<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MBf USA, INC.
(Name of Registrant as Specified In Its Charter
and Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE> 2
MBF USA, INC.
500 PARK BOULEVARD
ITASCA, ILLINOIS 60143
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of MBf USA, INC.:
Notice is hereby given that the annual meeting of shareholders (the "Meeting"
or the "Annual Meeting") of MBf USA, INC., an Oklahoma corporation (the
"Company"), will be convened at the Wyndham Hotel, 400 Park Boulevard, Itasca,
Illinois 60143, on December [11], 1995, at 8:30 a.m. Central Standard Time (the
"Meeting Date"). All holders of Common Stock, par value $.01 per share, and
Series A Convertible Common Stock, par value $.01 per share of the Company (the
"Shareholders") are entitled to attend the Meeting. The Company is soliciting
proxies, pursuant to the attached Proxy Statement, for use at the Annual
Meeting on the Meeting Date. The Company expects that a quorum will be present
on the Meeting Date and that the proposals to be considered by the Shareholders
will be:
(1) To elect six (6) Class A Directors and two (2) Class B Directors to hold
office until the next annual meeting of Shareholders or until their
respective successors are elected and qualified;
(2) To concur in the selection of Arthur Andersen LLP as the Company's
independent public accountants for the year 1995; and
(3) To consider and vote on a proposal to reincorporate the Company as a
Maryland corporation by merger of the Company into a newly formed wholly
owned subsidiary of the Company incorporated in Maryland; and
(4) To transact any other business as may properly come before the Meeting,
or any adjournment or postponement thereof.
Only Shareholders of record at the close of business on October 30, 1995, are
entitled to receive notice of the Meeting and to vote at the Meeting or any
adjournment or postponement thereof (the "Eligible Holders"). A list of
Eligible Holders will be available for inspection at the Company's office for
at least 10 days prior to the Meeting.
The Company's Annual Report to Shareholders is being mailed concurrently with
this Notice and Proxy Statement to all Shareholders of record. The Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 is
included in the Annual Report.
All Shareholders are cordially invited to attend the Annual Meeting. Those
who cannot attend are urged to sign, date and otherwise complete the enclosed
proxy and return it promptly in the envelope provided. Any Shareholder giving
a proxy has the right to revoke it at any time before it is voted.
By order of the Board of Directors:
Edward J. Marteka
President
Itasca, Illinois
November __, 1995
<PAGE> 3
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS OF
MBF USA, INC.
DECEMBER 11, 1995
This proxy statement (the "Proxy Statement") is furnished to all holders of
record as of the close of business on October 30, 1995 of Common Stock, par
value $.01 per share (the "Common Stock"), and Series A Convertible Common
Stock, par value $.01 per share (the "Series A Common Stock") (the
"Shareholders") of MBf USA, INC., an Oklahoma corporation (the "Company"), in
connection with the solicitation of proxies by and on behalf of the Company's
Board of Directors (the "Directors" or the "Board") to be voted at the annual
meeting of Shareholders (the "Meeting" or the "Annual Meeting"). The Annual
Meeting will be convened on December [11], 1995, at approximately 8:30 a.m.
Central Standard Time (the "Meeting Date"), or any adjournment or postponement
thereof. This Proxy Statement, and the enclosed form of proxy are first being
mailed or otherwise delivered to Shareholders on or about November __, 1995.
Shareholders who wish to attend the Meeting should contact the Company at (708)
285-9191 so that arrangements can be made.
The Company expects that a quorum will be present on the Meeting Date and
that the proposals to be considered by the Shareholders will be:
(1) To elect six (6) Class A Directors and two (2) Class B Directors to hold
office until the next annual meeting of Shareholders or until their
respective successors are elected and qualified;
(2) To concur in the selection of Arthur Andersen LLP as the Company's
independent public accountants for the year 1995; and
(3) To consider and vote on a proposal to reincorporate the Company as a
Maryland corporation by merger of the Company into a newly formed wholly
owned subsidiary of the Company incorporated in Maryland; and
(4) To transact any other business as may properly come before the Meeting,
or any adjournment or postponement thereof.
THE PROXIES SOLICITED BY THE COMPANY PURSUANT TO THIS PROXY STATEMENT ARE
SOLICITED FOR USE AT THE MEETING WHEN CONVENED ON THE MEETING DATE AND ANY
SUBSEQUENT ADJOURNMENTS AND MAY NOT BE USED FOR ANY PURPOSE, INCLUDING THE
DETERMINATION OF WHETHER A QUORUM IS PRESENT, PRIOR TO THE MEETING DATE.
