compensation for serving on a Committee of
the Company's Board of Directors. Outside Director's fees prior to
becoming an executive officer of the Company are excluded.
(7) Mr. Boultbee served as President and Chief Executive Officer of the
Company from September 1, 1993 through August 31, 1994 at an annual
salary of $250,000 and as a Director from April 1994 through December
31, 1994. Mr. Boultbee was granted stock options in 1993 to purchase
10,000 shares of Common Stock at $19.38 per share which options
expired unexercised. Mr. Boultbee was awarded 67 shares of Common
Stock for services rendered in 1994 as a Committee Member of the Board
of Directors.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the details of options granted to the
individuals listed in the Summary Compensation table during the year ended
December 31, 1994. No stock appreciation rights have been granted to date.
<TABLE>
<CAPTION>
Option/SAR Grants in the Year Ended December 31, 1994
-----------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES
OF STOCK
PRICE
APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERMS
------------------------------------ -------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- --------------- ---------- ----------- --------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
James R. Murphy(1) 2,000 6.0% $11.25 06/09/04 - $2,258
Robert M. Stote, M.D. - - - - - -
Michael D. Price - - - - - -
Ranald Stewart, Jr.(2) 20,000 59.5% 5.63 12/31/94 - -
3,000 9.0% 11.25 06/09/04 - 3,387
Donald E. Boultbee - - - - - -
</TABLE>
_________________________________________
(1) Mr. Murphy was granted ten-year options in 1994 to purchase 2,000
shares of Common Stock at $11.25 per share under the 1991 Stock Option
Plan (see "Stock Option Plans"), upon his election as an outside
Director in June 1994 (prior to becoming an executive officer). The
options were granted at their fair market value ($11.25) on the date
of grant. Of these options, 1,000 options vested on June 9, 1995 and
the remaining 1,000 options are scheduled to vest on June 9, 1996.
(2) Mr. Stewart was granted ten-year options in 1994 to purchase 20,000
shares of Common Stock at $5.63 per share under the 1991 Stock Option
Plan (see "Stock Option Plans"). The options were granted at their
fair market value ($5.63) on the date of grant. Mr. Stewart was also
granted ten-year options to purchase 3,000 shares of Common Stock at
$11.25 per share under the 1991 Stock Option Plan upon his election as
an outside Director in June 1994 (prior to becoming an executive
officer). The options were granted at their fair market value ($11.25)
on the date of grant and expired unexercised.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the
number of shares of Common Stock acquired upon the exercise of stock options
during the year ended December 31, 1994 by, and the number and value at December
31, 1994 of shares of Common Stock subject to unexercised options held by, the
individuals listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (# SHARES) FY-END ($)
SHARES ------------------ -----------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ----------------------- --------------- ------------ ------------------ -----------------
<S> <C> <C> <C> <C>
James R. Murphy - - 1,000 / 2,000 -0- / -0-
Robert M. Stote, M.D. - - 21,250 / 13,750 -0- / -0-
Michael D. Price - - 5,500 / 4,500 -0- / -0-
Ranald Stewart, Jr. - - 5,200 / 2,000 -0- / -0-
Donald E. Boultbee - - -0- / -0- -0- / -0-
</TABLE>
- -------------------------
(1) Represents the closing price of the Company's Common Stock on the
American Stock Exchange on December 30, 1994 minus the respective
exercise prices.
REMUNERATION OF CHAIRMAN OF THE BOARD AND NON-EMPLOYEE DIRECTORS
The Company pays non-employee Director fees equal to $12,000 per year
for attendance at meetings and reimburses expenses incurred in attending
meetings. Total non-employee Director fee payments during the year ended
December 31, 1994 were $44,000 and expenses incurred by non-employee Directors
in attending meetings which were reimbursed by the Company totaled $5,060. Total
Chairman's fee paid to or accrued for the benefit of Ranald Stewart, Jr., former
Chairman of the Board and Chief Executive Officer of the Company during the year
ended December 31, 1994 was $162,000. Mr. Stewart, in his capacity as Chairman,
was also issued 6,000 shares of Common Stock in 1994, with a fair market value
of $127,500 for services provided in 1993 and has been awarded an additional
6,000 shares of Common Stock in 1995 with a fair market value of $33,750 for
services provided in 1994. During 1994, Mr. Stewart also received options to
purchase 20,000 shares of Common Stock. In addition, options to purchase 1,000
shares of Common Stock are automatically granted to each non-employee Director
upon his or her election or reelection to the Board for each year of the term
for which he or she is elected. The options vest as to 1,000 shares at the end
of each year of such term. During the year ended December 31, 1994, the Company
granted to the individuals who served as non-employee Directors during such
fiscal year, options to purchase an aggregate of 8,800 shares of Common Stock in
recognition of such services. The options which were granted pursuant to the
1991 Stock Option Plan, are exercisable for ten years (commencing one year from
the date of the grant) at exercise prices ranging from $6.88 to $11.25 per share
(representing the fair market value of the Common Stock on the date of grant).
Non-employee Directors who serve on committees of the Company's Board
of Directors are awarded 200 shares of Common Stock annually. During the fiscal
year ended December 31, 1994, no such shares of Common Stock were granted to
non-employee Directors; however, 817 shares were granted in 1995 to such
individuals for services rendered during 1994.
-40-
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. James R. Murphy, Chairman of the Board, President and Chief
Executive Officer, entered into an employment agreement with the Company dated
as of June 12, 1995 providing for an initial term which expires on June 12,
1998. Under the terms of this agreement, Mr. Murphy's annual base salary is
$225,000. The agreement with Mr. Murphy also provides for bonuses at the
recommendation and discretion of the Compensation Committee of the Company's
Board of Directors and a severance payment equal to two years salary and
immediate vesting of all outstanding stock options upon termination following a
change in control of the Company. Pursuant to the agreement, if terminated
without cause, Mr. Murphy will be entitled to a severance payment equal to one
year salary and immediate vesting of all outstanding stock options.
Dr. Robert M. Stote, Senior Vice President and Chief Science Officer,
entered into an employment agreement with the Company dated as of June 12, 1995
providing for an initial term which expires on June 12, 1998. Under the terms of
this agreement, Dr. Stote's annual base salary is $215,000. The agreement with
Dr. Stote also provides for bonuses at the recommendation and discretion of the
Compensation Committee of the Company's Board of Directors and a severance
payment equal to two years salary and immediate vesting of all outstanding stock
options upon termination following a change in control of the Company. Pursuant
to the agreement, if terminated without cause, Dr. Stote will be entitled to a
severance payment equal to one year salary and immediate vesting of all
outstanding stock options.
Mr. Michael D. Price, Vice President, Chief Financial Officer,
Treasurer and Secretary, entered into an employment agreement with the Company
dated as of June 12, 1995 providing for an initial term which expires on June
12, 1998. Under the terms of this agreement, Mr. Price's annual base salary is
$115,000. The agreement with Mr. Price also provides for bonuses at the
recommendation and discretion of the Compensation Committee of the Company's
Board of Directors and a severance payment equal to two years salary and
immediate vesting of all outstanding stock options upon termination following a
change in control of the Company. Pursuant to the agreement, if terminated
without cause, Mr. Price will be entitled to a severance payment equal to one
year salary and immediate vesting of all outstanding stock options.
STOCK OPTION PLANS
The Company's Incentive Stock Option Plan and Non-Qualified Stock
Option Plan (the "Plans") were terminated by the Board of Directors pursuant to
their provisions on September 30, 1991. Although outstanding options were not
affected by such termination, options may no longer be granted thereunder.
Options granted under the Incentive Stock Option Plan to purchase shares of
Common Stock are intended to qualify as "incentive stock options" under Section
422A (now Section 422) of the Internal Revenue Code of 1986, as amended (the
"Code"). Participation in the Plans was limited to employees and Directors of
the Company selected by the Compensation Committee, which determined the number
of shares subject to any option, the option exercise price per share which could
not be less than 98% (in the case of the Non-Qualified Stock Option Plan) or
100% (in the case of the Incentive Stock Option Plan) of the fair market value
of the Common Stock on the date of grant and the time period (which could not
exceed ten years from the date of grant) within which, and the conditions under
which, all or portions of each option could be exercised.
1991 STOCK OPTION PLAN
The Company's 1991 Stock Option Plan (the "1991 Plan") permits the
grant of up to an aggregate of 240,000 shares of Common Stock to promote the
interests of the Company in attracting and retaining employees (including
officers) and experienced and knowledgeable non-employee Directors for the
Company and its subsidiaries, by enabling them to acquire or increase a
proprietary interest in the Company, to benefit from appreciation in the value
of the Company's Common Stock and, thus, participate in the long-term growth of
the Company. The 1991 Plan replaced the Plans (see "-- Stock Option Plans")
which terminated as to future grants on September 30, 1991.
The 1991 Plan is administered by a committee of the Board of
Directors of not less than two Directors, each of whom must be "disinterested
persons" within the meaning of regulations promulgated by the Commission. The
Board of Directors has designated the Compensation Committee of the Board
consisting of Mrs. Wardell and Messrs. Arnegger and Bolling to administer the
1991 Plan. The Compensation Committee has the authority under the 1991 Plan to
determine the terms of options granted under the 1991 Plan, including, among
other things, the individuals who shall receive options, the times when they
shall receive them, whether an incentive stock option and/or non-qualified
option shall be granted, the number of shares to be subject to each option, and
the date or dates each option shall become exercisable.
-41
<PAGE>
No options may be granted under the 1991 Plan after September 30,
2001. The Board may amend, suspend or terminate the 1991 Plan or any portion
thereof at any time and from time to time in such respects as it deems necessary
or advisable (including without limitation to conform with applicable law or the
regulations or rulings thereunder), but may not without the approval of the
Company's shareholders make any alteration or amendment thereof which would (i)
change the class of those eligible to receive options, (ii) increase the maximum
number of shares for which options may be granted (except for anti-dilution
adjustments) or (iii) materially increase the benefits to participants under the
1991 Plan.
During the fiscal year ended December 31, 1994, options to purchase
2,000, 23,000, and 28,600 shares of Common Stock, were granted to Mr. Murphy,
Mr. Stewart and all Executive Officers as a group, respectively. The options
were granted at prices ranging from $5.63 to $11.25, representing the fair
market value of the Common Stock on the dates of grant. The average exercise
prices of the options granted to Mr. Murphy, Mr. Stewart and all Executive
Officers as a group were $11.25, $6.38, and $7.20, respectively. Expiration
dates of these options range from June 9, 2004 to October 31, 2005.
Also during the fiscal year ended December 31, 1994, options to
purchase 3,600 and 5,000 shares of Common Stock were granted to non-employee
Directors of the Company and to employees of the Company who are not executive
officers, respectively. Options granted to non-employee Directors were granted
at prices ranging from $6.88 to $11.25 per share, representing the fair market
value on the date of grant and expiration dates ranging from June 9, 2004 to
October 31, 2005. Options granted to employees of the Company who are not
Executive Officers were granted at $5.00 per share, representing the fair market
value of the Common Stock on the date of grant. The expiration date of these
options is December 12, 2004.
As of December 1, 1995, although no options had been exercised,
options to purchase 194,100 shares held by 11 optionees were outstanding at a
weighted average per share exercise price of $28.39 and 45,900 shares are
available for future grants under the 1991 Plan.
401(K) RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan (the "401(k) Plan")
under which eligible employees may contribute, on a pre-tax basis, between 1% to
15% of their respective total annual income from the Company, subject to maximum
aggregate annual contribution imposed by the Internal Revenue Code of 1986, as
amended. All full-time employees who have worked for the Company for at least
six months are eligible to participate in the 401(k) Plan. All employee
contributions are allocated to the employee's individual account and are
invested in various investment options as directed by the employee. Cash
contributions are fully vested and nonforfeitable. The Company may elect to make
matching contributions to the 401(k) Plan; however, the Company has made no
contributions to the 401(k) Plan since its inception.
-42-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of December 14, 1995 as
to (i) each person (including any "group" as that term is used in Section
13(d)(3) of the 1934 Act) who is known to the Company to be the beneficial owner
of more than five percent of the Company's Common Stock, its only class of
voting securities; (ii) each director; (iii) each executive officer named in the
Summary Compensation Table and (iv) the shares of the Company's Common Stock
beneficially owned by all current executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
Name and Address Number of Shares
(where applicable) Shares Owned Percentage
of Beneficial Owner Before Offering(1) of Class
------------------- ------------------ ----------
<S> <C> <C>
Shulmit Pritziker 453,020(2) 13.01%
50 Broad Street
New York, New York 10004
Ilya Margulis 427,300(3) 12.53%
50 Broad Street
New York, New York 10004
Light Associates 200,594(4) 6.02%
1031 Rosewood Way
Alameda, California 94501
Susquehanna Capital Group 177,843(5) 5.12%
42 Read's Way
New Castle, Delaware 19720
James R. Murphy 2,587(6) *
Chairman of the Board,
President, Chief Executive
Officer and Director
Robert M. Stote, M.D. 35,300(7) 1.05%
Senior Vice President, Chief
Science Officer and Director
Michael D. Price 10,403(8) *
Vice President, Chief
Financial Officer, Treasurer,
Secretary and Director
Randolph W. Arnegger 1,013(9) *
Director
Charles L. Bolling 4,800(10) *
Director
Doris E. Wardell 1,112(11) *
Director
Ranald Stewart, Jr. 59,175(12) 1.75%
Former Chairman of the Board, Former
Chief Executive Officer, and Former Director
-43-
<PAGE>
Donald E. Boultbee 66 *
Former President, Former Chief
Executive Officer and Former Director
All current executive officers and
directors as a group (6 persons) 51,615(13) 1.53%
</TABLE>
___________________________________________
* Less than one percent.
(1) A person is deemed to be the beneficial owner of securities that can
be acquired by such person within 60 days from the date of this
Prospectus upon the exercise of options, warrants and convertible
securities. Each beneficial owner's percentage ownership is determined
by assuming that options, warrants and convertible securities that are
held by such person (but not those held by any other person) and which
are exercisable within 60 days of this Prospectus have been exercised.
Except as otherwise indicated, all shares are beneficially owned, and
sole investment and voting power is held, by the persons named.
(2) Includes 150,904 shares of Common Stock which Shulmit Pritziker has
the right to acquire pursuant to presently exercisable stock purchase
warrants.
(3) Includes 79,100 shares which Ilya Margulis has the right to acquire
pursuant to presently exercisable stock purchase warrants.
(4) As reported in the Light Associates Schedule 13-D (Amendment No. 4)
dated January 20, 1995.
(5) Includes 143,343 shares which Susquehanna Capital Group has the right
to acquire pursuant to presently exercisable stock purchase warrants
and 34,500 shares of Common Stock which the Company believes continue
to be beneficially owned by Susquehanna Capital Group.
(6) Includes 2,000 shares of Common Stock which Mr. Murphy has the right
to acquire pursuant to presently exercisable stock options.
(7) Includes 35,000 shares of Common Stock which Dr. Stote has the right
to acquire pursuant to presently exercisable stock options.
(8) Includes 101 shares of Common Stock owned by Mr. Price's sons as to
which Mr. Price disclaims beneficial ownership. Also includes 10,000
shares of Common Stock which Mr. Price has the right to acquire
pursuant to presently exercisable stock options.
(9) Includes 600 shares of Common Stock which Mr. Arnegger has the right
to acquire pursuant to presently exercisable stock options.
(10) Includes 100 shares of Common Stock owned by Mr. Bolling's wife as to
which Mr. Bolling disclaims beneficial ownership. Includes 4,000
shares of Common Stock which Mr. Bolling has the right to acquire
pursuant to presently exercisable stock options.
(11) Includes 1,000 shares of Common Stock which Mrs. Wardell has the right
to acquire pursuant to presently exercisable stock options.
(12) Includes 4,775 shares of Common Stock owned by Mr. Stewart's wife, as
to which Mr. Stewart disclaims beneficial ownership. Also includes
42,200 shares of Common Stock which Mr. Stewart has the right to
acquire pursuant to presently exercisable stock options.
-44-
<PAGE>
(13) Includes 50,600 shares of Common Stock which certain of such Executive
Officers and Directors have the right to acquire pursuant to presently
exercisable stock options.
-45-
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock,
par value $.02 per share.* The holders of Common Stock are entitled to cast one
vote for each share held at all stockholder meetings for all purposes, including
the election of directors, and to share equally on a per share basis in such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Upon liquidation or dissolution, each outstanding share of
Common Stock will be entitled to share equally in the assets of the Company
legally available for distribution to stockholders, after the payment of all
debts and other liabilities and any payments due to holders of shares of
Preferred Stock.
No holder of Common Stock has a preemptive or preferential right to
purchase or subscribe for any unissued or additional authorized stock or any
securities of the Company convertible into shares of its Common Stock.
The Common Stock does not have cumulative voting rights which means
that the holders of more than 50% of the Common Stock voting for the election of
directors can elect 100% of the directors of the Company if they choose to do
so. The By-Laws of the Company require that a majority of the issued and
outstanding shares of the Company be represented to constitute a quorum and
transact business at a stockholders' meeting.
In accordance with the Amended and Restated Articles of Incorporation
of the Company, as amended, the Board of Directors of the Company is divided
into three classes, with the classes as nearly equal in number as possible. The
term of each class of directors is three years, with the term of one class
expiring each year in rotation. The consent of the holders of 66-2/3% of all
outstanding shares is required to fill a vacancy on the Board of Directors
created by death or resignation or to remove a director, and then only for
cause. These provisions are designed to provide continuity of directors. In
addition, a vote of 66-2/3% of all outstanding shares is required to approve a
merger, a sale of substantially all of the Company's assets and similar
transactions, or to amend any provision of the Amended and Restated Articles of
Incorporation relating to officers and directors.
The Company effected a one-for-ten reverse stock split on July 25,
1995 which decreased the number of authorized shares of Common Stock from
50,000,000 to 5,000,000 without any change in the par value.
The stockholders of the Company approved a proposal to amend the
Company's Articles of Incorporation to increase the number of authorized shares
of Common Stock from 5,000,000 to 20,000,000 at a Special Meeting of
Stockholders held on December 8, 1995. An amendment to the Company's Articles of
Incorporation effecting the increase in authorized shares was filed with the
Department of State of the State of Florida on December __, 1995. The additional
15,000,000 shares are part of the existing class of Common Stock and have the
same rights and privileges as the shares of Common Stock presently issued and
outstanding.
UNITS
The Debentures and the Redeemable Warrants offered hereby are offered
in Units. Each Unit consists of a One Thousand Dollar ($1,000) principal amount
12% Convertible Senior Subordinated Debenture Due January __, 2006 and 1,000
Class A Redeemable Warrants, each to purchase one share of Common Stock and one
Class B Redeemable Warrant. The Debentures and Class A Redeemable Warrants may
not be detached for six months after their issuance without the prior written
consent of the Underwriter, after which the Debentures and the Class A
Redeemable Warrants will be separately transferable. See "Description of
Debentures."
- --------
* Assuming filing of the amendment to the Company's Articles of
Incorporation approved at the Company's Special Meeting of
Shareholders held on December 8, 1995. See preliminary note in
"Prospectus Summary."
-46-
<PAGE>
REDEEMABLE WARRANTS
The Redeemable Warrants will be issued in registered form under,
governed by, and subject to the terms of a warrant agreement (the "Warrant
Agreement") between the Company and American Stock Transfer and Trust Company of
New York, as warrant agent (the "Warrant Agent"). The following statements are
brief summaries of what management believes are all of the material provisions
of the Warrant Agreement and are subject to the detailed provisions thereof, to
which reference is made for a complete statement of such provisions. Copies of
the Warrant Agreement may be obtained from the Company or the Warrant Agent and
have been filed with the Commission as an exhibit to the Registration Statement
of which this Prospectus forms a part. See "Available Information."
Class A Redeemable Warrants. The Company has authorized the issuance
of 7,500,000 Class A Redeemable Warrants to purchase an aggregate of 6,900,000
shares of Common Stock and 6,900,000 Class B Redeemable Warrants (including
900,000 shares of Common Stock and 900,000 Class B Redeemable Warrants
underlying the Class A Redeemable Warrants comprising part of the Units issuable
pursuant to the Underwriter's over-allotment option) and 600,000 shares of
Common Stock and 600,000 Class B Redeemable Warrants underlying the Class A
Redeemable Warrants comprising part of the Units issuable pursuant to the
Underwriter Warrants and has reserved an equivalent number of shares of Common
Stock for issuance upon exercise of such Warrants. Each Class A Redeemable
Warrant entitles the registered holder thereof to purchase, at any time for a
period of three years commencing on the date of this Prospectus, one share of
Common Stock at an exercise price of $3.00 and one Class B Redeemable Warrant.
The Warrant exercise price and the number of shares issuable upon exercise of
the Class A Redeemable Warrants are subject to adjustment as described below.
The Class A Redeemable Warrants are subject to redemption by the
Company upon 30 days prior written notice at $.05 per Redeemable Warrant if the
closing price of the underlying Common Stock on the American Stock Exchange for
each of the 20 consecutive trading days immediately preceding the record date
for redemption equals or exceeds 150% of the then exercise price. Warrant
holders will have the right to exercise their Warrants until the close of
business on the date fixed for redemption. If any of the Redeemable Warrants are
redeemed, then all of such Warrants remaining unexercised at the end of the
redemption period must be redeemed.
Class B Redeemable Warrants. The Company has authorized the issuance
of 7,500,000 Class B Warrants to purchase an aggregate of 3,750,000 shares of
Common Stock (including 450,000 shares of Common Stock underlying the Class B
Redeemable Warrants comprising part of the Units issuable pursuant to the
Underwriter's over-allotment option) and 300,000 shares of Common Stock
underlying the Class B Redeemable Warrants comprising part of the Units issuable
pursuant to the Underwriter Warrants and has reserved an equivalent number of
shares of Common Stock for issuance upon exercise of such Warrants. Two Class B
Redeemable Warrants entitle the registered holder thereof to purchase, at any
time for a period of five years commencing on the date of this Prospectus, one
share of Common Stock at an exercise price of $5.00 per share. The Warrant
exercise price and the number of shares issuable upon exercise of the Class B
Redeemable Warrants are subject to adjustments as described below. Holders will
only be permitted to exercise or trade Class B Warrants in multiples of two.
The Class B Redeemable Warrants are subject to redemption by the
Company upon 30 days prior written notice at $.05 per Redeemable Warrant if the
closing price of the underlying Common Stock on the American Stock Exchange for
each of the 20 consecutive trading days immediately preceding the record date
for redemption equals or exceeds 130% of the then exercise price. Warrant
holders will have the right to exercise their Warrants until the close of
business on the date fixed for redemption. If any of the Redeemable Warrants are
redeemed, then all of such Warrants remaining unexercised at the end of the
redemption period must be redeemed.
Class A and Class B Redeemable Warrants. The Redeemable Warrants
contain provisions that protect the holders thereof against dilution by
adjustment of the exercise price and the number of shares issuable upon exercise
in certain events including, but not limited to, stock dividends, stock splits,
reclassifications, mergers, or a sale of substantially all of the Company's
assets. The Company does not intend to issue fractional shares of Common Stock.
Therefore, holders must exercise two Class B Redeemable Warrants simultaneously.
A Warrant holder will not possess any rights as a stockholder
-47-
<PAGE>
of the Company. The shares of Common Stock, when issued upon the exercise of the
Redeemable Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.
The Redeemable Warrants will be exchangeable and transferable on the
books of the Company at the principal office of the Warrant Agent. Each Class A
Redeemable Warrant or two Class B Redeemable Warrants may be exercised upon
surrender of a Warrant certificate on or prior to the close of business on
January __, 1999 or January __, 2001, respectively (or earlier redemption date
thereof), after which the Redeemable Warrants become wholly void and of no
value, at the offices of the Warrant Agent with the form of "Election to
Purchase" on the reverse side of the Warrant certificate completed and executed
as indicated, accompanied by payment of the full exercise price (by cash, or by
bank check, certified check or money order payable to the order of the Warrant
Agent) for the number of Redeemable Warrants being exercised.
Upon receipt of duly exercised Redeemable Warrants and payment of the
exercise price, the Company shall issue and cause to be delivered to, or upon
the written order of, the exercising Warrant holder, certificates representing
the number of shares of Common Stock so purchased. If less than all of the
Redeemable Warrants evidenced by a Warrant certificate are exercised, a new
Warrant certificate representing the remaining number of Redeemable Warrants
will be issued to the Warrant holder by the Warrant Agent. No amendment
adversely affecting the rights of the holders of the Redeemable Warrants may be
made without the approval of the holders of a majority of the then outstanding
Redeemable Warrants.
PREFERRED STOCK
The Company is authorized to issue an aggregate of 2,000,000 shares
of Preferred Stock, $1.00 par value. The Preferred Stock may be issued in series
from time to time with such designations, rights, preferences and limitations,
including but not limited to dividend rates and conversion features, as the
Board of Directors may determine. Accordingly, Preferred Stock may be issued
having dividend and liquidation preferences over the Common Stock without the
consent of the Common Stockholders. In addition, the ability of the Board to
issue Preferred Stock could also be used by the Company as a means of resisting
a change of control of the Company and, therefore, could be considered an
"anti-takeover" device.
During the year ended June 30, 1992, the Company issued 290,000
shares of $1 par value Series A Convertible Exchangeable Preferred Stock (the
"Series A Preferred Stock") and 340,000 shares of $1 par value Series B
Convertible Exchangeable Preferred Stock (the "Series B Preferred Stock") at $25
per share. The issuance of these shares provided aggregate proceeds to the
Company of $15,750,000. All shares of the Series B Preferred Stock have been
converted. Since the Series A Preferred Stock meets the definition of
Mandatorily Redeemable Preferred Stock, it has been excluded from the Common
Stockholders' Equity section of the Consolidated Balance Sheets. As of September
30, 1995 and December 31, 1994, 220,000 shares of the Series A Preferred Stock
had been converted into 48,100 shares of Common Stock.
The shares of Series A Preferred Stock are convertible at the option
of the holders into Common Stock at any time prior to the close of business on
the date fixed for redemption or exchange, at an initial conversion price of
$115.00 per share (at an initial conversion rate of approximately .21739 shares
of Common Stock). The conversion rates were adjusted by the Company, in lieu of
paying cumulative dividends of 9% per annum due in 1992 and 1993 to .25808. The
Company has not paid the holders the dividends due in 1994 or 1995. The dividend
payment date for Series A Preferred Stock is October 15.
See Note 11 of Notes to Consolidated Financial Statements.
The Series A Preferred Stock has a liquidation preference equal to
$25.00 per share, plus accrued and unpaid dividends up to the liquidation date.
The Series A Preferred Stock are redeemable for cash at the option of the
Company. The Preferred Stock is also redeemable for cash at the option of the
holder upon certain major stock acquisitions or business combinations at $25.00
per share, plus accrued and unpaid dividends through the redemption dates. The
holders of Preferred Stock have no voting rights except as required by
applicable law and except that if the equivalent of two full annual cash
dividends shall be accrued and unpaid, the holders of the Series A Preferred
Stock have the right, as a class, to elect two additional members of the
Company's Board of Directors. As of the date hereof, the holders of the Series A
Preferred Stock are owed two years arrears of dividends, aggregating
approximately $270,000, but have not exercised their right to appoint such
directors.
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<PAGE>
The Series A Preferred Stock is exchangeable in whole, but not in
part, at the option of the Company on any dividend payment date beginning
October 15, 1993, for 9% Convertible Subordinated Debentures of the Company due
2016. Holders of Series A Preferred Stock will be entitled to $25 principal
amount of Debentures for each share of Series A Preferred Stock. The Series A
Preferred Stock is recorded at redemption value, which is $25.00 per share plus
cumulative dividends of 9% per annum. The following table summarizes activity of
the Series A Preferred Stock:
<TABLE>
<CAPTION>
Series A
-------------------------
Shares Amounts
-------- ---------
(in thousands)
<S> <C> <C>
Balance at June 30, 1992 74 $1,882
Converted to Common Stock - -
Accretion of discount and
accrual of 9% dividends - 116
--------- --------
Balance at December 31, 1992 74 1,998
Converted to Common Stock - -
Accretion of discount and
accrual of 9% dividends - 220
--------- --------
Balance at December 31, 1993 74 2,218
Converted to Common Stock (4) (128)
Accrual of 9% dividends - 166
--------- --------
Balance at December 31, 1994 70 2,256
Accrual of 9% dividends - 118
--------- --------
Balance at September 30, 1995 70 $2,374
========= ========
</TABLE>
CERTAIN FLORIDA LEGISLATION
The State of Florida has enacted legislation that may deter or
frustrate takeovers of Florida corporations. The Florida Control Share Act
generally provides that shares acquired in excess of certain specified
thresholds will not possess any voting rights unless such voting rights are
approved by a majority vote of a corporation's disinterested shareholders. The
Florida Affiliated Transactions Act generally requires supermajority approval by
disinterested shareholders of certain specified transactions between a public
corporation and holders of more than 10% of the outstanding voting shares of the
corporation (or their affiliates). Florida law also authorizes the Company to
indemnify the Company's directors, officers, employees and agents.
LISTING ON THE AMERICAN STOCK EXCHANGE
The Company currently does not satisfy some of the American Stock
Exchange's financial guidelines for continued listing of its Common Stock. While
there can be no assurance that listing on the American Stock Exchange will be
continued, management of the Company believes that its business prospects are
improving and that it will be able to maintain continued listing. If the Common
Stock were delisted, an investor could find it more difficult to dispose of or
to obtain accurate quotations as to the price of the Common Stock.
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TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The Transfer Agent and Registrar for the Common Stock is Chemical
Mellon Shareholder Services of New York, 450 West 33rd Street, New York, New
York 10001. The Warrant Agent for the Redeemable Warrants and the Transfer Agent
and Registrar for the Units, Redeemable Warrants and Debentures is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
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DESCRIPTION OF DEBENTURES
GENERAL
The Debentures will be issued under an indenture (the "Indenture") to
be dated as of January __ 1996, between the Company and American Stock Transfer
& Trust Company (the "Trustee"). A copy of the Indenture is filed as an exhibit
to the Registration Statement of which this Prospectus is a part. See "Available
Information." Neither the Indenture, the Trustee nor the Debentures will be
subject to the provisions of the Trust Indenture Act of 1939. Accordingly,
Debenture holders will not have the protections of that Act available to them.
The following summaries of what management believes are all of the material
provisions of the Indenture do not purport to be complete and are subject to and
qualified in their entirety by reference to all of the provisions of the
Indenture, including the definitions therein of certain terms. Whenever
particular provisions or defined terms of the Indenture are referred to, such
provisions or defined terms are incorporated herein by reference. Parenthetical
references set forth in this section are to sections in the Indenture or to
paragraphs in the form of Debenture which is appended to the Indenture as
Exhibit A.
The Debentures will (i) be limited to $7,500,000 aggregate principal
amount (including the $900,000 over-allotment option granted to the Underwriter
and $600,000 of Units issuable upon exercise of the Underwriter Warrant)
(Debenture paragraph 4); (ii) be unsecured obligations of the Company (Debenture
paragraph 4); (iii) mature on January __, 2006 (Face of Debenture); and (iv)
bear interest from the date of delivery at the rate per annum set forth on the
cover page of this Prospectus, payable quarterly on January 1, April 1, July 1
and October 1 each year, commencing April 1, 1996, to the holders of record,
with certain exceptions, at the close of business on the 15th day of the month
preceding the payment date (Debenture paragraphs 1 and 2). Principal (and
premium, if any) and interest are to be payable and the Debentures will be
exchangeable and convertible and transfers thereof will be registrable at the
offices or agencies of the Company maintained for such purposes in the Borough
of Manhattan, City and State of New York, initially to the Trustee/American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005,
provided that payment of interest may be made at the option of the Company by
check mailed to the address of the person entitled thereto as it appears in the
Debenture register (Debenture paragraphs 2 and 3).
The Debentures will be issued only in fully registered form in
denominations of $1,000 or an integral multiple thereof. The Debentures are
exchangeable and transfers thereof will be registrable without charge therefor,
but the Company may require payment of a sum sufficient to cover tax or other
governmental charge payable in connection therewith (Debenture paragraph 9).
CONVERSION
The holders of the Debentures will be entitled at any time commencing
at the earlier of (i) twelve months after the date hereof or (ii) upon the
Company sending a notice of redemption, or (iii) such earlier date as may be
designated by the Company and the Underwriter, and from time to time up to the
close of business on January __, 2006, subject to prior redemption, to convert
the Debentures or portions thereof (which are $1,000 or integral multiples
thereof) into shares of the Company's Common Stock at an initial conversion
price, which is subject to adjustment in certain circumstances as set forth
below, of the lesser of $3.00 per share or 80% of the average closing price on
the American Stock Exchange for the 20 consecutive trading days immediately
preceding the first anniversary of the issuance of the Debentures or the giving
of the notice of redemption, as applicable. (Debenture paragraph 7). No
adjustment will be made on conversion of any Debenture for interest accrued
thereon or for dividends on any Common Stock issued other than dividends payable
in Common Stock or Convertible Securities (as defined in the Indenture) (Article
X: Section 10.02). The Company is not required to issue fractional interests in
the Common Stock upon conversion of the Debentures and, in lieu thereof, will
round any fractional share to the nearest share (Article X: Section 10.03). In
the case of Debentures called for redemption, conversion rights will expire at
the close of business on the business day prior to the redemption date (Article
X: Section 10.02).
The conversion price is subject to downward adjustment in the event
that the Company issues shares of Common Stock (including shares issuable
pursuant to a stock dividend) and the per share consideration received by the
Company upon issuance of the Common Stock is less than the current conversion
price (Article X: Section 10.06). In case of a stock split
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or reverse stock split, a stock dividend, a reclassification, the current
conversion price shall be proportionately decreased or increased (Article X:
Section 10.05). No adjustment in the current conversion price will be required
unless such adjustment would require a change of at least $.05; provided,
however, that any adjustment that would otherwise be required to be paid shall
be carried forward and taken into account in any subsequent adjustment (Article
X: Section 10.10).
The Company may reduce the conversion price by any amount for any
period of time if the period is at least 20 days. Upon such reduction, the
Company shall mail a notice thereof to Debenture holders (Article X: Section
10.15).
In the event of a merger or consolidation of the Company with another
corporation, a capital reorganization or reclassification of the Company's
capital stock, or sale of all or substantially all of the Company's assets that
is effected in such a way that holders of the Common Stock are entitled to
receive stock, securities or assets (including, without limitation, cash) with
respect to or in exchange for Common Stock, then the holders of the outstanding
Debentures shall from such point onward have the right thereafter to convert
each such Debenture into the kind and amount of stock, securities or assets
received by a holder of the number of shares of Common Stock into which such
Debentures might have been converted immediately prior to such transaction
(Article X: Section 10.17).
It should be noted that, in the event of such a transaction, no
subsequent adjustment of the current conversion price is required. Thus, for
example, if the Company were to engage in a merger in which Common Stockholders
received cash in an amount less than the then current conversion price, exercise
of the conversion right would result in the Debenture holder receiving less than
the principal amount of such Debenture.
The shares of Common Stock, when issued upon the conversion of the
Debentures in accordance with the terms thereof, will be fully paid and
non-assessable.
SUBORDINATION OF DEBENTURES
The payment of the principal of (and premiums, if any) and interest
on the Debentures will be subordinated in right of payment to the extent set
forth in the Indenture to the prior payment in full of the principal of (and
premiums, if any) and interest on all Senior Debt of the Company (Article XI:
Section 11.01). Senior Debt is defined to include indebtedness for money
borrowed outstanding on the day of execution of the Indenture or thereafter,
created for money borrowed from banks, or other traditional long-term
institutional lenders such as insurance companies and pension funds, unless in
the instrument creating or evidencing such indebtedness it is provided that such
Debt is not senior in right of payment to the Debentures (Article XI: Section
11.02(c)). At September 30, 1995, Senior Debt aggregated $1,220,000. The Company
expects from time to time to make additional borrowings which will constitute
Senior Debt.
The Company is not limited in the amount of additional indebtedness,
including Senior Debt, which it can create, incur, assume or guarantee.
Accordingly, the Debenture holders are not protected against highly leveraged or
other transactions involving the Company that may adversely affect them.
However, any additional indebtedness, other than Senior Debt, may not be senior
to the priority of the Debentures (Article XI: Section 11.13).
Upon any payment or distribution of the Company's assets to creditors
on any dissolution, winding up, total or partial liquidation, reorganization or
readjustment of the Company, whether voluntary or involuntary, or bankruptcy,
insolvency, receivership or other proceedings all principal of (and premiums, if
any) and interest due upon all Senior Debt must be paid in full before the
Debenture holders or the Trustee are entitled to receive or retain any assets so
paid or distributed in respect of the Debentures (Article XI: Section 11.03).
