As filed with the Securities and Exchange Commission on May 19, 1997
Registration No. 33-65125
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
POST-EFFECTIVE AMENDMENT NO. 1
ON
FORM S-3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
BENTLEY PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Florida 59-1513162
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation Identification No.)
or Organization)
Mr. James R. Murphy
Bentley Pharmaceuticals, Inc.
One Urban Centre One Urban Centre
Suite 548 Suite 548
4830 West Kennedy Blvd. 4830 West Kennedy Blvd.
Tampa, Florida 33609 Tampa, Florida 33609
(813) 286-4401 (813) 286-4401
(Address, Including Zip Code, and Telephone Number (Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices) Including Area Code, of Agent For Service)
</TABLE>
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Copy to:
Mark S. Hirsch, Esq.
Jordan A. Horvath, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
-----------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective, as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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. |_|_____________________
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.
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 Section 8(a), may determine.
===============================================================================
<PAGE>
Subject to Completion, Dated May 19, 1997
PROSPECTUS
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BENTLEY PHARMACEUTICALS, INC.
11,513,500 Shares of Common Stock
consisting of
7,470,000 Shares of Common Stock (6,900,000 shares issuable upon exercise
of the Class A Redeemable Warrants and 570,000 shares issuable upon exercise of
the Class A Redeemable Warrants comprising part of the Units issuable upon
Exercise of the Underwriter Warrants)
3,735,000 Shares of Common Stock (3,450,000 shares issuable upon
exercise of the Class B Redeemable Warrants and 285,000 shares issuable
upon exercise of the Class B Redeemable Warrants comprising part of the
Units issuable upon Exercise of the Underwriter Warrants)
308,500 Shares of Common Stock being Offered by the Selling
Stockholders
570 Units issuable upon Exercise of the Underwriter Warrants, Each Unit
Consisting of One Thousand Dollars ($1,000) Principal Amount 12% Convertible
Senior Subordinated Debenture Due February 13, 2006 and 1,000 Class A Redeemable
Warrants each to Purchase One Share of Common Stock and One Class B Redeemable
Warrant
570,000 Class B Redeemable Warrants issuable upon Exercise of the 570,000 Class
A Warrants included in the Units issuable upon Exercise of the Underwriter
Warrants
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This Prospectus is being delivered to the holders of 6,900,000 Class A
redeemable warrants (the "Class A Warrants") that were issued by Bentley
Pharmaceuticals, Inc. (the "Company") in a public offering (including the
over-allotment relating to such offering, the "Public Offering") which was
declared effective on February 14, 1996 (the "Effective Date"). In the Public
Offering, the Company offered and sold a total of 6,900 units (the "Units"),
each Unit consisted of a One Thousand Dollar ($1,000) principal amount 12%
Convertible Senior Subordinated Debenture Due February 13, 2006 (the
"Debentures") and 1,000 Class A Warrants. Each Class A Warrant entitles the
holder, for a period of three years from the Effective Date, to purchase one
share of common stock and one Class B redeemable warrant ("Class B Warrants")
for an aggregate purchase price of $3.00. Two Class B Warrants, together, for a
period of five years from the Effective Date, entitle the holder to purchase one
share of Common Stock at a price of $5.00 per share. This Prospectus is being
delivered to facilitate the exercise of the Class A Warrants and the Class B
Warrants.
The Company may redeem, on 30 days prior written notice, all of the
Class A Warrants for $.05 per Warrant if the per share closing price for the
underlying Common Stock on the
<PAGE>
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. The Company may also redeem, on 30 days prior written notice,
all of the Class B 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 exercise price of the Class A and Class B
Warrants is subject to adjustment under certain circumstances.
This Prospectus is also being delivered to the holders of the
Underwriter Warrants to purchase 570 Units issued in connection with the Public
Offering (the "Underwriter Warrants"). The Units subject to the Underwriter
Warrants are in all respects identical to Units offered to the public in the
Public Offering except that the Underwriter Warrants will be exercisable for a
four-year period commencing one year after the closing of the Public Offering at
an exercise price of $1,200 per Unit.
This Prospectus is also being delivered to certain holders of 308,500
shares of Common Stock (the "Selling Stockholders' Shares"), whose shares were
registered in a registration statement on Form S-1 (the "Form S-1 Registration
Statement"), which became effective on the Effective Date, simultaneous with the
Public Offering, for future sales by such Stockholders (the "Selling
Stockholders").
The Company's Common Stock, Debentures and Class A Warrants are traded
on the American Stock Exchange and the Pacific Stock Exchange under the symbol
"BNT", "BNT.D" and "BNT.WS.A", respectively. The last reported sale price of the
Company's Common Stock on the American Stock Exchange on May 15, 1997 was $3.375
per share, the last reported sale price of the Debentures on the American Stock
Exchange on May 15, 1997 was $1,380 per Debenture and the last reported sale
price of the Class A Warrants on the American Stock Exchange on May 15, 1997 was
$1.25 per warrant. There is no public market for the Class B Warrants and there
can be no assurance that one will develop. Once a sufficient number of Class B
Warrants are outstanding, it is anticipated that they will be listed on the
American Stock Exchange and the Pacific Stock Exchange under the symbol
"BNT.WS.B". See "Risk Factors--No Assurance of Public Market." The Company's
executive offices are located at One Urban Centre, Suite 548, 4830 West Kennedy
Boule vard, Tampa, Florida 33609, and its telephone number is (813) 286-4401.
------------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE FACTORS
SPECIFIED UNDER THE CAPTION "RISK FACTORS" LOCATED ON PAGE 9 OF
THIS PROSPECTUS.