THEREFORE, IT IS ANTICIPATED THAT THE BUSINESS OF THE COMPANY TO BE CONSIDERED
AT THE MEETING, WITH RESPECT TO WHICH PROXIES ARE SOLICITED PURSUANT TO THIS
PROXY STATEMENT, WILL BE ADDRESSED ON THE MEETING DATE.
1
<PAGE> 4
The shares of Common Stock and/or the Series A Common Stock (the "Shares")
represented by properly executed proxies in the accompanying form received by
the Board of Directors prior to the Meeting Date will be voted at the Meeting.
The Shares not represented by properly executed proxies or held by Shareholders
who attend the Meeting will not be voted. Where a Shareholder specifies a
choice in a proxy with respect to any matter to be acted upon, the Shares
represented by such proxy will be voted as specified. When a Shareholder does
not specify a choice, in any otherwise properly executed proxy, with respect to
any proposal referred to therein, the Shares represented by such proxy will be
voted with respect to such proposal in accordance with the recommendations of
the Board of Directors described herein. A Shareholder who signs and returns a
proxy in the accompanying form may revoke it by: (i) giving written notice of
revocation to the Secretary of the Company before the proxy is voted at the
Meeting on the Meeting Date; (ii) executing and delivering a later-dated proxy;
or (iii) attending the Meeting on the Meeting Date and voting his or her Shares
in person.
In electing directors only, the Common Stock and the Series A Common Stock
each vote as a separate class. Six (6) Class A Directors will be elected by
the holder of the Series A Common Stock and two (2) Class B Directors will be
elected by the holders of the Common Stock. The Class A Directors and the
Class B Directors will be elected by a plurality of the votes cast by the
respective class. Concurrence in the selection of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December
31, 1995 and the proposed merger of the Company into a newly formed wholly
owned subsidiary of the Company incorporated in Maryland (the
"Reincorporation") require the affirmative vote of a majority of the votes
cast, with the holders of Common Stock and Series A Common Stock voting
together as a single class. MBf International Ltd., a Hong Kong corporation
("MBf International"), owns 100% of the Series A Common Stock and 18.26% of the
Common Stock, or 62% of the Shares. See below regarding the intention of MBf
International to vote in favor of the proposals described herein. Shares
represented at the Meeting as the result of proxies marked "abstain" will be
counted for purposes of determining the existence of a quorum at the Meeting,
but will not be voted. Shareholders have no cumulative voting rights.
It is not anticipated that matters other than those set forth in the Notice
of Annual Meeting, as described herein, will be brought before the Meeting for
action. If any other matters properly come before the Meeting, it is intended
that votes thereon will be cast pursuant to said proxies in accordance with the
best judgment of the proxy holders.
RECORD DATE
The close of business on October 30, 1995, has been fixed by the Board of
Directors of the Company as the record date (the "Record Date") for the
determination of Shareholders entitled to receive notice of, and to vote at,
the Meeting. Each outstanding share of Common Stock is entitled to one (1)
vote on all matters herein, except for the election of the Class A Directors.
Each outstanding share of Series A Common Stock is entitled to one (1) vote on
all matters herein, except for the election of Class B Directors. On the
Record Date, the Company had outstanding 16,007,951 shares of Common Stock and
12,525,374 shares of Series A Common Stock. Only Shareholders of record as of
the Record Date will be entitled to vote at the Meeting or any adjournment
thereof. A quorum, consisting of the holders of at least a majority of the
issued and outstanding Shares eligible to vote, must be present, in person or
by proxy at the Meeting for valid Shareholder action to be taken at the Meeting
or any adjournment thereof. Shareholders do not have any appraisal or similar
rights of dissent with respect to the matters to be considered at the Meeting.