COVENANTS
The Company may not declare or pay any cash dividends or make any
distributions to holders of the capital stock, other than dividends or
distributions payable in such capital stock. The Company may not purchase,
redeem or otherwise
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acquire or retire for value any shares of its capital stock or warrants or
rights to acquire such stock if, at the time of such declaration, payment,
distribution, purchase, redemption, other acquisition or retirement, an Event of
Default shall have occurred and be continuing (Article IV: Section 4.04).
The Company may not (i) sell or lease any property or render any
service to, make any investment in, purchase any property or borrow any money
from, or make any payment for any service rendered by an Affiliate unless the
Board of Directors determines in good faith that the terms of such transaction
are at least as favorable to the Company as those which could be obtained in a
similar transaction with an independent third party; (ii) make any payment to
any of its officers, directors or employees, or agreement to do so, unless the
Board of Directors determines in good faith that the amount to be paid, or to be
agreed to be paid, for such service bears a reasonable relationship to the value
of such services to the Company; or (iii) make any sale to an Affiliate of any
capital stock or other securities or obligations of an Affiliate at a cash sale
price less than the original cost thereof to the Company or such Affiliate, as
the same may have been reduced from time to time by cash dividends or interest
payments thereon or payments of principal thereof received by the Company or
such Affiliate plus interest on such investment, as the same may have been
reduced from time to time at a rate not less than the rate borne by the
Debentures, but in no event less than current fair market value. (Article IV:
Section 4.05).
The Indenture provides that the Company will not, and will not permit
any of its subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any such subsidiary to (i) pay dividends or make any other
distributions on its capital stock or any other interest or participation in, or
measured by, its profits owned by, or pay any indebtedness owed to, the Company
or a subsidiary of the Company, or (ii) make loans or advances to the Company or
a subsidiary of the Company, or (iii) transfer any of its properties or assets
to the Company (Article IV: Section 4.04).
The Company is required to file with the Trustee copies of the
reports it files with the Commission (Article IV: Section 4.02). It is also
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, an Officers' Certificate stating whether or not the signers know of any
Default that occurred during the fiscal year. If they do, the Certificate shall
describe the Default and its status (Article IV: Section 4.03).
REDEMPTION
Commencing six months after the date hereof, the Company may, on at
least 30 days prior written notice redeem the Debentures, in whole or in part,
if the closing price of the Common Stock on the American Stock Exchange (or
other principal trading market) for each of the 20 consecutive trading days
immediately preceding the record date for redemption equals or exceeds $7.00 per
share, as initially constituted. The redemption price will be 105% of the
principal amount of the Debentures plus accrued interest through the date of
redemption (Article III).
MODIFICATION OF THE INDENTURE
With the consent of the holders of not less than 662/3% in principal
amount of outstanding Debentures, the Company and the Trustee may enter into an
indenture or indentures supplemental to the Indenture for the purpose of adding
any provisions to or changing in any manner or eliminating any provisions of the
Indenture or modifying in any manner the rights of the Debenture holders under
the Indenture, provided that no such supplemental indenture shall, without the
consent of the Debenture holders affected (a) reduce the rate of, or change the
time of payment of, interest on any Debenture; (b) reduce the principal (or
premium on), or change the fixed maturity of any Debenture; (c) impair the right
to institute suit for the enforcement of any such payment when due; (d) reduce
the above stated percentage of outstanding Debentures; (e) alter the provisions
of the Indenture so as to adversely affect the terms of conversion of the
Debentures into Common Stock; or (f) make any change in the subordination of the
Debentures in a manner that is materially adverse to the Holders (Article IX:
Section 9.02).
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EVENTS OF DEFAULT, NOTICE AND WAIVER
Events of Default are defined in the Indenture as being (a) a default
for 10 days in payment of any interest installment when due, and default in
payment of principal (or premium, if any) when due; (b) a default for 60 days
after written notice to the Company by the Trustee or by the holders of 25% in
principal amount of the outstanding Debentures in the performance of any other
covenant of the Company in the Indenture; (c) a default by the Company or any
Subsidiary on indebtedness in an aggregate principal amount of at least
$250,000; and (d) certain events of bankruptcy, insolvency and reorganization of
the Company (Article VI: Section 6.01). If an Event of Default shall occur and
be continuing, either the Trustee or the holders of 25% in principal amount of
the outstanding Debentures may declare the principal of all of the Debentures to
be due and payable (Article VI: Section 6.02).
The holders of a majority in principal amount of the outstanding
Debentures may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any power of trust
conferred on the Trustee (Article VI: Section 6.05). The right of a Debenture
holder to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent, including the provision of notice and
indemnification for the Trustee (Article VI; Section 6.06). The holders of a
majority in principal amount of the outstanding Debentures may, on behalf of the
Debenture holders, waive any past default and its consequences under the
Indenture, except a default in the payment of the principal of (or premium, if
any) or interest on any Debenture or a default in respect of the conversion
right of Debenture holders (Article VI: Section 6.04).
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company may terminate its obligations under the Indenture at any
time by delivering all outstanding Debentures to the Trustee for cancellation.
After all the Debentures have been called for redemption or mature in one year,
the Company may terminate all of its obligations under the Indenture, other than
its obligations to pay the principal of and interest on the Debentures and
certain other obligations, at any time, by depositing with the Trustee money or
non-callable U.S. Government obligations sufficient to pay all remaining
indebtedness on the Debentures (Article VIII).
TRANSFER AND EXCHANGE
A holder may transfer or exchange Debentures in accordance with the
Indenture. The Registrar may require a holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar is not required to
transfer or exchange any Debenture selected for redemption. Also, the Registrar
is not required to transfer or exchange any Debenture for a period of 15 days
before a selection of Debentures to be redeemed. The registered holder of a
Debenture may be treated as the owner of it for all purposes.
COMMUNICATIONS AMONG HOLDERS
Three or more Debenture holders who have owned their Debentures for
at least six months may request the Trustee to send copies of a proxy or other
communications to the other holders, upon payment by the requesting holders of
the reasonable expenses of such mailing and the Trustee determining that the
mailing would not be contrary to the best interests of all the holders nor in
violation of applicable law.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest (as
defined) it must eliminate such conflict or resign.
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<PAGE>
The holders of a majority in principal amount of the then outstanding
Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee.
The Indenture provides that in case an Event of Default shall occur (which shall
not be cured), the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
holders of the Debentures, unless they shall have offered to the Trustee
security and indemnity satisfactory to it.
CONSENT TO SERVICE
The Indenture provides that the Company will irrevocably designate
the Trustee as its authorized agent for service of process in any legal action
or proceeding arising out of or relating to the Indenture or the Debentures
brought in any Federal court or court of the State of New York and will
irrevocably submit to such jurisdiction.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the
Indenture without charge by writing to the Secretary of the Company, Belmac
Corporation, 4830 West Kennedy Boulevard, One Urban Centre, Suite 550, Tampa,
Florida 33609.
GOVERNING LAW
The Indenture and Debentures will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
State's conflicts of laws principles.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
consequences to purchasers of the Units. This discussion is based on provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated or proposed thereunder, positions of the
Internal Revenue Service ("IRS") and existing judicial decisions as of the date
hereof, all of which are subject to change at any time. Moreover, the effect of
any such change may be retroactive as well as prospective. Further, there can be
no assurance that the IRS will not take a contrary view to that set forth herein
which may be upheld by a court. No ruling from the IRS or opinion of counsel has
been or will be sought as to any of the matters discussed below.
This summary is for general information purposes only and applies
only to the initial purchasers who hold the Units (and each of its components
and the underlying Common Stock) as capital assets within the meaning of Section
1221 of the Code. It does not purport to address all tax consequences that may
be relevant to particular investors (including, for example, foreign persons,
financial institutions, broker-dealers, insurance companies, tax-exempt
organizations and persons in special situations). In addition, the discussion
does not address any aspect of state, local or foreign taxation or other federal
taxes. This summary of certain U.S. federal tax consequences is based upon the
advice of Parker Chapin Flattau & Klimpl, LLP, counsel to the Company.
PROSPECTIVE PURCHASERS OF THE UNITS ARE URGED TO CONSULT THEIR TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING,
OWNING OR DISPOSING OF THE UNITS, THE DEBENTURES, THE WARRANTS AND THE
UNDERLYING COMMON STOCK, AS WELL AS THE APPLICATION OF STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
THE UNITS
Each Unit is comprised of $1,000 Principal Amount of 12% Convertible
Senior Debenture due January __, 2006 and 1,000 Class A Redeemable Warrants,
each to purchase one share of Common Stock and one Class B Redeemable Warrant.
Two Class B Warrants may be exercised to purchase one additional share of Common
Stock.
The issue price of a Unit is equal to the initial offering price to
the public (excluding sales to bond houses, brokers and others acting in the
capacity as underwriters, placement agents or wholesalers) at which a
substantial amount of Units are sold. Such amount must then be allocated between
the Debenture and the Warrants in accordance with their relative fair market
values on the issue date. The Company intends to make such allocation based on
the respective trading prices for the Debentures and the Class A Warrants. No
assurance can be given, however, that the IRS will not challenge the Company's
determination.
The Company's allocation of the issue price of the Units is binding
on a holder, unless he discloses the use of a different allocation on the
applicable form attached to his federal income tax return for the year in which
the acquisition occurs. A holder who uses a different allocation than the
Company should consult with his tax advisors as to the consequences of such
allocation, including the effect of having acquired the Debenture for more or
less than its issue price.
THE DEBENTURES
The stated interest on the Debentures will be taxable as ordinary
income when received or accrued by the holder in accordance with his method of
accounting. In addition, a portion of the original issue discount ("OID") with
respect to the Debenture must be included in gross income each year based on an
economic accrual of interest, even if the holder has not received a cash payment
in respect of such OID. The amount of OID required to be included in gross
income increases the holder's basis in the Debentures. Proposed legislation,
however, would defer the Company's ability to deduct the OID until it is paid.
The OID with respect to a Debenture is equal to the excess, if any,
of its stated redemption price at maturity over the issue price of the Debenture
(since it will exceed the de minimis exception allowed where the OID would
otherwise be
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less than 1/4% multiplied by the number of full years to maturity of the
Debentures). Such amount could be increased if the IRS successfully challenges
the allocation of the issue price.
Upon the sale, exchange or retirement of a Debenture, the holder will
recognize gain or loss equal to the difference between the amount realized on
such sale, exchange or retirement and his tax basis in the Debenture. Such gain
or loss will be long-term capital gain or loss if the Debenture was held for
more than one year. Net capital gains of individuals are generally taxed at
lower rates than ordinary income. Proposed legislation would make such rates
even more favorable for both individuals and corporations. On the other hand,
there are limitations on the deductibility of capital losses.
Conversion of a Debenture (other than with respect to any accrued but
unpaid interest) into Common Stock pursuant to its terms is not taxable. The
holder's basis and holding period for the Common Stock will include his basis
and holding period in the Debenture.
THE WARRANTS
Upon a sale or exchange of a Warrant (including the receipt of cash
in lieu of a fractional share of Common Stock upon exercise of a Warrant), a
holder will recognize capital gain or loss equal to the difference between the
amount realized upon the sale or exchange and the holder's basis in the Warrant
(as determined above). Such gain or loss will be long-term if, at the time of
the sale or exchange, the Warrant was held for more than one year. Adjustments
to the exercise price or conversion ratio, or the failure to make adjustments,
may result in the receipt of a constructive dividend by the holder.
Upon the exercise of a Warrant, a holder's tax basis in the interest
acquired upon such exercise will be equal to his tax basis in the Warrant plus
the exercise price of the Warrant. In the case of the exercise of a Class A
Warrant, such basis must be allocated between the Common Stock and the Class B
Warrant received in proportion to their relative fair market values. His holding
period with respect to such interest will commence on the date of exercise. If a
Warrant expires without being exercised, the holder will have a capital loss
equal to his tax basis in the Warrant as if the Warrant had been sold on such
date for no consideration.
COMMON STOCK
Distributions paid with respect to shares of Common Stock will be
includible in the gross income of the holder as ordinary income to the extent
such distributions are paid out of the Company's current or accumulated earnings
and profits (as computed for detail income tax purposes). To the extent that
distributions exceed such earnings and profits, they will be treated as a
non-taxable return of capital in an amount up to the holder's tax basis in such
Common Stock (which reduces such basis), and distributions in excess of such tax
basis is taxed as a capital gain from the sale of the Common Stock. Dividends
received by a corporate holder are generally eligible for the dividends received
deduction, subject to the limitations under Section 1059 of the Code relating to
extraordinary dividends. Proposed legislation would reduce the amount of the
available dividends received deduction and place additional limitations on it.
Upon the sale or exchange of the Common Stock, a holder will
recognize capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's tax basis in the Common
Stock. Such gain or loss will be long-term if the Common Stock was held for more
than one year. An even more favorable tax rate may be available if the Common
Stock sold qualifies as "qualified small business stock" under Section 1202 of
the Code.
BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% of
the interest paid on a Debenture, the dividends on the Common Stock and the
proceeds from the sale, exchange or retirement of a Unit, Debenture, Warrant or
Common Stock, unless (a) the holder is a corporation or other exempt recipient
and, when required, demonstrates such fact or (b) provides, when required, his
taxpayer identification number to the payor, certifies that he is not subject to
backup withholding and otherwise complies with the backup withholding rules.
Backup withholding is not an additional tax; any
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amount so withheld is creditable against the holder's federal income tax
liability. Failure to furnish the holder's taxpayer identification number may
also subject the holder to a penalty.
REQUIREMENT FOR CURRENT REGISTRATION
The Company is required to have a current registration statement on
file with the Commission and to effect appropriate qualifications, except where
exemptions therefrom are available, under the laws and regulations of the states
in which the holders of the Redeemable Warrants reside in order to comply with
applicable laws in connection with the exercise of the Redeemable Warrants and
the resale of the Common Stock issued upon such exercise. The Company,
therefore, will be required to file post effective amendments to its
Registration Statement when subsequent events require such amendments in order
to continue the registration of the Common Stock underlying the Redeemable
Warrants and to take appropriate action under state securities laws. There can
be no assurance that the Company will be able to keep its Registration Statement
current or to effect appropriate action under applicable state securities laws,
the failure of which may cause the exercise of the Redeemable Warrants and
resale or other disposition of the underlying Common Stock to be effected under
circumstances which do not comply with applicable securities laws. See "Risk
Factors -- Current Prospectus and State Securities Law Qualification Required to
Exercise the Redeemable Warrants."
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement between the Company and the Underwriter (the "Underwriting
Agreement"), Coleman and Company Securities, Inc. (the "Underwriter"), has
agreed to purchase from the Company, and the Company has agreed to sell to the
Underwriter, 6,000 Units, at the initial offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the
Underwriter to pay for and accept delivery of the Units are subject to certain
conditions precedent, and that the Underwriter will purchase all of the Units if
any of such Units are purchased.
The Underwriter has advised the Company that it proposes initially to
offer the Units directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $___ per Unit. The Underwriter may allow, and
such dealers may reallow, a concession not in excess of $___ per Unit to certain
other dealers. After the initial public offering, the public offering price,
concession and re-allowance may be changed.
The Company has granted to the Underwriter an option exercisable
during the 45-day period after the date of this Prospectus, to purchase up to an
aggregate of 900 additional Units at the initial public offering price set forth
on the cover page of the Prospectus, less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. The Underwriter may
exercise this option only to cover over-allotments, if any, made in connection
with the sale of the Units offered hereby.
The Company has agreed to pay to the Underwriter a non-accountable
expense allowance equal to 3% of the gross proceeds of this Offering, $50,000 of
which has already been paid to cover some of the underwriting costs and due
diligence expenses related to this Offering.
The Company has agreed to permit the Underwriter to have an observer
attend the meetings of the Company's Board of Directors for a period of three
years from the date hereof.
The Company and the Underwriter have agreed to indemnify each other
against, or to contribute to losses arising out of, certain civil liabilities in
connection with this Offering, including liabilities under the Securities Act.
Prior to this Offering there has been no public trading market for
the Company's Units, Debentures or Warrants. The initial public offering price
of the Units, and the terms of the Debentures and Warrants have been determined
by negotiation between the Company and the Underwriter. The factors considered
in determining the initial public offering price and such terms, in addition to
prevailing market conditions, were the history of and prospects for the industry
in which the Company competes, the market for the Company's Common Stock, an
assessment of the Company's management, the prospects of the Company, and the
demand for similar securities of comparable companies.
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement of which this Prospectus is a part.
UNDERWRITER WARRANTS
The Company has agreed to sell to the Underwriter or its designees,
for a nominal consideration, the Underwriter Warrants to purchase an aggregate
of 600 Units. The Units subject to the Underwriter Warrants will be in all
respects identical to Units offered to the public hereby except that the
Underwriter Warrants will be exercisable for a four-year period commencing one
year after their issuance at an exercise price equal to $1,200 per Unit.
Pursuant to the terms of the Underwriting Agreement, the Company is registering
the shares of Common Stock issuable upon conversion of the Debentures and upon
exercise of the Redeemable Warrants each as included in the Units issuable upon
conversion of the
-59-
<PAGE>
Underwriter Warrants in the Registration Statement of which this Prospectus is a
part. For the life of the Underwriter Warrants the holders thereof are given the
opportunity to profit from a rise in the market price of the Common Stock, which
may result in a dilution of the interests of other stockholders.
PRIVATE PLACEMENTS
In October 1995 the Underwriter served as placement agent for the
issuance and sale by the Company to certain purchasers in private placements for
an aggregate purchase price of $1,770,000. For terms of the placements, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Private Placements." The
Underwriter received placement fees of $177,000. Mr. Barry Blank, a
representative of the Underwriter, participated in placing the private
placements and purchased Common Stock and Notes aggregating $240,000 in the
placements.
Purchasers of notes in the private placements who have not converted
prior to the date hereof may use their notes to purchase the Units offered
hereby. The Underwriter will receive commissions from such purchasers both for
the private placement, as stated in the immediately preceding paragraph, and
from the purchase of the Units, in the amount stated on the cover page of this
Prospectus.
CONCURRENT OFFERING
Concurrently with this Offering, the Company is registering certain
shares of Common Stock for concurrent or future sales by certain selling
shareholders. Such shares of Common Stock were issued in connection with private
placements conducted by the Company in October 1995 and which are issuable upon
conversion of notes sold in one of such placements, to the extent such notes
have been converted prior to use of the proceeds of this Offering to repay such
notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Private Placements"
and "Underwriting -- Private Placements."
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas,
New York, New York 10036. Reid & Priest, LLP, 40 West 57th Street, New York, New
York 10019 has acted as counsel for the Underwriter in connection with this
Offering. Parker Chapin Flattau & Klimpl, LLP has represented the Underwriter in
connection with other transactions.
EXPERTS
On June 6, 1994, Price Waterhouse declined to stand for re-election
as the Company's independent public accountant. There was no adverse opinion or
disclaimer of opinion, or modification as to uncertainty, audit scope or
accounting principles contained in the reports of Price Waterhouse for the
fiscal years ended June 30, 1992 and December 31, 1993 or the six month
transition period ended December 31, 1992, other than the inclusion in Price
Waterhouse's reports relating to the periods ended December 31, 1992 and 1993 of
a statement as to an uncertainty regarding the ability of the Company to
continue as a going concern.
During the Company's fiscal periods covered by Price Waterhouse's
reports and the subsequent interim period preceding Price Waterhouse's decision
not to stand for re-election on June 6, 1994, there were no disagreements with
Price Waterhouse on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which disagreements, if not
resolved to the satisfaction of Price Waterhouse, would have caused Price
Waterhouse to make reference in connection with its report concerning the
Company's financial statements to the subject matter of the disagreements other
than as set forth below.
-60-
<PAGE>
For the fiscal year ended June 30, 1992, Price Waterhouse reported
material weaknesses indicating that during much of fiscal 1992, European
financial management personnel were not in place, uniform accounting policies
and reporting procedures were not clearly established and certain corporate
documents, such as Board of Directors meeting minutes, contractual agreements
and documents filed with the Securities and Exchange Commission, were not
contemporaneously available from management and signed copies of such documents
were not readily available. These items were discussed with the Audit Committee
of the Company's Board of Directors and, during the year ended December 31,
1993, were resolved to the satisfaction of Price Waterhouse. The Price
Waterhouse report to the Audit Committee for the year ended December 31, 1993
did not contain any material weaknesses. The Company authorized Price Waterhouse
to respond fully to the inquiries of a successor accountant concerning all
subject matters.
The Audit Committee of the Board of Directors of the Company selected
Deloitte & Touche LLP to serve as the Company's independent auditors for the
year ended December 31, 1994 and for the year ending December 31, 1995.
The consolidated financial statements as of December 31, 1994 and for
the year then ended, and as of September 30, 1995 and for the nine months then
ended, included in this Prospectus and the related financial statement schedule
as of December 31, 1994 and for the year then ended, and as of September 30,
1995 and for the nine months then ended included elsewhere in the Registration
Statement have been audited by Deloitte & Touche LLP independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement (which reports express an unqualified opinion and include an
explanatory paragraph referring to the Company's recurring losses from
operations as well as negative operating cash flows which raise substantial
doubt about its ability to continue as a going concern), and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements with respect to the year ended
June 30, 1992, the six months ended December 31, 1992 and the year ended
December 31, 1993 included in this Prospectus and the related financial
statement schedule included elsewhere in the Registration Statement have been so
included in reliance on the report (which includes an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 of Notes to Consolidated Financial Statements) of Price Waterhouse LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
-61-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page Herein
-----------
Independent Auditors' Reports F-2 to F-3
Consolidated Balance Sheets as of December 31, 1993
and 1994, and September 30, 1995 F-4
Consolidated Statements of Operations for the year ended
June 30, 1992, for the six months ended December 31, 1992,
for the years ended December 31, 1993 and 1994, and for
the nine months ended September 30, 1994 (unaudited)
and 1995 F-5
Consolidated Statements of Changes in Common Stockholders'
Equity for the year ended June 30, 1992, for the six months
ended December 31, 1992, for the years ended December 31,
1993 and 1994, and for the nine months ended September 30,
1995 F-6
Consolidated Statements of Cash Flows for the year ended
June 30, 1992, for the six months ended December 31, 1992,
for the years ended December 31, 1993 and 1994, and for
the nine months ended September 30, 1994 (unaudited) and
1995 F-7
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Belmac Corporation
Tampa, Florida
We have audited the accompanying consolidated balance sheets of Belmac
Corporation and subsidiaries (the "Company") as of December 31, 1994 and
September 30, 1995, and the related consolidated statements of operations,
changes in common stockholders' equity, and cash flows for the year ended
December 31, 1994 and for the nine months ended September 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1994
and September 30, 1995, and the results of its operations and its cash flows for
the periods then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has been experiencing recurring
losses from operations as well as negative operating cash flows. These matters
raise substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Deloitte & Touche LLP
Tampa, Florida
December 8, 1995
F-2
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and
Stockholders of Belmac Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in common stockholders'
equity, and of cash flows present fairly, in all material respects, the
financial position of Belmac Corporation and its subsidiaries at December 31,
1993, and the results of their operations and their cash flows for the year
ended June 30, 1992, the six months ended December 31, 1992, and the year ended
December 31, 1993 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Belmac
Corporation for any period subsequent to December 31, 1993.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Price Waterhouse LLP
Tampa, Florida
March 30, 1994
F-3
<PAGE>
<TABLE>
<CAPTION>
BELMAC CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands except
per share data)
December 31, September 30,
-------------------------- ---------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,552 $ 1,321 $ 580
Investments available for sale 1,118 215 1
Receivables 5,953 7,609 8,268
Inventories 1,298 1,247 1,000
Prepaid expenses and other 302 296 361
----------- ----------- ----------
Total current assets 10,223 10,688 10,210
----------- ----------- ----------
Fixed assets, net 3,704 3,618 4,012
Drug licenses and related costs, net 1,474 968 965
Other non-current assets, net 759 1,058 983
----------- ----------- ----------
$16,160 $16,332 $16,170
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,466 $ 5,374 $ 5,067
Accrued expenses 2,445 2,282 2,144
Current portion of long term debt 1,269 724 1,220
Deferred revenue - 380 -
----------- ----------- ----------
Total current liabilities 8,180 8,760 8,431
----------- ----------- ----------
Long term debt 35 - -
----------- ----------- ----------
Other non-current liabilities 2,786 336 500
----------- ----------- ----------
Commitments and Contingencies (Notes 11, 15 and 16)
Redeemable preferred stock, $1.00 par value,
authorized 2,000 shares
Series A, issued and outstanding, 74 shares at
December 31, 1993, and 70 shares at December 31,
1994 and September 30, 1995 2,218 2,256 2,374
----------- ----------- ----------
Common Stockholders' Equity:
Common stock, $.02 par value, authorized 5,000 shares,
issued and outstanding, 2,070, 2,977 and 2,978 shares 41 60 60
Stock purchase warrants (to purchase 156, 477 and
574 shares of common stock)
Paid-in capital in excess of par value 63,902 69,493 69,009
Stock subscriptions receivable (1,268) (1,550) (105)
Accumulated deficit (58,344) (61,922) (63,441)
Cumulative foreign currency translation adjustment (1,390) (1,101) (658)
----------- ----------- ----------
2,941 4,980 4,865
----------- ----------- ----------
$16,160 $16,332 $16,170
=========== =========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
BELMAC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands except
per share data)
For the For the Six For the Year For the Nine
Year Months Ended Months Ended
Ended Ended December 31, September 30,
June 30, December 31, ------------------- -------------------
1992 1992 1993 1994 1994 1995
-------- ------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Sales $13,138 $9,708 $19,849 $26,284 $19,676 $23,583
Cost of sales 8,871 5,899 15,100 21,464 15,940 19,523
-------- ------- ------- ------- ------- -------
Gross margin 4,267 3,809 4,749 4,820 3,736 4,060
-------- ------- ------- ------- ------- -------
Operating expenses:
Selling, general and administrative 8,665 9,830 9,170 7,716 6,428 5,516
Research and development 5,168 3,599 1,555 759 608 341
Depreciation and amortization 925 743 756 575 377 408
Write-off of Biolid and related costs - - 2,241 - - -
Settlement of class action litigation - - 1,000 - - -
Other non-recurring charges - 9,321 - - - -
-------- ------- ------- ------- ------- -------
Total operating expenses 14,758 23,493 14,722 9,050 7,413 6,265
-------- ------- ------- ------- ------- -------
Loss from operations (10,491) (19,684) (9,973) (4,230) (3,677) (2,205)
Other (income) expenses:
Interest expense 427 205 271 423 140 215
Interest income (448) (256) (91) (123) (44) (1)
Other (income) expense (2) (102) 83 (952) (122) (900)
-------- ------- ------- ------- ------- -------
Loss before income taxes (10,468) (19,531) (10,236) (3,578) (3,651) (1,519)
Provision for income taxes 343 - - - - -
-------- ------- ------- ------- ------- -------
Net loss ($10,811) ($19,531) ($10,236) ($3,578) ($3,651) ($1,519)
======== ======== ======== ======= ======= =======
Net loss per common share ($11.12) ($16.60) ($6.32) ($1.56) ($1.67) ($.55)
======== ======== ======== ======= ======= =======
Weighted average common
shares outstanding 997 1,203 1,655 2,395 2,257 2,978
======== ======== ======== ======= ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
BELMAC CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON STOCKHOLDERS' EQUITY
(In Thousands except per share data)
$.02 Par Value
Common Stock Additional Other
-------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit Transactions Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1991 751 $15 $19,252 ($17,766) $730 $2,231
Private placement of common stock 94 2 8,445 - - 8,447
Stock subscriptions receivable - - - - (199) (199)
Conversion of redeemable preferred stock 66 1 8,399 - - 8,400
Exercise of stock options 42 1 2,056 - - 2,057
Conversion of stock purchase warrants 203 4 8,109 - (1,392) 6,721
Issuance of shares relating to Chimos
acquisition 10 - 612 - - 612
Repurchase of common stock (5) - (495) - - (495)
Accretion/accrual of dividends - preferred
stock - - (277) - - (277)
Foreign currency translation adjustment - - - - 666 666
Net loss - - - (10,811) - (10,811)
------- ------- ------- ------- ------- -------
Balance at June 30, 1992 1,161 23 46,101 (28,577) (195) 17,352
Private placement of common stock 81 2 3,862 - - 3,864
Stock subscriptions receivable - - - - (1,700) (1,700)
Cancellation of stock subscriptions receivable - - - - 426 426
Conversion of redeemable preferred stock 1 - 201 - - 201
Exercise of stock options 1 - 60 - - 60
Issuance of common stock as compensation 17 - 960 - - 960
Other equity transactions - - 135 - - 135
Accretion/accrual of dividends - preferred stock - - (439) - - (439)
Foreign currency translation adjustment - - - - (1,423) (1,423)
Net loss - - - (19,531) - (19,531)
------- ------- ------- ------- ------- -------
Balance at December 31, 1992 1,261 25 50,880 (48,108) (2,892) (95)
Private placement of common stock 733 15 7,370 - - 7,385
Stock subscription receivable - - - - (856) (856)
Stock subscription received - - - - 1,700 1,700
Conversion of redeemable preferred stock 36 1 5,401 - - 5,402
Conversion of stock purchase warrants 9 - 97 - - 97
Conversion of minority interest -
Pharmacin Corp. 10 - - - - -
Stock issued for termination compensation 15 - 330 - - 330
Miscellaneous 6 - 44 - - 44
Accretion/accrual of dividends - preferred stock - - (220) - - (220)
Foreign currency translation adjustment - - - - (610) (610)
Net loss - - - (10,236) - (10,236)
------- ------- ------- ------- ------- -------
Balance at December 31, 1993 2,070 41 63,902 (58,344) (2,658) 2,941
Conversion of stock purchase warrants 2 - 34 - - 34
Private placement of common stock, net 826 17 4,776 - - 4,793
Stock subscriptions receivable - - - - (1,596) (1,596)
Stock subscriptions received - - - - 693 693
Conversion of redeemable preferred stock 1 - 129 - - 129
Repurchase of common stock (41) (1) (620) - 621 -
Sale of treasury stock 42 1 294 - - 295
Issuance of common stock as compensation 7 - 146 - - 146
Issuance of common stock to settle litigation 70 2 998 - - 1,000
Accrual of dividends - preferred stock - - (166) - - (166)
Foreign currency translation adjustment - - - - 289 289
Net loss - - - (3,578) - (3,578)
------- ------- ------- ------- ------- -------
Balance at December 31, 1994 2,977 60 69,493 (61,922) (2,651) 4,980
Stock subscription received - - - - 562 562
Stock subscription revaluation/cancellation - - (351) - 883 532
Common stock issued as compensation 1 - 3 - - 3
Accrual of dividends - preferred stock - - (118) - - (118)
Miscellaneous - - (18) - - (18)
Foreign currency translation adjustment - - - - 443 443
Net loss - - - (1,519) - (1,519)
------- ------- ------- ------- ------- -------
Balance at September 30, 1995 2,978 $60 $69,009 ($63,441) ($763) $4,865
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
BELMAC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the For the Six For the For the Nine
Year Months Year Months
Ended Ended Ended Ended
June 30, December 31, December 31, September 30,
---------- ---------- ------------------------ ------------------------
1992 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ($10,811) ($19,531) ($10,236) ($3,578) ($3,651) ($1,519)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 925 743 756 575 377 408
Gain on sale of Belmacina(R) - - - (884) - (380)
Other non-cash items (72) (50) (10) 108 120 117
Write-off of Biolid(R)and related costs - - 2,241 - - -
Settlement of class action litigation - - 1,000 - - -
Stock issued as compensation - - 375 146 - -
Other non-recurring charges - 9,321 - - - -
Cancellation of stock subscription receivable - - - - - 533
Research and development charges - 250 - - - -
(Increase) decrease in assets and
increase (decrease) in liabilities net
of effects of acquisitions:
Receivables (5,561) 2,886 (2,160) 124 1,361 (1,007)
Inventories (2,815) 930 1,066 154 (698) 199
Prepaid expenses and other current assets (444) 279 (10) 20 (114) (44)
Other assets (811) (165) 286 349 210 66
Accounts payable and accrued expenses 5,086 743 (2,936) 228 386 (795)
Other liabilities - - - (657) - -
---------- ---------- ---------- ---------- ---------- ----------
Net cash (used in) operating activities (14,503) (4,594) (9,628) (3,415) (2,009) (2,422)
---------- ---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of Belmacina(R) - - - 651 778 922
Proceeds from sale of investments 1,924 4,533 555 1,040 720 214
Purchase of investments (5,479) (1,510) (1,118) (116) (116) -
Net change in fixed assets (795) (296) (133) - - (507)
Investment in partnership - - - (648) (605) (13)
(Repayment to) received from Evans - - 532 (793) (793) -
Proceeds from sale of Amodex(R)rights - - 3,260 - - -
Pharmaceutical license acquisitions (5,500) (459) - - - -
Chimos acquisition, net of cash acquired (312) - - - - -
Other investments - (30) (20) - - -
Laboratorios Belmac acquisition, net
of cash acquired (2,759) - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities (12,921) (2,238) 3,076 134 (16) 616
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
(Continued)
F-7
<PAGE>
<TABLE>
<CAPTION>
BELMAC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the For the Six For the For the Nine
Year Months Year Months
Ended Ended Ended Ended
June 30, December 31, December 31, September 30,
--------- ----------- ----------------- ---------------------
1992 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in notes payable $242 ($858) $391 $ - ($395) $444
Proceeds from private placement:
Preferred stock 15,750 - - - - -
Common stock 10,120 2,386 8,711 3,761 2,903
Offering costs of private placement (2,136) (217) (2,096) (377) (287) (56)
Collection of stock subscription receivable - - 1,700 693 457 562
Proceeds from exercise of stock options 2,057 60 - - - -
Proceeds from exercise of stock warrants 6,522 - 97 34 34 -
Other equity transactions - 135 - - - -
Net change in debt (1,228) (1,632) (221) (600) - -
Payments on capital leases (36) (45) (81) (72) (55) (25)
------- ------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities 31,291 (171) 8,501 3,439 2,657 925
------- ------- ------- ------- ------- -------
Effect of exchange rate changes on cash (425) (536) (997) (389) (9) 140
------- ------- ------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents 3,442 (3,063) 952 (231) 623 (741)
Cash and cash equivalents at beginning of
period 221 3,663 600 1,552 1,552 1,321
------- ------- ------- ------- ------- -------
Cash and cash equivalents at end of period $3,663 $600 $1,552 $1,321 $2,175 $580
======= ======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
The Registrant paid cash during the period for (in thousands):
Interest $267 $186 $309 $263 $172 $220
======= ======= ======= ======= ======= =======
Taxes $285 $428 $0 $6 $6 -
======= ======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES: The Registrant has
issued Common Stock in exchange for services, rights or in settlement of
litigation as follows (in thousands):
Shares Issued - 17 38 99 7 1
======= ======= ======= ======= ======= =======
Amount - $960 $820 $1,290 $146 $3
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying Notes to Consolidated Statements
are an integral part of these financial statements.
(Concluded)
F-8
<PAGE>
BELMAC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND OPERATIONS:
- -------------------------------
Belmac Corporation (the "Company") is an international pharmaceutical and
healthcare company headquartered in Tampa, Florida engaged primarily in the
research, development, manufacturing, marketing and distribution of
pharmaceutical and healthcare products. The Company also has chemical and
pharmaceutical operations in France and Spain. Research and development
activities are conducted both in the United States and Europe. The majority of
the Company's sales are outside of the United States.
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
consolidated financial statements, the Company has incurred significant net
losses as well as negative operating cash flows for all periods presented. These
losses, although decreasing, and other factors may indicate that the Company may
be unable to continue as a going concern.
The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. The Company's continuation as
a going concern is dependent upon its ability to generate sufficient cash flow
to meet its obligations on a timely basis, to obtain additional financing as may
be required, and ultimately to attain profitable operations and positive cash
flows. Management has developed a comprehensive strategic plan which focuses on
short-term profitability and goals and includes plans to achieve continued
profitability on an ongoing basis. Additionally, management is exploring various
financing alternatives, including a public offering of its debt and/or equity
securities. Management plans include careful prioritization of research and
development activities and continuation of an austerity program that it
implemented in early 1993. Additionally, management is considering possible
joint ventures or other third party relationships for the continuing
development, licensing and marketing of certain drugs currently under
development.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------
CHANGE IN YEAR END
Effective December 31, 1992 the Company changed its fiscal year end from
June 30 to December 31.