------------------------------------
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<PAGE>
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 May 19, 1997.
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<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: New York Regional Office, 7 World Trade Center, Suite
1300, New York, New York 10048; and Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. 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 and Class A Warrants are listed.
This Prospectus does not contain all the information set forth in the
Form S-3 Registration Statement (No.33-65125) (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. 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. This Registration Statement has been filed electronically
through the Electronic Data Gathering, Analysis and Retrieval System (EDGAR) and
is publicly available through the Commission's web site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders; the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997; the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on July 20, 1990 and the
description of the Class A Warrants, the Class B Warrants and the Debentures
contained in the Company's Registration Statement on Form 8-A filed January 30,
1996 ("Warrants and Debentures Form 8-A") and Amendment No. 1 to Warrants and
Debentures Form 8-A filed February 7, 1996, all as filed pursuant to the 1934
Act, including any amendment or report filed for the purpose of updating such
descriptions, are hereby incorporated by reference.
Each document filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of
this offering shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement.
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<PAGE>
The Company will provide without charge to each person, including any
beneficial owner, 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 Bentley Pharmaceuticals, Inc., One Urban Centre, Suite 548, 4830
West Kennedy Boulevard, Tampa, Florida 33609, (813) 286-4401, Attention: Michael
D. Price, Chief Financial Officer.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
<TABLE>
The Offering
<S> <C>
Securities Offered by the Company...... 6,900,000 shares of Common Stock
issuable upon the exercise of the Class
A Warrants issued in the Public Offering
3,450,000 shares of Common Stock
issuable upon the exercise of the Class
B Warrants which may be issued pursuant
to the exercise of the Class A Warrants
issued in the Public Offering
570 Units issuable upon exercise of the
Underwriter Warrants, each Unit
Consisting of One Thousand Dollars
($1,000) Principal Amount 12%
Convertible Senior Subordinated
Debenture Due February 13, 2006 and
1,000 Class A Warrants each to Purchase
one share of Common Stock and one Class
B Warrant
570,000 shares of Common Stock issuable
upon exercise of the Class A Warrants
included in the Units issuable upon
exercise of the Underwriter Warrants
570,000 Class B Redeemable Warrants
issuable upon exercise of the Class A
Warrants included in the Units issuable
upon exercise of the Underwriter
Warrants
285,000 shares of Common Stock issuable
upon exercise of the Class B Warrants
issuable upon exercise of the Class A
Warrants which are included in the Units
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<PAGE>
issuable pursuant to the Underwriter
Warrants.
The exercise price of the Class A and
Class B Warrants is subject to
adjustment under certain circumstances.
Securities Offered by Selling Stockholders...... 308,500 shares of Common Stock
Estimated Net Proceeds to the Company (1)....... $41,744,000
Common Stock Outstanding Prior to the Offering.. 3,348,195 shares
Common Stock to be Outstanding After
the Offering (2)............................... 14,653,195 shares
American Stock Exchange Symbols
Common Stock................................... BNT
Debentures..................................... BNT.D
Class A Warrants............................... BNT.WS.A
Class B Warrants (3)........................... BNT.WS.B
</TABLE>
Ratio of Earnings to Fixed Charges
Earnings are inadequate to cover fixed charges. The resultant
deficiency was $10,468,000, $19,531,000, $10,236,000, $3,578,000, $2,326,000,
$2,919,000 and $826,000 for the year ended June 30, 1992, for the six month
period ended December 31, 1992, for the years ended December 31, 1993, 1994,
1995 and 1996 and for the three month period ended March 31, 1997, respectively.
________________________
(1) Includes exercise price of the Class A Warrants, Class B Warrants,
Underwriter Warrants, Class A Warrants included in the Underwriter Warrants
and Class B Warrants included in the Class A Warrant issuable upon exercise
of the Underwriter Warrants, after deducting $25,000 for expenses of this
offering payable by the Company. Does not include the receipt of proceeds
of $250,000 upon the exercise of warrants issued to Baytree Associates,
Inc., one of the selling stockholders.
(2) Excludes (i) 2,760,000 shares of Common Stock reserved for issuance upon
conversion of the Debentures issued in the Public Offering; (ii) 228,000
shares of Common Stock reserved for issuance upon conversion of the
Debentures included in the Units issuable upon exercise of the Underwriter
Warrants; (iii) 727,597 shares of Common Stock reserved for issuance upon
exercise of outstanding stock purchase warrants which were issued in
various transactions
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<PAGE>
not related to the Public Offering; (iv) 1,715,100 shares of Common Stock
reserved for issuance upon exercise of stock options; (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) 32,183
shares of Common Stock reserved for issuance to current members of the
Board of Directors of the Company and others as compensation.
(3) The Class B Warrants will not be listed on the American Stock Exchange or
the Pacific Stock Exchange until a sufficient number of Class A Warrants
have been exercised.
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<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a substantial
degree of risk. Prospective investors should give careful consideration to,
among other items, the following factors prior to making an investment decision.
Certain statements in this Prospectus that are not historical facts
constitute "forward- looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results of the Company to be materially different from the historical
results or from any results, expressed or implied by such forward-looking
statements. Such risks, uncertainties and other factors include, but are not
limited to, the following risks.
Financial Risks
History of Operating Losses; Accumulated Deficit; Uncertainty of Future
Financial Results. As of March 31, 1997, the Company had a cumulative deficit of
approximately $67,993,000. 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.
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 was used for working capital purposes. The Public
Offering resulted in proceeds to the Company of approximately $5,700,000. A
substantial portion of the proceeds of the Public Offering has been used to
repay the debt incurred in the private placements. The future existence and
profitability of the Company is dependent upon its ability to obtain additional
funds 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.
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, Laboratorios Belmac, S.A., a pharmaceutical
manufacturer located in Spain ("Laboratorios Belmac") and Chimos/LBF, S.A., a
company based in France which distributes specialty pharmaceutical products and
chemicals in France ("Chimos"). Chimos and Laboratorios Belmac were acquired by
the Company in August 1991 and February 1992,
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<PAGE>
respectively. See "Negotiations to Sell Chimos." 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. Due to
its limited cash resources, the Company has suspended most of its research and
development activities pending the selection of strategic partners for
development and marketing. There is no assurance that the Company will receive
additional funding necessary to continue 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 the Public Offering, should provide
sufficient liquidity to enable it to conduct its existing operations into 1998,
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.
Possible Restriction on Ability to Utilize Net Operating Loss Carry
Forwards Resulting from Change in Equity Ownership and Change in Tax Year. At
December 31, 1996, the Company has net operating loss (the "NOL") carryforwards
of approximately $38,000,000 available to offset future U.S. taxable income. The
Company calculates that its use of the NOL will be limited to approximately
$3,000,000 each year as a result of stock, option and warrant issuances during
prior fiscal years which resulted in an ownership change of more than 50% of the
Company's outstanding equity. Additionally, approximately $1,800,000 of the NOL
generated in 1995 available to offset future U.S. taxable income will be limited
to approximately $300,000 per year over the next six years due to the change in
tax year end during 1995. If not offset against future taxable income, the NOL
carryforwards will expire in tax years 1997 through 2011. The Company's
subsidiaries in France and Spain have NOL carry forwards of approximately
$13,300,000 and $2,700,000, respectively. These will expire in various years
ending in 2001.
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. During a periodic review of the dossier of Biolid by France's
Ministry of Health in 1993
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<PAGE>
which was completed shortly after the Company had negotiated the sale of its
rights to the sachet formulation of Biolid in France, the Ministry required the
suspension of marketing of Biolid pending provision by the Company of additional
clinical data regarding the mechanisms for the comparatively enhanced absorption
of the Biolid sachet. The suspension was unrelated to safety or efficacy issues,
but has not been lifted since the Company has not had sufficient resources to
conduct the study required. See "Risks Inherent in Pharmaceutical Development;
Dependency 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. Non-compliance with these regulations could have a
material adverse effect on the Company and/or prevent the commercialization of
the Company's products.
Dependency on Others; Discontinuation of Certain Marketing Activities. The
Company relies on outside contractors for manufacturing of the products it
distributes in France. Until the distribution agreement between Genzyme
Corporation and Chimos expired on March 31, 1996, the Company relied on sales of
Ceredase, a drug used in the treatment of Gaucher's Disease and other products
by Chimos to Pharmacie Centrale des Hopitaux. Sales to Pharmacie Centrale des
Hopitaux accounted for approximately 10%, 23% and 30% of the Company's sales for
the years ended December 31, 1996, 1995 and 1994, respectively. Consequently,
the Company's sales in France declined significantly beginning in the second
quarter of 1996 as a result of the expiration of the distribution agreement.
Notwithstanding the relative significance of its sales volume, the Ceredase
gross margins as a percentage of sales were minimal, therefore the impact on
operating profits was not material. The Company is exploring alternative uses
for its working capital that has historically supported the Ceredase
distribution arrangement. Chimos, as one of the authorized distributors of
Orphan Drugs in France, is occasionally contacted by manufacturers of such
products outside of
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<PAGE>
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. See "Negotiations to Sell Chimos."
Negotiations to Sell Chimos. The Company is currently engaged in
negotiations with a subsidiary of a large European conglomerate to sell Chimos.
The transaction is expected to be finalized in the second quarter of 1997. As no
definitive agreement has been signed, there can be no assurance that such sale
will be consummated. Since the expiration of the Ceredase distribution
agreement, Chimos has been generating revenues at the rate of approximately $5.5
million per annum. See "Dependency on Others; Discontinuation of Certain
Marketing Activities."
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.
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
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<PAGE>
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 approximately one
year 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.
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.
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 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. The Company does not currently market any Orphan Drugs in the United
States.
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<PAGE>
Attraction and Retention of Key Personnel. The Company believes that it has
been able to attract 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 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 remain 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 from Offering. All of the net
proceeds from the exercise of the Class A and Class B Warrants and the
Underwriter Warrants 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 1995 and 1996 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
stockholders. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested stockholders 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
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<PAGE>
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
No Assurance of Public Market. Since the Class B Warrants will not be
outstanding until the Class A 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 Warrants in multiples of
two.
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.
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 stockholder 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. See "Description of
Securities--Preferred Stock."
Underwriter Warrants and Outstanding Convertible Securities. The Company
sold to the Underwriter, for nominal consideration, warrants to purchase up to
570 Units exercisable for a period of four years, commencing one year from the
date of sale, at an exercise price of $1,200 per Unit. In addition to warrants
issued in the Public Offering, the Company currently has outstanding 2,542,697
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.
Discount on Conversion of Debentures. The Debentures are convertible into
Common Stock at a conversion price per share equal to$2.50. A conversion of the
Debentures may dilute the
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<PAGE>
interests of holders of Common Stock and may adversely affect the market price
for the Common Stock and any other traded securities of the Company.