PRINCIPLES OF CONSOLIDATION AND FOREIGN CURRENCY TRANSLATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries: B.O.G. International Finance, Inc., Belmac
Jamaica, Ltd., Belmac Healthcare Corporation and its wholly owned subsidiary
Belmac Hygiene, Inc., Chimos/LBF S.A. (formerly known as the separate entities
of Laboratoires Belmac S.A. and Chimos S.A.) and its wholly owned subsidiary
Laboratorios Belmac S.A., and Belmac Holdings, Inc. (formerly known as Pharmacin
Holdings, Inc.), and its wholly owned subsidiary, Belmac A. I., Inc. (formerly
known as Pharmacin Corp.). Belmac Hygiene, Inc. entered into a 50/50 partnership
with Maximed Corporation of New York in March 1994. Belmac Hygiene's
participation in the partnership is accounted for using the equity method. All
significant intercompany balances have been eliminated in consolidation. The
financial position and results of operations of the Company's foreign
subsidiaries are measured using local currency as the functional currency.
Assets and liabilities of foreign subsidiaries are translated at the rate of
exchange in effect at the end of the period. Revenues and expenses are
translated at the average exchange rate for the period. Foreign currency
translation gains and losses not impacting cash flows are credited to or charged
against Stockholders' Equity. Foreign currency translation gains and losses
arising from cash transactions are credited to or charged against current
earnings.
F-9
<PAGE>
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less when purchased to be cash equivalents for purposes of
the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows.
Investments in securities which do not meet the definition of cash equivalents
are classified as investments available for sale in the Consolidated Balance
Sheets. A bank overdraft of approximately $30,000 at December 31, 1993 is
included in accounts payable as of that date and restricted cash of
approximately $300,000 at December 31, 1993 is included in investments available
for sale as of that date as well.
INVESTMENTS AVAILABLE FOR SALE
Investments available for sale are reported at approximate market value.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined
on the first-in, first-out ("FIFO") method.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the following estimated economic lives of the assets:
Years
-----
Buildings 30
Equipment 5-7
Furniture and fixtures 5-7
Other 5
Leasehold improvements are depreciated over the life of the
respective lease.
Expenditures for replacements and improvements that significantly add
to productive capacity or extend the useful life of an asset are capitalized,
while expenditures for maintenance and repairs are charged against operations as
incurred. When assets are sold or retired, the cost of the asset and the related
accumulated depreciation are removed from the accounts and any gain or loss is
recognized currently.
DRUG LICENSES AND RELATED COSTS
Drug licenses and related costs incurred in connection with obtaining
or acquiring licenses, patents, and other proprietary rights related to the
Company's commercially developed products are capitalized. Capitalized drug
licenses and related costs are being amortized on a straight-line basis over
fifteen years from the dates of acquisition. Costs of acquiring pharmaceuticals
requiring further development are expensed as purchased research and
development. Carrying values of such assets are reviewed annually by the Company
and are adjusted for any diminution in value.
INVESTMENT IN PARTNERSHIP
Belmac Hygiene, Inc., a wholly-owned subsidiary of the Company
entered into a 50/50 partnership in March 1994 with Maximed Corporation
("Maximed") to develop and market feminine healthcare products. Maximed
contributed the hydrogel-based technology and the Company, through its
subsidiary, is responsible for providing financing and funding of the
partnership's activities. The investment in the partnership is accounted for
using the equity method.
Belmac Hygiene, Inc. has become involved in a dispute with Maximed
and filed suit in December 1994 against Maximed (See Note 15). In the opinion of
management, the carrying value of its investment in the partnership, accounted
F-10
<PAGE>
for using the equity method, of $501,000 and $513,000 as of December 31, 1994
and September 30, 1995, respectively, is not impaired and no reserve is
considered necessary.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed when incurred.
AMORTIZATION OF GOODWILL
Costs of investments in purchased companies in excess of the
underlying fair value of net identifiable assets at date of acquisition are
recorded as goodwill and included in other non-current assets which is amortized
over fifteen years on a straight-line basis. Carrying values of such assets are
reviewed annually by the Company and are adjusted for any diminution in value.
REVENUE RECOGNITION
Sales of products are recognized by the Company when the products are
shipped to customers. The Company allows sales returns in certain situations,
but does not reserve for returns and allowances based upon the Company's
favorable historical experience.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" (SFAS 109). SFAS 109 mandates the liability method in accounting for the
effects of income taxes for financial reporting purposes. The Company adopted
SFAS 109 effective January 1, 1993. This statement did not have a material
impact on the Company's consolidated financial statements as a result of
establishing a valuation allowance equal to the deferred tax asset arising
primarily from its net operating loss carryforwards.
NET LOSS PER COMMON SHARE
Primary loss per common share is computed by dividing the net loss
(less accretion of discount and accrued dividends on mandatorily redeemable
preferred stock) by the weighted average number of shares of Common Stock
outstanding during each period. Common Stock equivalents were not included in
the calculation of primary loss per share as they were determined to be
antidilutive.
The Company effected a one-for-ten reverse split of its Common Stock
on July 25, 1995 as a result of an amendment to its Articles of Incorporation
which was approved by the stockholders at the Company's Annual Stockholders
Meeting held on June 9, 1995. All information with respect to per share data and
number of common shares has been retroactively adjusted to give effect to the
reverse stock split.
UNAUDITED PERIOD
Amounts reported for the nine-month period ended September 30, 1994
are unaudited and in the opinion of management of the Company include all
adjustments that are of a normal recurring nature and necessary for a fair
presentation.
F-11
<PAGE>
NOTE 3 - ACQUISITIONS:
- ---------------------
CHIMOS S.A.
In August 1991, the Company, through its 100% owned subsidiary,
Laboratoires Belmac S.A., purchased all of the outstanding shares of Chimos
S.A., ("Chimos"), a company with executive offices in Paris, France. The
acquisition price consisted of 3,000,000 French Francs (approximately $500,000)
plus 10,000 shares of the Company's Common Stock (approximate value of
$613,000). This acquisition has been accounted for by the purchase method and
the excess of purchase price over the fair market value of net assets acquired
has been recorded as goodwill (approximately $548,000) and included in other
non-current assets. These two entities were merged in 1994 into one surviving
entity known as Chimos/LBF S.A. Chimos/LBF S.A. is engaged in the distribution
of specialty pharmaceutical products and fine chemicals to pharmacies and
hospitals in France.
RIMAFAR S.A.
In February 1992, the Company, through its wholly-owned subsidiary,
Laboratoires Belmac S.A., consummated the acquisition of all of the outstanding
shares of Rimafar S.A. (currently known as Laboratorios Belmac S.A.), a Spanish
corporation. The Company paid a cash purchase price of approximately $3,100,000
(including costs associated with the acquisition) for 100% of the shares.
This acquisition was accounted for by the purchase method and the
excess of purchase price over the tangible net assets acquired was assigned to
nine different Spanish drug licenses held by the Company (See Note 8).
PRO FORMA FINANCIAL INFORMATION
The following pro forma Statement of Operations reflects the effect
on the Company's 1992 operations, as if the above described acquisitions had
occurred at the beginning of the Company's fiscal year ended June 30, 1992:
Pro forma Combined (Unaudited)
Net sales $ 17,249,000
Net loss $ (11,145,000)
Loss per Common Share $ (11.40)
The above pro forma financial information relating to Chimos and
Laboratorios Belmac is presented in accordance with accounting rules relating to
business acquisitions and is not necessarily indicative either of the results of
operations that would have occurred had the acquisitions been effective at the
beginning of the fiscal year indicated or of future results of operations of the
combined companies.
NOTE 4 - OTHER NON-RECURRING CHARGES:
- ------------------------------------
The aggregate amount of other non-recurring charges for the period
ended December 31, 1992 of $9,321,000 relates primarily to a 1992 realignment of
the Company and its products in the United States and in Europe by its
management as outlined below.
MANAGEMENT
On February 26, 1993, Jean-Francois Rossignol resigned as Chairman
and Chief Executive Officer of the Company. The Company agreed to forgive
$271,000 of a note receivable from Dr. Rossignol at the time of his resignation,
the cost of which has been included in the period ended December 31, 1992.
F-12
<PAGE>
The Company decided in December 1992 to realign its pharmaceutical
operations in France by implementing a more cost effective marketing strategy
utilizing an outside marketing firm during certain times of the year in place of
its internal French management and sales force. Severance costs associated with
the displacement of the French employees totaling approximately $1,054,000 were
included in the period ended December 31, 1992.
As part of the realignment of French operations, the Company decided
to relocate its French offices from Sophia Antipolis to Paris. In conjunction
with this decision the Company wrote-off certain leasehold improvements and
other assets and expensed certain lease and other commitments aggregating
$2,108,000 which was included in the period ended December 31, 1992.
On November 23, 1992 Michael M. Harshbarger was appointed President
and Chief Operating Officer of the Company. Under the terms of Harshbarger's
employment agreement 10,000 shares of the Company's Common Stock were granted to
him on December 16, 1992. The market value of the shares on the date of grant of
$575,000 was included in the period ended December 31, 1992.
As an incentive to its employees in Spain, the Company's Board of
Directors on December 29, 1992 approved the issuance of 7,000 shares of Common
Stock to the employees of Laboratorios Belmac, resulting in a charge of $385,000
based on the market price of the Company's Common Stock on the date of grant.
These costs were also included in the period ended December 31, 1992.
PRODUCTS
In January 1993, the Company sold its product rights and inventory of
Amodex(R) to a third party. Charges of $3,574,000 and $212,000 representing the
write-down of drug licenses and inventory, respectively, to net-realizable value
were included in the period ended December 31, 1992.
The Company decided to discontinue marketing its Biolid(R) infant and
pediatric formulations in France due to lower than expected sales volume and low
gross margins. Additionally, it was determined that excessive quantities of the
adult formulation of Biolid(R) existed, recognizing the Company's restructured
marketing efforts. Accordingly, inventory write-offs relating to Biolid(R)
totaling approximately $630,000 were reflected in the period ended December 31,
1992. The Company wrote-off certain capitalized costs related to the sachet
formulation of Biolid(R) as of December 31, 1993 (See Note 8).
The Company has decided to focus its product development efforts for
Alphanon(R) on a transdermal patch delivery system and accordingly $243,000 of
deferred product costs relating to the intra-navel transdermal technology were
written off in 1992. The inability to collect receivables for Alphanon(R) sales
amounting to $162,000 from a major customer outside the United States was
indicative of the limited market opportunity for the product in its
navel-transdermal delivery form. Accordingly, the Company also wrote-off
approximately $107,000 of inventory relating to Alphanon(R).
F-13
<PAGE>
NOTE 5 - RECEIVABLES:
- --------------------
Receivables consist of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
----------------------- -------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Trade receivables $5,163 $6,360 $7,479
Sale of Belmacina(R)(Note 8) - 1,140 243
Other (Notes 8 and 15) 840 233 645
------ ------ ------
6,003 7,733 8,367
Less - allowance for doubtful accounts (50) (124) (99)
------ ------ ------
$5,953 $7,609 $8,268
====== ====== ======
</TABLE>
NOTE 6 - INVENTORIES:
- --------------------
Inventories consist of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
----------------------- -------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Raw materials $ 553 $ 149 $ 217
Work in progress 3 3 1
Finished goods 742 1,095 782
------ ------ ------
$1,298 $1,247 $1,000
====== ====== ======
</TABLE>
F-14
<PAGE>
NOTE 7 - FIXED ASSETS:
- ---------------------
Fixed assets consist of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
---------------------------- ---------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Land $1,033 $1,121 $1,195
Buildings 1,667 1,810 2,477
Equipment 845 916 964
Furniture and fixtures 603 675 653
Leasehold improvements 302 340 335
Equipment under capital lease 181 221 138
------- -------- -------
4,631 5,083 5,762
Less-accumulated depreciation (927) (1,465) (1,750)
------- -------- -------
$3,704 $3,618 $4,012
======= ======== ========
</TABLE>
Depreciation expense was $287,000, $173,000, $489,000, $434,000, $258,000
(unaudited) and $290,000 for the year ended June 30, 1992, for the six months
ended December 31, 1992, for the years ended December 31, 1993 and 1994, and for
the nine months ended September 30, 1994 and 1995, respectively.
NOTE 8 - DRUG LICENSES AND RELATED COSTS, NET:
- ---------------------------------------------
Drug licenses and related costs consist of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
---------------- -------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Laboratorios Belmac's portfolio (Note 3) $1,721 $1,259 $1,342
Less - accumulated amortization (247) (291) (377)
------- ------- ------
$1,474 $ 968 $965
======= ======= ======
</TABLE>
In September 1992, the Company, through its Spanish subsidiary
Laboratorios Belmac, acquired the Spanish license and product rights to
Belmacina(R), a ciprofloxacin antibiotic, for approximately $577,000. The
Company sold its Spanish license and product rights to Ciprofloxacin in 1994 for
approximately $1,556,000 and sold the related trademark for approximately
$380,000 in 1995. The Company received approximately $651,000 in cash,
net of transaction costs and a receivable of approximately $1,140,000, which
includes amounts related to the sale of the trademark. The gain on sale of
the license and product rights of approximately $884,000 was included in
Other Income for the year ended December 31,
F-15
<PAGE>
1994 and the gain on the sale of the related trademark was recorded as a
receivable and as deferred revenue as of December 31, 1994. The Company
recognized the gain on the sale of the related trademark upon the transfer of
the trademark to the buyer in 1995.
In December 1991, the Company, through its wholly-owned French
subsidiary Laboratoires Belmac S.A., acquired certain inventory and all French
product rights of Amodex(R). Amodex(R) is an amoxicillin-based antibiotic that
has been registered with the Ministry of Health in France and has been granted
regulatory approval for marketing in France. Pursuant to this agreement,
Laboratoires Belmac S.A. agreed to pay approximately $6,800,000, of which
$5,500,000 was paid at consummation and approximately $1,300,000 was agreed to
be payable in three installments in December 1993, 1994 and 1995. Subsequent to
June 30, 1992, Laboratoires Belmac S.A. renegotiated the terms of the agreement
whereby one payment of approximately $882,000 was made in lieu of the three
installment payments. The related intangible asset and debt were adjusted at
June 30, 1992 to reflect the revised agreement.
In January 1993 the Company sold all of its French product rights and
inventory of Amodex(R) to a third party. At December 31, 1992 the cost
associated with the Amodex(R) product rights was reduced to $3,260,000 to
reflect its net realizable value (See Note 4).
In September 1993 the Company entered into an agreement to sell its
rights to the Biolid(R) sachet formulation in France and related inventories to
Evans Medical S.A. for approximately $2,245,000. The Company received
approximately $950,000 cash upon execution of the agreement including
approximately $350,000 for promotion and marketing of the product. The Company
recorded a receivable of approximately $1,550,000 as of September 30, 1993,
representing the balance of the purchase price which was due upon transfer of
the French AMM (license to market the product) to Evans. This transaction was
subject to approval, by a French regulatory authority, of the transfer of the
French AMM to Evans. The French regulatory authority subsequently requested
additional information prior to approving this transfer and requested marketing
of Biolid(R) be suspended pending the additional data. The Company discontinued
marketing this product, which is a sachet formulation.
As a result of the regulatory action, the Company entered into an
agreement with Evans in March 1994 which canceled the previous sales agreement
and the Company agreed to refund approximately $532,000 deposited by Evans and
an additional $175,000 of the promotional costs paid by Evans. Accordingly, the
Company reversed the sale of the rights to the sachet formulation of Biolid(R)
and removed the previously recorded gain and receivable from its books,
effective December 31, 1993. As a result of the decision to withdraw the sachet
formulation of Biolid(R) from the French market and the subsequent agreement
with Evans, the Company recorded an expense of $2,241,000 in the fourth quarter
of 1993 reflecting the write-off of the sachet formulation of Biolid(R)
intangible asset, the Biolid(R) inventories and the reimbursement of Evans'
promotional costs.
The Company owns all rights, title and interest to Alphanon(R), a
camphor based anti-hemorrhoidal drug. In connection with the acquisition of
Alphanon(R), the Company agreed to pay for the longer of fifteen years from the
first marketing of Alphanon(R) in each country or the life of an Alphanon(R)
patent in each country, a royalty fee of 5% of the gross profit from the
manufacture and sale of the product and 5% of the net royalty payments received
from any licensing agreements of the product. Costs capitalized related to this
drug license included $262,000 for the value of Common Stock issued. In December
1992 the Company wrote-off all remaining unamortized Alphanon(R) license and
related costs reflecting the decision to discontinue further sales and marketing
efforts related to Alphanon(R) pending further development of the transdermal
patch technology (See Note 4).
Amortization expense for drug licenses and related costs was
approximately $553,000, $328,000, $227,000, $102,000, $89,000 (unaudited) and
$86,000 for the year ended June 30, 1992, for the six months ended December 31,
1992, for the years ended December 31, 1993 and 1994, and for the nine months
ended September 30, 1994 and 1995, respectively.
F-16
<PAGE>
NOTE 9 - ACCRUED EXPENSES:
- -------------------------
Accrued expenses consist of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
---------------------------- -------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Accrued expenses $ 774 $1,914 $1,669
Accrued payroll and severance benefits (Note 4) 964 368 475
Amount due to Evans (Note 8) 707 - -
------- ------- ------
$2,445 $2,282 $2,144
======= ======= ======
</TABLE>
NOTE 10 - DEBT
- --------------
Debt consists of the following (in Thousands):
<TABLE>
<CAPTION>
December 31, September 30,
---------------------------- -------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Trade receivables discounted (with a Spanish
financial institution), with recourse, effective
interest rate on the note is 13.9%. $ 570 $ 463 $ 675
Short-term loan (with a French financial institution),
maturing in January 1994, average interest rate 4.5%. 369 -- --
Short-term loan (with a French financial institution),
matured on February 2, 1994, interest rate 4.25% 101 -- --
Short-term loan (with a French financial institution),
maturing in January 1995, average interest rate 7.3% -- 200 --
Short term loan (with a French financial institution) -- -- 304
maturing in December 1995, average interest rate 11.3%
First mortgage loan, principal and interest of $35
quarterly through February 1995, collateralized by
land and buildings in Spain. Interest is based on the
Madrid Interbank Offering Rate (MIBOR*) plus
1.45%. 175 37 --
F-17
<PAGE>
Capital lease obligations, relating to various
equipment used by the Company. 89 24 4
Other -- -- 237
-------- -------- -------
Total debt 1,304 724 1,220
Less current portion (1,269) (724) (1,220)
-------- -------- -------
Total long-term debt $ 35 $ -0- $ -0-
======== ====== ======
</TABLE>
*MIBOR at December 31, 1993 and 1994, and September 30, 1995 was 9.5%, 8.65% and
9.35%, respectively.
The weighted average interest rate on borrowings outstanding at December 31,
1994 and September 30, 1995 was 8.57% and 10.5%, respectively.
NOTE 11 - REDEEMABLE PREFERRED STOCK:
- ------------------------------------
During the year ended June 30, 1992, the Company issued 290,000
shares of $1 par value Series A Convertible Exchangeable Preferred Stock (the
"Series A Preferred Stock") and 340,000 shares of $1 par value Series B
Convertible Exchangeable Preferred Stock ("the Series B Preferred Stock") at $25
per share. The issuance of these shares provided aggregate proceeds to the
Company of $15,750,000. Since the Series A and B Preferred Stock meet the
definition of Mandatorily Redeemable Preferred Stock, it has been excluded from
the Common Stockholders' Equity section of the Consolidated Balance Sheets. As
of December 31, 1994 and September 30, 1995, 220,000 shares of the Series A
Preferred Stock and all shares of the Series B Preferred Stock had been
converted into 56,100 and 48,100 shares, respectively, of Common Stock.
The shares of Series A and B Preferred Stock were convertible at the
option of the holders into Common Stock at any time prior to the close of
business on the date fixed for redemption or exchange, at an initial conversion
price for the Series A Preferred Stock of $115.00 per share (at an initial
conversion rate of approximately .21739 shares of Common Stock for each share of
Series A Preferred Stock) and for the Series B Preferred Stock of $160.00 per
share (at an initial conversion rate of .15625 shares of Common Stock for each
share of Series B Preferred Stock). The conversion rates were adjusted by the
Company, in lieu of paying cumulative dividends of 9% per annum to .25828 and
.1703 for the Series A and B Preferred Stock, respectively. The dividend payment
date for Series A Preferred Stock is October 15. The dividend payment date for
Series B Preferred Stock was February 1, 1993.
The Series A Preferred Stock has a liquidation preference equal to
$25.00 per share, plus accrued and unpaid dividends up to the liquidation date.
The Series A Preferred Stock is redeemable for cash at the option of the
Company. The Preferred Stock is also redeemable for cash at the option of the
holder upon certain major stock acquisitions or business combinations at $25.00
per share, plus accrued and unpaid dividends through the redemption dates. The
holders of Preferred Stock have no voting rights except as required by
applicable law and except that if the equivalent of two full annual cash
dividends shall be accrued and unpaid, the holders of the Series A Preferred
Stock shall have the right, as a class, to elect two additional members of the
Company's Board of Directors. As of the date hereof, the holders of the Series A
Preferred Stock have not exercised their right to appoint such directors.
The Series A Preferred Stock is exchangeable in whole, but not in
part, at the option of the Company on any dividend payment date beginning
October 15, 1993, for 9% Convertible Subordinated Debentures of the Company due
2016. Holders of Series A Preferred Stock will be entitled to $25 principal
amount of Debentures for each share of Series A Preferred Stock.
F-18
<PAGE>
The Series A Preferred Stock is recorded at redemption value, which
is $25.00 per share plus cumulative dividends of 9% per annum. The following
table summarizes activity of the Series A and B Preferred Stock:
(In Thousands)
<TABLE>
<CAPTION>
Series A Series B
Shares Amounts Shares Amounts
------ ------- ------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 74 $1,998 212 $ 5,403
Converted to Common Stock - - (212) (5,403)
Accretion of discount and
accrual of 9% dividends - 220 - -
------- ------- ------- -------
Balance at December 31, 1993 74 2,218 - -
Converted to Common Stock (4) (128)
Accrual of 9% dividends - 166 - -
------- ------- ------- -------
Balance at December 31, 1994 70 2,256 - -
Accrual of 9% dividends - 118 - -
------- ------- ------- -------
Balance at September 30, 1995 70 $2,374 - $ -
======= ====== ======= =======
</TABLE>
NOTE 12 - COMMON STOCKHOLDERS' EQUITY:
At December 31, 1994 and September 30, 1995 the Company had the following Common
Stock reserved for issuances under various plans and agreements:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1995
----------------- -------------------
<S> <C> <C>
For conversion of Series A Preferred Stock (Note 11) 18,000 18,000
For stock purchase warrants 476,500 574,000
For stock options 382,500 260,500
For other 7,500 8,500
--------- ---------
884,500 861,000
========= =========
</TABLE>
The Company has never paid any dividends on its Common Stock. The
current policy of the Board of Directors is to retain earnings to finance the
operation of the Company's business. Accordingly, it is anticipated that no cash
dividends will be paid to the holders of the Common Stock in the foreseeable
future. Under the terms of the Series A Preferred Stock, the Company is
restricted from paying dividends on its Common Stock so long as there are
arrearages on dividend payments on the Series A Preferred Stock. There currently
are such arreages.
STOCK PURCHASE WARRANTS
During the year ended June 30, 1992, stock purchase warrants were
converted into 203,300 shares of the Company's Common Stock at prices ranging
from $31.00 to $105.00 per share. Such conversions yielded net proceeds of
$6,721,000 to the Company in the year ended June 30, 1992.
No warrants were converted into shares of the Company's Common Stock
in the six months ended December 31, 1992.
F-19
<PAGE>
During the year ended December 31, 1993, stock purchase warrants were
converted into 8,700 shares of the Company's Common Stock at prices ranging from
$10.00 to $13.75 per share. Such conversions yielded net proceeds of $97,000 to
the Company in the year ended December 31, 1993.
During the year ended December 31, 1994, stock purchase warrants were
converted into 2,500 shares of the Company's Common Stock at $13.75 per share.
Such conversions yielded net proceeds of $34,000 to the Company in the year
ended December 31, 1994.
No warrants were converted into shares of the Company's Common Stock
in the nine months ended September 30, 1995.
At September 30, 1995, there were 574,000 warrants outstanding which
were exercisable at prices ranging from $2.50 to $120.00 per share, of which
241,000 warrants have an exercise price of $2.50 per share. The Warrants expire
through December 1998.
COMMON STOCK TRANSACTIONS
During the year ended June 30, 1992, the Company issued 94,100 shares
of Common Stock in two private placement transactions with total net proceeds of
$8,447,000 and purchased 5,400 shares of its outstanding Common Stock for
$495,000. Also during the year ended June 30, 1992, 336,000 shares of the
Company's Series A and B Preferred Stock were converted into 65,700 shares of
Common Stock at conversion prices ranging from $115.00 to $160.00 per share.
During the six months ended December 31, 1992, the Company issued
80,600 shares of Common Stock in a private placement transaction, with total net
proceeds of $3,864,000 ($1,700,000 of such proceeds were received subsequent to
December 31, 1992 and were recorded as stock subscriptions receivable in the
Common Stockholders' Equity section of the Consolidated Balance Sheets at
December 31, 1992). The Company also awarded 17,000 shares of Common Stock to
employees as incentive compensation in the six months ended December 31, 1992
and 8,000 shares of the Company's Series B Preferred Stock were converted into
1,300 shares of Common Stock at the conversion price of $160.00 per share during
this period.
During the year ended December 31, 1993, the Company issued 733,400
shares of Common Stock in private placement transactions, with total net
proceeds of $7,385,000 ($770,000 of such proceeds were recorded as stock
subscriptions receivable in the Common Stockholders' Equity section of the
Consolidated Balance Sheets). Also, 212,000 shares of the Company's Series B
Preferred Stock were converted into 36,100 shares of Common Stock at the
conversion price of $160.00 per share. The Company also awarded 1,900 shares of
Common Stock to employees as incentive compensation and settled litigation with
two former officers of the Company by issuing to them an aggregate of 14,700
shares of Common Stock in the year ended December 31, 1993.
During the year ended December 31, 1994, the Company issued 845,800
shares of Common Stock in private placement transactions, with total net
proceeds of $4,944,000 ($1,596,000 of such proceeds were recorded as stock
subscriptions receivable in the Common Stockholders' Equity section of the
Consolidated Balance Sheets of which approximately $1,193,000 had been received
as of December 8, 1995). Also, 4,000 shares of the Company's Series A Preferred
Stock were converted into 1,100 shares of Common Stock at the conversion price
of $115.00 per share. The Company also awarded 7,000 shares of Common Stock to
Directors as compensation and settled litigation with shareholders of the
Company by issuing to them an aggregate of 70,200 shares of Common Stock in the
year ended December 31, 1994.
During the nine months ended September 30, 1995, the Company issued
817 shares of Common Stock to Directors as compensation.
F-20
<PAGE>
STOCK SUBSCRIPTIONS RECEIVABLE
Stock subscriptions receivable at June 30, 1992 represent amounts
owed to the Company by two former officers of the Company (see explanation
below). Certain receivables from one of the former officers included in the June
30, 1992 balance were forgiven and are included in non-recurring charges for the
six months ended December 31, 1992. (See Notes 4, 15 and 16).
Stock subscriptions receivable at December 31, 1992 included $412,000
owed to the Company by a former officer of the Company (see explanation below)
and $1,700,000 owed to the Company by a subscriber of 50,000 shares of Common
Stock which were issued in a private placement. The $1,700,000 was received in
full in February 1993.
Stock subscriptions receivable at December 31, 1993 included $498,000
owed to the Company by a former officer of the Company (see explanation below).
Additionally, amounts owed to the Company by a subscriber of 50,000 shares of
Common Stock which were issued in a private placement total $770,000 and were
included in the December 31, 1993 balance. Of this amount $473,000 was received
in 1994.
Stock subscriptions receivable at December 31, 1994 include an amount
owed to the Company by a former officer and director of the Company for the
exercise of various warrants and options to purchase 6,570 shares of the
Company's Common Stock at prices ranging from $38.10 to $105.00 per share
totaling $412,000. The notes accrued interest at the rate of 8.5% per annum
payable through the issuance of additional promissory notes having the same
terms as the subscriptions receivable. Such accrued interest totaled $121,000 at
December 31, 1994. The Company cancelled the promissory notes receivable
together with interest due on such notes aggregating approximately $533,000 in
May 1995 as a result of a jury verdict. See Note 15. Additionally, amounts owed
to the Company by subscribers of shares of Common Stock which were issued in
private placements total $1,017,000 and are included in the December 31, 1994
balance, however, $561,000 of this balance was collected in the nine months
ended September 30, 1995 and the remaining balance was adjusted to reflect the
value of the underlying Common Stock.
STOCK OPTION PLANS
The Company has in effect Stock Option Plans (the "Plans"), pursuant
to which directors, officers, and employees of the Company who contribute
materially to the success and profitability of the Company are eligible to
receive grants of options for the Company's Common Stock. An aggregate of
380,500 shares of Common Stock have been reserved for issuance under the Plans,
of which 166,200 and 214,600 had been granted as of and December 31, 1994 and
September 30, 1995, respectively. Options may be granted for terms not exceeding
ten years from the date of grant except for stock options which are granted to
persons owning more than 10% of the total combined voting power of all classes
of stock of the Company. For these individuals, options may be granted for terms
not exceeding five years from the date of grant. Options may not be granted at a
price which is less than 100% of the fair market value on the date the options
are granted (110% in the case of persons owning more than 10% of the total
combined voting power of the Company).
During the year ended June 30, 1992, holders of stock options
exercised options acquiring 41,800 shares of the Company's Common Stock. Such
exercises provided proceeds to the Company of $2,057,000 in the year ended June
30, 1992.
Holders of stock options exercised no options during the year ended
December 31, 1993 or 1994, or the nine months ended September 30, 1995; however,
they exercised options during the six months ended December 31, 1992, acquiring
1,100 shares of the Company's Common Stock at prices ranging from $50.00 to
$66.88 per share. Such exercises provided proceeds of $60,000 to the Company in
the six months ended December 31, 1992.
In addition, the Company has granted options and warrants outside of
the Plans in connection with private placements of its securities and
as consideration for various services. These options and warrants have
been granted for terms not exceeding six years from the date of grant.
The table below summarizes all activity for the year ended June 30,
F-21
<PAGE>
1992, the six months ended December 31, 1992, the years ended December 31, 1993
and 1994 and the nine months ended September 30, 1995.
<TABLE>
<CAPTION>
Number of Price
Common Shares per share
------------ ---------
(In Thousands)
<S> <C> <C> <C>
Outstanding at June 30, 1991 278
Granted 142 $100.00 to $177.50
Exercised (245) $ 25.00 to $105.00
Canceled (4) $ 50.00 to $ 58.75
--------
Outstanding at June 30, 1992 171
Granted 88 $ 42.00 to $300.00
Exercised (1) $ 50.00 to $ 66.88
Canceled (14) $ 50.00 to $152.50
-------
Outstanding at December 31, 1992 244
Granted 171 $ 10.00 to $ 45.00
Exercised (9) $ 10.00 to $ 13.75
Canceled (110) $ 37.50 to $300.00
-----
Outstanding at December 31, 1993 296
Granted 359 $ 2.50 to $ 20.00
Exercised (2) $ 13.75
Canceled (10) $ 13.75 to $ 71.25
---------
Outstanding at December 31, 1994 643
Granted 180 $ 2.50 to $ 7.50
Exercised - -
Canceled (34) $11.25 to $177.50
---------
Outstanding at September 30, 1995 789
========
</TABLE>
Options and warrants outstanding include 574,000 warrants, all of which are
exercisable, and 215,000 options, of which 82,000 are vested and exercisable at
September 30, 1995.
NOTE 13 - PROVISION FOR INCOME TAXES:
- ------------------------------------
The Company adopted SFAS 109, "Accounting for Income Taxes" effective
January 1, 1993, and began recognizing income tax benefits for net operating
loss carryforwards, credit carryforwards and certain temporary differences for
which tax benefits have not previously been recorded. As a result of the
adoption of SFAS 109, the Company has recognized approximately $18,000,000 as a
deferred tax asset; however, the Company has established a valuation allowance
equal to the full amount of the deferred tax asset, as future operating profits
cannot be assured. The Company expects to recognize the benefit of the asset
when financial reporting and taxable income is generated.
At December 31, 1994 and September 30, 1995, the Company has net
operating loss (the "NOL") carryforwards of approximately $34,000,000 and
$35,000,000, respectively, available to offset future U.S. taxable income. The
Company calculates that its use of the NOL may be limited to approximately
$3,000,000 each year as a result of stock option and warrant issuances during
prior fiscal years resulting in an ownership change of more that 50% of the
Company's outstanding equity. If not offset against future taxable income, the
NOL carryforwards will expire in tax years 1996 through 2010.
F-22
<PAGE>
In addition, Chimos/LBF S.A. and Laboratorios Belmac S.A. have NOL
carryforwards of approximately $14,000,000 and $3,000,000 available to offset
future taxable income for income tax purposes in France and Spain, respectively.
If not offset against taxable income, the NOL carryforwards will expire in
various years ending 1999.
The provision for income taxes of $343,000 for the year ended June
30, 1992 is the result of current French taxes on profits generated by Chimos
S.A. in the year ended June 30, 1992. Chimos was not eligible to file a French
consolidated income tax return with Laboratoires Belmac S.A. until fiscal year
1993. Therefore, the Laboratoires Belmac losses were not available to offset
Chimos' taxable profits for the year ended June 30, 1992. For the six months
ended December 31, 1992, the years ended December 31, 1993 and 1994 and for the
nine months ended September 30, 1994 and 1995, no income tax provision is
recorded due to domestic losses and the consolidation of Chimos S.A. with
Laboratoires Belmac S.A. and subsequent merger of the two entities for French
tax purposes.
NOTE 14 - BUSINESS SEGMENT INFORMATION ON FOREIGN OPERATIONS:
- ------------------------------------------------------------
The following is a summary of the results of operations and
identifiable assets of the Company's wholly-owned foreign subsidiaries as of and
for the year ended June 30, 1992, as of and for the six months ended December
31, 1992, and as of and for the years ended December 31, 1993 and 1994 and for
the nine months ended September 30, 1994 and 1995.
<TABLE>
<CAPTION>
(In Thousands)
Year Ended June 30, 1992
--------------------------
France Spain U.S. Consolidated
------ ----- ----- ------------
<S> <C> <C> <C> <C>
Revenue $ 10,891 $ 2,247 $ - $ 13,138
Net loss (5,168) (189) (5,454) (10,811)
Identifiable assets 26,452 7,781 4,520 38,753
(In Thousands)
Six Months Ended December 31, 1992
--------------------------
France Spain U.S. Consolidated
------ ----- ----- ------------
Revenue $ 7,738 $ 1,970 $ - $ 9,708
Net loss (11,808) (1,228) (6,495) (19,531)
Identifiable assets 10,793 7,373 3,787 21,953
(In Thousands)
Year Ended December 31, 1993
--------------------------
France Spain U.S. Consolidated
------ ----- ----- ------------
Revenue $ 15,155 $ 4,328 $ 366 $ 19,849
Net loss (811) (1,655) (7,770) (10,236)
Identifiable assets 7,023 6,873 2,264 16,160
F-23
<PAGE>
(In Thousands)
Year Ended December 31, 1994
--------------------------
France Spain U.S. Consolidated
------ ----- ----- ------------
Revenue $20,257 $ 5,843 $ 184 $26,284
Net income (loss) 595 (405) (3,768) (3,578)
Identifiable assets 6,476 7,833 2,023 16,332
(In Thousands)
Nine Months Ended September 30, 1994
--------------------------
(Unaudited)
France Spain U.S. Consolidated
------ ----- ----- ------------
Revenue $15,499 $4,061 $ 116 $19,676
Net income (loss) (65) (974) (2,612) ( 3,651)
Identifiable assets 7,316 7,404 2,180 16,900
(In Thousands)
Nine Months Ended September 30, 1995
--------------------------
France Spain U.S. Consolidated
------ ----- ----- ------------
Revenue $19,282 $4,147 $ 154 $23,583
Net income (loss) 1,103 (352) (2,270) ( 1,519)
Identifiable assets 7,713 7,349 1,108 16,170
</TABLE>
Total liabilities attributable to foreign operations were $11,029,000,
$8,358,000, $8,428,000 and $6,649,000 at December 31, 1992, December 31, 1993,
December 31, 1994 and September 30, 1995, respectively. There were no dividends
from foreign subsidiaries, and net foreign currency gains (losses) reflected in
results of operations for the year ended June 30, 1992, the six months ended
December 31, 1992, the year ended December 31, 1993 and 1994 and the nine months
ended September 30, 1994 and 1995 were approximately $35,000, $40,000,
($133,000), $66,000, $30,000 (unaudited), and $2,000, respectively. Sales in
France for the years ended December 31, 1993 and 1994, and the nine months ended
September 30, 1994 and 1995 include approximately $4,500,000, $8,000,000,
$6,953,000 (unaudited) and $6,024,000, respectively, to Pharmacie Centrale des
Hopitaux. Sales in France for the six months ended December 31, 1992, include
approximately $1,900,000 to Pharmacie Centrale des Hopitaux and $2,500,000 to
Distraphar. Sales in France for the year ended June 30, 1992 include
approximately $3,000,000 and $1,400,000 to Pharmacie Centrale des Hopitaux and
Industrie Chemiche Farmaceutiche Italienne, respectively.