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. Most of the
Company's revenues are derived from its foreign subsidiaries. Any restrictions
on the subsidiaries to make payments to the Company would affect its ability to
pay interest. 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, including trade
creditors of the Company's subsidiaries, 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 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. Warrant holders will have the right to
exercise the Redeemable Warrants 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 and has qualified them in
the states where it sold 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 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
Warrants remaining unexercised at the end of the redemption period must be
redeemed. Accordingly,
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<PAGE>
to the extent that such class of 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--Warrants."
Determination of Warrant Exercise Price and Allocation of Consideration.
The exercise price 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. As of December 31, 1996 and 1995, 230,000 out of the 290,000
Series A Preferred Stock had been converted into 51,200 shares of Common Stock
and all 340,000 shares of the Series B Preferred Stock had been converted into
56,100 shares of Common Stock. The Company exercised its right to adjust the
conversion rate of the Series A Preferred Stock in lieu of paying annual
dividend payments due commencing October 15, 1992. The conversion rate was
adjusted by the Company from an initial conversion rate of approximately .21739
shares of Common Stock for each share of Series A Preferred Stock to a
conversion rate of .3088. The Company also adjusted the conversion rate for the
Series B Preferred Stock from an initial conversion rate of .15625 shares of
Common Stock for each share of Series B Preferred Stock to a conversion rate of
.1703. The arrearages on the payment of dividends have the effect of limiting
the payment of cash dividends to holders of Common Stock and giving the Series A
Preferred Stockholders, as a class, the right to designate two directors. As of
the date hereof, the holders of the Series A Preferred Stock have not exercised
their right to elect such 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 on its capital stock.
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<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Selling
Stockholders' Shares, however, the Company will receive proceeds upon the
exercise of the Class A and Class B Warrants and the Underwriter Warrants (see
"Plan of Distribution" and "Selling Stockholders" below). The proceeds, if any,
from such exercise will be used for general working capital purposes.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Company has issued or may issue an aggregate of 308,500 shares of
Common Stock to the Selling Stockholders that are being offered pursuant to this
Prospectus. The Selling Stockholders 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, the Pacific 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 Stockholders, 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 Stockholders 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 Company has agreed to bear all
expenses in connection with the registration of the Shares.
The Selling Stockholders, 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 Stockholders, 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 following table sets forth certain information with respect to persons
for whom the Company is registering the Selling Stockholders' Shares for resale
to the public. Beneficial ownership of the Selling Stockholders' Shares by such
Selling Stockholders after the offering will depend on the number of Selling
Stockholders' Shares sold by each Selling Stockholder.
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<PAGE>
<TABLE>
Beneficial
Beneficial Ownership
Ownership Maximum After Offering if
Prior to Offering Amount to Maximum is Sold
----------------- ---------------
Amount Percent be sold Amount Percent
------ ------- ------- ------- -------
Selling Stockholders
<S> <C> <C> <C> <C> <C>
Robert J. Alldredge(1)........................ 5,000 * 5,000 0 0
Thomas G. Babington(1)........................ 10,000 * 10,000 0 0
Joseph Giamanco(1)............................ 20,000 * 20,000 0 0
John E. McConnaughy, Jr.(1)................... 40,000 1.20% 40,000 0 0
Khin Aye(2)................................... 7,500 * 7,500 0 0
Wilson Price Barranco Billingsly Keogh
Plan, John S. Price, Trustee
FBO Carl A. Barranco(2)..................... 3,750 * 3,750 0 0
Wilson Price Barranco Billingsly Keogh
Plan, John S. Price, Trustee FBO
William Barranco(2)........................... 3,750 * 3,750 0 0
Albert Brod(2)................................ 3,750 * 3,750 0 0
Thomas J. Carroll(2).......................... 7,500 * 7,500 0 0
Leo Denslow(2)................................ 7,500 * 7,500 0 0
James H. Friar(2)............................. 7,500 * 7,500 0 0
Barry Friedman(2)............................. 3,750 * 3,750 0 0
John N. Kapoor Trust DTD 9/20/89,
John N. Kapoor Trustee(2)................... 7,500 * 7,500 0 0
John Kiser (2)................................ 7,500 * 7,500 0 0
Willard J. Kiser Living Trust DTD
11/1/91(2).................................... 7,500 * 7,500 0 0
Alec G. Land(2)............................... 7,500 * 7,500 0 0
Richard M. Maser(2)........................... 15,000 * 15,000 0 0
Robert A. Mignatti(2)......................... 3,750 * 3,750 0 0
Kenneth W. Moore(2)........................... 7,500 * 7,500 0 0
Sara Parnum(2)................................ 3,750 * 3,750 0 0
Therold W. Perkins Trust U/A/D 7/1/90,
Therold W. Perkins Trustee (2)............... 7,500 * 7,500 0 0
Sam A. Phillips(2)............................ 7,500 * 7,500 0 0
JoAnn Timbanard(2)............................ 3,750 * 3,750 0 0
James R. Washburn(2).......................... 7,500 * 7,500 0 0
Baytree Associates, Inc.(3)................... 100,000 2.90% 100,000 0 0
Martin E. Janis & Co., Inc.(4)................ 2,250 * 2,250 0 0
- ----------------------
* Less than one percent
</TABLE>
(1) The Selling Stockholders' Shares include 75,000 shares of Common Stock
issued by the Company in an October 1995 private placement (the "First
Placement"). This Selling Stockholder was issued shares in the First
Placement.
(2) The Selling Stockholders' Shares include 131,250 shares of Common Stock
issued by the Company in a subsequent October 1995 private placement (the
"Second Placement"). This Selling Stockholder was issued shares in the
Second Placement.
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<PAGE>
(3) Baytree Associates, Inc., which provides financial advisory services to the
Company, assisted the Company in raising private capital from foreign
sources during early 1993 and 1994. Such shares are issuable upon the
exercise of warrants issued to Baytree.
(4) Martin E. Janis & Co., Inc. provided the Company with investor relations
services in 1994 and 1995.
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<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 35,000,000 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.
Units
Each Unit offered in the Public Offering consisted of the Debenture and
1,000 Class A Warrants, each Class A Warrant to purchase one share of Common
Stock and one Class B Warrant. Of the Unit purchase price of $1,000, for
financial reporting purposes the consideration allocated to the Debenture is
$722, to the conversion discount feature of the Debenture is $224 and to the
1,000 Class A Warrants is $54, and for federal income tax purposes (including
original issue discount) the consideration allocated to the Debenture is $931
and to the 1,000 Class A Warrants is $69. No consideration has been allocated to
the Class B Warrants. The Debentures and Class A Warrants were not detachable
until May 29, 1996, after which all of the Debentures and the Class A Warrants
have been separately transferable. See "Description of Debentures."
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<PAGE>
Redeemable Warrants
The Redeemable Warrants were 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 Form S-1 Registration
Statement.
Class A Warrants. The Company has authorized the issuance of 7,470,000
Class A Warrants to purchase an aggregate of 6,900,000 shares of Common Stock
and 6,900,000 Class B Warrants and 570,000 shares of Common Stock and 570,000
Class B Warrants underlying the Class A 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 Warrant entitles the registered holder thereof to purchase, at any
time for a period of three years from the Effective Date, one share of Common
Stock and one Class B Warrant for an aggregate price of $3.00. The Warrant
exercise price and the number of shares issuable upon exercise of the Class A
Warrants are subject to adjustment as described below.
The Class A Warrants are subject to redemption by the Company, upon not
less than 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 within 10 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 Warrants. The Company has authorized the issuance of 7,470,000
Class B Warrants to purchase an aggregate of 3,450,000 shares of Common Stock
and 285,000 shares of Common Stock underlying the Class B 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 Warrants entitle the registered holder thereof for a
period of five years from the Effective Date to purchase 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 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 Warrants are subject to redemption by the Company, upon not
less than 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 within 10 days immediately preceding the
record date for redemption equals or exceeds 130% of the then exercise
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<PAGE>
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 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 Warrants simultaneously. A Warrant holder will not
possess any rights as a stockholder 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
Warrant or two Class B Warrants may be exercised upon surrender of a Warrant
certificate on or prior to the close of business on February 14, 1999 or
February 14, 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
Transfer Agent, Registrar and Warrant Agent
The Transfer Agent and Registrar for the Common Stock and 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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<PAGE>
DESCRIPTION OF DEBENTURES
General
The Debentures were issued under an indenture (the "Indenture") dated as of
February 14, 1996, between the Company and American Stock Transfer & Trust
Company (the "Trustee"). 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 Indenture was filed as an exhibit to the
registration statement on Form S-1 which this Registration Statement amends (the
"Public Offering Registration Statement")).
The Debentures (i) are limited to $7,470,000 aggregate principal amount
(including the $900,000 over-allotment option granted to the Underwriter and
$570,000 included in the Units issuable upon exercise of the Underwriter
Warrants) (Debenture paragraph 4); (ii) are unsecured obligations of the Company
(Debenture paragraph 4); (iii) mature on February 13, 2006 (Face of Debenture);
and (iv) bear interest from the date of delivery at 12% per annum, 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 were 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 February 14, 1996 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 February 13, 2006, subject to prior redemption, to convert
the
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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 $2.50
per share (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 up to the
next highest 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 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 10.8).
The Company may reduce the conversion price by any amount, without
limitation, for any period of time if the period is at least 20 consecutive
trading days. Upon such reduction, the Company shall mail a notice thereof to
Debenture holders and publish an announcement of the notice (Article X: Section
10.13). The Company may consider reducing the conversion price if it was
experiencing difficulty servicing the debt represented by the Debentures and the
price of its Common Stock had declined subsequent to the Offering. Under such
circumstances, a reduction in the conversion price would be intended to provide
the holders with additional incentive to convert their Debentures thereby
reducing the Company's debt obligations.
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 10.15).
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
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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 December
31, 1996, Senior Debt aggregated $1,014,000. 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 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
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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 and to provide to holders copies of all documents
furnished to stockholders of the Company (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 February 14, 1996, 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 60% 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
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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).
Events of Default, Notice and Waiver
Events of Default are defined in the Indenture as being (a) a default for
20 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
$500,000; (d) the entering of a final judgment or judgments for the payment of
at least $500,000 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; and (e) 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).
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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. (Article XII: Section 12.02).
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.
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.
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Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to the Secretary of the Company, Bentley
Pharmaceuticals, Inc., 4830 West Kennedy Boulevard, One Urban Centre, Suite 548,
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 of
certain U.S. federal tax consequences is based upon the advice of Parker Chapin
Flattau & Klimpl, LLP, counsel to the Company.
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.
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 Debentures
The stated interest on the Debenture 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 $69 of 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 Debenture. 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 ($1,000) over the issue price of the
Debenture ($931), since it will exceed the de minimis exception allowed where
the OID would otherwise be less than 1/4% of the stated redemption price at
maturity 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 Unit issue price.
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Upon the sale, exchange or redemption of a Debenture, the holder will
recognize gain or loss equal to the difference between the amount realized on
such sale, exchange or redemption 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 a
distribution exceeds such earnings and profits, it 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 a distribution 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.