NOTE 15 - COMMITMENTS AND CONTINGENCIES:
- ---------------------------------------
On July 15, 1993, Michael M. Harshbarger, was discharged for cause
from the Company as President and Chief Executive Officer. At the time
of his discharge, Harshbarger owed the Company approximately $121,000
as a result of expenses of a personal nature which he charged to
the Company's accounts and removal of corporate assets for personal use.
F-24
<PAGE>
Harshbarger has sued the Company for wrongful termination, seeking damages in
excess of $1,400,000 and the Company has countersued for wrongful conversion and
civil theft, fraud and deceit, and breach of contract, in an effort to recover
the amounts owed by Harshbarger. The Company is amending a counterclaim against
Harshbarger for breach of fiduciary duty and is seeking damages in excess of
$1,000,000. In the opinion of current management, the amounts are collectable
and this litigation will have no material effect on the financial position or
results of operations of the Company.
On November 30, 1992, Marc S. Ayers resigned as Chief Financial
Officer of the Company and effective December 17, 1992, resigned as a member of
the Board of Directors. At December 31, 1994 Ayers owed the Company $412,000
plus $121,000 accrued interest under two stock subscription notes receivable,
both of which had matured and remained unpaid. Ayers sued the Company alleging
breach of contract and the Company countersued Ayers. This matter was tried in
1994 and a jury verdict rendered on August 18, 1994, found in favor of Ayers on
one issue and in favor of the Company on another issue. The judge ordered a new
trial on all issues and no judgement was entered in the case. After a jury trial
in May 1995, the jury found no binding contract was made between the Company and
Ayers while awarding Ayers a recovery of approximately $27,000 for consulting
services rendered and cancellation of the promissory notes and interest thereon.
The cancellation of the promissory notes and related interest was charged to
expenses in the nine months ended September 30, 1995.
Belmac Hygiene, Inc. ("Hygiene"), a subsidiary of the Company, filed
an action on December 9, 1994 in the United States District Court for the
Southern District of New York against Medstar, Inc. ("Medstar"), Maximed, Inc.
("Maximed") and Robert S. Cohen. The defendants are Hygiene's partners (or such
partner's control persons) in the Company's partnership with Maximed (the
"Partnership"), which was formed for the development and ultimate sale of
Maximed's intravaginal controlled release products. The action seeks (i) to
enjoin the defendants from interfering with the management of the Partnership by
Hygiene's representatives, and (ii) to recover damages as a result of
defendants' misrepresentations and breach of warranty in the Partnership
agreement. The defendants have filed a counterclaim against Hygiene. Medstar
also filed a separate action on May 4, 1995 in the Untied States District Court
for the Southern District of New York against the Company alleging that Hygiene
failed to fund the Partnership and seeking $10,000,000 from the Company pursuant
to its guaranty of Hygiene's obligations. Management of the Company views both
Medstar's claim and the counterclaim of Medstar, Maximed and Robert S. Cohen to
be frivolous and entirely without merit and is vigorously pursuing the Company's
claims and defending both Medstar's action and the counterclaim. The issues were
tried, without a jury, on August 21-23, 1995. Thereafter, post-trial briefs and
proposed findings of fact and conclusions of law were submitted, and argument
was heard on October 25, 1995. However, a decision has not yet been rendered as
of December 8, 1995.
The Company has determined that it is exposed to certain
contingencies with respect to its operations in Spain totaling approximately
$640,000 and has accrued $120,000 for such contingencies that are considered
probable and included such amount in other non-current liabilities as of
September 30, 1995.
The Company is also obligated to pay royalties on sales of the drug
Alphanon(R) (Notes 4 and 8).
The Company is entitled to payments of $360,000 related to the
commercialization of a certain drug provided to Jean-Francois Rossignol, its
former Chairman and Chief Executive Officer. On April 8, 1995, Rossignol filed a
Demand for Arbitration seeking to recover unspecified damages for the alleged
breach of a written agreement between Rossignol and the Company dated August 13,
1993. In April 1995, the Company commenced an action against Rossignol, Marc S.
Ayers and Romarc Laboratories, L.C., in the Circuit Court of the Thirteenth
Judicial Circuit, State of Florida, Hillsborough County Civil Division seeking,
inter alia, a stay of the arbitration commenced by Rossignol and $360,000
representing the principal amount of a promissory note issued in connection with
the August 13, 1993 agreement and damages. Under the terms of a settlement
agreement entered into on December 6, 1995 (the "Settlement Agreement"),
Rossignol agreed to pay to the Company the full amount of the promissory note in
three installments, the first of which ($160,000) was paid upon execution of the
Settlement Agreement and the remaining two ($100,000 each) are due in January
and March 1996, respectively. Consequently, the Company has included such
amounts in Other (Income) Expense for the nine months ended September 30, 1995.
F-25
<PAGE>
The Company leases certain of its assets under noncancellable
operating leases. Total charges to operations under operating leases were
approximately $105,000, $204,000, $598,000, $360,000, $347,000 (unaudited) and
$318,000, for the year ended June 30, 1992, for the six months ended December
31, 1992, for the years ended December 31, 1993 and 1994 and for the nine months
ended September 30, 1994 and 1995, respectively. Future minimum lease payments
under operating leases are as follows:
(In Thousands)
Period ending, December 31
1995 $133
1996 419
1997 321
1998 246
1999, and thereafter -0-
NOTE 16 - RELATED PARTY TRANSACTIONS:
- ------------------------------------
See Note 12 for stock subscriptions receivable from former officers
and Note 15 for additional disclosures related to former officers.
On May 30, 1991 Rossignol exercised options to purchase 11,120 shares
of Common Stock at an average exercise price of $38.30 per share and Ayers
exercised options to purchase 4,674 shares at an exercise price of $45.60 per
share. On September 6, 1991, Ayers exercised options to purchase 1,896 shares of
Common Stock at an exercise price of $105.00 per share. Rossignol and Ayers
exercised their options through the issuance of promissory notes (the "Notes")
in the principal amounts of $426,000 and $412,000, respectively, representing
the aggregate exercise prices for such options. Each of the Notes accrued
interest at the rate of 8.5% per annum which was payable through the issuance of
additional promissory notes having the same terms as the Notes. In November
1992, Rossignol prepaid his note down to $271,000 (including accrued interest)
through the offset of payments from the Company (See additional explanation
below), Effective February 26, 1993, Rossignol resigned as Chief Executive
Officer and Chairman of the Board and the Company agreed to forgive $271,000 of
his Note balance (including accrued interest) due to the Company and to release
his Belmac Holdings, Inc. (formerly Pharmacin Holdings, Inc.) stock which was
held as collateral by the Company. This transaction has been included in other
non-recurring charges for the six months ended December 31, 1992. Ayers' notes
and accrued interest were cancelled in May 1995 as a result of litigation and
are included in Other (Income) Expense for the nine months ended September 30,
1995. See Note 15.
Healthcare Capital Investments ("Healthcare"), a registered
broker-dealer which is 80% owned by Harshbarger, a former Director and former
President and Chief Executive Officer of the Company and his wife, has acted as
placement agent for the Company on private placements of the Company's
securities. In a $14,250,000 private placement completed in October 1991 which
Healthcare co-managed with Societe Generale Securities Corporation ("Societe
Generale"), Healthcare received a fee of $426,000. In a $10,620,000 private
placement completed in April 1992 which Healthcare also co-managed with Societe
Generale, Healthcare received a fee of $318,600. In connection with a private
placement completed in October 1992, Healthcare received a fee of $244,500 and
four-year warrants to purchase 2,391 shares of Common Stock at an exercise price
of $120.00 per share. In addition, in July 1992 Healthcare was granted five-year
options to purchase 15,000 shares of Common Stock at an exercise price of
$116.25 per share for its advisory services. Healthcare and its affiliates
received fees during the year ended December 31, 1993 totaling $242,000 and
four- and five-year warrants to purchase an aggregate of 9,600 shares of Common
Stock at an exercise price of $22.00 per share. Fees paid in connection with the
above private placements have been charged to additional-paid-in-capital.
Receivables at December 31, 1994 and September 30, 1995 include
approximately $121,000 owed by Harshbarger. See Note 15.
F-26
<PAGE>
NOTE 17 - SUBSEQUENT EVENTS:
- ---------------------------
PRIVATE PLACEMENTS. To finance its operations, in October 1995 the
Company conducted two private placements of its securities. In the first
placement the Company sold to certain purchasers for an aggregate purchase price
of $720,000, 120,000 shares of the Company's Common Stock and 12% promissory
notes in the aggregate principal amount of $720,000 (the "Notes") which become
payable in full upon the earlier of July 31, 1996 or the closing of a public
offering of the Company's securities (a "Public Offering"). The Notes are
convertible into shares of Common Stock, at the option of the holders thereof,
at a conversion price of the lower of $3.00 per share or 80% of the current
market price, for an aggregate of 240,000 shares of Common Stock, subject to
anti-dilution provisions. The Notes are subject to mandatory conversion at a
conversion price of $3.00 per share if no Public Offering is completed by July
31, 1996.
In the second placement, the Company sold to certain purchasers for
an aggregate purchase price of $1,050,000, 131,250 shares of Common Stock and
12% promissory notes in the aggregate principal amount of $1,050,000 (the "A
Notes") which become payable in full upon the earlier of September 30, 1996 or
the completion of a Public Offering. The A Notes are subject to mandatory
conversion, at a conversion price equal to the average closing price for the
Common Stock quoted on the American Stock Exchange for the five trading days
immediately preceding September 30, 1996, if no Public Offering is completed by
September 30, 1996.
SETTLEMENT OF LITIGATION. In December 1995, the Company entered into
a Settlement Agreement with Jean Francois Rossignol, Marc S. Ayers and Romark
Laboratories, L.C., whereby all parties agreed to settle all claims relative to
this matter and Rossignol agreed to pay to the Company the full amount of the
$360,000 promissory note dated August 13, 1993 due to the Company in three
installments. The first installment of $160,000 was paid upon execution of the
Settlement Agreement and the remaining two installments of $100,000 each are due
in January and March 1996, respectively. Consequently, the Company has included
such amounts in Other (Income) Expense for the nine months ended September 30,
1995. See Note 15.
SHAREHOLDERS MEETING. At a Special Meeting of Shareholders held on
December 8, 1995, the shareholders of the Company approved proposals to increase
the number of authorized shares of Common Stock from 5,000,000 to 20,000,000 and
to change the name of the Company to Bentley Pharmaceuticals, Inc.
F-27
<PAGE>
========================================= =====================================
No dealer, salesperson or any other
person has been authorized to give any
information or to make any representation
other than those contained in this
Prospectus in connection with the offer 6,000 UNITS
made by this Prospectus, and, if given
or made, such information or representa-
tions must not be relied upon as having BELMAC CORPORATION
been authorized by the Company or any
Underwriter. This Prospectus does not con-
stitute an offer to sell or a solicitation Each Consisting of One Thousand
of an offer to sell or of an offer to buy Dollars ($1,000) Principal Amount
any of these securities in any jurisdic- 12% Covertible Senior Subordianted
tion to any person to whom it is unlawful Debenture
to make such offer or solicitation. Except Due January __, 2006
where otherwise indicated, this Prospectus and
speaks as of the effective date of the 1,000 Class A Redeemable Warrants
Registration Statement. Neither the deli- Each to Purchase One Share
very of this Prospectus nor any sale made of Common Stock and
hereunder shall, under any circumstances, One Class B Redeemable
create any implication that there has been Warrant
no change in the affairs of the Company
since the date hereof. Offering Price $1,000 per Unit
TABLE OF CONTENTS
Page
Available Information.....................
Prospectus Summary........................
Risk Factors..............................
Use of Proceeds........................... ----------
Price Range of Common Stock and PROSPECTUS
Dividend Policy.......................... ----------
Capitalization............................
Selected Financial Data...................
Management's Discussion and............... COLEMAN AND COMPANY
Analysis of Financial Condition SECURITIES, INC.
and Results of Operations................
Business..................................
Legal Proceedings......................... January ___, 1996
Management................................
Executive Compensation....................
Certain Transactions......................
Principal Stockholders....................
Description of Securities.................
Description of Debentures.................
Certain Federal Income Tax Considerations.
Requirement For Current Registration......
Underwriting..............................
Concurrent Offering.......................
Legal Matters.............................
Experts...................................
Index to Financial Statements.............
========================================= =====================================
<PAGE>
********************************************************************************
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these Securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
********************************************************************************
[Alternate Page for Selling Shareholder Prospectus]
Subject to Completion, Dated December__, 1995
PROSPECTUS
BELMAC CORPORATION
491,250 Shares of Common Stock
This Prospectus relates to 491,250 shares (the "Selling Shareholders'
Shares") of common stock, par value $.02 per share (the "Common Stock"), of
Belmac Corporation (the "Company"), which are being offered for sale by certain
selling shareholders (the "Selling Shareholders"). The Selling Shareholders'
Shares include (i) 120,000 shares of Common Stock issued by the Company in an
October 1995 private placement (the "First Placement"); (ii) 240,000 shares of
Common Stock issuable upon conversion, at the option of the holder thereof, of
$60,000 principal amount convertible notes (the "Notes") issued in the First
Placement at a conversion price of $3.00 per share upon 15 days notice to the
Company; and (iii) 131,250 shares of Common Stock issued by the Company in a
subsequent October 1995 private placement (the "Second Placement"). See "Selling
Shareholders and Plan of Distribution." The Company will not receive any of the
proceeds from the sales of the Selling Shareholders' Shares by the Selling
Shareholders.
The Selling Shareholders, their pledgees and/or their donees, may be
deemed to be "underwriters" as defined in the Securities Act of 1933. If any
broker-dealers are used by the Selling Shareholders, their pledgees and/or their
donees, any commissions paid to broker-dealers and, if broker-dealers purchase
any Selling Shareholders' Shares as principals, any profits received by such
broker-dealers on the resale of the Selling Shareholders' Shares may be deemed
to be underwriting discounts or commissions under the Securities Act of 1933. In
addition, any profits realized by the Selling Shareholders, their pledgees
and/or their donees, may be deemed to be underwriting commissions. All costs,
expenses and fees in connection with the registration of the Selling
Shareholders' Shares offered by Selling Shareholders will be borne by the
Company. Brokerage commission, if any, attributable to the sale of the Selling
Shareholders' Shares will be borne by the Selling Shareholders, their pledgees
and/or their donees.
The Selling Shareholders' Shares offered by this Prospectus may be sold
from time to time by the Selling Shareholders, their pledgees and/or their
donees. No underwriting arrangements have been entered into by the Selling
Shareholders. The distribution of the Selling Shareholders' Shares by the
Selling Shareholders, their pledgees and/or their donees, may be effected in one
or more transactions that may take place on the American Stock Exchange or the
over-the-counter market, including ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more dealers for
resale of such shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Shareholders, their pledgees and/or their donees, in
connection with sales of the Selling Shareholders' Shares.
On the date of this Prospectus, a registration statement under the
Securities Act of 1933 with respect to an underwritten public offering of 6,000
Units (without giving effect to the over-allotment option (the "Over-allotment
Option") granted to the Underwriters to purchase an additional 900 Units), with
each Unit consisting of one thousand dollar ($1,000) principal amount 12%
Convertible Senior Subordinated Debenture due January ___, 2006 and 1,000 Class
A Redeemable Warrants, with each redeemable warrant entitling the holder to
purchase one share of Common Stock and one Class B Redeemable Warrant (the
"Units"), was declared effective by the Securities and Exchange Commission. In
connection with the offering of the Units, the Company granted the Underwriter a
warrant to purchase 600 Units (the "Underwriter Warrant").
------------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS SPECIFIED
UNDER THE CAPTION "RISK FACTORS" LOCATED ON PAGE 8 OF THIS
PROSPECTUS.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is January __, 1996.
A
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
THE OFFERING
This Prospectus relates to the offering of 491,250 shares of Common Stock. See
"Description of Securities" and "Selling Shareholders and Plan of Distribution."
RISK FACTORS
Investment in the Company involves certain risks. Risk factors include,
among others, the following: (i) the Company has a history of operating losses
and accumulated operating deficits; (ii) the Company has a negative cash flow
from operating activities and may not be able to fund current operations; and
(iii) these matters may indicate that there is substantial doubt about the
Company's ability to continue as a going concern. See "Risk Factors."
B
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
The Company has issued or may issue an aggregate of 491,250 shares of
Common Stock to the Selling Shareholders that are being offered pursuant to this
Prospectus. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Selling Shareholders have advised the Company that sales of the shares of
Common Stock may be effected from time to time by themselves, their pledgees
and/or their donees, in transactions (which may include block transactions) on
the American Stock Exchange, on the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Shareholders, their pledgees and/or their donees, may effect such
transactions by selling Common Stock directly to purchasers or through
broker-dealers that may act as agents or principals. Such broker-dealers may
receive compensation in the form of discounts, concessions or commission from
the Selling Shareholders and/or the purchasers of shares of Common Stock for
whom such broker-dealers may act as agents or to whom they sell as principals,
or both (which compensation as to a particular broker-dealer might be in excess
of customary commissions).
The Selling Shareholders, their pledgees and/or their donees, and any
broker-dealers that act in connection with the sale of the shares of Common
Stock as principals may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act and any commissions received by them and any
profit on the resale of the shares of Common Stock as principals might be deemed
to be underwriting discounts and commissions under the Securities Act. The
Selling Shareholders, their pledgees and/or their donees, may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the shares of Common Stock against certain liabilities, including
liabilities arising under the Securities Act. The Company will not receive any
proceeds from the sales of the Selling Shareholders' Shares by the Selling
Shareholders. Sales to the Selling Shareholders' Shares by the Selling
Shareholders, or even the potential of such sales, would likely have an adverse
effect on the market price of the Common Stock.
C
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
The following table sets forth certain information with respect to
persons for whom the Company is registering the Selling Shareholders' Shares for
resale to the public. The Company will not receive any of the proceeds from the
sale of the Selling Shareholders' Shares. Beneficial ownership of the Selling
Shareholders' Shares by such Selling Shareholders after the offering will depend
on the number of Selling Shareholders' Shares sold by each Selling Shareholder.
The Selling Shareholders' Shares offered by the Selling Shareholders are not
being underwritten by the Underwriter.
<TABLE>
<CAPTION>
Beneficial Ownership
Beneficial Ownership After Offering if
Selling Shareholder Prior to Offering Maximum Maximum is Sold
------------------- --------------------- Amount to ----------------------
Amount Percent be Sold Amount Percent
------ ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert J. Alldredge(1).................... 15,000 .45% 15,000 0 0
Thomas G. Babington(1).................... 30,000 .90% 30,000 0 0
Barry Blank(1)(3)......................... 120,000 3.52% 120,000 0 0
Violet M. Blank(1)........................ 15,000 .45% 15,000 0 0
Joseph Giamanco(1)........................ 60,000 1.78% 60,000 0 0
John E. McConnaughy, Jr.(1)............... 120,000 3.52% 120,000 0 0
Khin Aye(2)............................... 7,500 .23% 7,500 0 0
Wilson Price Barranco Billingsly
Keogh Plan, John S. Price, Trustee
Trustee, FBO Carl A. Barranco(2)........ 3,750 .11% 3,750 0 0
Wilson Price Barranco Billingsly
Keogh Plan, John S. Price, Trustee
Trustee, FBO William Barranco(2)........ 3,750 .11% 3,750 0 0
Albert Brod(2)............................ 3,750 .11% 3,750 0 0
Thomas J. Carroll(2)...................... 7,500 .23% 7,500 0 0
Leo Denslow(2)............................ 7,500 .23% 7,500 0 0
James H. Friar(2)......................... 7,500 .23% 7,500 0 0
Barry Friedman(2)......................... 3,750 .11% 3,750 0 0
John N. Kapoor Trust DTD 9/20/89,
John N. Kapoor Trustee(2)............... 7,500 .23% 7,500 0 0
John Kiser (2)............................ 7,500 .23% 7,500 0 0
Willard J. Kiser Living Trust DTD
11/1/91(2).............................. 7,500 .23% 7,500 0 0
Alec G. Land(2)........................... 7,500 .23% 7,500 0 0
Richard M. Maser(2)....................... 15,000 .45% 15,000 0 0
Robert A. Mignatti(2)..................... 3,750 .11% 3,750 0 0
Kenneth W. Moore(2)....................... 7,500 .23% 7,500 0 0
Sara Parnum(2)............................ 3,750 .11% 3,750 0 0
D
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
Beneficial Ownership
Beneficial Ownership After Offering if
Selling Shareholder Prior to Offering Maximum Maximum is Sold
------------------- --------------------- Amount to ----------------------
Amount Percent be Sold Amount Percent
------ ------- --------- ------ -------
Therold W. Perkins Trustee(2)............. 7,500 .23% 7,500 0 0
Sam A. Phillips(2)........................ 7,500 .23% 7,500 0 0
JoAnn Timbanard(2)........................ 3,750 .11% 3,750 0 0
James R. Washburn(2)...................... 7,500 .23% 7,500 0 0
</TABLE>
- ---------------
* Less than one percent
(1) First Placement
(2) Second Placement
(3) Mr. Blank is an officer of Coleman & Company Securities, Inc.
("Coleman"). Coleman acted as the placement agent for the First
Placement and the Second Placement.
E
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas,
New York, New York 10036. Barry B. Feiner, P.C. has acted as counsel for the
Selling Shareholders in connection with this offering. Parker Chapin Flattau &
Klimpl, LLP and Mr. Feiner have represented Coleman in connection with other
transactions.
EXPERTS
On June 6, 1994, Price Waterhouse declined to stand for re-election as
the Company's independent public accountant. There was no adverse opinion or
disclaimer of opinion, or modification as to uncertainty, audit scope or
accounting principles contained in the reports of Price Waterhouse for the
fiscal years ended June 30, 1992 and December 31, 1993 or the six month
transition period ended December 31, 1992, other than the inclusion in Price
Waterhouse's reports relating to the periods ended December 31, 1992 and 1993 of
a statement as to an uncertainty regarding the ability of the Company to
continue as a going concern.
During the Company's fiscal periods covered by Price Waterhouse's
reports and the subsequent interim period preceding Price Waterhouse's decision
not to stand for re-election on June 6, 1994, there were no disagreements with
Price Waterhouse on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which disagreements, if not
resolved to the satisfaction of Price Waterhouse, would have caused Price
Waterhouse to make reference in connection with its report concerning the
Company's financial statements to the subject matter of the disagreements other
than as set forth below.
For the fiscal year ended June 30, 1992, Price Waterhouse reported
material weaknesses indicating that during much of fiscal 1992, European
financial management personnel were not in place, uniform accounting policies
and reporting procedures were not clearly established and certain corporate
documents, such as Board of Directors meeting minutes, contractual agreements
and documents filed with the Securities and Exchange Commission, were not
contemporaneously available from management and signed copies of such documents
were not readily available. These items were discussed with the Audit Committee
of the Company's Board of Directors and, during the year ended December 31,
1993, were resolved to the satisfaction of Price Waterhouse. The Price
Waterhouse report to the Audit Committee for the year ended December 31, 1993
did not contain any material weaknesses. The Company authorized Price Waterhouse
to respond fully to the inquiries of a successor accountant concerning all
subject matters.
The Audit Committee of the Board of Directors of the Company selected
Deloitte & Touche LLP to serve as the Company's independent auditors for the
year ended December 31, 1994 and for the year ending December 31, 1995.
The consolidated financial statements as of December 31, 1994 and for
the year then ended, and as of September 30, 1995 and for the nine months then
ended, included in this Prospectus and the related financial statement schedule
as of December 31, 1994 and for the year then ended, and as of September 30,
1995 and for the nine months then ended included elsewhere in the Registration
Statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement (which reports express an unqualified opinion and include an
explanatory paragraph referring to the Company's recurring losses from
operations as well as negative operating cash flows which raise substantial
doubt about its ability to continue as a going concern), and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements with respect to the year ended
June 30, 1992, the six months ended December 31, 1992 and the year ended
December 31, 1993 included in this Prospectus and the related financial
statement schedule included elsewhere in the Registration Statement have been so
included in reliance on the report (which includes an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 of Notes to Consolidated Financial Statements) of Price Waterhouse LLP,
independent accountants, given on authority of said firm as experts in auditing
and accounting.
F
<PAGE>
[Alternate Page for Selling Shareholder Prospectus]
- ------------------------------------------- ---------------------------------
No dealer, salesperson or any other
person has been authorized to give any
information or to make any representation
other than those contained in this
Prospectus in connection with the offer 491,250 SHARES
made by this Prospectus, and, if given OF COMMON STOCK
or made, such information or representa-
tions must not berelied upon as having BELMAC CORPORATION
been authorized by the Company or any
Underwriter. This Prospectus does not con-
stitute an offer to sell or a solicitation
of an offer to sell or of an offer to buy
any of these securities in any jurisdic-
tion to any person to whom it is unlawful
to make such offer or solicitation. Except
where otherwise indicated, this Prospectus
speaks as of the effective date of the
Registration Statement. Neither the deli-
very of this Prospectus nor any sale made
hereunder shall, under any circumstances,
create any implication that there has been
no change in the affairs of the Company
since the date hereof.
-------------
TABLE OF CONTENTS PROSPECTUS
Page -------------
Available Information.....................
Prospectus Summary........................
Risk Factors..............................
Price Range of Common Stock and
Dividend Policy......................
Capitalization............................
Selected Financial Data...................
Management's Discussion and
Analysis of Financial Condition January __, 1996
and Results of Operations.............
Business..................................
Management................................
Executive Compensation....................
Certain Transactions......................
Principal Stockholders....................
Description of Securities.................
Description of Debentures.................
Certain Federal Income Tax Considerations.
Requirement For Current Registration......
Selling Shareholders and Plan
of Distribution.......................
Legal Matters.............................
Experts...................................
Index to Financial Statements.............
- ------------------------------------------- ---------------------------------
G
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
It is estimated that the following expenses will be incurred in
connection with the proposed offering hereunder. All of such expenses will be
borne by the Registrant.
<TABLE>
<S> <C>
Registration fee - Securities
and Exchange Commission.......................................... $ 11,514
Legal fees and expenses............................................ 100,000
Accounting fees and expenses....................................... 80,000
Blue sky fees and expenses
(including counsel fees).............................. 10,000
Printing expenses.................................................. 35,000
Miscellaneous...................................................... $ 13,486
---------
Total................................................. $ 250,000
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850 of the Florida 1989 Business Corporation Act is set
forth below:
ss.607.0850 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS. A
corporation shall have the power to indemnify any person who was or is a party
to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against liability
incurred in connection with such proceeding, including any appeal thereof, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
A. A corporation shall have power to indemnify any person, who was or
is a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the
II-1
<PAGE>
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interest of
the corporation, except that no indemnification shall be made under this
subsection in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
B. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith.
C. Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if
obtainable, by majority vote of a committee duly designated by the board of
directors (in which directors who are parties may participate) consisting solely
of two or more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(1) Selected by the board of directors prescribed
in paragraph (a) or the committee prescribed in paragraph (b); or
(2) If a quorum of the directors cannot be
obtained for paragraph (a) and the committee cannot be designated under
paragraph (b), selected by majority vote of the full board of directors (in
which directors who are parties may participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
D. Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
E. Expenses incurred by an officer or director in defending
a civil or criminal proceeding may be paid by the corporation
in advance of the final disposition of such proceeding upon receipt
II-2
<PAGE>
of an undertaking by or on behalf of such director or officer to repay such
amount if he is ultimately found not to be entitled to indemnification by the
corporation pursuant to this section. Expenses incurred by other employees and
agents may be paid in advance upon such terms or conditions that the board of
directors deems appropriate.
F. The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer,
employee, or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which
the liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the
best interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
G. Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
H. Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled
to mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
II-3
<PAGE>
(b) The director, officer, employee, or agent is entitled
to indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly
and reasonably entitled to indemnification or advancement of expenses, or both,
in view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
I. For purposes of this section, the term "corporation" includes,
in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
J. For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including
those for appeal;
(c) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending,
or completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation"
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation" describes the actions of a person who acts in good faith and in a
manner he reasonably believes to be in the best interests of the participants
and beneficiaries of an employee benefit plan.
K. A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any
liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the
II-4
<PAGE>
corporation would have the power to indemnify him against such liability under
the provisions of this section.
* * * * *
Article IV of the Registrant's By-laws contains provisions for the
indemnification of officers, directors, employees and agents to the fullest
extent permitted by Section 607.0850.
There is in effect a directors and officers liability insurance
policy with Lexington Insurance Company. The policy insures the directors and
officers of the Registrant against loss arising from certain claim or claims
made against such directors or officers by reason of certain wrongful acts. The
policy provides combined limit of liability of $2,000,000 per policy year for
both directors' and officers' liability coverage at an annual premium of
$113,400.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
A. On December 16, 1992 the Registrant granted to an officer 10,000
shares of Common Stock in exchange for services rendered. Such grant was made in
reliance on the exemption provided by Section 4(2) of the Securities Act of
1933, as amended (the "Act").
B. On December 29, 1992 the Registrant granted to 70 employees of the
Registrant in Spain an aggregate of 7,000 shares of Common Stock for services
rendered. Such grant was made in reliance on the exemption provided by Section
4(2) of the Act.
C. On April 1, 1993 the Registrant granted to 19 employees of the
Registrant in Tampa, Florida an aggregate of 1,900 shares of Common Stock for
services rendered. Such grant was made in reliance on the exemption provided by
Section 4(2) of the Act.
D. From April 19, 1993 through July 13, 1993 the Registrant conducted
a private placement to investors which are accredited investors as such term is
defined in Regulation D ("Regulation D") promulgated under the Act and to
investors who are not U.S. Persons, as such term is defined in Regulation S
("Regulation S") promulgated under the Act, of 547,335 shares of Common Stock
for aggregate proceeds of $5,725,000 and aggregate commissions and underwriter
discounts of $1,345,000. The placement agents for such sales were Global
Financial, Drake Capital, The Lion Group, Baytree Associates, Healthcare Capital
Group and Euro-Pacific Securities, Inc. Such sales were made in reliance upon
the exemptions provided by Regulation D and Regulation S.
E. On June 14, 1993 and December 31, 1993 the Registrant granted to
two former employees an aggregate of 14,667 shares of Common Stock in settlement
of litigation related to their termination. Such grant was made in reliance on
the exemption provided by Section 4(2) of the Act.
F. On July 22, 1993 the Registrant issued to a former officer and
director 10,000 shares of Common Stock upon conversion of such employee's
minority interest in a subsidiary of the Registrant. Such issuance was made in
reliance on the exemption provided by Section 4(2) of the Act.
II-5
<PAGE>
G. From September 10, 1993 through September 28, 1993 the Registrant
conducted a private placement to investors which are accredited investors as
such term is defined in Regulation D of 66,000 shares of Common Stock for
aggregate proceeds of $841,000 and commissions of $11,000. The placement agent
for such sales was Phillipe Aransaenz. Such sales were made in reliance upon the
exemption provided by Regulation D.
H. On November 23, 1993 the Registrant conducted a private placement
to investors which are not U.S. Persons as such term is defined in Regulation S
of 50,000 shares of Common Stock for aggregate proceeds of $618,000. The
placement agents for such sales were Euro-Pacific Securities, Inc. and Pacific
International. Such sales were made in reliance upon the exemption provided by
Regulation S.
I. On November 24, 1993 the Registrant conducted a private placement
to investors which are accredited investors as such term is defined in
Regulation D of 70,000 shares of Common Stock for aggregate proceeds of
$1,700,000. The placement agent for such sales was Healthcare Capital Group,
which received commissions of approximately $102,000. Such sales were made in
reliance upon the exemption provided by Regulation D.
J. From November 24, 1993 through February 4, 1994 the Registrant
issued to two holders of warrants an aggregate of 11,250 shares of Common Stock
for aggregate proceeds of $131,250. Such issuances were made in reliance upon
the exemptions provided by Regulation D and Regulation S.
K. On March 29, 1994 the Registrant conducted a private placement to
an investor who is an accredited investor as such term is defined in Regulation
D of 52,500 shares of Common Stock for aggregate proceeds of $577,000. The
placement agent for such sales was Baytree Associates, which received
commissions of $58,000. Such sale was made in reliance upon the exemption
provided by Regulation D.
L. On April 22, 1994 the Registrant conducted a private placement to
an investor who is not a U.S. Person as such term is defined in Regulation S of
20,000 shares of Common Stock for aggregate proceeds of $150,000. The placement
agent for such sales was Baytree Associates, which received commissions of
$15,000. Such issuance was made in reliance upon the exemption provided by
Regulation S.
M. On May 9, 1994 the Registrant issued to class members settling a
class action proceeding against the Registrant an aggregate of 70,176 shares of
Common Stock with an aggregate market value of $1,000,000. Such sale was made in
reliance on the exemption provided by Section 3(a)(10) of the Act.
N. On June 2, 1994 the Registrant issued to members of the
Registrant's board of directors an aggregate of 7,000 shares of Common Stock for
services rendered. Such sale was made in reliance on the exemption provided by
Section 4(2) of the Act.
O. From June 16, 1994 through December 7, 1994 the Registrant
conducted a private placement to investors which are not U.S. Persons as
such term is defined in Regulation S of 723,316 shares of Common Stock
for aggregate proceeds of $3,868,000. The placement agents were Baytree
II-6
<PAGE>
Associates and American Capital, which recieved commissions of $343,000. Such
sales were made in reliance upon the exemption provided by Regulation S.
P. On October 14, 1994 the Registrant issued to a consultant 21,818
shares of Common Stock for consulting services rendered. Such sale was made in
reliance upon the exemption provided by Regulation D.
Q. On December 19, 1994 the Registrant issued upon conversion of
outstanding shares of Series A Preferred Stock 1,152 shares of Common Stock.
Such sale was made in reliance upon the exemption provided by Regulation D.
R. On April 7, 1995 the Registrant issued to members of the
Registrant's board of directors an aggregate of 817 shares of Common Stock for
services rendered. Such sales were made in reliance on the exemption provided by
Section 4(2) of the Act.
S. On October 5, 1995 the Registrant conducted a private placement to
investors who are accredited investors as such term is defined in Regulation D
of 12 Units each consisting of a 12% Convertible Subordinated Note and 10,000
shares of Common Stock for aggregate proceeds of $720,000. The placement agent
was Coleman and Company Securities, Inc. received commissions of $72,000. Such
sales were made in reliance upon the exemption provided by Regulation D.
T. On October 11, 1995 the Registrant issued upon conversion of
outstanding shares of Series A Preferred Stock 3,088 shares of Common Stock.
Such issuance was made in reliance upon the exemption provided by Regulation D.
U. On October 26, 1995 the Registrant conducted a private placement
to investors who are accredited investors as such term is defined in Regulation
D of 17.5 Units each consisting of a 12% Convertible Subordinated Note and 7,500
shares of Common Stock (or a proportional share thereof) for aggregate proceeds
of $1,050,000. The placement agent was Coleman and Company Securities, Inc.,
which received commissions of $105,000. Such sales were made in reliance upon
the exemption provided by Regulation D.
V. On December 8, 1995, the Registrant issued to its former Chairman
6,000 shares of Common Stock for services rendered. Such sale was made in
reliance on the exemption provided by Section 4(2) of the Act.
W. On December 8, 1995, the Registrant issued to a consultant 2,250
shares of Common Stock for consulting services rendered. Such sale was made in
reliance upon the exemption provided by Regualtion D.
X. On December 8, 1995, the Registrant issued to a holder of warrants
an aggregate of 90,000 shares of Common Stock for aggregate proceeds of
$225,000. Such issuance was made in reliance upon the exemption provided by
Regulation S.
II-7
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Sequentially
Number Description Numbered Page
- ------- --------------- ---------------
1.1(1) Underwriting Agreement.
3.1(1) Articles of Incorporation of the Registrant, as amended and restated.
3.2 By-Laws of the Registrant, as amended and restated. (Reference is made
to Exhibit 3.2 to the Registrant's Form 10-K filed June 30, 1989,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
3.3 Amendment to By-Laws of the Registrant.(Reference is made to Exhibit
3.2(a) to the Registrant's Amendment No. 1 on Form S-3 to Form S-1
Registration Statement, Commission File No. 33-35941, which exhibit is
incorporated herein by reference.)
4.1 Registrant's Incentive Stock Option Plan.(Reference is made to Exhibit
4.3 to the Registrant's Registration Statement on Form S-18,
Commission File No. 33-17201, which exhibit is incorporated herein by
reference.)
4.2 Registrant's Non-Qualified Stock Option Plan. (Reference is made to
Exhibit 4.4 to the Registrant's Form 10-K filed June 30, 1989,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.3 Form of Incentive Stock Option Agreement under the Registrant's Incen-
tive Stock Option Plan. (Reference is made to Exhibit 4.6 to the
Registrant's Form 10-K filed June 30, 1989, Commission File No. 1-
10581, which exhibit is incorporated herein by reference.)
4.4 Form of Director's Incentive Stock Option Agreement under the Regis-
trant's Incentive Stock Option Plan. (Reference is made to Exhibit
4.6(a) to the Registrant's Form 10-K filed June 30, 1989,
- -----------------
(1) To be filed by amendment.
II-8
<PAGE>
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.5 Form of Non-Qualified Stock Option Agreement under the Registrant's
Non-Qualified Stock Option Plan. (Reference is made to Exhibit 4.7(a)
to the Registrant's Form 10-K filed June 30, 1989, Commission File No.
1-10581, which exhibit is incorporated herein by reference.)
4.6 Form of Director's Non-Qualified Stock Option Agreement under the
Registrant's Non-Qualified Stock Option Plan. (Reference is made to
Exhibit 4.7(a) to the Registrant's Form 10-K filed June 30, 1989,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.7 Form of Subscription Agreement between the Registrant and each
purchaser in connection with the Registrant's October 1991 sales of
its $2.25 Convertible Exchangeable Preferred Shares, Series A.
(Reference is made to Exhibit 4.1 to the Registrant's Form 8-K filed
October 17, 1991, Commission File No. 1-10581, which exhibit is
incorporated herein by reference.)
4.8 Indenture relating to the Registrant's 9% Convertible Subordinated
Debentures due 2016 (with the Form of Debenture attached thereto as
Exhibit A.) (Reference is made to Exhibit 4.2 to the Registrant's Form
8-K filed October 17, 1991, Commission File No. 1-10581, which exhibit
is incorporated herein by reference.)
4.9 Specimen Certificate of the Registrant's $2.25 Convertible Exchange-
able Preferred Shares, Series A. (Reference is made to Exhibit 4.3 to
the Registrant's Form 8-K filed October 17, 1991, Commission File No.
1-10581, which exhibit is incorporated herein by reference.)
4.10 Registrant's 1991 Stock Option Plan. (Reference is made to Exhibit
4.6 to the Registrant's Form 8-K filed October 17, 1991, Commission
File No. 1-10581, which exhibit is incorporated herein by reference.)
4.11 Amendment to Registrant's 1991 Stock Option Plan. (Reference is made
to Exhibit 4.17 to the Registrant's Form 10-K for the Transition
Period Ended December 31, 1992, Commission File No. 1-10581, which
exhibit is incorporated herein by reference.)
II-9
<PAGE>
4.12 Amendment to Registrant's 1991 Stock Option Plan as approved by the
shareholders on June 9, 1994. (Reference is made to Exhibit 4.16 to
the Registrant's Form 10-K for the year ended December 31, 1994,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference).
4.13 Form of Non-qualified Stock Option Agreement under the Registrant's
1991 Stock Option Plan. (Reference is made to Exhibit 4.25 to the
Registrant's Form 10-K dated June 30, 1992, Commission File No.
1-10581, which exhibit is incorporated herein by reference.)
4.14 Subscription Agreement between the Registrant and Bodel Inc. dated
November 23, 1993. (Reference is made to Exhibit 4.20 to the
Registrant's Form 10-K filed December 31, 1993, Commission File No.
1-10581, which exhibit is incorporated herein by reference.)
4.15 Subscription Agreement between the Registrant and E.C. Morgan, dated
May 10, 1993. (Reference is made to Exhibit 4.4 to the Registrant's
Registration Statement on Form S-3, Commission File No. 33-69946,
which exhibit is incorporated herein by reference.)
4.16 Form of Subscription Agreement between the Registrant and various
subscribers to its common stock entered into by each of the Selling
Stockholders other than E.C. Morgan, Rossignol, Ferraris, and Huguet.
(Reference is made to Exhibit 4.5 to the Registrant's Registration
Statement on Form S-3, Commission File No. 33-69946, which exhibit is
incorporated herein by reference.)
4.17 Warrants issued by the Registrant to Grant Harshbarger, dated November
11, 1993 and November 17, 1993, respectively. (Reference is made to
Exhibit 4.8 to the Registrant's Registration Statement on Form S-3,
Commission File No. 33-69946, which exhibit is incorporated herein by
reference.)
4.18 Warrants issued by the Registrant to Healthcare Capital Investments,
Inc., dated November 11, 1993 and November 17, 1993, respectively.
(Reference is made to Exhibit 4.9 to the Registrant's Registration
Statement on Form S-3, Commission File No. 33-69946, which exhibit is
incorporated herein by reference.)
4.19 Subscription Agreement between the Registrant and Western Slops, Ltd.
dated March 29, 1994. (Reference is made to Exhibit 4.29 to the
Registrant's Form 10-K for the year ended December 31, 1994,
II-10
<PAGE>
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.20 Form of Subscription Agreement between the Registrant and various
subscribers to its Common Stock for the purchase of shares in a 1994
private placement. (Reference is made to Exhibit 4.30 to the
Registrant's Form 10-K for the year ended December 31, 1994,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.21 Form of Subscription Agreement between the Registrant and various
subscribers to its Common Stock for the purchase of units in a 1994
private placement. (Reference is made to Exhibit 4.31 to the
Registrant's Form 10-K for the year ended December 31, 1994,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.22 Subscription Agreement between the Registrant and Shulmit Pritziker
dated December 7, 1994. (Reference is made to Exhibit 4.32 to the
Registrant's Form 10-K for the year ended December 31, 1994,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.23(2) Warrants issued by the Registrant to Baytree Associates, Inc. dated
October 18, 1995.
4.24 Form of Subscription Agreement between the Registrant and various
purchasers of Units consisting of one note and 10,000 shares of Common
Stock in an October 1995 private placement. (Reference is made to
Exhibit 4.1 to the Registrant's Form 8-K filed November 29, 1995,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.25 Form of Note dated September 30, 1995 issued by the Registrant to the
purchasers of Units in an October 1995 private placement. (Reference
is made to Exhibit 4.2 to the Registrant's Form 8-K filed November 29,
1995, Commission File No. 1-10581, which exhibit is incorporated
herein by reference.)
- -----------------
(2) Filed herewith.
II-11
<PAGE>
4.26 Form of Subscription Agreement between the Registrant and various
purchasers of Units consisting of one note and 7,500 shares of Common
Stock in an October 1995 private placement. (Reference is made to
Exhibit 4.3 to the Registrant's Form 8-K filed November 29, 1995,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.27 Form of Note dated October 25, 1995 issued by the Registrant to the
purchasers of Units in an October 1995 private placement. (Reference
is made to Exhibit 4.4 to the Registrant's Form 8-K filed November 29,
1995, Commission File No. 1-10581, which exhibit is incorporated
herein by reference.)
4.28(2) Form of Indenture relating to the Registrant's $1,000 Principal Amount
12% Senior Convertible Subordinated Debentures due January __, 2006
(with the Form of Debenture attached thereto as Exhibit A.)
4.29(1) Form of Warrant Agreement, including form of Class A and Class B
Warrant.
5.1(1) Opinion and consent of Parker Chapin Flattau & Klimpl, LLP
10.1(2) Employment Agreement dated as of June 12, 1995 between the Registrant
and James R. Murphy.
10.2(2) Employment Agreement dated as of June 12, 1995 between the Registrant
and Robert M. Stote, M.D.
10.3(2) Employment Agreement dated as of June 12, 1995 between the Registrant
and Michael D. Price.
10.4 Agreement between the Registrant and Jean-Francois Rossignol dated
August 13, 1993. (Reference is made to Exhibit 4.2 to the Registrant's
Registration Statement on Form S-3, Commission File No. 33-69946,
which exhibit is incorporated herein by reference.)
- ---------------
(1) To be filed by amendment.
(2) Filed herewith.
II-12
<PAGE>
10.5 Partnership Agreement dated March 11, 1994 of Belmac/Maximed
Partnership (Reference is made to Exhibit 10.1 to the Registrant's
Form 10-Q for the quarter ended March 31, 1994, Commission File No.
1-10581, which exhibit is incorporated herein by reference.)
10.6 Contract for Sale and Transfer of Belmacina(R) Know-How and Trademark
between Laboratorios Belmac S.A. and CEPA, together with English
Summary. (Reference is made to Exhibit 2.1 to the Registrant's Form
8-K dated February 1, 1995, Commission File No. 1-10581, which exhibit
is incorporated herein by reference.)
12.1(2) Computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of the Registrant. (Reference is made to Exhibit 21.1 to
the Registrant's Form 10-K for the year ended December 31, 1994,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
23.1(2) Consent of Deloitte & Touche LLP.
23.2(2) Consent of Price Waterhouse LLP.
- -------------
(2) Filed herewith.
II-15
<PAGE>
(b) Financial Statement Schedules:
Item Description Page
Reports of Independent Auditors' on Financial S-1 and S-2
Statement Schedule
Schedule II Valuation and qualifying accounts and reserves S-3
</TABLE>
All other schedules have been omitted because they are
inapplicable or are not required, or the information is included elsewhere in
the consolidated financial statements or notes thereto.
II-14
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes:
(1) that for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) that for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
Securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(A) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(B) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the
II-15
<PAGE>
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(C) to include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(4) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tampa,
State of Florida, on the 18th day of December, 1995.
BELMAC CORPORATION
By /s/ JAMES R. MURPHY
--------------------------
James R. Murphy
Chairman of the Board,
President, Chief Executive Officer
and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints each of James R. Murphy, Robert
M. Stote and Michael D. Price and each of them with power of substitution, as
his or her attorney-in-fact, in all capacities, to sign any amendments to this
registration statement (including post-effective amendments) and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-facts or their substitutes may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------- -------
<S> <C> <C>
/s/ JAMES R. MURPHY Chairman of the Board, President, December 18, 1995
- --------------------- Chief Executive Officer and Director
James R. Murphy (Principal Executive Officer)
/s/ ROBERT M. STOTE Senior Vice-President, Chief Science December 18, 1995
- --------------------- Officer and Director
Robert M. Stote
/s/ MICHAEL D. PRICE Vice-President, Chief Financial December 18, 1995
- --------------------- Officer, Treasurer, Secretary and
Michael D. Price Director (Principal Financial and
Accounting Officer)
<PAGE>
Signature Title Date
----------- ------- -------
/s/ RANDOLPH W. ARNEGGER Director December 18, 1995
- ---------------------
Randolph W. Arnegger
/s/ CHARLES L. BOLLING Director December 18, 1995
- ---------------------
Charles L. Bolling
/s/ DORIS E. WARDELL Director December 18, 1995
- ---------------------
Doris E. Wardell
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Belmac Corporation
Tampa, Florida
We have audited the consolidated financial statements of Belmac Corporation and
subsidiaries (the "Company") as of December 31, 1994 and for the year then ended
and as of September 30, 1995 and for the nine months then ended, and have issued
our report thereon dated December 8, 1995, which report expresses an unqualified
opinion and includes an explanatory paragraph referring to the Company's
recurring losses from operations as well as negative operating cash flows, which
raise substantial doubt about its ability to continue as a going concern; such
consolidated financial statements and report are included elsewhere in this
Registration Statement on Form S-1. Our audit also included the financial
statement schedule of Belmac Corporation as of December 31, 1994 and for the
year then ended, and as of September 30, 1995 and for the nine months then ended
listed in Item 16. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audit. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Tampa, Florida
December 8, 1995
S-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON FINANCIAL
STATEMENT SCHEDULE
To the Board of Directors
of Belmac Corporation
Our audits of the consolidated financial statements of Belmac Corporation
referred to in our report dated March 30, 1994 appearing elsewhere in this
Registration Statement on Form S-1 also included an audit of the Financial
Statement Schedule listed in Item 16 of this form. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
Price Waterhouse LLP
Tampa, Florida
March 30, 1994
S-2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
Valuation and qualifying accounts and reserves
- ------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------------------------
Description Balance at Additions Deductions- Balance at
beginning of --------------------------------- describe end of period
period
Charged to Charged to
costs and other accounts-
expenses describe
====================================================================================================================================
<S> <C> <C> <C>
Drug licenses and related costs:
For the year ended June 30, 1992 $162,000 $553,000 $715,000
For the six months ended December 31, 1992 715,000 328,000 $609,000 (a) 434,000
For the year ended December 31, 1993 434,000 227,000 414,000 (b) 247,000
For the year ended December 31, 1994 247,000 102,000 58,000 (c) 291,000
For the nine months ended September 30, 1994(e) 247,000 76,000 323,000
For the nine months ended September 30, 1995 291,000 86,000 377,000
Goodwill:
For the year ended June 30, 1992 0 48,000 48,000
For the six months ended December 31, 1992 48,000 20,000 68,000
For the year ended December 31, 1993 68,000 40,000 108,000
For the year ended December 31, 1994 108,000 40,000 148,000
For the nine months ended September 30, 1994(e) 108,000 30,000 138,000
For the nine months ended September 30, 1995 148,000 30,000 178,000
Other:
For the year ended June 30, 1992 0 102,000 102,000
For the six months ended December 31, 1992 102,000 222,000 324,000 (d) 0
</TABLE>
(a) Due to the restructuring of the Registrant, capitalized costs relating to
Alphanon(R) were written off along with the corresponding accumulated
amortization of approximately $125,000. Also Amodex(R) was written down to
its net realizable value and the corresponding accumulated amortization of
approximately $484,000 was written off.
(b) Due to the Registrant's sale of its French marketing rights to Amodex(R),
the drug license and related accumulated amortization of approximately
$66,000 were removed from the accounts, and includes the effect of
exchange rate fluctuation. Due to the agreement with Evans dated March 25,
1994, whereby the Registrant agreed to return to Evans the 25% deposit and
one-half of the promotion campaign monies paid and to release from escrow
the balance of the purchase price, the capitalized costs relating to
Biolid(R) and the related accumulated amortization of approximately
$387,000 were written off, which includes the effect of exchange rate
fluctuation.
(c) Due to the Registrant's sale of its Spanish marketing rights to
Belmacina(R), the drug license and related accumulated amortization of
approximately $81,000 were removed from the accounts and includes the
effect of exchange rate fluctuation.
(d) Other costs were written off and included in restructuring charges of the
Registrant for the six months ended December 31, 1992.
(e) Unaudited.
S-3
EXHIBIT 4.23
-----------
- -
October 18, 1995
BELMAC CORPORATION
The Transferability of this Warrant is
Restricted as Provided in Article 3
In consideration of $.001 per Warrant and other good and valuable
consideration, the receipt of which is hereby acknowledged by BELMAC
CORPORATION, One Urban Centre, Suite 550, 4830 West Kennedy Boulevard, Tampa,
Florida 33609, a Florida corporation ("the Company"), Baytree Associates, Inc.
is hereby granted the right to purchase, at the initial exercise price of $2.50
per share, at any time until 5:00 P.M., New York time, on October 18, 1999,
100,000 (one hundred thousand) shares of the Company's Common Stock, $.02 par
value per share ("Shares").
This Warrant initially is exercisable at a price of $2.50 per Share
payable in cash or by certified or official bank check in New York Clearing
House funds, subject to adjustment as provided in Article 6 hereof. Upon
surrender of this Warrant, with the annexed Subscription Form duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Shares purchased, at the offices of the Company, the registered holder of this
Warrant ("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased.
1. Exercise of Warrant.
-------------------
The purchase rights represented by this Warrant are exercisable at the
option of the
<PAGE>
Holder hereof, in whole or in part (but not as to fractional Shares underlying
this Warrant), during any period in which this Warrant may be exercised as set
forth above. In the case of the purchase of less than all the Shares purchasable
under this Warrant, the Company shall cancel this Warrant upon the surrender
hereof and shall execute and deliver a new Warrant of like tenor for the balance
of the Shares purchasable hereunder.
2. Issuance of Certificates.
------------------------
Upon the exercise of this Warrant, the issuance of certificates for
Shares underlying this Warrant shall be made forthwith (and in any event within
five business days thereafter) without charge to the Holder hereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Articles 3
hereof) be issued in the name of, or in such names as may be directed by, the
Holder hereof; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The certificates
representing the Shares underlying this Warrant shall be executed on behalf of
the Company by the manual or facsimile signature of one of the present or any
future Chairman or President of the Company and any present or future Vice
President or Secretary of the Company.
-2-
<PAGE>
3. Restriction on Transfer of Warrant.
----------------------------------
The Holder of this Warrant, by its acceptance hereof, covenants and
agrees that this Warrant is being acquired as an investment and not with a view
to the distribution hereof, and that it may not be exercised, sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part unless in
the opinion of counsel concurred in by the Company's counsel such transfer is in
compliance with all applicable securities laws.
4. Price.
-----
4.1 Initial and Adjusted Purchase Price. The initial purchase price
shall be $2.50 per Share. The adjusted purchase price shall be the price which
shall result from time to time from any and all adjustments of the initial
purchase price in accordance with the provisions of Article 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, depending upon the
context.
5. Adjustments of Purchase Price and Number of Shares.
--------------------------------------------------
5.1 Subdivision and Combination. In case the Company shall at any
time subdivide
-3-
<PAGE>
or combine the outstanding Shares, the Purchase Price shall forthwith be
proportionately decreased in the case of subdivision or increased in the case of
combination.
5.2 Adjustment in Number of Shares. Upon each adjustment of the
Purchase Price pursuant to the provisions of this Article 5, the number of
Shares issuable upon the exercise of this Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Purchase Price in effect
immediately prior to such adjustment by the number of Shares issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.
5.3 Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding Shares (other than a change in par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in the case of any consolidation of the Company
with, or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the surviving corporation and
which does not result in any reclassification or change of the outstanding
Shares, except a change as a result of a subdivision or combination of such
shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an entirety,
the Holder of this Warrant shall thereafter have the right to purchase upon the
exercise of this Warrant the kind and number of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Holder were the owner of the
Shares underlying this Warrant immediately prior to any such events at the
Purchase Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if such
Holder had exercised this Warrant.
-4-
<PAGE>
6. Registration Rights.
-------------------
The Company hereby agrees, for one time only, to include the Shares in
any one Registration Statement (other than a Registration Statement on Form S-4
or S-8 or similar or successor forms) filed by the Company with the Securities
and Exchange Commission between the date hereof and the expiration date of this
Warrant. The Company shall pay all filing fees, related accountants' and
counsels' fees and all other registration expenses incurred by the Company in
complying with this Section 6; provided, however, that all underwriting
discounts and selling commissions applicable to the Shares shall be borne by the
seller or sellers thereof.
7. Exchange and Replacement of Warrant.
-----------------------------------
This Warrant is exchangeable without expense, upon the surrender hereof
by the registered Holder at the principal executive office of the Company for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
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<PAGE>
8. Elimination of Fractional Interests.
-----------------------------------
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated pursuant to
Section 5.2.
9. Reservation and Listing of Securities.
-------------------------------------
The Company shall at all times reserve and keep available out of its
authorized Shares, solely for the purpose of issuance upon the exercise of this
Warrant, such number of Shares as shall be issuable upon the exercise hereof and
thereof. The Company covenants and agrees that, upon exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable. As
long as this Warrant shall be outstanding, the Company shall use its reasonable
best efforts to cause all Shares issuable upon the exercise of this Warrant to
be listed (subject to official notice of issuance) on all securities exchanges
on which the Shares of the Company's Common Stock may then be listed and/or
quoted on NASDAQ.
-6-
<PAGE>
10. Notices.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first page of
this Warrant or to such other address as the Company may designate by
notice to the Holders.
11. Successors.
----------
All the covenants, agreements, representations and warranties contained
in this Warrant shall bind the parties hereto and their respective heirs,
executors, administrators, distributees, successors and assigns.
12. Headings.
--------
The Article and Section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
-7-
<PAGE>
13. Law Governing.
-------------
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Florida.
WITNESS the seal of the Company and the signature of its duly
authorized officers.
BELMAC CORPORATION
[SEAL]
By ___________________
James R. Murphy
President & CEO
Attest:
___________________________
Michael D. Price, Secretary
-8-
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase Shares by this Warrant according to the conditions hereof and herewith
makes payment of the Purchase Price of such Shares in full.
______________________
Signature
______________________
Address
Dated: ______________________, 19____. ______________________
Social Security Number or
Taxpayer's Identification Number
-9-
EXHIBIT 4.28
------------
BELMAC CORPORATION
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRUSTEE
INDENTURE
Dated as of January , 1996
$7,500,000
12% Convertible Senior Subordinated Debentures due January , 2006
-1-
<PAGE>
TABLE OF CONTENTS
ARTICLE SECTION HEADING PAGE
I DEFINITIONS AND RULES
OF CONSTRUCTION 1
1.01 Definitions 3
1.02 Other Definitions 3
1.03 Rules of Construction 3
II THE SECURITIES 3
2.01 Form and Dating 3
2.02 Execution and Authentication 3
2.03 Registrar, Paying Agent and
Conversion Agent 4
2.04 Paying Agent to Hold Money in Trust 4
2.05 Holder Lists 4
2.06 Transfer and Exchange 5
2.07 Replacement Securities 5
2.08 Outstanding Securities 5
2.09 Treasury Securities 5
2.10 Temporary Securities 6
2.11 Cancellation 6
2.12 Defaulted Interest 6
III REDEMPTION 7
3.01 Notices to Trustee 7
3.02 Selection of Securities to be Redeemed 7
3.03 Notice of Redemption 7
3.04 Effect of Notice of Redemption 7
3.05 Deposit of Redemption Price 8
3.06 Securities Redeemed in Part 8
IV COVENANTS 8
4.01 Payment of Securities 8
4.02 SEC Reports 8
4.03 Compliance Certificate 8
i
<PAGE>
4.04 Limitation on Dividends;
Stock Purchase and
Senior Debt 9
4.05 Certain Transactions With a
Parent and its Affiliates 9
4.06 Corporate Existence 10
4.07 Maintenance of Protection 10
4.08 Payment of Tasks and Other
Claims 10
V SUCCESSORS 11
5.01 When Company May Merge, Etc. 11
5.02 Successor Corporation Substituted 11
VI DEFAULTS AND REMEDIES 11
6.01 Events of Default 11
6.02 Acceleration 12
6.03 Other Remedies 13
6.04 Waiver of Past Defaults 13
6.05 Control by Majority 13
6.06 Limitation on Suits 13
6.07 Rights of Holders to Receive Payment
or Convert Securities 13
6.08 Collection Suit by Trustee 14
6.09 Trustee May File Proofs of Claim 14
6.10 Priorities 14
6.11 Undertaking for Costs 14
VII TRUSTEE 15
7.01 Duties of Trustee 15
7.02 Rights of Trustee 15
7.03 Individual Rights of Trustee 15
7.04 Trustee's Disclaimer 15
7.05 Notice of Defaults 15
7.06 Reports by Trustee to Holders 15
7.07 Compensation and Indemnity 16
7.08 Replacement of Trustee 17
7.09 Successor Trustee by Merger, Etc. 18
7.10 Eligibility; Disqualification 18
ii
<PAGE>
VIII DISCHARGE OF INDENTURE 18
8.01 Termination of Company's Obligations 18
8.02 Application of Trust Money 19
8.03 Repayment to Company 19
IX AMENDMENTS 19
9.01 Without Consent of Holders 19
9.02 With Consent of Holders 21
9.03 Revocation and Effect of Consents 21
9.04 Notation on or Exchange of Securities 21
9.05 Trustee to Sign Amendments, Etc. 21
X CONVERSION 22
10.01 Conversion Privilege 22
10.02 Conversion Procedure 22
10.03 Fractional Shares 23
10.04 Taxes on Conversion 23
10.05 Adjustment for Change in Capital Stock 23
10.06 Adjustment for Certain Issuances
of Common Stock 24
10.07 Subscription Offerings 24
10.08 Other Rights to Acquire Common Stock 25
10.09 Current Market Price 25
10.10 Minimum Adjustment 26
10.11 When Adjustment May Be Deferred 26
10.12 Number of Shares 26
10.13 When No Adjustment Required 26
10.14 Notice of Adjustment 26
10.15 Voluntary Reduction 27
10.16 Notice of Certain Transactions 27
10.17 Company Determination Final 27
10.18 Trustee's Disclaimer 27
XI SUBORDINATION 28
11.01 Agreement to Subordinate 28
11.02 Certain Definitions 28
11.03 Liquidation, Dissolution, Bankruptcy 28
11.04 Default on Senior Debt 29
11.05 Acceleration of Securities 29
iii
<PAGE>
11.06 When Distribution Must be Paid Over 29
11.07 Notice by Company 30
11.08 Subrogation 30
11.09 Relative Rights 30
11.10 Subordination May Not Be Impaired
by Company 30
11.11 Distribution or Notice to Representative 30
11.12 Rights of Trustee and Paying Agent 31
11.13 Ranking of Securities 31
11.14 Application by Trustee of Monies
Deposited with It 31
XII MISCELLANEOUS 32
12.01 Notices 33
12.02 Communications by Holders with
Other Holders 33
12.03 Certificate and Opinion as to
Conditions Precedent 33
12.04 Statements Required in Certificate
or Opinion 33
12.05 Rules by Trustee and Agents 34
12.06 Legal Holidays 34
12.07 No Recourse Against Others 34
12.08 Duplicate Originals 34
12.09 Governing Law 34
12.10 Conflict with Trust Indenture Act 34
12.11 No Adverse Interpretation of
Other Document 34
SIGNATURES
EXHIBIT A - FORM OF SECURITY
iv
<PAGE>
INDENTURE dated as of January , 1996 between BELMAC CORPORATION, a Florida
corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a [ ]
corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Company's 12% Convertible Senior
Subordinated Debentures due January , 2006 (the "Securities").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01 DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Capital Stock" means any class of capital stock of the Company as it
exists on the date of this Indenture or as it may be constituted from time to
time, and warrants, options and similar rights to acquire any such capital
stock.
"Company" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Holder" means a person in whose name a Security is registered.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Officer" means the Chairman of the Board, the President, any Vice Pre-
sident, the Treasurer or the Secretary of the Company.
<PAGE>
"Officers' Certificate" means a certificate signed by two Officers.
See Sections 12.03 and 12.04.
"Opinion of Counsel" means a written opinion from legal counsel wh
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee. See Sections 12.03 and 12.04.
"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or other
legal entity or any government or agency or political subdivision thereof.
"Principal" of a debt security means the principal of the security plus
the premium, if any, on the security.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued under this In-
denture.
"Subsidiary" means any entity of which at least a majority of the
capital stock having ordinary voting power for the election of directors or
other governing body of such entity (other than securities having such power
only by reason of the happening of a contingency) shall be owned by the Company
directly or indirectly through one or more of such Subsidiaries.
"Trustee" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Trust Indenture Act" means, as of any time, the Trust Indenture Act of
1939, or any successor statute, as in effect at such time.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
2
<PAGE>
Section 1.02 OTHER DEFINITIONS.
Term Defined in Section
"Bankruptcy Law" 6.01
"Common Stock" 10.01
"Conversion Agent" 2.03
"Conversion Price" 3.03
"Current Market Price" 10.09
"Custodian" 6.01
"Event of Default" 6.01
"Existing Conversion Price" 10.06
"Indebtedness" 11.02
"Legal Holiday" 12.06
"Paying Agent" 2.03
"Registrar" 2.03
"Representative" 11.02
"Senior Debt" 11.02
"U.S. Government Obligations" 8.01
Section 1.03 RULES OF CONSTRUCTION.
Unless the context otherwise requires (i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles; (iii) "or" is not
exclusive; (iv) words in the singular include the plural, and in the plural
include the singular; and (v) provisions apply to successive events and
transactions.
ARTICLE II
THE SECURITIES
Section 2.01 FORM AND DATING.
The Securities shall be in the form of Exhibit A, which is part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule or usage. Each Security shall be dated the date of
its authentication.
Section 2.02 EXECUTION AND AUTHENTICATION.
(a) Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that office at
the time the Security is authenticated, the Security shall be valid
nevertheless.
3
<PAGE>
(b) A Security shall not be valid until authenticated by the manual signature of
the Trustee. The Trustee shall authenticate the Securities executed by the
Company upon the receipt of the written request executed by one of the Officers
together with the Officers' Certificate and Opinion of Counsel pursuant to
Sections 12.03 and 12.04. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture. The Trustee shall
authenticate Securities for original issue in the aggregate principal amount of
up to $7,500,000 upon a written order of the Company signed by two Officers. The
aggregate principal amount of Securities outstanding at any time may not exceed
that amount except as provided in Section 2.07.
(c) The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
Section 2.03 REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
The Company shall maintain an office or agency in the Borough of Manhattan, the
City of New York, where Securities may be presented for registration of transfer
or for exchange (the "Registrar"), an office or agency where Securities may be
presented for payment (the "Paying Agent") and an office or agency where
Securities may be presented for conversion (the "Conversion Agent"). The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars, one or more
additional paying agents and one or more additional conversion agents. The term
"Paying Agent" includes any additional conversion agent. The Company shall
notify the Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to maintain a Registrar, Paying Agent or
Conversion Agent, the Trustee shall act as such. The Trustee shall initially be
appointed as the Registrar, Paying Agent and Conversion Agent and serve as
authenticating agent.
Section 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of
or interest on the Securities, and will notify the Trustee of any failure by the
Company in making any such payment. If the Company acts as Paying Agent, it
shall segregate the money and hold it as a separate trust fund. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee.
Upon doing so the Paying Agent shall have no further liability for the money.
4
<PAGE>
Section 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably practicable the
most recent list available to it of the names and addresses of Holders. The
Company shall furnish to the Trustee on or before each interest payment date and
at such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders.
Section 2.06 TRANSFER AND EXCHANGE.
Where Securities are presented to the Registrar or a co-registrar with a request
to register transfer or to exchange them for an equal principal amount of
Securities the Trustee shall permit the Registrar or co-registrar to register
the transfer or make the exchange if its requirements for such transaction are
met. Securities issued upon any transfer or exchange for Securities will be
issued (i) in the same denominations as the Securities transferred or exchanged,
(ii) in denominations of $1,000 or any integral multiples of $1,000 if necessary
to effectuate the transfer or exchange, or (iii) such other denominations as may
be required to effect the provisions of paragraph 10 of the Securities or as may
be authorized by the Company. Whenever any Securities are surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive. The Company may charge a reasonable fee for any registration of
transfer or exchange but not for any exchange pursuant to Section 2.10, 3.06 or
10.02.
Section 2.07 REPLACEMENT SECURITIES.
If the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security of the like tenor and principal amount and bearing a number
not written previously outstanding, if there shall be delivered to the Company
and the Trustee (i) evidence to their satisfaction of the ownership of and
destruction, loss or theft of such Security and (ii) an indemnity bond
sufficient in the judgment of both to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Security is replaced. The Company may charge for its expenses in replacing a
Security. Every replacement Security is an additional obligation of the Company.
Section 2.08 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. If a
Security is replaced pursuant to Section 2.07, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. If Securities are considered paid under
Section 4.01, they cease to be outstanding and interest on them ceases to
accrue. A Security does not cease to be outstanding because the Company or an
Affiliate holds the Security.
5
<PAGE>
Section 2.09 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an Affiliate shall be disregarded, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded.
Section 2.10 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Securities. Temporary Securities shall
be substantially in the form of definitive Securities but may have variations
that the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Securities in exchange for temporary Securities.
Section 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for cancellation.
The Registrar, Paying Agent and Conversion Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange,
payment or conversion. The Trustee shall cancel all Securities surrendered for
registration of transfer, exchange, payment, conversion or cancellation and
shall dispose of canceled Securities as the Company directs. The Company may not
issue new Securities to replace Securities that it has paid or delivered to the
Trustee for cancellation or that any Holder has converted pursuant to Article X.
Section 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it shall pay
the defaulted interest in any lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this Section,
such manner of payment shall be declared practicable by the Trustee. It may pay
the defaulted interest, plus any interest payable on the defaulted interest, to
the persons who are Holders on a subsequent special record date. The Company
shall fix the special record date and payment date. At least 15 days before the
special record date, the Company shall mail to Holders a notice that states the
special record date, payment date and amount of interest to be paid.
6
<PAGE>
ARTICLE III
REDEMPTION
Section 3.01 NOTICES TO TRUSTEE.
If the Company wants to redeem Securities pursuant to Paragraph 5 of the
Securities, it shall notify the Trustee in writing of the redemption date and
the principal amount of Securities to be redeemed at least 50 days before the
redemption date.
Section 3.02 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the Trustee shall select the
Securities to be redeemed pro rata or by lot. The Trustee shall make the
selection not less than 30 days before the redemption date from Securities
outstanding not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them it selects shall be in
amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption.
Section 3.03 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, the Company
shall mail a notice of redemption to each Holder whose Securities are to be
redeemed. The notice shall identify the Securities to be redeemed and shall
state (i) the redemption date and redemption price; (ii) if less than all of the
Securities are to be redeemed, the portion of the principal amount of any
Security to be redeemed in part; (iii) the conversion price (the "Conversion
Price"); (iv) the name and address of the Paying Agent and Conversion Agent ;
(v) that Securities called for redemption may be converted at any time before
the close of business on the redemption date; (vi) that Holders who want to
convert Securities must satisfy the requirements in paragraph 7 of the
Securities; (vii) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price; and (viii) that interest on
Securities called for redemption ceases to accrue on and after the redemption
date. At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense.
Section 3.04 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Securities called for redemption become due
and payable on the redemption date at the redemption price. Upon surrender to
the Paying Agent, such Securities shall be paid at the redemption price, plus
accrued interest to the redemption date.
7
<PAGE>
Section 3.05 DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the Paying
Agent money sufficient to pay the redemption price of and accrued interest on
all Securities to be redeemed on that date. The Paying Agent shall return to the
Company any money not required for that purpose because of conversion of
Securities.
Section 3.06 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company shall execute
and the Trustee shall authenticate for the Holder a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE IV
COVENANTS
Section 4.01 PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities on the
dates and in the manner provided in the Securities. Principal and interest shall
be considered paid on the date due if the Paying Agent holds on that date money
sufficient to pay all principal and interest then due. The Company shall pay
interest on overdue principal at the rate borne by the Securities. It shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.
Section 4.02 SEC REPORTS.
The Company shall file with the Trustee within 15 days after it files them with
the SEC copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Section 4.03 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company an Officers' Certificate stating whether or not the
signers know of any Default that occurred during the fiscal year. If they do,
the Certificate shall describe the Default and its status. The Certificate need
not comply with Section 12.04.
8
<PAGE>
Section 4.04 LIMITATION ON DIVIDENDS; STOCK PURCHASE AND SENIOR DEBT.
(a) The Company will not declare or pay any cash dividends on, or make any
distribution to the holders of, any shares of Capital Stock of the Company,
other than dividends or distributions payable in such Capital Stock. Neither the
Company nor any Subsidiary will purchase, redeem or otherwise acquire or retire
for value any shares of Capital stock of the Company or warrants or rights to
acquire such capital stock if, at the time of such declaration, payment,
distribution, purchase, redemption, other acquisition or retirement, an Event of
Default shall have occurred and be continuing.
(b) The provisions of this Section 4.04 shall not prevent the retirement of any
shares of the Company's Capital Stock in exchange for, or out of the proceeds of
the substantially concurrent sale (other than to a Subsidiary) of, other shares
if its Capital Stock (other than any preferred stock which by its terms must be
redeemed by the Company prior to the maturity date of the Securities), and
neither such retirement nor the proceeds of any such sale or exchange shall be
included in any computation made under this Section 4.04.