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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 redemption 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 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.
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REQUIREMENTS 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."
LEGAL MATTERS
Parker Chapin Flattau & Klimpl, LLP, New York, New York, is acting as
counsel to the Company and is passing on the validity of the shares of Common
Stock offered hereby.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of the Company incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports which are incorporated herein by reference and have been so incorporated
in reliance upon the reports of such firm, given upon their authority as experts
in accounting and auditing.
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<TABLE>
- -------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
No dealer, salesperson or any other BENTLEY
person has been authorized to give any information PHARMACEUTICALS, INC.
or to make any representation not contained in
this Prospectus and, if given or made, such 11,513,500 Shares
information or representation must not be relied of Common Stock
upon as having been authorized by the company, by
the Selling Stockholder or by any other person. 570 Units issuable upon Exercise
This Prospectus does not constitute an offer to of the Underwriter Warrants,
sell or a solicitation of an offer to buy the Each Unit Consisting of One
securities offered hereby to any person or by Thousand Dollars ($1,000)
anyone in any jurisdiction in which such offer or Principal Amount 12%
solicitation may not lawfully be made. Neither the Convertible Senior Subordinated
delivery of this Prospectus nor any sale made Debenture Due February 13,
hereunder shall, under any circumstances, create 2006 and 1,000 Class A
any implication that there has been no change in Redeemable Warrants each to
the affairs of the Company since the date hereof. Purchase One Share of Common
Stock and One Class B
Redeemable Warrant
TABLE OF CONTENTS 570,000 Class B Redeemable
Warrants issuable upon Exercise
Page of the 570,000 Class A Warrants
---- included in the Units issuable
Available Information.............................4 upon Exercise of the
Incorporation of Certain Documents Underwriter Warrants
by Reference.................................4
Prospectus Summary................................6
Risk Factors......................................9 ----------
Use of Proceeds..................................18 PROSPECTUS
Selling Stockholders and Plan of Distribution....18 ----------
Description of Securities........................21
Description of Debentures........................24
Certain Federal Income Tax Considerations........31
Requirements for Current Registration............34
Legal Matters....................................34
Experts..........................................34 May 19, 1997
- ------------------------------------------------------------ -------------------------------
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
It is estimated that the following additional expenses will be incurred in
connection with the proposed Post Effective Amendment on Form S-3 filed hereby.
All of such expenses will be borne by the Company.
Registration fee - Securities
and Exchange Commission....... $ 0
Legal fees and expenses Commission ......... 10,000
Accounting fees and expenses................. 7,500
Blue sky fees and expenses
(including counsel fees)...... 3,000
Printing expenses............................ 3,500
Miscellaneous................................ 1,000
Total......................... $ 25,000
========
Item 15. 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.
(1) 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.
(2) 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
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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 pro ceeding
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 interests 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.
(3) 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.
(4) 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 stockholders by a majority vote of a quorum consisting of
stockholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of stockholders who were not parties to such
proceeding.
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(5) 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.
(6) 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 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.
(7) 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 stockholders 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 judg ment 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
stockholder.
(8) 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.
(9) 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 stockholders 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
II-3
<PAGE>
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;
(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).
(10) 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.
(11) 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;
II-4
<PAGE>
(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.
(12) 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 corporation would have the power to indemnify him against
such liability under the provisions of this section.
* * * * *
Article IV of the Company'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 Company 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 $117,600.
Item 16. Exhibits.
---------
Exhibit
Number Description
- ------ -----------
1.1(2) 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 for the period ended 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 Company'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.)
II-5
<PAGE>
4.1 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.)
4.2 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.)
4.3 Specimen Certificate of the Registrant's $2.25 Convertible
Exchangeable 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.)
4.4 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.)
4.5 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.)
4.6 Amendment to Registrant's 1991 Stock Option Plan as approved by the
stockholders 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.)
4.7 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.)
4.8 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.)
4.9 Warrants issued by the Registrant to Grant Harshbarger, dated November
11, 1993 and November 17, 1993, respectively. (Reference is made to
Exhibit 4.8
II-6
<PAGE>
to the Registrant's Registration Statement on Form S-3, Commission
File No. 33-69946, which exhibit is incorporated herein by reference.)
4.10 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.)
4.11 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,
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.12 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.)
4.13(2) Warrants issued by the Registrant to Baytree Associates, Inc. dated
October 18, 1995.
4.14 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.)
4.15 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.)
4.16 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.)
4.17 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,
II-7
<PAGE>
Commission File No. 1-10581, which exhibit is incorporated herein by
reference.)
4.18(2) Form of Indenture relating to the Registrant's $1,000 Principal Amount
12% Senior Convertible Subordinated Debentures due February 13, 2006
(with the Form of Debenture attached thereto as Exhibit A.)
4.19(2) Form of Warrant Agreement, including form of Class A and Class B
Warrant.
4.20(2) Form of Underwriter Warrant.
4.21(2) Form of Unit Certificate.
5.1(2) Opinion 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 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.)
12.1(1) 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(1) Consent of Deloitte & Touche LLP.
23.2(2) Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1 hereto).
II-8
<PAGE>
23.3(2) Consent of Parker Chapin Flattau & Klimpl, LLP, as tax counsel.
25.1(2) Power of Attorney.
- ----------------------
(1) Filed herewith.
(2) Previously filed.
Item 17. Undertakings.
------------
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement 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;
(2) 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;
(3) 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; and
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and 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 15th day of May,
1997.
Bentley Pharmaceuticals, Inc.