(c) The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to (i)
pay dividends or make any other distribution to the Company or any of its
Subsidiaries on its capital stock or with respect to any other interest or
participation in, or measured by, its profits; (ii) pay any indebtedness owed to
the Company or any of its Subsidiaries; (iii) make loans or advances to the
Company or any of its Subsidiaries; (iv) transfer any of its properties or
assets to the Company or any of its Subsidiaries; or (v) guarantee the
Securities or any renewals or refinancings thereof, except for such encumbrances
or restrictions existing under or by means of (A) existing indentures as in
effect on the date of this Indenture; (B) this Indenture and the Securities; and
(C) applicable law.
Section 4.05 CERTAIN TRANSACTIONS WITH A PARENT AND ITS AFFILIATES.
The Company may not, and it may not permit any Subsidiary, directly or
indirectly, sell (by merger, exchange or otherwise) or lease any property to an
Affiliate, make any investment in, or render any service to an Affiliate, or
purchase (by merger, exchange or otherwise) or borrow any money from, or make
any payment for any service rendered by an Affiliate except (i) any sale or
lease of any property, or the rendering of any service to an Affiliate, or any
purchase or lease of any property, or any payment for any service rendered, or
the making of any agreement to do so, if (A) such transaction is effected in the
ordinary course of business and the Board of Directors determines in good faith
that the terms thereof are at least as favorable to the Company or its
Subsidiary as those which could be, or could reasonably be expected to be,
obtained in a similar transaction with an entity other than any of its
Affiliates or (B) the terms of such transaction are at least as favorable to the
Company or its Subsidiary as those which could be obtained in a similar
transaction with an entity other than any of its Affiliates; (ii) any borrowing
of money, or the making of any agreement to do so, if the Board of Directors
determines in good faith that the terms of such transaction are at least
9
<PAGE>
as favorable to the Company or its Subsidiary as those which could be, or could
reasonably be expected to be, obtained in a similar transaction with an entity
other than any of its Affiliates; (iii) any payment by the Company or any of its
Subsidiaries to any of its officers, directors or employees or agreement to do
so, if the Board of Directors determines in good faith that the amount to be
paid, or to be agreed to be paid, for such service bears a reasonable
relationship to the value of such services to the Company or such Subsidiary; or
(iv) any sale to an Affiliate by the Company or a Subsidiary of any capital
stock or other securities or other obligations of an Affiliate at a cash sale
price not less than the original cost thereof to the Company or such an
Affiliate or Subsidiary, as the same may have been reduced from time to time by
cash dividends or interest payments thereon or payments of principal thereof
received by the Company or such Subsidiary plus interest on such investment, as
the same may have been reduced from time to time at a rate not less than the
rate borne by the Debentures; but in no event less than current fair market
value.
Section 4.06 CORPORATE EXISTENCE.
Subject to Article IX, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 4.07 MAINTENANCE OF PROPERTIES.
The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 4.09 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or caused to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (ii) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or
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claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
ARTICLE V
SUCCESSORS
Section 5.01 WHEN COMPANY MAY MERGE, ETC.
The Company shall not consolidate with or merge into, or convey, transfer or
lease all or substantially all of its assets to, any person unless (i) the
person is a corporation organized and existing under the laws of the United
States of America, any State thereof, or the District of Columbia; (ii) the
corporation assumes by supplemental indenture all the obligations of the Company
under the Securities and this Indenture, except that it need not assume the
obligations of the Company as to conversion of Securities if pursuant to Section
10.17 the Company or another person enters into a supplemental indenture
obligating it to deliver securities, cash or other assets upon conversion of
Securities; (iii) immediately after the transaction no Default exists; and (iv)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each of which shall state that such consolidation, merger,
conveyance or other transfer or lease, and such supplemental indenture, complies
with this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
Section 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 5.01, the successor corporation formed by such consolidation or
into which the Company is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein, and thereafter,
except in the case of a lease, the predecessor corporation shall be relieved of
all obligations and covenants under this Indenture and the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01 EVENTS OF DEFAULT.
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(a) An "Event of Default" occurs if (i) the Company Defaults in the payment of
interest on any Security when the same becomes due and payable and the Default
continues for a period of 10 days; (ii) the Company defaults in the payment of
the principal of any Security when the same becomes due and payable at maturity,
upon redemption or otherwise; (iii) the Company fails to comply with any of its
other covenants and agreements in the Securities or this Indenture and the
Default continues for the period and after the notice specified below; (iv) the
Company or any Subsidiary (A) has a material event of default under the
documentation for Indebtedness in the payment of any amounts due and payable in
respect of any of its respective Indebtedness (other than the Securities) in the
aggregate principal or like amount of $250,000 or more or (B) defaults in the
payment when due in the principal of, interest on, or other amounts payable in
respect of, or fails to perform or comply with any of its other agreements in
respect of, any such Indebtedness and such Indebtedness shall have been declared
to be due and payable immediately, and such acceleration shall not have been
rescinded or annulled, or such Indebtedness discharged, within the period and
after the notice specified below; (v) a final judgment or final judgments for
the payment of money are entered by a court of competent jurisdiction against
the Company or any Subsidiary which remains unpaid and unstayed for a period of
30 days after the date on which the right to appeal has expired, provided that
the aggregate of all such judgments exceeds $250,000; (vi) the Company pursuant
to or within the meaning of any Bankruptcy Law (A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an involuntary
case, (C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or (D) makes a general assignment for the
benefit of its creditors; or (vii) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that (A) is for relief against the
Company in an involuntary case, (B) appoints a Custodian of the Company or for
all or substantially all of its property, or (C) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 60 days.
(b) The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(c) A Default under clause 6.01 (a) (iii) above is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the Securities
notify the Company of the Default and the Company does not cure the Default
within 30 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
Section 6.02 ACCELERATION.
If an Event of Default occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
interest on all the Securities to be due and payable. Upon such declaration the
principal and interest shall be due and payable immediately, anything in the
Securities or this Indenture to the contrary notwithstanding. The Holders of at
least a majority in principal amount of the Securities by notice to the Trustee
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
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have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
Section 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal of or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture. The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All remedies are cumulative to the extent
permitted by law.
Section 6.04 WAIVER OF PAST DEFAULTS.
The Holders of at least a majority in principal amount of the Securities then
outstanding by notice to the Trustee may waive an existing Default and its
consequences except a Default in the payment of the principal of or interest in
any Security or a Default under Article X.
Section 6.05 CONTROL BY MAJORITY.
The Holders of at least a majority in principal amount of the Securities then
outstanding may direct the time, method and place of conducting any proceeding
for and remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, is unduly prejudicial to the rights of
another Holder or would involve the Trustee in personal liability.
Section 6.06 LIMITATION ON SUITS.
(a) A Holder may pursue a remedy with respect to this Indenture or the
Securities only if (i) the Holder gives to the Trustee written notice of a
continuing Event of Default; (ii) the Holders of at least 25% in principal
amount of the Securities make a written request to the Trustee to pursue the
remedy; (iii) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period the Holders of at least a
majority in principal amount of the Securities do not give the Trustee a
direction inconsistent with the request.
(b) A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
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Section 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT OR CONVERT SECURITIES.
(a) Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on his Securities, on or
after the respective due dates expressed in the Securities, or to bring suit for
the enforcement of any such payment on or after such respective due dates, shall
not be impaired or affected without the consent of the Holder.
(b) Notwithstanding any other provision of this Indenture, the right of any
Holder to bring suit for the enforcement of his right to convert his Securities
shall not be impaired or affected without the consent of the Holder.
Section 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in clauses 6.01 (a) (i) or (ii) above occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation and expenses of the Trustee, its agents and counsel.
Section 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee and the
Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property.
Section 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay out the
money in the following order: first to the Trustee for amounts due under Section
7.07; second to holders of Senior Debt to the extent required by Article XI;
third to Holders for amounts due and unpaid on the Securities for principal and
interest, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and fourth to the Company. The Trustee may fix a record date and
payment date for any payment to Holders.
Section 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture or
in any suit against the Trustee for any action taken or omitted by the Trustee,
a condition for the institution of such suit shall be the giving by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorney's fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 or a suit by Holders of more than 10% in principal
amount of the Securities.
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ARTICLE VII
TRUSTEE
Section 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee shall
exercise its rights and powers and use the same degree of care and skill in
their exercise as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default (i) the Trustee need
perform only those duties that are specifically set forth in this Indenture and
no others; and (ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; provided, however,
that the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that (i)
this paragraph does not limit the effect of Paragraph (b) of this Section; (ii)
the Trustee shall not be liable for any error of judgment made in good faith by
a Trust Officer, unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the Trustee is
subject to Paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to the extent required by
law.
Section 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may require an Officers'
Certificate or an Opinion of Counsel. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the Certificate or
Opinion.
(c) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in
good faith which it believes to be authorized or within its rights or powers.
Section 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or an affiliate
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 7.04 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities other than its authentication.
Section 7.05 NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to the Trustee, the
Trustee shall mail to Holders a notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment on any Security, the Trustee
may withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the interests of
Holders.
Section 7.06 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after March 31, 1996, the Trustee shall mail to Holders a brief
report dated as of such reporting date that contains the type of information
required by Section 313 (a) of the Trust Indenture Act of 1939. A copy of each
report at the time of its mailing to Holders shall be filed with each stock
exchange on which the Securities are listed.
Section 7.07 COMPENSATION AND INDEMNITY.
(a) The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
out-of-pocket expenses of the Trustee's agents and counsel.
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(b) The Company shall indemnify the Trustee against any loss or liability
incurred by it. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity and the Company shall defend the claim. The Trustee
may have separate counsel but the fees and expenses of such counsel shall be
borne by the Trustee unless the Company shall not have promptly employed counsel
to assume the defense of the claim, in which event such fees and expenses shall
be borne by the Company. The Company shall have the right, in its sole
discretion, to satisfy or settle any claim for which indemnification has been
sought and is available hereunder as long as such satisfaction or settlement is
at no cost to the Trustee. The Company need not pay for any settlement made
without its consent or reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.
(c) To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. When the Trustee incurs expenses or renders
services after an Event of Default specified in clauses 6.01 (a) (vi) or (vii)
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
Section 7.08 REPLACEMENT OF TRUSTEE.
(a) A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section. The Trustee may resign by so notifying
the Company. The Holders of a majority in principal amount of the Securities may
remove the Trustee by so notifying the Trustee and the Company. The Company may
remove the Trustee if (i) the Trustee fails to comply with Section 7.10; (ii)
the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or public
officer takes charge of the Trustee or its property; or (iv) the Trustee becomes
incapable of acting.
(b) If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the Securities may appoint a successor Trustee
to replace the successor Trustee appointed by the Company.
(c) If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least l0% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(d) If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
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7.01A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company. Thereupon, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Paragraph 7.07 (c).
Section 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who shall at all times be a
corporation organized and doing business under the laws of the United States or
of any State or Territory or of the District of Columbia which is (i) authorized
under such laws to exercise corporate trust powers, and (ii) subject to
supervision or examination by Federal, State, Territorial, or District of
Columbia authority. The Trustee shall always have a combined capital and surplus
of at least $10,000,000 as set forth in its most recent published annual report
of condition. If the Trustee shall have or acquire any conflicting interest
within the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign in the manner and in the effect, and subject to
the conditions provided in the Trust Indenture Act and this Indenture. This
Indenture shall never have a Trustee that directly or indirectly controls or is
directly or indirectly controlled by or is under direct or indirect common
control with the Company.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01 TERMINATION OF COMPANY'S OBLIGATIONS.
(a) The Company may terminate all of its obligations under this Indenture if (i)
the Securities mature within one year or all of them are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
giving the notice of redemption; and (ii) the Company irrevocably deposits in
trust with the Trustee money or U.S. Government Obligations sufficient to pay
principal and interest on the Securities to maturity or redemption, as the case
may be. The Company may make the deposit only during the one year period and
only if Article XI permits it. However, the Company's obligations in Sections
2.03, 2.04, 2.05, 2.06, 2.07, 3.03, 4.01, 7.07, 7.08,
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8.02 and 8.03, and in Article X, shall survive until the Securities are no
longer outstanding. Thereafter the Company's obligations in Section 7.07 and
8.03 shall survive.
(b) Upon receipt by the Trustee of an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been complied with, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those surviving
obligations specified in Paragraph (a) above.
(c) In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government Obligations shall be payable as
to principal or interest on or before such payment date in such amounts as will
provide the necessary money. U.S. Government Obligations shall not be callable
at the issuer's option.
(d) "U.S. Government Obligations" means direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged.
Section 8.02 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations deposited
with it pursuant to Section 8.01 above. It shall apply the deposited money and
the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal and interest on the
Securities. Money and securities so held in trust are not subject to Article XI.
Section 8.03 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon request
any excess money or securities held by them at any time. The Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years. After
payment to the Company, Holders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned property law
designates another person.
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ARTICLE IX
AMENDMENTS
Section 9.01 WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may enter into one or more indentures supplemental
hereto in form satisfactory to the Trustee to amend this Indenture or the
Securities without the consent of any Holder to (i) cure any ambiguity, defect
or inconsistency; (ii) comply with Sections 5.01 and 10.17; or (iii) make any
change that does not adversely affect the right of any Holder.
Section 9.02 WITH CONSENT OF HOLDERS.
(a) The Company and the Trustee may enter into one or more indentures
supplemental hereto in form satisfactory to the Trustee to amend this Indenture
or the Securities with the written consent of the Holders of at least 66-2/3% in
principal amount of the Securities. However, without the consent of each Holder
affected, an amendment under this Section may not: (i) reduce the amount of
Securities whose Holders must consent to an amendment; (ii) reduce the rate of
or change the time for payment of interest on any Security; (iii) reduce the
principal of or change the fixed maturity of any Security; (iv) make any
Security payable in money other than that stated in the Security; (v) make any
change in Sections 6.04 or 6.06 or the second sentence of Section 9.02; (vi)
make any change that adversely affects the right to convert any Security; or
(vii) make any change in Article XI that adversely affects the rights of any
Holder.
(b) An amendment under this Section may not make any change that adversely
affects the rights under Article XI of any holder of an issue of Senior Debt
unless the holders of the issue pursuant to its terms consent to the change.
(c) After an amendment under this Section becomes effective, the Company shall
mail to Holders a notice briefly describing the amendment.
Section 9.03 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a Holder of a
Security is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
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Section 9.04 NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment or waiver on
any Security thereafter authenticated. The Company in exchange for all
Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
Section 9.05 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplement or waiver authorized pursuant
to this Article if the amendment or supplement or waiver does not adversely
affect the rights of the Trustee. If it does adversely affect the rights of the
Trustee, the Trustee may but need not sign it. In signing such amendment or
supplement or waiver the Trustee shall be entitled to receive, and (subject to
Article VII) shall be fully protected in relying upon, an Opinion of Counsel
stating that such amendment or supplement or waiver is authorized or permitted
by and complies with this Indenture. The Company may not sign an amendment or
supplement until the Board of Directors approves it.
ARTICLE X
CONVERSION
Section 10.01 CONVERSION PRIVILEGE.
A Holder may convert his Security into Common Stock of the Company at any time
during the period stated in Paragraph 7 of the Securities. "Common Stock" means
Common Stock of the Company as it exists on the date this Indenture is
originally signed. The number of shares of Common Stock issuable upon conversion
of a Security shall be determined by dividing the principal amount converted by
the Conversion Price in effect on the conversion date. The initial Conversion
Price is as stated in Paragraph 7 of the Securities. The Conversion Price is
subject to adjustment. A Holder may convert a portion of a Security if the
portion is $1,000 or a whole multiple of $1,000. Provisions of this Indenture
that apply to conversion of all of a Security also apply to conversion of a
portion of it.
Section 10.02 CONVERSION PROCEDURE.
To convert a Security a Holder must satisfy the requirements in Paragraph 7 of
the Securities. The date on which the Holder satisfies all those requirements is
the conversion date. As soon as practical, the Company shall deliver through the
Conversion Agent a certificate for the number of full shares of Common Stock
issuable upon the conversion adjusted to account for any fractional share as
provided in Section 10.03 below. The person in whose name the certificate is
registered shall be treated as a stockholder of record on and after the
conversion date. No payment or adjustment will be made for accrued interest on a
converted Security. If a Holder converts more than one Security
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at the same time, the number of full shares issuable upon the conversion shall
be based on the total principal amount of the Securities converted. Upon
surrender of a Security that is converted in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount to the
unconverted portion of the Security surrendered. If the last day on which a
Security may be converted is a Legal Holiday in a place where a Conversion Agent
is located, the Security may be surrendered to that Conversion Agent on the next
succeeding day that is not a Legal Holiday. The Company shall reserve out of its
authorized but unissued Common Stock or its Common Stock held in treasury enough
shares of Common Stock to permit the conversion of the Securities. The Company
shall from time to time, in accordance with applicable law, increase the
authorized amount of its Common Stock if at any time the authorized amount of
Common Stock remaining unissued shall not permit the conversion of all
Securities at the time outstanding. All shares of Common Stock which may be
issued upon conversion of the Securities shall be fully paid and non-assessable.
The Company will endeavor to comply with all securities laws regulating the
offer and delivery of shares of Common Stock upon conversion of Securities and
will endeavor to list such shares on each national securities exchange or
national securities system on which the Common Stock is then listed. If the
Company calls for the redemption of any Securities, such right of conversion
shall cease and terminate, as to the Securities designated for redemption, at
the close of business on the date immediately preceding the redemption date
therefor, unless the Company defaults in the payment of the redemption price.
Section 10.03 FRACTIONAL SHARES.
The Company will not issue a fractional share of Common Stock upon conversion of
a Security. Instead the Company will round any fractional share to the nearest
share so that if the fraction is less than 0.5 no share shall be issued and if
the fraction is 0.5 or higher the Company shall issue one full share.
Section 10.04 TAXES ON CONVERSION.
If a Holder converts his Security, the Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of shares of Common Stock upon
the conversion. However, the Holder shall pay any such tax which is due because
the shares are issued in a name other than his.
Section 10.05 ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.
Except as provided in Section 10.17, if the Company shall (i) declare a dividend
on its outstanding Common Stock in shares of its Capital Stock, (ii) subdivide
its outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its Capital Stock by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then in each such case the conversion privilege and the Conversion
Price in effect immediately prior to such action shall be adjusted so that the
Holder of a Security thereafter converted may receive the number and kind of
shares which he would have owned immediately following such action if he had
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converted the Security immediately prior to such action. Such adjustment shall
be made successively whenever such event shall occur. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification. If after an adjustment a Holder
upon conversion of his Security may receive shares of two or more classes of
Capital Stock of the Company, the Company's Board of Directors shall determine,
in good faith, the allocation of the adjusted Conversion Price between the
classes of capital stock. After such allocation, the conversion privilege and
Conversion Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Article.
Section 10.06 ADJUSTMENT FOR CERTAIN ISSUANCES OF COMMON STOCK.
If the Company shall at any time or from time to time issue any shares of Common
Stock (other than shares issued as a dividend or distribution as provided in
Section 10.05 above) for a consideration per share less than the Conversion
Price in effect on the date of such issue or less than the Current Market Price
per share of Common Stock, then, forthwith upon such issue, the Conversion Price
in effect immediately prior to such action (the "Existing Conversion Price")
shall be reduced by dividing the number of shares so issued by the total number
of shares outstanding after such issuance, multiplying the quotient by the
difference between the Existing Conversion Price and the price of the shares so
issued and subtracting the result from the Existing Conversion Price. In the
case of an issue of additional shares of Common Stock for cash, the
consideration received by the Company therefor shall be deemed to be the net
cash proceeds received for such shares, excluding cash received on account of
accrued interest or accrued dividends and after deducting therefrom any and all
commissions and expenses paid or incurred by the Company for any underwriting
of, or otherwise in connection with, the issue of such shares. The term "issue"
shall be deemed to include the sale or other disposition of shares held in the
Company's treasury. The number of shares outstanding at any given time shall not
include shares in the Company's treasury.
Section 10.07 SUBSCRIPTION OFFERINGS.
In case the Company shall issue rights, options, or warrants entitling the
holders thereof to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per share (or
having a conversion price per share, in the case of a security convertible into
or exchangeable for Common Stock) less than the Existing Conversion Price or the
Current Market Price per share of Common Stock on the record date for the
determination of stockholders entitled to receive such rights or the granting
date if such holders are not stockholders, then in each such case the Conversion
Price shall be adjusted by multiplying Conversion Price in effect immediately
prior to such record or granting date by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such record or
granting date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so to be offered
(or the aggregate initial Conversion Price of the convertible securities so to
be offered) would purchase at such Existing Conversion Price or Current Market
Price, as the case may be, and of which the denominator shall be the number of
shares of Common Stock outstanding on such record
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or granting date plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially convertible or
exchangeable). Such adjustment shall become effective at the close of business
on such record or granting date; provided, however, that, to the extent the
shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Conversion Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
as to those Securities which are not converted after such expiration), to the
Conversion Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) actually issued. In case any
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Company's Board of Directors. Shares of Common
Stock owned by or held for the account of the Company or any majority-owned
subsidiary shall not be deemed outstanding for the purpose of any such
computation.
Section 10.08 OTHER RIGHTS TO ACQUIRE COMMON STOCK.
In case the Company shall distribute to all holders of Common Stock (including
any such distribution made to the stockholders of the Company in connection with
a consolidation or merger in which the Company is the continuing corporation)
evidences of its indebtedness or assets (other than cash dividends or
distributions and dividends payable in shares of Common Stock), or options or
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred to in
Section 10.07 above), then in each such case the Conversion Price shall be
adjusted by multiplying the Conversion Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such
distribution by a fraction, of which the numerator shall be the Current Market
Price per share of Common Stock on such record date, less the fair market value
(as determined in good faith by the Company's Board of Directors) of the portion
of the evidences of indebtedness or assets so to be distributed, or of such
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to one share, and of which the denominator shall be such
Current Market Price per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of such distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
Section 10.09 CURRENT MARKET PRICE.
For the purpose of any computation under Sections 10.06, 10.07 and 10.08 above,
the "Current Market Price" per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices for the 30 consecutive trading
days commencing no more than 45 trading days before such date. The closing price
for each day shall be the last reported sales price regular way or, in case no
such reported sale takes place on such day, the closing bid price regular way,
in either case on the American Stock Exchange, or if the Common Stock is not
listed or admitted to trading on such
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Exchange, on principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the highest reported bid price
as furnished by the National Association of Securities Dealers, Inc. through
NASDAQ or similar organization if NASDAQ is no longer reporting such
information, or by the National Daily Quotation Bureau or similar organization
if the Common Stock is not then quoted on an inter-dealer quotation system. If
on any such date the Common Stock is not quoted by any such organization, the
fair value of the Common Stock on such date, as determined by the Company's
Board of Directors, shall be used.
Section 10.10 MINIMUM ADJUSTMENT.
No adjustment in the Conversion Price shall be required if such adjustment is
less than $0.05; provided, however, that any adjustments which by reason of this
Section 10.10 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article X
shall be made to the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
Section 10.11 WHEN ADJUSTMENT MAY BE DEFERRED.
In any case in which this Article X shall require that an adjustment in the
Conversion Price be made effective as of a record date for a specified event, if
a Security shall have been converted after such record date the Company may
elect to defer until the occurrence of such event issuing to the Holder of such
Security the shares, if any, issuable upon such conversion over and above the
shares, if any, issuable upon such conversion on the basis of the Conversion
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such Holder a due bill or other appropriate instrument
evidencing the Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
Section 10.12 NUMBER OF SHARES.
Upon each adjustment of the Conversion Price as a result of the calculations
made in Sections 10.05 through 10.08 above, the Securities shall thereafter
evidence the right to purchase, at the adjusted Conversion Price, that number of
shares (calculated to the nearest thousandth) obtained by dividing (i) the
product obtained by multiplying the number of shares purchasable upon conversion
of the Securities prior to adjustment of the number of shares by the Conversion
Price in effect prior to adjustment of the Conversion Price by (ii) the
Conversion Price in effect after such adjustment of the Conversion Price.
Section 10.13 WHEN NO ADJUSTMENT REQUIRED.
No adjustment need be made for a transaction referred to in Sections 10.05
through 10.08 if Holders are permitted to participate in the transaction on a
basis no less favorable than any other party and at a level which would preserve
the Holders' percentage equity participation in the Common Stock
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upon conversion of the Securities. No adjustment need be made for sales of
Common Stock pursuant to a Company plan for reinvestment of dividends or
interest. No adjustment need be made for a change in the par value or no par
value of the Common Stock. If the Securities become convertible solely into
cash, no adjustment need be made thereafter. Interest will not accrue on the
cash.
Section 10.14 NOTICE OF ADJUSTMENT.
Whenever the Conversion Price is adjusted, the Company shall promptly mail to
Holders a notice of the adjustment. The Company shall file with the Trustee a
certificate from the Company's independent public accountants briefly stating
the facts requiring the adjustment and the manner of computing it. The
certificates shall be evidence that the adjustment is correct.
Section 10.15 VOLUNTARY REDUCTION.
The Company from time to time may reduce the Conversion Price by any amount for
any period of time if the period is at least 20 days and if the reduction is
irrevocable during the period. Whenever the Conversion Price is reduced, the
Company shall mail to Holders a notice of the reduction. The Company shall mail
the notice at least 15 days before the date the reduced Conversion Price takes
effect. The notice shall state the reduced Conversion Price and the period it
will be in effect. A reduction of the Conversion Price does not change or adjust
the Conversion Price otherwise in effect for purposes of Sections 10.05 through
10.08 above.
Section 10.16 NOTICE OF CERTAIN TRANSACTIONS.
If (i) the Company takes any action that would require an adjustment in the
Conversion Price pursuant to this Article X; (ii) the Company takes any action
that would require a supplemental indenture pursuant to Section 10.17; or (iii)
there is a liquidation or dissolution of the Company, the Company shall mail to
Holders a notice stating the proposed record date for a distribution or
effective date of a reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
Section 10.17. REORGANIZATION OF COMPANY.
If the Company is a party to a transaction subject to Section 5.01 or a merger
which reclassifies or changes its outstanding Common Stock, the person obligated
to deliver securities, cash or other assets upon conversion of Securities shall
enter into a supplemental indenture. If the issuer of securities deliverable
upon conversion of Securities is an affiliate of the surviving, transferee or
lessee corporation, that issuer shall join in the supplemental indenture. The
supplemental indenture shall provide that the Holder of a Security may convert
it into the kind and amount of securities, cash or other assets which he would
have owned immediately after the consolidation, merger, transfer or lease if he
had converted the Security immediately before the effective date of the
transaction. The
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supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this Article
X. The successor company shall mail to Holders a notice briefly describing the
supplemental indenture. If this Section applies, Section 10.05 above does not
apply.
Section 10.18 COMPANY DETERMINATION FINAL.
Any determination that the Company or the Board of Directors must make pursuant
to this Article X shall be conclusive, absent manifest error.
Section 10.19 TRUSTEE'S DISCLAIMER.
The Trustee has no duty to determine when an adjustment under this Article X
should be made, how it should be made or what it should be. The Trustee has no
duty to determine whether any provisions of a supplemental indenture under
Section 10.17 are correct. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of
Securities. The Trustee shall not be responsible for the Company's failure to
comply with this Article X. Each Conversion Agent other than the Company shall
have the same protection under this Section 10.19 as the Trustee.
ARTICLE XI
SUBORDINATION
Section 11.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Security agrees, that the
indebtedness evidenced by the Securities is subordinated in right of payment, to
the extent and in the manner provided in this Article XI, to the prior payment
in full of all Senior Debt, and that the subordination is for the benefit of the
holders of Senior Debt.
Section 11.02 CERTAIN DEFINITIONS.
(a) "Indebtedness" means any indebtedness, contingent or otherwise, in respect
of borrowed money (whether or not the recourse of the lender is to the whole of
the assets of the borrower or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or letters of credit, or representing
the balance deferred and unpaid of the purchase price of any property or
interest therein, except any such balance that constitutes a trade payable, if
and to the extent such indebtedness would appear as a liability upon a balance
sheet of the borrower prepared on a consolidated basis in accordance with
generally accepted accounting principles.
(b) "Representative" means the indenture trustee or other trustee, agent or
representative for an issue of Senior Debt.
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(c) "Senior Debt" means the principal of and premium, if any, and interest
(including post-petition interest, if any) on, and any other payment due
pursuant to the terms of instruments creating or evidencing Indebtedness of the
Company outstanding on the date of this Indenture or Indebtedness thereafter
created, incurred, assumed or guaranteed by the Company and all renewals,
extensions and refundings thereof, which is payable to banks or other
traditional long-term institutional lenders such as insurance companies and
pension funds, unless in the instrument creating or evidencing such
Indebtedness, it is provided that such Indebtedness is not senior in right of
payment to the Securities. Notwithstanding the foregoing, Senior Debt with
respect to the Company or any Subsidiary shall not include (i) any Indebtedness
of the Company to any Subsidiary for money borrowed or advanced from such
Subsidiary and (ii) any Indebtedness representing the redemption price of any
preferred stock.
(d) A distribution as referred to in this Article XI may consist of cash,
securities or other property.
Section 11.03 LIQUIDATION, DISSOLUTION, BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property (i)
holders of Senior Debt shall be entitled to receive payment in full in cash of
the principal of and interest to the date of payment on the Senior Debt before
Holders shall be entitled to receive any payment of principal of or interest on
Securities; and (ii) until the Senior Debt is paid in full in cash, any
distribution to which Holders would be entitled but for this Article XI shall be
made to holders of Senior Debt as their interest may appear, except that Holders
may receive securities that are subordinated to Senior Debt to at least the same
extent as the Securities.
Section 11.04 DEFAULT ON SENIOR DEBT.
The Company may not pay principal or interest on the Securities and may not
acquire any Securities for cash or property other than capital stock of the
Company if (i) a default on Senior Debt occurs and is continuing that permits
holders of Senior Debt to accelerate its maturity, and (ii) the default is the
subject of judicial proceedings or the Company receives a notice of the default
from a person who may give it pursuant to Section 11.12. The Company may resume
payments on the Securities and may require them when (A) the default is cured or
waived, or (B) 120 days pass after the notice is given if the default is not the
subject of judicial proceedings, if this Article XI otherwise permits the
payment or acquisition at that time.
Section 11.05 ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration. The
Company may pay the Securities when 120 days pass after the acceleration occurs
if this Article XI permits the payment at that time.
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Section 11.06 WHEN DISTRIBUTION MUST BE PAID OVER.
If a distribution is made to Holders that because of this Article XI should not
have been made to them, the Holders who receive the distribution shall hold it
in trust for holders of Senior Debt and pay it over to them as their interests
may appear.
Section 11.07 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of any facts
known to the Company that would cause a payment of principal or interest on the
Securities to violate this Article XI.
Section 11.08 SUBROGATION.
Subject to the payment in full of all Senior Debt, the Holders of the Securities
shall be subrogated to the rights of the holders of the Senior Debt to receive
payments or distributions of assets of the Company applicable to the Senior Debt
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no payments or distributions to the holders of the
Senior Debt by or on behalf of the Company or by or on behalf of the Holders of
the Securities by virtue of this Article XI which otherwise would have been made
to the Holders of the Securities shall, as between the Company and the Holders
of the Securities, be deemed to be payment by the Company to or on the account
of the Senior Debt, it being understood that the provisions of this Article XI
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the one hand, and the holder of the Senior, on
the other hand.
Section 11.09 RELATIVE RIGHTS.
This Article XI defines the relative rights of Holders and holders of Senior
Debt. Nothing in this Indenture shall (i) impair, as between the Company and the
Holders, the obligation of the Company, which is absolute and unconditional, to
pay principal and interest on the Securities in accordance with their terms;
(ii) affect the relative rights of Holders and creditors of the Company other
than holders of Senior Debt; or (iii) prevent the Trustee or any Holder from
exercising its available remedies upon a Default, subject to the rights of
holders of Senior Debt to receive distributions otherwise payable to Holders. If
the Company fails because of this Article XI to pay principal or interest on a
Security on the due date, the failure is still a Default.
Section 11.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any current or future holder of any Senior Debt to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company, or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with.
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Section 11.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of Senior
Debt, the distribution may be made and the notice given to their Representative.
Section 11.12 RIGHTS OF TRUSTEE AND PAYING AGENT.
The Trustee or Paying Agent may continue to make payments on the Securities
until it receives notice satisfactory to it that payments may not be made under
this Article XI. The Company, an Agent, a Representative or a holder of Senior
Debt may give the notice. If an issue of Senior Debt has a Representative, only
the Representative may give the Notice. The Trustee in its individual or any
other capacity may hold Senior Debt with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights.
Section 11.13 RANKING OF SECURITIES.
The indebtedness evidenced by the Securities shall rank (i) senior to or pari
passu with all other indebtedness evidenced by securities of the Company issued
by the Company after the date of this Indenture and any other evidence of
Indebtedness of the Company, except as expressly provided for in Section 11.01;
and (ii) senior to the Capital Stock of the Company, including any rights or
warrants entitling holders thereof to subscribe for or purchase shares of
Capital Stock of the Company or any securities convertible into exchangeable for
Capital Stock of the Company issued by the Company after the date of this
Indenture.
Section 11.14 APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Any deposit of monies by the Company with the Trustee or any Paying Agent
(whether or not in trust) for the payment of the principal or interest on any
Securities shall be subject to the provisions of Sections 11.01, 11.02, 11.03
and 11.04 except that, if prior to the close of business on the business day
immediately preceding the date on which by the terms of this Indenture any such
monies may become payable for any purpose (including, without limitation, the
payment of either the principal or the interest on any Security) the Trustee or,
in the case of any such deposit of monies with a Paying Agent, the Paying Agent
shall not have received with respect to such monies the notice provided for in
Section 11.07, then the Trustee or such Paying Agent, as the case may be, shall
have full power and authority to receive such monies and to apply the same to
the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date. In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article XI, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such person,
the extent to which such person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such person under
this Article XI, and if such evidence is not furnished, the Trustee may defer
any payment to such person pending judicial determination as to the
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right of such person to receive such payment. The Trustee, however, shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt but shall have
only such obligations to such holders as are expressly set forth in this Article
XI.
ARTICLE XII
MISCELLANEOUS
Section 12.01 NOTICES.
(a) Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail
(or by facsimile transmission) to the other's address as follows:
The Company's address is: The Trustee's address is:
Belmac Corporation American Stock Transfer & Trust Company
One Urban Centre, Suite 550 Trust Department
4830 West Kennedy Boulevard 40 Wall Street
Tampa, Florida 33609-2517 New York, New York 10005
Fax (813) 286-4402 Fax
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
(b) Any notice or communication to a Holder shall be mailed by first-class mail
to his address shown on the register kept by the Registrar. Failure to mail a
notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders. If a notice or communication is
mailed in the manner provided above within the time prescribed, it is duly
given, whether or not the addressee receives it. If the Company mails a notice
or communication to Holders, it shall mail a copy to the Trustee and each Agent
at the same time.
Section 12.02 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
The Trustee, within five business days after receipt of a written application by
any three or more Holders stating that they desire to communicate with other
Holders with respect to their rights under the Indenture or Securities, and
accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, and by reasonable proof that each such applicant
has owned his Securities for a period of at least six months preceding the date
of such application, shall inform such applicants as to the approximate number
of Holders and the approximate cost of mailing to such Holders the form of proxy
or other communication, if any, specified in such application. The
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Trustee shall, upon the written request of such applicants, mail to all Holders
copies of the form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment of the reasonable expenses of such mailing,
unless within five days after such tender, the Trustee shall determine, in good
faith, that such mailing would be contrary to the best interests of the Holders
or would be in violation of applicable law.
Section 12.03 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee (i) an Officers'
Certificate stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and (ii) an Opinion of Counsel stating that in
the opinion of such counsel, all such conditions precedent have been complied
with.
Section 12.04 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Certificate or Opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include (i) a statement that the
person making such Certificate or Opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
Certificate or Opinion are based; (iii) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with; and (iv) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Section 12.05 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar, Paying Agent or Conversion Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.06 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions
in the State of New York are not required to be open. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
Section 12.07 NO RECOURSE AGAINST OTHERS.
All liability described in the Securities of any director, officer, employee or
stockholder, as such, of the Company is waived and released.
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Section 12.08 DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One signed copy is
enough to prove this Indenture.
Section 12.09 GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities, without giving effect to principles of conflicts of law thereof.
Section 12.10 CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or controls or conflicts
with another provision hereof which is required to be included in this Indenture
by, or otherwise governed by, any provision of the Trust Indenture Act, such
other provision shall control.
Section 12.11 NO ADVERSE INTERPRETATION OF OTHER DOCUMENTS.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SIGNATURES
Dated:____________________ BELMAC CORPORATION
By ________________________________
James R. Murphy, President
Attest:
________________________________
Michael D. Price, Secretary [SEAL]
Dated:____________________ AMERICAN STOCK TRANSFER &
TRUST COMPANY
By _______________________________
Attest:
________________________________
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EXHIBIT A
No: ___ $ _____________________
BELMAC CORPORATION, a Florida corporation, promises to pay to _________________
or registered assigns, the principal of ____________________________________
Dollars on ______________, 200__.
12% Convertible Senior Subordinated Debenture due 2006
Interest Payment Dates: January 1, April 1, July 1 and October 1
Record Dates : December 15, March 15, June 15 and September 15
Dated: ________________
Authenticated
AMERICAN STOCK TRANSFER BELMAC CORPORATION
& TRUST COMPANY
By __________________________ By __________________________
Authorized Officer Authorized Officer
[SEAL]
<PAGE>
BELMAC CORPORATION
12% CONVERTIBLE SENIOR SUBORDINATED DEBENTURE DUE JANUARY ___, 2006
1. INTEREST. Belmac Corporation (the "Company"), a Florida corporation, promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. The Company will pay interest quarterly on January 1, April 1, July
1 and October 1 of each year commencing April 1, 1996. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the day of delivery of the Debentures.
Interest will be computed on the basis of a 360-day year of twelve 30 day
months.
2. METHOD OF PAYMENT. The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of Securities (the
"Holders") at the close of business on the 15th day of the month next preceding
the interest payment date even though Securities are canceled after the record
date and on or before the interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time of payment
is legal tender for the payment of public and private debts. However, the
Company may pay principal and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address.
3. PAYING AGENT, REGISTRAR, CONVERSION AGENT. Initially, American Stock Transfer
& Trust Company (the "Trustee"), will act as Paying Agent, Registrar and
Conversion Agent. The Company may change any Paying Agent, Registrar, Conversion
Agent or co-registrar without notice. The Company may act as Paying Agent,
Registrar, Conversion Agent or co-registrar.
4. INDENTURE. The Company issued the Securities under an Indenture dated as of
January ___, 1996 ("Indenture") between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture. The Securities are
subject to all such terms, and Holders are referred to the Indenture for a
statement of such terms. The Securities are unsecured general obligations of the
Company limited to $7,500,000 in aggregate principal amount.
5. REDEMPTION. On or after [INSERT DATE SIX MONTHS AFTER DATE OF
INDENTURE], 1996, and from time to time thereafter, the Company may redeem all
or part of the Securities from time to time at 105% of principal amount, plus
accrued interest to the redemption date, if the closing price of the Common
Stock for each of the immediately preceding 20 consecutive trading days equal or
exceeds $7.00 per share, as initially constituted. The closing price for each
day shall be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the closing bid price regular way, in
either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or, if the Common Stock is not listed or
<PAGE>
admitted to trading on any national securities exchange, the highest reported
bid price as furnished by the National Association of Securities Dealers, Inc.
through Nasdaq or similar organization if Nasdaq is no longer reporting such
information, or by the National Daily Quotation Bureau or similar organization
if the Common Stock is not then quoted on an inter-dealer quotation system.
6. NOTICE OF REDEMPTION. Notice of redemption (the "Notice of Redemption") will
be mailed at least 30 days but not more than 60 days before the redemption date
to each Holder of Securities to be redeemed at his registered address.
Securities in denominations larger than $1,000 may be redeemed in part but only
in whole multiples of $1,000. On and after the redemption date interest ceases
to accrue on Securities or portions of them called for redemption.
7. CONVERSION.
(a) A Holder may convert his Security into Common Stock of the Company
("Common Stock") at any time after the earlier of the date on which a Notice of
Redemption is mailed on _______ __, 1996 (or earlier with the consent of the
Company and Coleman and Company Securities, Inc.) and before the close of
business on _______ __, 2006. If the Security is called for redemption, the
Holder may convert it at any time before the close of business on the redemption
date. The initial Conversion Price, subject to adjustment in certain events, is
the lesser of (i) $3.00 per share; or (ii) 80% of the average last sale price on
the American Stock Exchange over the 20 trading days immediately preceding the
first anniversary of the issuance of the Debentures (the "Anniversary Date") or
the date of notice of redemption is given or other earlier date, as applicable.
In addition, the Company may from time to time voluntarily reduce the Conversion
Price. To determine the number of shares issuable upon conversion of a Security,
divide the principal amount converted by the Conversion Price in effect on the
conversion date. On conversion no payment or adjustment for interest will be
made. The Company will round to the nearest share for any fractional share so
that if the fraction is less than .5 no share shall be issued and if the
fraction is .5 or higher the Company shall issue one full share.
(b) To convert a Security a Holder must (i) complete and sign the
conversion notice on the back of the Security; (ii) surrender the Security to a
Conversion Agent; (iii) furnish appropriate endorsements and transfer documents,
if required by the Registrar or Conversion Agent; and (iv) pay any transfer or
similar tax if required. A Holder may convert a portion of a Security if the
portion is $1,000 or a whole multiple of $1,000.
(c) The Conversion Price will be adjusted for dividends or
distributions on Common Stock payable in Company stock; subdivisions,
combinations or certain reclassifications of Common Stock; certain issuances of
Common Stock at less than the Conversion Price at the time of issuance;
2
<PAGE>
or distributions of assets or debt securities of the Company. However, no
adjustment will be made if Holders may participate in the transaction or in
certain other cases.
(d) If the Company is a party to a consolidation or merger or a
transfer or lease of all or substantially all of its assets, the right to
convert a Security into Common Stock may be changed into a right to convert it
into securities, cash or other assets of the Company or another entity.
8. SUBORDINATION. The Securities are subordinated to Senior Debt, which is the
principal of and premium, if any, and interest (including post-petition
interest, if any) on, and any other payment due pursuant to the terms of
instruments creating or evidencing Indebtedness of the Company outstanding on
the date of this Indenture or Indebtedness thereafter created, incurred, assumed
or guaranteed by the Company and all renewals, extensions and refundings
thereof, which is payable to banks or other traditional long-term institutional
lenders such as insurance companies and pension funds, unless in the instrument
creating or evidencing such Indebtedness, it is provided that such Indebtedness
is not senior in right of payment to the Securities. Notwithstanding the
foregoing, Senior Debt with respect to the Company or any Subsidiary shall not
include (i) any Indebtedness of the Company to any Subsidiary for money borrowed
or advanced from such Subsidiary and (ii) any Indebtedness representing the
redemption price of any preferred stock. "Indebtedness," as applied to any
entity means any indebtedness, contingent or otherwise, in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such entity or only to a portion thereof), or evidenced by bonds, notes,
debentures or similar instruments or letters of credit, or representing the
balance deferred and unpaid of the purchase price of any property or interest
therein, except any such balance that constitutes a trade payable, if and to the
extent that such indebtedness would appear as a liability upon a balance sheet
of such entity prepared on a consolidated basis in accordance with generally
accepted accounting principles. The Securities shall rank senior or pari passu
to all indebtedness evidenced by securities of the Company and any other
indebtedness other than Senior Debt. To the extent provided in the Indenture,
Senior Debt must be paid before the Securities may be paid. The Company agrees
to the subordination and authorizes the Trustee to give it effect.
9. DENOMINATION, TRANSFER AND EXCHANGE. The Securities are in registered form
without coupons in denominations of $1,000 and whole multiples of $1,000. The
transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not exchange or register the transfer of any Securities for a period of 15
days before a selection of Securities to be redeemed.
10. PERSONS DEEMED OWNERS. The registered holder of a Security may be treated as
its owner for all purposes.
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<PAGE>
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the
Securities may be amended with the consent of the Holders of at least 66-2/3% in
principal amount of the Securities. Without the consent of any Holder, the
Indenture or the Securities may be amended to cure any ambiguity, defect or
inconsistency, to provide for assumption of Company obligations to Holders or to
make any change that does not adversely affect the rights of any Holders.
12. DEFAULTS AND REMEDIES. Each of the following occurrences constitutes an
Event of Default: (i) failure by the Company to pay interest on the Securities
for more than 10 days after the due date thereof; (ii) failure by the Company to
pay principal when due; (iii) failure by the Company for 60 days after notice to
comply with any of its other agreements in the Indenture or the Securities; (iv)
certain defaults under and accelerations prior to maturity of other
indebtedness; and (v) certain events of bankruptcy or insolvency. If an Event of
Default occurs and is continuing, the Trustee or the Holder of at least 25% in
principal amount of the Securities may declare all of the Securities to be due
and payable immediately. Holders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust power. The
Trustee may withhold from Holders notice of any continuing default (except a
default in the payment of principal or interest) if it determines that
withholding notice is in their interest. The Company must furnish an annual
compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH THE COMPANY. American Stock Transfer & Trust Company,
the Trustee under the Indenture, in its individual or any other capacity, may
make loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as
such, of the Company shall not have any liability for any obligations of the
Company under the Securities or the Indenture or for any claim based thereon, in
respect of or by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
15. AUTHENTICATION. This Security shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent appointed by the
Trustee.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM ("tenants in common"), TEN ENT ("tenants by the
entireties"), JT TEN ("joint
4
<PAGE>
tenants with right of survivorship and not as tenants in common"), CUST
("Custodian"), and U/G/M/A ("Uniform Gifts to Minors Act").
The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture, which has in it the text of this Security in larger type.
Requests may be made to: Michael D. Price, Secretary, Belmac Corporation, One
Urban Centre, Suite 550, 4830 West Kennedy Boulevard, Tampa, Florida 33609-2517.
5
<PAGE>
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, fill in the To convert this Security into Common
form below. Stock of the Company, check the box:[]
I or we assign and transfer this Secu- To convert only part of this Security,
rity to state the amount:
(Insert assignee's soc.sec. or tax i.d. $__________________
no.)
_____________________________________ If you want the stock certificate made
out in another person's name, fill in
_____________________________________ the form below:
_____________________________________ (Insert assignee's soc. sec. or tax
(Print or type assignee's name, add- i.d. no.)
ress and zip code) ______________________________________
and irrevocably appoint _______________ ______________________________________
_______ agent to transfer this Security
on the books of the Company. This agent ______________________________________
may substitute another to act for him. (print or type assignee's name,address
and zip code)
-------------------------------------------------------
Date:______________________ Your Signature________________________________
(Sign your name exactly as it appears on the other side of this Security)
EXHIBIT 10.1
------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 12th day of June 1995 (the
"Effective Date"), by and between BELMAC CORPORATION, a Florida corporation (the
"Employer") and Michael D. Price (the "Employee"), as the same may be modified,
supplemented, amended or restated from time to time in the manner provided
herein.
RECITALS
The Employer desires to employ the Employee, and the Employee desires to be
employed by the Employer, all upon the terms and provisions and subject to the
conditions set forth in this Agreement.
WITNESSETH
NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to be legally bound as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and the Employee
hereby accepts such employment as the Vice President, Chief Financial Officer,
Secretary and Treasurer, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM. Subject to the termination provisions hereinafter contained, the
term of employment under this Agreement shall be for an initial term commencing
on the Effective Date and terminating on June 12, 1998. This Agreement and the
Employee's employment hereunder shall thereafter be automatically renewed for
successive one (1) year terms, unless terminated as hereinafter provided.
3. COMPENSATION, REIMBURSEMENT, ETC.
(a) Base Salary. The Employer shall pay to the Employee as
compensation for all services rendered by the Employee a base salary, the first
year of which shall equal $115,000 per annum.
(b) Expense Reimbursement. The Employer shall reimburse the
Employee on a semi-monthly basis for all reasonable expenses incurred by the
Employee in the performance of his duties under this Agreement; provided
however, that the Employee shall have previously furnished to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
(c) Benefits. The Employee shall be entitled to health and
other benefits on the same terms and conditions as the Employer makes available
to its other participants in the corporate health provisions. The Employer shall
obtain a term life insurance policy for the
<PAGE>
Employee with a value equal to one year's salary payable to the estate of the
Employee upon the Employee's death as provided in Section 7 (a) hereof.
(d) Bonuses. The Employee shall be entitled to bonuses of up
to 40% of his annual salary each year, in stock and/or cash, the grant of which
shall be upon the recommendation and at the discretion of the Compensation
Committee of the Employer.
(e) Annual Review. The Employee shall be reviewed by the Board
of Directors of the Employer on an annual basis and entitled to receive a merit
increase in salary, stock options and/or bonuses annually from the Effective
Date of this Agreement.
(f) Stock Option Plan. The Employee shall be eligible for
periodic stock option grants as determined by the Management and Compensation
Committees.
4. DUTIES. The Employee is engaged as the Vice President, Chief Financial
Officer, Secretary and Treasurer of the Employer. In addition, the Employee
shall have such other duties and hold such offices as may from time to time be
reasonably assigned to him by the Board of Directors of the Employer.
5. EXTENT OF SERVICES. During the term of employment under this Agreement,
the Employee shall devote his full time, energy and attention to the benefit and
business of the Employer and its affiliates and shall not be employed by another
entity, except as a consultant to or as a director of a non-competitive company
approved, IN ADVANCE, by the Employer's Board of Directors.
6. VACATION AND DAYS OFF. The Employee may take a maximum of four weeks of
vacation each calendar year, at times to be determined in a manner most
convenient to the business of the Employer. A maximum of 5 unused days of
vacation may be carried over from one calendar year to the next, but without
recompense. The carryover provision will be effective beginning December 31,
1996.
7. TERMINATION FOLLOWING DEATH OR INCAPACITY.
(a) Death. All rights of the Employee under this Agreement
shall terminate upon death (other than rights accrued prior thereto). All stock
options will immediately vest and transfer to the Employee's estate and be
exercisable for a period of 5 years or the period of time indicated in the
option contract, whichever is greater. The Employer shall pay to the estate of
the Employee any unpaid salary and other benefits due as well as reimbursable
expenses accrued and owing to the Employee prior to his death. The Employer
shall have no additional financial obligation under this Agreement to the
Employee or his estate beyond the term-life insurance benefit which pays his
estate one year's salary.
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<PAGE>
(b) Disability.
(i) During any period of disability, illness or incapacity
during the term of this Agreement which renders the Employee at least
temporarily unable to perform the services required under this Agreement, the
Employee shall receive throughout which time, his salary payable under Section 3
(a) of this Agreement, less any benefits received by him under any insurance
carried by or provided by the Employer; provided however, all rights of the
Employee under this Agreement (other than rights already accrued) shall
terminate as provided below upon the Employee's permanent disability (as defined
below).
(ii) The term "permanent disability" as used in this
Agreement shall mean the inability of the Employee, as determined by the Board
of Directors of the Employer, by reason of physical or mental disability to
perform the duties required of him under this Agreement after a period of: (a)
120 consecutive days of such disability; or (b) disability for at least six
months during any twelve month period. Upon such determination, the Board of
Directors may terminate the Employee's employment under this Agreement upon ten
(10) days prior written notice.
(iii) If any determination of the Board of Directors with
respect to permanent disability is disputed by the Employee, the parties hereto
agree to abide by the decision of a panel of three physicians. The Employee and
Employer shall each appoint one member, and the third member of the panel shall
be appointed by the other two physicians. The Employee agrees to make himself
available for and to submit to reasonable examinations by such physicians as may
be directed by the Employer. Failure to submit to any such examination shall
constitute a material breach of this Agreement. In the event such a panel is
convened, the party whose position is not sustained by the panel shall bear all
associated costs.
8. OTHER TERMINATIONS.
(a) Without Cause.
(i) Either the Employee or the Employer may terminate this
Agreement upon written notice, ninety (90) days prior to the end of the initial
term or any one-year extension of this Agreement.
(ii) If the Employee gives notice pursuant to paragraph
(i) above, the Employer shall have the right to either (a) relieve the Employee,
in whole or in part, of his duties under this Agreement (without reduction in
compensation) or (b) to accelerate the date of termination to coincide with the
date on which the written notice is received (without reduction in compensation
for the notice period).
(iii) Notwithstanding any provisions hereof to the
contrary, the Employer may terminate this Agreement without cause at any time.
If the Employer terminates
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<PAGE>
this Agreement pursuant to the provisions of this paragraph 8(a) (iii), it shall
pay to the Employee as a severance benefit an amount equal to one-year of the
Employee's then current Base Salary and all options theretofore awarded to the
Employee shall immediately vest and be exercisable by the Employee for a period
of 5 years or the period of time indicated in the option contract, whichever is
greater.
(b) For Cause.
(i) The Employer may terminate this Agreement without
notice (a) upon the Employee's breach of any material provision of this
Agreement, or (b) for other "good cause" (as defined below).
(ii) The term "good cause" as used in this Agreement
shall include, but shall not be limited to: (a) conduct disloyal to the
Employer; (b) conviction of any crime involving moral turpitude; and (c)
substantial dependence, as determined by the Board of Directors of the Employer,
on any addictive substance, including but not limited to alcohol, amphetamines,
barbiturates, methadone, cannabis, cocaine, PCP, THC, LSD, or narcotic drug.
Should the Employee dispute such a determination, the parties hereto agree to
abide by the decision of a panel of three physicians selected in a manner
provided in Section 7(b)(iii) of this Agreement. In the event such a panel is
convened, the party whose position is not sustained by the panel shall pay all
associated costs and expenses. The Employee agrees to make himself available for
and to submit to an annual examination and such other reasonable periodic
examinations by such panel as may be directed by the Employer at the Employer's
sole expense. Failure to submit to any such examination shall constitute a
material breach of this Agreement.
(c) Payment On Termination. If this Agreement is terminated
pursuant to Section 8(b), the Employer shall pay to the Employee any unpaid
salary and other benefits and reimbursable expenses accrued and owing to the
Employee. Such payment shall be in full and complete discharge of any and all
liabilities or obligations of the Employer to the Employee hereunder except as
provided in Section 9 hereof. The Employee shall be entitled to no further
benefits under this Agreement other than extension of health benefits at the
Employee's expense and options awarded to the Employee shall immediately vest
and be exercisable for a period of 5 years.
9. TERMINATION OF EMPLOYMENT UPON CHANGE IN CONTROL.
(a) For purposes hereof, a "Change in Control" shall be deemed
to have occurred (i) if there has occurred a "change in control" as such term is
used in Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as in effect at the date hereof (hereinafter
referred to as the "Act"); (ii) if there has occurred a change in control as the
term "control" is defined in Rule 12b-2 promulgated under the Act; (iii) when
any "person" (as such term is defined in Sections 3 (a) (9) and 13 (d) (3) of
the Act), during the term of this Agreement, becomes a beneficial owner,
directly or indirectly, of securities of the
- 4 -
<PAGE>
Employer representing 20% or more of the Employer's then outstanding securities
having the right to vote on the election of directors; (iv) if the stockholders
of the Employer approve a plan of complete liquidation or dissolution of the
Employer or a merger or consolidation in which the Employer is not the surviving
corporation; (v) if there has occurred a change in ownership or effective
control of the Employer or a change in the ownership of a substantial portion of
the assets of the Employer (within the meaning of Section 280G (b) (2) (A) of
the Internal Revenue Code of 1986, as amended (the "Code")); or (vi) when the
individuals who are members of the Board of Directors of the Employer on the
date hereof shall cease to constitute at least a majority of the Board of
Directors, PROVIDED, HOWEVER, that any new director whose election to the Board
of Directors or nomination for election to the Board of Directors by the
Employer's stockholders was approved by a vote of at least 50% of the directors
then still in office, shall not be deemed to have replaced his or her
predecessor.
(b) The Employee may terminate his employment at any time
within 12 months after a Change in Control and in the event that any of the
following events has occurred: (i) an assignment to the Employee of any duties
inconsistent with the status of the Employee's office and/or position with the
Employer as constituted immediately prior to the Change in Control or a
significant adverse change in the nature or scope of the Employee's authorities,
powers, functions or duties as constituted immediately prior to the Change in
Control, (ii) a failure by the Employer, after having received written notice
from the Employee specifying a material breach of its obligations pursuant to
this Agreement, to cure such breach within 30 days after receipt of such notice,
or (iii) the headquarters of the Employer is moved to a new location which is
more than 100 miles from its current location.
An election by the Employee to terminate his employment following a
Change in Control shall not be deemed a voluntary termination of employment by
the Employee for the purpose of interpreting the provisions of this Agreement or
any of the Employer's employee benefit plans and arrangements. The Employee's
continued employment with the Employer for any period of time during the term of
this Agreement after a Change in Control shall not be considered a waiver of any
right he may have to terminate his employment to the extent permitted under this
Section 9 (b).
If the Employer terminates the Employee without cause pursuant to
Section 8 (a) hereof within six months after a Change in Control has occurred,
such termination shall be deemed an election by the Employee to terminate his
employment pursuant to this Section 9.
In addition, in the event of such termination, the Employee shall
continue to have the obligations provided for in Sections 11 and 12 (b) hereof.
(c) If the Employee's employment with the Employer is
terminated under Section 9 (b) hereof, (i) the Employee shall be entitled to any
benefits to which he would have been entitled under Section 8 (a) (iii) hereof
had the Employee been terminated "without cause", to the extent such benefits
would have accrued as of the expiration of the term of this Agreement;
- 5 -
<PAGE>
(ii) in addition, the Employee shall be paid in a lump sum, within 30 days after
termination of employment, in cash, severance pay in an amount equal to two
years' salary or that amount of salary that would have been due to the Employee
through the expiration of the term of this Agreement, whichever is greater;
(iii) the Employee shall be issued a number of stock options to purchase Common
Stock of the Employer, at an exercise price of $3.75 per share, equal to the
number of stock options held by the Employee immediately prior to the effective
date of any Change of Control; and (iv) all stock options held by the Employee
immediately prior to the effective date of the Change of Control and those
options granted pursuant to Section 9 (c) (iii) shall immediately vest and
become fully exercisable for a period of 5 years or the period of time indicated
in the option contract, whichever is greater. The lump sum severance payment
described in this Section 9 (c) (i)-(iv) is hereinafter referred to as the
"Termination Compensation". The amount of the Termination Compensation shall be
determined, at the expense of the Employer, by its regular certified public
accountant immediately prior to the Change in Control (the "Accountant"). Upon
payment of the Termination Compensation and any other accrued compensation, this
Agreement shall terminate (except for the Employee's obligations pursuant to
Sections 11 and 12 (b) hereof) and be of no further force or effect.
(d) After a Change in Control has occurred, the Employer shall
honor the Employee's exercise of the Employee's outstanding stock options and
any other stock related rights, in accordance with this Employment Agreement.
After a Change in Control has occurred and the Employee's employment is
terminated as a result thereof, the Employee (or his designated beneficiary or
personal representative) shall also receive, except to the extent already paid
pursuant to Section 9 (c) (i) hereof or otherwise, the sums the Employee would
otherwise have received (whether under this Agreement, by law or otherwise) by
reason of termination of employment if a Change in Control had not occurred.
(e) Notwithstanding anything in this Agreement to the
contrary, the Employee shall have the right, prior to the receipt by him of any
amounts due hereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Employer which the Employee shall repay to the
Employer, within 90 days from the date of receipt, with interest at the rate
provided in Section 7872 of the Code. The repayment of the loan balance will be
with the deferred severance funds which will then be supplied by the Employer.
Notice of any such waiver or treatment of amounts received as a loan shall be
given by the Employee to the Employer in writing and shall be binding upon the
Employer.
(f) The Employee shall not be required to mitigate the payment
of the Termination Compensation or other benefits or payments by seeking other
employment. To the extent that the Employee shall, after the term of this
Agreement, receive compensation from any other employment, the payment of
Termination Compensation or other benefits or payments shall not be adjusted.
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<PAGE>
10. DISCLOSURE, PROPRIETARY RIGHTS. The Employee agrees that during the
term of his employment by the Employer, he will disclose only to the Employer
all ideas, methods, plans, formulas, processes, trade secrets, developments, or
improvements known by him which relate directly or indirectly to the business of
the Employer, including any lines of business, acquired by the Employee during
his employment by the Employer; provided, that nothing in this Section 10 shall
be construed as requiring any such communication where the idea, plan, method or
development is lawfully protected from disclosure, including but not limited to
trade secrets of third parties. For purposes of this Agreement, the term "the
business of the Employer" shall include, without limitation, the following: the
design, development, obtaining regulatory approval, production, manufacturing,
marketing and licensing of prescription and non-prescription drugs, medical
devices, medical instruments and methods for the diagnosis, evaluation,
treatment or correction of any disease, injury, illness or other medical or
health condition and such other lines of business as the Employer shall engage
in during the term hereof. The parties further agree that any inventions,
formulas, trade secrets, ideas, or secret processes which shall arise from any
disclosure made by the Employee pursuant to this paragraph, whether or not
patentable, shall be and remain the sole property of the Employer.
11. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of employment
by the Employer, he will not, without prior written consent of the Employer,
disclose any such confidential information to any third person, partnership,
joint venture, company, corporation, or other organization.
12. CONFLICT OF INTEREST.
(a) Conflict Of Interest. The Employee shall devote his full
time, energy and attention to the benefit and business of the Employer and its
affiliates and shall not be employed by another entity, except as permitted in
Section 5.
(b) Covenant Not To Solicit. During employment with the
Employer, and for a period of two years thereafter, the Employee agrees he will
refrain from and will not, directly or indirectly, as independent contractor,
employee, consultant, agent, partner, joint venturer or otherwise, solicit or
encourage any of the employees of the Employer to terminate their employment.
(c) Essential Element. It is understood by and between the
parties hereto that the foregoing restrictive covenants set forth in Sections
11, 12(a), 12(b) and 13 are essential elements of this Agreement, and that but
for the agreement of the Employee to comply with such covenants, the Employer
would not have agreed to enter into this Agreement. Notwithstanding anything to
the contrary in this Agreement, the terms and provisions of Sections 12(a), 12
(b) and 13 of this Agreement, together with any definitions used in such terms
and provisions, shall
- 7 -
<PAGE>
survive the termination or expiration of this Agreement. The existence of any
claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of such covenants.
13. SPECIFIC PERFORMANCE. The Employee agrees that damages at law will be
insufficient remedy to the Employer if the Employee violates the terms of
Sections 10, 11, or 12 of this Agreement and that the Employer shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive or other equitable relief to enforce the provisions of such Sections,
which injunctive or other equitable relief shall be in addition to any other
rights or remedies available to the Employer, and the Employee agrees that he
will not raise and hereby waives any objection or defense that there is an
adequate remedy available at law.
14. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and warrants
that the execution of this Agreement by him and his performance of his
obligation hereunder will not conflict with, result in the breach of any
provision of, terminate, or constitute a default under any Agreement to which
the Employee is or may be bound.
15. WAIVER OF BREACH. The waiver by the Employer of a breach of any of the
provisions of this Agreement by the Employee shall not be construed as a waiver
of any subsequent breach by the Employee.
16. D&O INSURANCE; INDEMNIFICATION. The Employer hereby agrees to maintain
in full force and effect for the duration of this Agreement, Director's and
Officer's Liability Insurance of at least $2,000,000 and to indemnify and hold
harmless to the full extent permitted by law, the Employee for acts performed by
him in carrying out his duties and responsibilities in accordance with this
Agreement.
17. BINDING EFFECT, ASSIGNMENT. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer. This Agreement is a personal employment
contract and the rights, obligations and interests of the Employee hereunder may
not be sold, assigned, transferred, pledged or hypothecated.
18. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Whenever in this Agreement
reference is made to any party, such reference shall be deemed to include the
successors, assigns, heirs, and legal representatives of such party, and,
without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of the Employee
in this Agreement shall inure to the benefit of the successors and assigns of
the Employer; PROVIDED, HOWEVER, that nothing herein shall be deemed to
authorize or permit the Employee to assign any of his rights or obligations
under this Agreement to any other person (whether or not a family member or
other affiliate or the Employee other than stated in Section 7 of this
Agreement), and the Employee covenants and agrees that he shall not make any
such assignments.
- 8 -
<PAGE>
19. MODIFICATION, AMENDMENT, ETC. Each and every modification and amendment
of this Agreement shall be in writing and signed by all of the parties hereto,
and each and every waiver of, or consent to any departure from, any
representation, warranty, covenant or other term or provision of this Agreement
shall be in writing and signed by each affected party hereto.
20. NOTICE. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, first class, return receipt requested, to the parties at the
following addresses:
To the Employer: Belmac Corporation
4830 West Kennedy Boulevard
One Urban Centre
Suite 550
Tampa, FL 33609-2517
To the Employee: Michael D. Price
11114 Carrollwood Drive
Tampa, FL 33618
21. SEVERABILITY. It is agreed by the Employer and Employee that if any
portion of the covenants set forth in this Agreement are held to be
unreasonable, arbitrary or against public policy, then that portion of such
covenants shall be considered divisible both as to time and geographical area.
The Employer and Employee agree that if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Agreement to be unreasonable, arbitrary or against public
policy, then a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
the Employee. The Employer and Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Employer and the Employee and supersedes all prior agreements and
understandings, oral or written, with respect to the subject matter hereof.
Notwithstanding the provisions with respect to vesting requirements, option
prices, terms of options, or termination of employment contained in the 1991
Stock Option Plan or any other plan under which stock options have been or may
be granted, it is expressly agreed that the terms of this Employment Agreement
supersede and override such provisions and shall govern the treatment of such
subject matter.
23. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
- 9 -
<PAGE>
24. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
25. COUNTERPARTS. This Agreement may be executed in two counterpart copies
of the entire document or of signature pages to the document, each of which may
be executed by one or more of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written.
BELMAC CORPORATION
By: /S/ JAMES R. MURPHY
------------------------
James R. Murphy
Chairman, President and CEO
Belmac Corporation
EMPLOYEE
By: /S/ MICHAEL D. PRICE
-------------------------
Michael D. Price
Vice President, Chief Financial
Officer
- 10 -
EXHIBIT 10.2
------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 12th day of June 1995 (the
"Effective Date"), by and between BELMAC CORPORATION, a Florida corporation (the
"Employer") and Robert M. Stote (the "Employee"), as the same may be modified,
supplemented, amended or restated from time to time in the manner provided
herein.
RECITALS
The Employer desires to employ the Employee, and the Employee desires to be
employed by the Employer, all upon the terms and provisions and subject to the
conditions set forth in this Agreement.
WITNESSETH
NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to be legally bound as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and
the Employee hereby accepts such employment as the Senior Vice President and
Chief Science Officer, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM. Subject to the termination provisions hereinafter
contained, the term of employment under this Agreement shall be for an initial
term commencing on the Effective Date and terminating on JUNE 12, 1998. This
Agreement and the Employee's employment hereunder shall thereafter be
automatically renewed for successive one (1) year terms, unless terminated as
hereinafter provided.
3. COMPENSATION, REIMBURSEMENT, ETC.
(a) Base Salary. The Employer shall pay to the Employee
as compensation for all services rendered by the Employee a base salary, the
first year of which shall equal $215,000 per annum.
(b) Expense Reimbursement. The Employer shall reimburse
the Employee on a semi-monthly basis for all reasonable expenses incurred by the
Employee in the performance of his duties under this Agreement; provided
however, that the Employee shall have previously furnished to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
(c) Benefits. The Employee will be provided a health
insurance allowance equivalent to the annual individual premium cost for medical
insurance, to be paid on a quarterly
<PAGE>
basis. The Employer shall obtain a term life insurance policy for the Employee
with a value equal to one year's salary payable to the estate of the Employee
upon the Employee's death as provided in Section 7(a) hereof.
(d) Bonuses. The Employee shall be entitled to bonuses
of up to 40% of his annual salary each year, in stock and/or cash, the grant of
which shall be upon the recommendation and at the discretion of the Compensation
Committee of the Employer.
(e) Annual Review. The Employee shall be reviewed by
the Board of Directors of the Employer on an annual basis and entitled to
receive a merit increase in salary, stock options and/or bonuses annually from
the Effective Date of this Agreement.
(f) Stock Option Plan. The Employee shall be eligible
for periodic stock option grants as determined by the Management and
Compensation Committees.
4. DUTIES. The Employee is engaged as the Chief Science
Officer. In addition, the Employee shall have such other duties and hold such
offices as may from time to time be reasonably assigned to him by the Board of
Directors of the Employer.
5. EXTENT OF SERVICES. During the term of employment under
this Agreement, the Employee shall devote his full time, energy and attention to
the benefit and business of the Employer and its affiliates and shall not be
employed by another entity, except as a consultant to or as a director of a
non-competitive company approved, IN ADVANCE, by the Employer's Board of
Directors. It is understood that at this time, Dr. Stote is on the Board of
Directors of Collaborative Clinical Research, Inc., and will remain on that
Board of Directors.
6. VACATION AND DAYS OFF. The Employee may take a maximum of
four weeks of vacation each calendar year, at times to be determined in a manner
most convenient to the business of the Employer. A maximum of 5 unused days of
vacation may be carried over from one calendar year to the next, but without
recompense. The carryover provision will be effective beginning December 31,
1996.
7. TERMINATION FOLLOWING DEATH OR INCAPACITY.
(a) Death. All rights of the Employee under this Agree-
ment shall terminate upon death (other than rights accrued prior thereto). All
stock options will immediately vest and transfer to the Employee's estate and be
exercisable for a period of 5 years or the period of time indicated in the
option contract, whichever is greater. The Employer shall pay to the estate of
the Employee any unpaid salary and other benefits due as well as reimbursable
expenses accrued and owing to the Employee prior to his death. The Employer
shall have no additional financial obligation under this Agreement to the
Employee or his estate beyond the term-life insurance benefit which pays his
estate one year's salary.
<PAGE>
(b) Disability.
(i) During any period of disability, illness
or incapacity during the term of this Agreement which renders the Employee at
least temporarily unable to perform the services required under this Agreement,
the Employee shall receive throughout which time, his salary payable under
Section 3 (a) of this Agreement, less any benefits received by him under any
insurance carried by or provided by the Employer; provided however, all rights
of the Employee under this Agreement (other than rights already accrued) shall
terminate as provided below upon the Employee's permanent disability (as defined
below).
(ii) The term "permanent disability" as used
in this Agreement shall mean the inability of the Employee, as determined by the
Board of Directors of the Employer, by reason of physical or mental disability
to perform the duties required of him under this Agreement after a period of:
(a) 120 consecutive days of such disability; or (b) disability for at least six
months during any twelve month period. Upon such determination, the Board of
Directors may terminate the Employee's employment under this Agreement upon ten
(10) days prior written notice.
(iii) If any determination of the Board of
Directors with respect to permanent disability is disputed by the Employee, the
parties hereto agree to abide by the decision of a panel of three physicians.
The Employee and Employer shall each appoint one member, and the third member of
the panel shall be appointed by the other two physicians. The Employee agrees to
make himself available for and to submit to reasonable examinations by such
physicians as may be directed by the Employer. Failure to submit to any such
examination shall constitute a material breach of this Agreement. In the event
such a panel is convened, the party whose position is not sustained by the panel
shall bear all associated costs.
8. OTHER TERMINATIONS.
(a) Without Cause.
(i) Either the Employee or the Employer may
terminate this Agreement upon written notice, ninety (90) days prior to the end
of the initial term or any one-year extension of this Agreement.
(ii) If the Employee gives notice pursuan
to paragraph (i) above, the Employer shall have the right to either (a) relieve
the Employee, in whole or in part, of his duties under this Agreement (without
reduction in compensation) or (b) to accelerate the date of termination to
coincide with the date on which the written notice is received (without
reduction in compensation for the notice period).
(iii) Notwithstanding any provisions hereof
to the contrary, the Employer may terminate this Agreement without cause at any
time. If the Employer terminates this Agreement pursuant to the provisions of
this paragraph 8(a) (iii), it shall pay to the Employee as a severance benefit
an amount equal to one-year of the Employee's then current Base Salary and all
options theretofore awarded to the Employee shall immediately vest and be
exercisable by the Employee for a period of 5 years or the period of time
indicated in the option contract, whichever is greater.
<PAGE>
(b) For Cause.
(i) The Employer may terminate this Agreemen
without notice (a) upon the Employee's breach of any material provision of this
Agreement, or (b) for other "good cause" (as defined below).
(ii) The term "good cause" as used in this
Agreement shall include, but shall not be limited to: (a) conduct disloyal to
the Employer; (b) conviction of any crime involving moral turpitude; and (c)
substantial dependence, as determined by the Board of Directors of the Employer,
on any addictive substance, including but not limited to alcohol, amphetamines,
barbiturates, methadone, cannabis, cocaine, PCP, THC, LSD, or narcotic drug.