By /s/ James R. Murphy
------------------------------------
James R. Murphy
Chairman of the Board, President and
Chief Executive Officer
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.
Signature Title Date
--------- ----- ----
/s/ James R. Murphy
- ---------------------- Chairman of the Board, May 15, 1997
James R. Murphy President, Chief Executive
Officer and Director
*
______________________ Senior Vice-President, Chief May 15, 1997
Robert M. Stote Science Officer and Director
*
______________________ Vice-President, Chief May 15, 1997
Michael D. Price Financial Officer, Secretary,
Treasurer and Director
(principal financial and
accounting officer)
*
______________________ Director May 15, 1997
Randolph W. Arnegger
II-10
<PAGE>
*
______________________ Director May 15, 1997
Charles L. Bolling
*
______________________ Director May 15, 1997
Doris E. Wardell
*By: /s/ James R. Murphy
-------------------
James R. Murphy
(Attorney-in-fact)
II-11
<PAGE>
Exhibit
Number Description
- ------ -----------
1.1(2) 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 for the period
ended 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 Company'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 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.)
4.2 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.)
4.3 Specimen Certificate of the Registrant's $2.25 Convertible
Exchangeable 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.)
-1-
<PAGE>
4.4 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.)
4.5 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.)
4.6 Amendment to Registrant's 1991 Stock Option Plan as approved by
the stockholders 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.)
4.7 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.)
4.8 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.)
4.9 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.)
4.10 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.)
-2-
<PAGE>
4.11 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,
Commission File No. 1-10581, which exhibit is incorporated herein
by reference.)
4.12 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.)
4.13(2) Warrants issued by the Registrant to Baytree Associates, Inc.
dated October 18, 1995.
4.14 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.)
4.15 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.)
4.16 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.)
4.17 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.)
-3-
<PAGE>
4.18(2) Form of Indenture relating to the Registrant's $1,000 Principal
Amount 12% Senior Convertible Subordinated Debentures due
February 13, 2006 (with the Form of Debenture attached thereto as
Exhibit A.)
4.19(2) Form of Warrant Agreement, including form of Class A and Class B
Warrant.
4.20(2) Form of Underwriter Warrant.
4.21(2) Form of Unit Certificate.
5.1(2) Opinion 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 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.)
12.1(1) 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(1) Consent of Deloitte & Touche LLP.
-4-
<PAGE>
23.2(2) Consent of Parker Chapin Flattau & Klimpl, LLP (included in
Exhibit 5.1 hereto).
23.3(2) Consent of Parker Chapin Flattau & Klimpl, LLP, as tax counsel.
25.1(2) Power of Attorney.
- -------------------------
(1) Filed herewith.
(2) Previously filed.
-5-
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BENTLEY PHARMACEUTICALS, INC.
To the Department of State
State of Florida
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the corporation hereinafter named (the "Corporation") does
hereby adopt the following Articles of Amendment.
1. The name of the corporation is Bentley Pharmaceuticals, Inc.
2. Article III of the Amended and Restated Articles of
Incorporation is hereby amended so as henceforth to read as follows:
"ARTICLE III
The total number of shares of all classes of stock which the
Corporation has authority to issue is Thirty Seven Million (37,000,000)
consisting of Thirty Five Million (35,000,000) shares of Common Stock,
par value $.02 per share (the "Common Stock"), and Two Million
(2,000,000) shares of Preferred Stock, par value $1.00 per share (the
"Preferred Stock"). All or any part of the Common Stock may be paid for
in cash, in property, in formulas, copyrights, patents, trade names,
equipment, or in labor or services at a fair valuation to be fixed by
the incorporators or by the Board of Directors at a meeting called for
said purpose. All stock when issued shall be non-assessable. The
stockholders of the Corporation shall not, solely by virtue of being
stockholders, have pre-emptive rights to acquire the Corporation's
stock, including unissued or treasury shares of the Corporation or
securities of the Corporation convertible into or carrying a right to
subscribe to or acquire shares of the Corporation's stock. The
Preferred Stock shall be issuable in series with such designations,
terms, limitations
<PAGE>
and relative rights and preferences as may be fixed from time to time
by the Board of Directors.
The designations, terms, limitations and relative rights and
preferences of the shares of Common Stock and Preferred Stock (unless
otherwise fixed by the Board of Directors) are as follows:
(a) COMMON STOCK
1. Dividends. Subject to the prior and superior right of the
Preferred Stock, the holders of outstanding shares of Common Stock
("Common Stock Holders") shall be entitled to receive dividends as,
when and in the amount declared by the Board of Directors, out of any
funds legally available therefor.
2. Liquidation, Dissolution and Winding Up. Subject to the
prior and superior right of the Preferred Stock, in the event of any
liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, the Common Stock Holders
shall be entitled to receive, out of the net assets of the Corporation,
after payment or provision for payment of the debts and other
liabilities of the Corporation, that portion of the remaining funds to
be distributed. Such funds shall be paid to the Common Stock Holders on
the basis of the number of shares of Common Stock held by each of them.
Neither the consolidation nor merger of the Corporation into or with
any other corporation nor the sale or transfer by the Corporation of
all or any part of its assets shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the
meaning of the provisions of this Section (a)(2).
3. Voting. Shares of Common Stock shall entitle the holder
thereof to one vote for each share held with respect to all matters
voted on by the stockholders of the Corporation.
(b) PREFERRED STOCK
1. Series. The shares of Preferred Stock may be divided into
and issued in one or more series, and each series shall be so
designated so as to distinguish the shares thereof from the shares of
all other series. All shares of Preferred Stock shall be identical
except in respect of particulars which may be fixed by the
-2-
<PAGE>
Board of Directors as hereinafter provided pursuant to authority which
is hereby expressly vested in the Board of Directors. Each share of a
series shall be identical in all respects with all other shares of such
series, except as to the date from which dividends are cumulative.
Shares of Preferred Stock of any series which have been retired in any
manner, including shares redeemed or reacquired by the Corporation and
shares which have been converted into or exchanged for shares of any
other class, or any series of the same or any other class shall have
the status of authorized but unissued shares of Preferred Stock and may
be reissued as shares of the series of which they were originally a
part or may be issued as shares of a new series or any other series of
the same class.
2. Provisions. Before any shares of Preferred Stock of any
series shall be issued, the Board of Directors, pursuant to authority
hereby expressly vested in it, shall fix by resolution or resolutions
the following provisions in respect of the shares of each such series
so far as the same are not inconsistent with the provisions of this
Article III applicable to all series of Preferred Stock:
(a) the distinctive designations of such series and
the number of shares which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below the
number of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(b) the annual rate or amount of dividends, if any,
payable on shares of such series (which dividends would be payable in
preference to any dividends on Common Stock), whether such dividends
shall be cumulative or non-cumulative and the conditions upon which
and/or the dates when such dividends shall be payable;
(c) whether the shares of such series shall be
redeemable and, if so, the terms and conditions of such redemption,
including the time or times when and the price or prices at which
shares of such series may be redeemed;
-3-
<PAGE>
(d) the amount, if any, payable on shares of such
series in the event of liquidation, dissolution or winding up of the
affairs of the Corporation;
(e) whether the shares of such series shall be
convertible into or exchangeable for shares of any other class, or any
series of the same or any other class, and, if so, the terms and
conditions thereof, including the date or dates when such shares shall
be convertible into or exchangeable for shares of any other class, or
any series of the same or any other class, the price or prices or the
rate or rates at which shares of such series shall be so convertible or
exchangeable, and the adjustments which shall be made, and the
circumstances in which such adjustments shall be made, in such
conversion or exchange prices or rates; and
(f) whether such series shall have any voting rights
in addition to those prescribed by law, and, if so, the terms and
conditions of exercise of voting rights; and
(g) any other preferences and relative,
participating, optional or other special rights, and any
qualifications, limitations and restrictions thereof."
3. The date of adoption of the aforesaid amendment was June
14, 1996.
4. The number of votes cast for the said amendment by the
shareholders was sufficient for the approval thereof.
5. These Articles of Amendment shall be effective upon filing.
-4-
<PAGE>
Executed on June 28, 1996.
BENTLEY PHARMACEUTICALS, INC.
/s/ Michael D. Price
--------------------------------
Michael D. Price
Vice President, Chief Financial
Officer, Treasurer and Secretary
-5-
EXHIBIT 12.1
<TABLE>
Bentley Pharmaceuticals, Inc. and Consolidated Subsidiaries
Combined with Unconsolidated Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(in thousands)
For the For the For the
Fiscal Year Six Months For the Fiscal Year Three Months
Ended Ended Ended Ended
June 30, December 31, December 31, March 31,
----------- ----------- -------------------------------------------- ---------
1992 1992 1993 1994 1995 1996 1997
----------- ----------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) from continuing operations
before provision for income taxes per
Consolidated Statement of Operations ($10,468) ($19,531) ($10,236) ($3,578) ($2,326) ($2,919) ($826)
Add:
Portion of rents reprsentative of
the interest factor 47 83 226 144 175 159 40
Interest on indebtednesss 427 205 271 423 396 874 243
Amortization of debt expense 0 0 0 0 167 353 77
Income (Loss) as adjusted ($9,994) ($19,243) ($9,739) ($3,011) ($1,588) ($1,533) ($466)
=========== =========== ========= ========= ========== ========= =========
Fixed Charges:
Interest on indebtedness:
Bentley Pharmaceuticals, Inc. and
consolidated subsidiaries $427 $205 $271 $423 $396 874 243
Unconsolidated subsidiaries 0 0 0 0 0 0 0
427 205 271 423 396 874 243
Less intercompany interest 0 0 0 0 0 0 0
----------- ----------- --------- --------- ---------- --------- ---------
(1) 427 205 271 423 396 874 243
Amortization of debt expense (2) 0 0 0 0 167 353 77
Capitalized interest (3) 0 0 0 0 0 0 0
Rents:
Bentley Pharmaceuticals, Inc. and
consolidated subsidiaries 141 249 679 432 526 476 119
Unconsolidated subsidiaries 0 0 0 0 0 0 0
----------- ----------- --------- --------- ---------- --------- ---------
141 249 679 432 526 476 119
Less intercompany rents 0 0 0 0 0 0 0
141 249 679 432 526 476 119
----------- ----------- --------- --------- ---------- --------- ---------
Portion of rents representative of
interest factor (4) 47 83 226 144 175 159 40
----------- ---------- --------- --------- ---------- --------- ---------
Fixed charges (1)+(2)+(3)+(4) $474 $288 $497 $567 $738 $1,386 $360
=========== =========== ========= ========= ========== ========= =========
Ratio of earnings to fixed charges -21.1 -66.8 -19.6 -5.3 -2.2 -1.1 -1.3
=========== =========== ========= ========= ========== ========= =========
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 33-65125 of Bentley Pharmaceuticals, Inc. on
Form S-3 of our reports dated March 27, 1997 appearing in the Annual Report on
Form 10-K of the Company for the year ended December 31, 1996 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Tampa, Florida
May 16, 1997