Should the Employee dispute such a determination, the parties hereto agree to
abide by the decision of a panel of three physicians selected in a manner
provided in Section 7(b)(iii) of this Agreement. In the event such a panel is
convened, the party whose position is not sustained by the panel shall pay all
associated costs and expenses. The Employee agrees to make himself available for
and to submit to an annual examination and such other reasonable periodic
examinations by such panel as may be directed by the Employer at the Employer's
sole expense. Failure to submit to any such examination shall constitute a
material breach of this Agreement.
(c) Payment On Termination. If this Agreement is
terminated pursuant to Section 8(b), the Employer shall pay to the Employee any
unpaid salary and other benefits and reimbursable expenses accrued and owing to
the Employee. Such payment shall be in full and complete discharge of any and
all liabilities or obligations of the Employer to the Employee hereunder except
as provided in Section 9 hereof. The Employee shall be entitled to no further
benefits under this Agreement other than extension of health benefits at the
Employee's expense and options awarded to the Employee shall immediately vest
and be exercisable for a period of 5 years.
9. TERMINATION OF EMPLOYMENT UPON CHANGE IN CONTROL.
(a) For purposes hereof, a "Change in Control" shall
be deemed to have occurred (i) if there has occurred a "change in control" as
such term is used in Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as in effect at the date hereof
(hereinafter referred to as the "Act"); (ii) if there has occurred a change in
control as the term "control" is defined in Rule 12b-2 promulgated under the
Act; (iii) when any "person" (as such term is defined in Sections 3 (a) (9) and
13 (d) (3) of the Act), during the term of this Agreement, becomes a beneficial
owner, directly or indirectly, of securities of the
<PAGE>
Employer representing 20% or more of the Employer's then outstanding securities
having the right to vote on the election of directors; (iv) if the stockholders
of the Employer approve a plan of complete liquidation or dissolution of the
Employer or a merger or consolidation in which the Employer is not the surviving
corporation; (v) if there has occurred a change in ownership or effective
control of the Employer or a change in the ownership of a substantial portion of
the assets of the Employer (within the meaning of Section 280G (b) (2) (A) of
the Internal Revenue Code of 1986, as amended (the "Code")); or (vi) when the
individuals who are members of the Board of Directors of the Employer on the
date hereof shall cease to constitute at least a majority of the Board of
Directors, PROVIDED, HOWEVER, that any new director whose election to the Board
of Directors or nomination for election to the Board of Directors by the
Employer's stockholders was approved by a vote of at least 50% of the directors
then still in office, shall not be deemed to have replaced his or her
predecessor.
(b) The Employee may terminate his employment at any
time within 12 months after a Change in Control and in the event that any of the
following events has occurred: (i) an assignment to the Employee of any duties
inconsistent with the status of the Employee's office and/or position with the
Employer as constituted immediately prior to the Change in Control or a
significant adverse change in the nature or scope of the Employee's authorities,
powers, functions or duties as constituted immediately prior to the Change in
Control, (ii) a failure by the Employer, after having received written notice
from the Employee specifying a material breach of its obligations pursuant to
this Agreement, to cure such breach within 30 days after receipt of such notice,
or (iii) the headquarters of the Employer is moved to a new location which is
more than 100 miles from its current location.
An election by the Employee to terminate his employment
following a Change in Control shall not be deemed a voluntary termination of
employment by the Employee for the purpose of interpreting the provisions of
this Agreement or any of the Employer's employee benefit plans and arrangements.
The Employee's continued employment with the Employer for any period of time
during the term of this Agreement after a Change in Control shall not be
considered a waiver of any right he may have to terminate his employment to the
extent permitted under this Section 9 (b).
If the Employer terminates the Employee without cause
pursuant to Section 8 (a) hereof within six months after a Change in Control has
occurred, such termination shall be deemed an election by the Employee to
terminate his employment pursuant to this Section 9.
In addition, in the event of such termination, the
Employee shall continue to have the obligations provided for in Sections 11 and
12 (b) hereof.
(c) If the Employee's employment with the Employer is
terminated under Section 9 (b) hereof, (I) the Employee shall be entitled to any
benefits to which he would have been entitled under Section 8 (a) (iii) hereof
had the Employee been terminated "without cause", to the extent such benefits
would have accrued as of the expiration of the term of this Agreement;
<PAGE>
(ii) in addition, the Employee shall be paid in a lump sum, within 30 days after
termination of employment, in cash, severance pay in an amount equal to two
years' salary or that amount of salary that would have been due to the Employee
through the expiration of the term of this Agreement, whichever is greater;
(iii) the Employee shall be issued a number of stock options to purchase Common
Stock of the Employer, at an exercise price of $3.75 per share, equal to the
number of stock options held by the Employee immediately prior to the effective
date of any Change of Control; and (iv) all stock options held by the Employee
immediately prior to the effective date of the Change of Control and those
options granted pursuant to Section 9 (c) (iii) shall immediately vest and
become fully exercisable for a period of 5 years or the period of time indicated
in the option contract, whichever is greater. The lump sum severance payment
described in this Section 9 (c) (i)-(iv) is hereinafter referred to as the
"Termination Compensation". The amount of the Termination Compensation shall be
determined, at the expense of the Employer, by its regular certified public
accountant immediately prior to the Change in Control (the "Accountant"). Upon
payment of the Termination Compensation and any other accrued compensation, this
Agreement shall terminate (except for the Employee's obligations pursuant to
Sections 11 and 12 (b) hereof) and be of no further force or effect.
(d) After a Change in Control has occurred, the
Employer shall honor the Employee's exercise of the Employee's outstanding stock
options and any other stock related rights, in accordance with this Employment
Agreement. After a Change in Control has occurred and the Employee's employment
is terminated as a result thereof, the Employee (or his designated beneficiary
or personal representative) shall also receive, except to the extent already
paid pursuant to Section 9 (c) (i) hereof or otherwise, the sums the Employee
would otherwise have received (whether under this Agreement, by law or
otherwise) by reason of termination of employment if a Change in Control had not
occurred.
(e) Notwithstanding anything in this Agreement to the
contrary, the Employee shall have the right, prior to the receipt by him of any
amounts due hereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Employer which the Employee shall repay to the
Employer, within 90 days from the date of receipt, with interest at the rate
provided in Section 7872 of the Code. The repayment of the loan balance will be
with the deferred severance funds which will then be supplied BY the Employer.
Notice of any such waiver or treatment of amounts received as a loan shall be
given by the Employee to the Employer in writing and shall be binding upon the
Employer.
(f) The Employee shall not be required to mitigate
the payment of the Termination Compensation or other benefits or payments by
seeking other employment. To the extent that the Employee shall, after the term
of this Agreement, receive compensation from any other employment, the payment
of Termination Compensation or other benefits or payments shall not be adjusted.
<PAGE>
10. DISCLOSURE, PROPRIETARY RIGHTS. The Employee agrees that
during the term of his employment by the Employer, he will disclose only to the
Employer all ideas, methods, plans, formulas, processes, trade secrets,
developments, or improvements known by him which relate directly or indirectly
to the business of the Employer, including any lines of business, acquired by
the Employee during his employment by the Employer; provided, that nothing in
this Section 10 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure,
including but not limited to trade secrets of third parties. For purposes of
this Agreement, the term "the business of the Employer" shall include, without
limitation, the following: the design, development, obtaining regulatory
approval, production, manufacturing, marketing and licensing of prescription and
non-prescription drugs, medical devices, medical instruments and methods for the
diagnosis, evaluation, treatment or correction of any disease, injury, illness
or other medical or health condition and such other lines of business as the
Employer shall engage in during the term hereof. The parties further agree that
any inventions, formulas, trade secrets, ideas, or secret processes which shall
arise from any disclosure made by the Employee pursuant to this paragraph,
whether or not patentable, shall be and remain the sole property of the
Employer.
11. CONFIDENTIALITY. The Employee agrees to keep in strict
secrecy and confidence any and all information the Employee assimilates or to
which he has access during his employment by the Employer and which has not been
publicly disclosed and is not a matter of common knowledge in the fields of work
of the Employer. The Employee agrees that both during and after the term of
employment by the Employer, he will not, without prior written consent of the
Employer, disclose any such confidential information to any third person,
partnership, joint venture, company, corporation, or other organization.
12. CONFLICT OF INTEREST.
(a) Conflict Of Interest. The Employee shall devote
his full time, energy and attention to the benefit and business of the Employer
and its affiliates and shall not be employed by another entity, except as
permitted in Section 5.
(b) Covenant Not To Solicit. During employment with
the Employer, and for a period of two years thereafter, the Employee agrees he
will refrain from and will not, directly or indirectly, as independent
contractor, employee, consultant, agent, partner, joint venturer or otherwise,
solicit or encourage any of the employees of the Employer to terminate their
employment.
(c) Essential Element. It is understood by and bet-
ween the parties hereto that the foregoing restrictive covenants set forth in
Sections 11, 12(a), 12 (b) and 13 are essential elements of this Agreement, and
that but for the agreement of the Employee to comply with such covenants, the
Employer would not have agreed to enter into this Agreement. Notwithstanding
anything to the contrary in this Agreement, the terms and provisions of Sections
12(a), 12 (b) and 13 of this Agreement, together with any definitions used in
such terms and provisions, shall
<PAGE>
survive the termination or expiration of this Agreement. The existence of any
claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of such covenants.
13. SPECIFIC PERFORMANCE. The Employee agrees that damages at
law will be insufficient remedy to the Employer if the Employee violates the
terms of Sections 10, 11, or 12 of this Agreement and that the Employer shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive or other equitable relief to enforce the provisions of such Sections,
which injunctive or other equitable relief shall be in addition to any other
rights or remedies available to the Employer, and the Employee agrees that he
will not raise and hereby waives any objection or defense that there is an
adequate remedy available at law.
14. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents
and warrants that the execution of this Agreement by him and his performance of
his obligation hereunder will not conflict with, result in the breach of any
provision of, terminate, or constitute a default under any Agreement to which
the Employee is or may be bound.
15. WAIVER OF BREACH. The waiver by the Employer of a breach
of any of the provisions of this Agreement by the Employee shall not be
construed as a waiver of any subsequent breach by the Employee.
16. D&O INSURANCE; INDEMNIFICATION. The Employer hereby agrees
to maintain in full force and effect for the duration of this Agreement,
Director's and Officer's Liability Insurance of at least $2,000,000 and to
indemnify and hold harmless to the full extent permitted by law, the Employee
for acts performed by him in carrying out his duties and responsibilities in
accordance with this Agreement.
17. BINDING EFFECT, ASSIGNMENT. The rights and obligations of
the Employer under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Employer. This Agreement is a
personal employment contract and the rights, obligations and interests of the
Employee hereunder may not be sold, assigned, transferred, pledged or
hypothecated.
18. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Whenever in this
Agreement reference is made to any party, such reference shall be deemed to
include the successors, assigns, heirs, and legal representatives of such party,
and, without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of the Employee
in this Agreement shall inure to the benefit of the successors and assigns of
the Employer; PROVIDED, HOWEVER, that nothing herein shall be deemed to
authorize or permit the Employee to assign any of his rights or obligations
under this Agreement to any other person (whether or not a family member or
other affiliate or the Employee other than stated in Section 7 of this
Agreement), and the Employee covenants and agrees that he shall not make any
such assignments.
<PAGE>
19. MODIFICATION, AMENDMENT, ETC. Each and every modification
and amendment of this Agreement shall be in writing and signed by all of the
parties hereto, and each and every waiver of, or consent to any departure from,
any representation, warranty, covenant or other term or provision of this
Agreement shall be in writing and signed by each affected party hereto.
20. NOTICE. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by certified or
registered mail, first class, return receipt requested, to the parties at the
following addresses:
To the Employer: Belmac Corporation
4830 West Kennedy Boulevard
One Urban Centre
Suite 550
Tampa, FL 33609-2517
To the Employee: Robert M. Stote
6210 Pasadena Point Boulevard
Gulfport, FL 33707
21. SEVERABILITY. It is agreed by the Employer and Employee
that if any portion of the covenants set forth in this Agreement are held to be
unreasonable, arbitrary or against public policy, then that portion of such
covenants shall be considered divisible both as to time and geographical area.
The Employer and Employee agree that if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Agreement to be unreasonable, arbitrary or against public
policy, then a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
the Employee. The Employer and Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
22. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the Employer and the Employee and supersedes all prior
agreements and understandings, oral or written, with respect to the subject
matter hereof. Notwithstanding the provisions with respect to vesting
requirements, option prices, terms of options, or termination of employment
contained in the 1991 Stock Option Plan or any other plan under which stock
options have been or may be granted, it is expressly agreed that the terms of
this Employment Agreement supersede and override such provisions and shall
govern the treatment of such subject matter.
23. HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
<PAGE>
24. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida.
25. COUNTERPARTS. This Agreement may be executed in two
counterpart copies of the entire document or of signature pages to the
document, each of which may be executed by one or more of the parties hereto,
but all of which, when taken together, shall constitute a single agreement
binding upon all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written.
BELMAC CORPORAT10N
By: /S/ JAMES R. MURPHY
-------------------------
James R. Murphy
Chairman, President and CEO
Belmac Corporation
EMPLOYEE
By: /S/ ROBERT M. STOTE
-------------------------
Robert M. Stote
Senior Vice President, Chief
Science Officer
EXHIBIT 10.3
------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 12th day of June 1995 (the
"Effective Date"), by and between BELMAC CORPORATION, a Florida corporation (the
"Employer") and Michael D. Price (the "Employee"), as the same may be modified,
supplemented, amended or restated from time to time in the manner provided
herein.
RECITALS
The Employer desires to employ the Employee, and the Employee desires to be
employed by the Employer, all upon the terms and provisions and subject to the
conditions set forth in this Agreement.
WITNESSETH
NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree to be legally bound as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and the Employee
hereby accepts such employment as the Vice President, Chief Financial Officer,
Secretary and Treasurer, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM. Subject to the termination provisions hereinafter contained, the
term of employment under this Agreement shall be for an initial term commencing
on the Effective Date and terminating on June 12, 1998. This Agreement and the
Employee's employment hereunder shall thereafter be automatically renewed for
successive one (1) year terms, unless terminated as hereinafter provided.
3. COMPENSATION, REIMBURSEMENT, ETC.
(a) Base Salary. The Employer shall pay to the Employee as
compensation for all services rendered by the Employee a base salary, the first
year of which shall equal $115,000 per annum.
(b) Expense Reimbursement. The Employer shall reimburse the
Employee on a semi-monthly basis for all reasonable expenses incurred by the
Employee in the performance of his duties under this Agreement; provided
however, that the Employee shall have previously furnished to the Employer an
itemized account, satisfactory to the Employer, in substantiation of such
expenditures.
(c) Benefits. The Employee shall be entitled to health and
other benefits on the same terms and conditions as the Employer makes available
to its other participants in the corporate health provisions. The Employer shall
obtain a term life insurance policy for the
<PAGE>
Employee with a value equal to one year's salary payable to the estate of the
Employee upon the Employee's death as provided in Section 7 (a) hereof.
(d) Bonuses. The Employee shall be entitled to bonuses of up
to 40% of his annual salary each year, in stock and/or cash, the grant of which
shall be upon the recommendation and at the discretion of the Compensation
Committee of the Employer.
(e) Annual Review. The Employee shall be reviewed by the Board
of Directors of the Employer on an annual basis and entitled to receive a merit
increase in salary, stock options and/or bonuses annually from the Effective
Date of this Agreement.
(f) Stock Option Plan. The Employee shall be eligible for
periodic stock option grants as determined by the Management and Compensation
Committees.
4. DUTIES. The Employee is engaged as the Vice President, Chief Financial
Officer, Secretary and Treasurer of the Employer. In addition, the Employee
shall have such other duties and hold such offices as may from time to time be
reasonably assigned to him by the Board of Directors of the Employer.
5. EXTENT OF SERVICES. During the term of employment under this Agreement,
the Employee shall devote his full time, energy and attention to the benefit and
business of the Employer and its affiliates and shall not be employed by another
entity, except as a consultant to or as a director of a non-competitive company
approved, IN ADVANCE, by the Employer's Board of Directors.
6. VACATION AND DAYS OFF. The Employee may take a maximum of four weeks of
vacation each calendar year, at times to be determined in a manner most
convenient to the business of the Employer. A maximum of 5 unused days of
vacation may be carried over from one calendar year to the next, but without
recompense. The carryover provision will be effective beginning December 31,
1996.
7. TERMINATION FOLLOWING DEATH OR INCAPACITY.
(a) Death. All rights of the Employee under this Agreement
shall terminate upon death (other than rights accrued prior thereto). All stock
options will immediately vest and transfer to the Employee's estate and be
exercisable for a period of 5 years or the period of time indicated in the
option contract, whichever is greater. The Employer shall pay to the estate of
the Employee any unpaid salary and other benefits due as well as reimbursable
expenses accrued and owing to the Employee prior to his death. The Employer
shall have no additional financial obligation under this Agreement to the
Employee or his estate beyond the term-life insurance benefit which pays his
estate one year's salary.
- 2 -
<PAGE>
(b) Disability.
(i) During any period of disability, illness or incapacity
during the term of this Agreement which renders the Employee at least
temporarily unable to perform the services required under this Agreement, the
Employee shall receive throughout which time, his salary payable under Section 3
(a) of this Agreement, less any benefits received by him under any insurance
carried by or provided by the Employer; provided however, all rights of the
Employee under this Agreement (other than rights already accrued) shall
terminate as provided below upon the Employee's permanent disability (as defined
below).
(ii) The term "permanent disability" as used in this
Agreement shall mean the inability of the Employee, as determined by the Board
of Directors of the Employer, by reason of physical or mental disability to
perform the duties required of him under this Agreement after a period of: (a)
120 consecutive days of such disability; or (b) disability for at least six
months during any twelve month period. Upon such determination, the Board of
Directors may terminate the Employee's employment under this Agreement upon ten
(10) days prior written notice.
(iii) If any determination of the Board of Directors with
respect to permanent disability is disputed by the Employee, the parties hereto
agree to abide by the decision of a panel of three physicians. The Employee and
Employer shall each appoint one member, and the third member of the panel shall
be appointed by the other two physicians. The Employee agrees to make himself
available for and to submit to reasonable examinations by such physicians as may
be directed by the Employer. Failure to submit to any such examination shall
constitute a material breach of this Agreement. In the event such a panel is
convened, the party whose position is not sustained by the panel shall bear all
associated costs.
8. OTHER TERMINATIONS.
(a) Without Cause.
(i) Either the Employee or the Employer may terminate this
Agreement upon written notice, ninety (90) days prior to the end of the initial
term or any one-year extension of this Agreement.
(ii) If the Employee gives notice pursuant to paragraph
(i) above, the Employer shall have the right to either (a) relieve the Employee,
in whole or in part, of his duties under this Agreement (without reduction in
compensation) or (b) to accelerate the date of termination to coincide with the
date on which the written notice is received (without reduction in compensation
for the notice period).
(iii) Notwithstanding any provisions hereof to the
contrary, the Employer may terminate this Agreement without cause at any time.
If the Employer terminates
- 3 -
<PAGE>
this Agreement pursuant to the provisions of this paragraph 8(a) (iii), it shall
pay to the Employee as a severance benefit an amount equal to one-year of the
Employee's then current Base Salary and all options theretofore awarded to the
Employee shall immediately vest and be exercisable by the Employee for a period
of 5 years or the period of time indicated in the option contract, whichever is
greater.
(b) For Cause.
(i) The Employer may terminate this Agreement without
notice (a) upon the Employee's breach of any material provision of this
Agreement, or (b) for other "good cause" (as defined below).
(ii) The term "good cause" as used in this Agreement
shall include, but shall not be limited to: (a) conduct disloyal to the
Employer; (b) conviction of any crime involving moral turpitude; and (c)
substantial dependence, as determined by the Board of Directors of the Employer,
on any addictive substance, including but not limited to alcohol, amphetamines,
barbiturates, methadone, cannabis, cocaine, PCP, THC, LSD, or narcotic drug.
Should the Employee dispute such a determination, the parties hereto agree to
abide by the decision of a panel of three physicians selected in a manner
provided in Section 7(b)(iii) of this Agreement. In the event such a panel is
convened, the party whose position is not sustained by the panel shall pay all
associated costs and expenses. The Employee agrees to make himself available for
and to submit to an annual examination and such other reasonable periodic
examinations by such panel as may be directed by the Employer at the Employer's
sole expense. Failure to submit to any such examination shall constitute a
material breach of this Agreement.
(c) Payment On Termination. If this Agreement is terminated
pursuant to Section 8(b), the Employer shall pay to the Employee any unpaid
salary and other benefits and reimbursable expenses accrued and owing to the
Employee. Such payment shall be in full and complete discharge of any and all
liabilities or obligations of the Employer to the Employee hereunder except as
provided in Section 9 hereof. The Employee shall be entitled to no further
benefits under this Agreement other than extension of health benefits at the
Employee's expense and options awarded to the Employee shall immediately vest
and be exercisable for a period of 5 years.
9. TERMINATION OF EMPLOYMENT UPON CHANGE IN CONTROL.
(a) For purposes hereof, a "Change in Control" shall be deemed
to have occurred (i) if there has occurred a "change in control" as such term is
used in Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as in effect at the date hereof (hereinafter
referred to as the "Act"); (ii) if there has occurred a change in control as the
term "control" is defined in Rule 12b-2 promulgated under the Act; (iii) when
any "person" (as such term is defined in Sections 3 (a) (9) and 13 (d) (3) of
the Act), during the term of this Agreement, becomes a beneficial owner,
directly or indirectly, of securities of the
- 4 -
<PAGE>
Employer representing 20% or more of the Employer's then outstanding securities
having the right to vote on the election of directors; (iv) if the stockholders
of the Employer approve a plan of complete liquidation or dissolution of the
Employer or a merger or consolidation in which the Employer is not the surviving
corporation; (v) if there has occurred a change in ownership or effective
control of the Employer or a change in the ownership of a substantial portion of
the assets of the Employer (within the meaning of Section 280G (b) (2) (A) of
the Internal Revenue Code of 1986, as amended (the "Code")); or (vi) when the
individuals who are members of the Board of Directors of the Employer on the
date hereof shall cease to constitute at least a majority of the Board of
Directors, PROVIDED, HOWEVER, that any new director whose election to the Board
of Directors or nomination for election to the Board of Directors by the
Employer's stockholders was approved by a vote of at least 50% of the directors
then still in office, shall not be deemed to have replaced his or her
predecessor.
(b) The Employee may terminate his employment at any time
within 12 months after a Change in Control and in the event that any of the
following events has occurred: (i) an assignment to the Employee of any duties
inconsistent with the status of the Employee's office and/or position with the
Employer as constituted immediately prior to the Change in Control or a
significant adverse change in the nature or scope of the Employee's authorities,
powers, functions or duties as constituted immediately prior to the Change in
Control, (ii) a failure by the Employer, after having received written notice
from the Employee specifying a material breach of its obligations pursuant to
this Agreement, to cure such breach within 30 days after receipt of such notice,
or (iii) the headquarters of the Employer is moved to a new location which is
more than 100 miles from its current location.
An election by the Employee to terminate his employment following a
Change in Control shall not be deemed a voluntary termination of employment by
the Employee for the purpose of interpreting the provisions of this Agreement or
any of the Employer's employee benefit plans and arrangements. The Employee's
continued employment with the Employer for any period of time during the term of
this Agreement after a Change in Control shall not be considered a waiver of any
right he may have to terminate his employment to the extent permitted under this
Section 9 (b).
If the Employer terminates the Employee without cause pursuant to
Section 8 (a) hereof within six months after a Change in Control has occurred,
such termination shall be deemed an election by the Employee to terminate his
employment pursuant to this Section 9.
In addition, in the event of such termination, the Employee shall
continue to have the obligations provided for in Sections 11 and 12 (b) hereof.
(c) If the Employee's employment with the Employer is
terminated under Section 9 (b) hereof, (i) the Employee shall be entitled to any
benefits to which he would have been entitled under Section 8 (a) (iii) hereof
had the Employee been terminated "without cause", to the extent such benefits
would have accrued as of the expiration of the term of this Agreement;
- 5 -
<PAGE>
(ii) in addition, the Employee shall be paid in a lump sum, within 30 days after
termination of employment, in cash, severance pay in an amount equal to two
years' salary or that amount of salary that would have been due to the Employee
through the expiration of the term of this Agreement, whichever is greater;
(iii) the Employee shall be issued a number of stock options to purchase Common
Stock of the Employer, at an exercise price of $3.75 per share, equal to the
number of stock options held by the Employee immediately prior to the effective
date of any Change of Control; and (iv) all stock options held by the Employee
immediately prior to the effective date of the Change of Control and those
options granted pursuant to Section 9 (c) (iii) shall immediately vest and
become fully exercisable for a period of 5 years or the period of time indicated
in the option contract, whichever is greater. The lump sum severance payment
described in this Section 9 (c) (i)-(iv) is hereinafter referred to as the
"Termination Compensation". The amount of the Termination Compensation shall be
determined, at the expense of the Employer, by its regular certified public
accountant immediately prior to the Change in Control (the "Accountant"). Upon
payment of the Termination Compensation and any other accrued compensation, this
Agreement shall terminate (except for the Employee's obligations pursuant to
Sections 11 and 12 (b) hereof) and be of no further force or effect.
(d) After a Change in Control has occurred, the Employer shall
honor the Employee's exercise of the Employee's outstanding stock options and
any other stock related rights, in accordance with this Employment Agreement.
After a Change in Control has occurred and the Employee's employment is
terminated as a result thereof, the Employee (or his designated beneficiary or
personal representative) shall also receive, except to the extent already paid
pursuant to Section 9 (c) (i) hereof or otherwise, the sums the Employee would
otherwise have received (whether under this Agreement, by law or otherwise) by
reason of termination of employment if a Change in Control had not occurred.
(e) Notwithstanding anything in this Agreement to the
contrary, the Employee shall have the right, prior to the receipt by him of any
amounts due hereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some or all of such
amounts as a loan from the Employer which the Employee shall repay to the
Employer, within 90 days from the date of receipt, with interest at the rate
provided in Section 7872 of the Code. The repayment of the loan balance will be
with the deferred severance funds which will then be supplied by the Employer.
Notice of any such waiver or treatment of amounts received as a loan shall be
given by the Employee to the Employer in writing and shall be binding upon the
Employer.
(f) The Employee shall not be required to mitigate the payment
of the Termination Compensation or other benefits or payments by seeking other
employment. To the extent that the Employee shall, after the term of this
Agreement, receive compensation from any other employment, the payment of
Termination Compensation or other benefits or payments shall not be adjusted.
- 6 -
<PAGE>
10. DISCLOSURE, PROPRIETARY RIGHTS. The Employee agrees that during the
term of his employment by the Employer, he will disclose only to the Employer
all ideas, methods, plans, formulas, processes, trade secrets, developments, or
improvements known by him which relate directly or indirectly to the business of
the Employer, including any lines of business, acquired by the Employee during
his employment by the Employer; provided, that nothing in this Section 10 shall
be construed as requiring any such communication where the idea, plan, method or
development is lawfully protected from disclosure, including but not limited to
trade secrets of third parties. For purposes of this Agreement, the term "the
business of the Employer" shall include, without limitation, the following: the
design, development, obtaining regulatory approval, production, manufacturing,
marketing and licensing of prescription and non-prescription drugs, medical
devices, medical instruments and methods for the diagnosis, evaluation,
treatment or correction of any disease, injury, illness or other medical or
health condition and such other lines of business as the Employer shall engage
in during the term hereof. The parties further agree that any inventions,
formulas, trade secrets, ideas, or secret processes which shall arise from any
disclosure made by the Employee pursuant to this paragraph, whether or not
patentable, shall be and remain the sole property of the Employer.
11. CONFIDENTIALITY. The Employee agrees to keep in strict secrecy and
confidence any and all information the Employee assimilates or to which he has
access during his employment by the Employer and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Employer. The Employee agrees that both during and after the term of employment
by the Employer, he will not, without prior written consent of the Employer,
disclose any such confidential information to any third person, partnership,
joint venture, company, corporation, or other organization.
12. CONFLICT OF INTEREST.
(a) Conflict Of Interest. The Employee shall devote his full
time, energy and attention to the benefit and business of the Employer and its
affiliates and shall not be employed by another entity, except as permitted in
Section 5.
(b) Covenant Not To Solicit. During employment with the
Employer, and for a period of two years thereafter, the Employee agrees he will
refrain from and will not, directly or indirectly, as independent contractor,
employee, consultant, agent, partner, joint venturer or otherwise, solicit or
encourage any of the employees of the Employer to terminate their employment.
(c) Essential Element. It is understood by and between the
parties hereto that the foregoing restrictive covenants set forth in Sections
11, 12(a), 12(b) and 13 are essential elements of this Agreement, and that but
for the agreement of the Employee to comply with such covenants, the Employer
would not have agreed to enter into this Agreement. Notwithstanding anything to
the contrary in this Agreement, the terms and provisions of Sections 12(a), 12
(b) and 13 of this Agreement, together with any definitions used in such terms
and provisions, shall
- 7 -
<PAGE>
survive the termination or expiration of this Agreement. The existence of any
claim or cause of action of the Employee against the Employer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Employer of such covenants.
13. SPECIFIC PERFORMANCE. The Employee agrees that damages at law will be
insufficient remedy to the Employer if the Employee violates the terms of
Sections 10, 11, or 12 of this Agreement and that the Employer shall be
entitled, upon application to a court of competent jurisdiction, to obtain
injunctive or other equitable relief to enforce the provisions of such Sections,
which injunctive or other equitable relief shall be in addition to any other
rights or remedies available to the Employer, and the Employee agrees that he
will not raise and hereby waives any objection or defense that there is an
adequate remedy available at law.
14. COMPLIANCE WITH OTHER AGREEMENTS. The Employee represents and warrants
that the execution of this Agreement by him and his performance of his
obligation hereunder will not conflict with, result in the breach of any
provision of, terminate, or constitute a default under any Agreement to which
the Employee is or may be bound.
15. WAIVER OF BREACH. The waiver by the Employer of a breach of any of the
provisions of this Agreement by the Employee shall not be construed as a waiver
of any subsequent breach by the Employee.
16. D&O INSURANCE; INDEMNIFICATION. The Employer hereby agrees to maintain
in full force and effect for the duration of this Agreement, Director's and
Officer's Liability Insurance of at least $2,000,000 and to indemnify and hold
harmless to the full extent permitted by law, the Employee for acts performed by
him in carrying out his duties and responsibilities in accordance with this
Agreement.
17. BINDING EFFECT, ASSIGNMENT. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Employer. This Agreement is a personal employment
contract and the rights, obligations and interests of the Employee hereunder may
not be sold, assigned, transferred, pledged or hypothecated.
18. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Whenever in this Agreement
reference is made to any party, such reference shall be deemed to include the
successors, assigns, heirs, and legal representatives of such party, and,
without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of the Employee
in this Agreement shall inure to the benefit of the successors and assigns of
the Employer; PROVIDED, HOWEVER, that nothing herein shall be deemed to
authorize or permit the Employee to assign any of his rights or obligations
under this Agreement to any other person (whether or not a family member or
other affiliate or the Employee other than stated in Section 7 of this
Agreement), and the Employee covenants and agrees that he shall not make any
such assignments.
- 8 -
<PAGE>
19. MODIFICATION, AMENDMENT, ETC. Each and every modification and amendment
of this Agreement shall be in writing and signed by all of the parties hereto,
and each and every waiver of, or consent to any departure from, any
representation, warranty, covenant or other term or provision of this Agreement
shall be in writing and signed by each affected party hereto.
20. NOTICE. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified or
registered mail, first class, return receipt requested, to the parties at the
following addresses:
To the Employer: Belmac Corporation
4830 West Kennedy Boulevard
One Urban Centre
Suite 550
Tampa, FL 33609-2517
To the Employee: Michael D. Price
11114 Carrollwood Drive
Tampa, FL 33618
21. SEVERABILITY. It is agreed by the Employer and Employee that if any
portion of the covenants set forth in this Agreement are held to be
unreasonable, arbitrary or against public policy, then that portion of such
covenants shall be considered divisible both as to time and geographical area.
The Employer and Employee agree that if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Agreement to be unreasonable, arbitrary or against public
policy, then a lesser time period or geographical area which is determined to be
reasonable, non-arbitrary and not against public policy may be enforced against
the Employee. The Employer and Employee agree that the foregoing covenants are
appropriate and reasonable when considered in light of the nature and extent of
the business conducted by the Employer.
22. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Employer and the Employee and supersedes all prior agreements and
understandings, oral or written, with respect to the subject matter hereof.
Notwithstanding the provisions with respect to vesting requirements, option
prices, terms of options, or termination of employment contained in the 1991
Stock Option Plan or any other plan under which stock options have been or may
be granted, it is expressly agreed that the terms of this Employment Agreement
supersede and override such provisions and shall govern the treatment of such
subject matter.
23. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
- 9 -
<PAGE>
24. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
25. COUNTERPARTS. This Agreement may be executed in two counterpart copies
of the entire document or of signature pages to the document, each of which may
be executed by one or more of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written.
BELMAC CORPORATION
By: /S/ JAMES R. MURPHY
------------------------
James R. Murphy
Chairman, President and CEO
Belmac Corporation
EMPLOYEE
By: /S/ MICHAEL D. PRICE
-------------------------
Michael D. Price
Vice President, Chief Financial
Officer
- 10 -
EXHIBIT 12.1
------------
<TABLE>
<CAPTION>
BELMAC CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMBINED WITH UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
For the
For the Fiscal Year Six Months For the Fiscal Year For the Nine
Ended Ended Ended Months Ended
June 30, December 31, December 31, September 30,
-------------------------- ----------- ---------------- -------------
1990 1991 1992 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) from continuing operations
before provision for income taxes per
Consolidated Statement of Operations ($2,493) ($2,476) ($10,468) ($19,531) ($10,236) ($3,578) ($1,519)
Add:
Portion of rents reprsentative of
the interest factor 24 26 47 83 226 144 114
Interest on indebtednesss 11 8 427 205 271 423 215
Amortization of debt expense 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
Income (Loss) as adjusted ($2,458) ($2,442) ($9,994) ($19,243) ($9,739) ($3,011) ($1,190)
======== ======== ======== ========= ======== ======== ========
Fixed Charges:
Interest on indebtedness:
Belmac Corporation and consolidated
subsidiaries $11 $8 $427 $205 $271 $423 $215
Unconsolidated subsidiaries 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
11 8 427 205 271 423 215
Less intercompany interest 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
(1) 11 8 427 205 271 423 215
-------- -------- -------- --------- -------- -------- --------
Amortization of debt expense (2) 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
Capitalized interest (3) 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
Rents:
Belmac Corporation and consolidated
subsidiaries 71 77 141 249 679 432 343
Unconsolidated subsidiaries 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
71 77 141 249 679 432 343
Less intercompany rents 0 0 0 0 0 0 0
-------- -------- -------- --------- -------- -------- --------
71 77 141 249 679 432 343
-------- -------- -------- --------- -------- -------- --------
Portion of rents representative of
interest factor (4) 24 26 47 83 226 144 114
-------- -------- -------- --------- -------- -------- --------
Fixed charges (1)+(2)+(3)+(4) $35 $34 $474 $288 $497 $567 $329
======== ======== ======== ========= ======== ======== ========
Ratio of earnings to fixed charges -70.2286 -71.8235 -21.0844 -66.816 -19.5956 -5.31041 -3.617021
======== ======== ======== ========= ======== ======== ========
</TABLE>
EXHIBIT 23.1
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Belmac Corporation and
subsidiaries on Form S-1 of our report dated December 8, 1995 (which expresses
an unqualified opinion and includes an explanatory paragraph referring to the
Company's recurring losses from operations as well as negative operating cash
flows, which raise substantial doubt about its ability to continue as a going
concern), appearing in the Prospectus, which is part of this Registration
Statement, and of our report dated December 8, 1995 relating to the financial
statement schedule appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Tampa, Florida
December 15, 1995
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 30, 1994, relating
to the financial statements of Belmac Corporation, which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedules for the year ended December 31, 1993 listed under Item 16(b)
of this Registration Statement when such schedules are read in conjunction with
the financial statements referred to in our report. The audits referred to in
such report also included these schedules. We also consent to the references to
us under the headings "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Tampa, Florida
December 18, 1995
<PAGE>