2
<PAGE> 5
EXPENSES OF SOLICITATION
The expenses of this solicitation of proxies will be borne by the Company,
including expenses in connection with the preparation and mailing of this Proxy
Statement and all documents which now accompany or may hereafter supplement
it. The Company anticipates the total cost of the proxy solicitation to be
[$_______]. Solicitations will be made only by the use of the mails, except
that, if deemed desirable, officers and regular employees of the Company may
solicit proxies by telephone, telegram, facsimile, or personal calls. Officers
and regular employees of the Company will not be paid additional compensation
for soliciting proxies. It is contemplated that brokerage houses, custodians,
nominees, and fiduciaries will be requested to forward the proxy soliciting
material to the beneficial owners of the Common Stock held of record by such
persons and that the Company will reimburse them for their reasonable expenses
incurred in connection therewith.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock and Series A Common Stock as of October
30, 1995 by: (i) each Director of the Company who beneficially owns Common
Stock or Series A Common Stock; (ii) each Executive Officer of the Company;
(iii) each person that is known by the Company to beneficially own in excess of
five percent of the outstanding shares of its Common Stock and Series A Common
Stock; and (iv) all Directors and Executive Officers, as a group. Except as
otherwise indicated in the footnotes to the table, the Shareholders named below
have sole voting and investment power with respect to the shares of Common
Stock and Series A Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ------------------------ -------------------- -----
<S> <C> <C> <C>
Series A Common
Stock MBf International Limited 12,525,374 100%
Common Stock MBf International Limited 5,210,524 18.26%(2)
Common Stock Tan Sri Dato (Dr.) Hean Heong 68,241(1) *
Loy
Common Stock Teik Hok Loy 100,000(1) *
Common Stock Heng Sewn Loi 500,000(1) 1.75%(2)
Common Stock Teoh Cheng Soon 10,000(1) *
Common Stock Edward J. Marteka 500,000(1) 1.75%(2)
Common Stock George Jeff Mennen 10,000(1) *
Common Stock Robert C. Carter 30,000(1) *
Common Stock Executive Officers and 1,218,241 4.27%(2)
Directors as a group (7 persons)
</TABLE>
3
<PAGE> 6
- ---------------
* Represents less than 1%.
(1) Represents shares issuable upon exercise of currently exercisable
options granted under the Company's Omnibus Equity Compensation Plan.
(2) Percent of class is based upon number of shares of Series A Common
Stock and Common Stock outstanding on October 30, 1995.
At the close of business on October 30, 1995, Cede & Co. owned of
record, but not beneficially, 7,461,763 shares (46.6%) of the Company's Common
Stock. Cede & Co., the nominee for the Depository Trust Company, holds
securities of record for participating financial institutions such as banks and
broker/dealers.
The Company is not aware of any arrangements, the operation of which
may at a subsequent date, result in a change of control of the Company.
MATTERS TO BE CONSIDERED BY SHAREHOLDERS
1. ELECTION OF DIRECTORS
Eight (8) individuals will be elected at the Annual Meeting to serve
as Directors of the Company until the next annual meeting of Shareholders or
until their successors have been elected and qualified. The nominees
designated by the Board of Directors, all of whom are presently Directors of
the Company, are set forth below. Six (6) of the nominees have been nominated
as Class A Directors and two (2) have been nominated as Class B Directors.
Holders of Common Stock and Series A Common Stock each vote as a separate class
only with respect to the election of Directors. The Company has been advised
that the proxy of the holder of the Series A Common Stock will require the
proxy holders to vote Series A Common Stock represented by that proxy for the
six (6) Class A nominees for Directors listed below. In the event any nominee
is unable or declines to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board of Directors to fill the vacancy. As of the date of this Proxy
Statement, the Company is not aware of any nominee who is unable or will
decline to serve as a Director. The nominees receiving more than the minimum
number of votes of shares of Common Stock or Series A Common Stock required for
election, as the case may be, shall be elected. See "Compensation of Directors
and Executive Officers," regarding compensation of Directors.
4
<PAGE> 7
CLASS A DIRECTORS
<TABLE>
<CAPTION>
Year First
Became A
Name Age Principal Occupation(s) During Past 5 Years Director
---- --- ------------------------------------------- --------
<S> <C> <C> <C>
Tan Sri Dato (Dr.) 59 Class A Director of the Company. Former Chairman of the 1992
Hean Heong Loy Board of Directors, elected to the Board of Directors on
February 27, 1992. On December 17, 1993, he resigned as
Chairman of the Board but continues to serve as a director
of the Company. He has served in various capacities with
MBf Holdings Berhad ("MBf Holdings") since 1963 and
currently is the President and Chief Executive Officer of
MBf Holdings. He has served as Chairman of the Board of
Directors of MBf International Ltd. since May 1991. Tan Sri
Dato Loy also serves on the Board of Directors of MasterCard
International. Tan Sri Dato Loy was made a Justice of the
Peace, an honorary title, by the late Sultan of Perak for
his contributions to the nation of Malaysia, and in the same
year was conferred the award of the honorary title "Dato
Paduka Mahkota Johor" by the late Sultan of Johor. On June
6, 1992, the additional title "Tan Sri" was conferred upon
him.
Teik Hok Loy 30 Class A Director of the Company. He has served in various 1993
capacities with MBf Holdings since 1988 and currently serves
in the position of Alternate to the President and Chief
Executive Officer of MBf Holdings. He also serves as a
director of MBf Holdings. Teik Hok Loy is the son of Tan
Sri Dato Loy.
Heng Sewn Loi 35 Class A Director of the Company and Chairman of the Board. 1993
He has served in various capacities with MBf Holdings since
1983 and previously served as President of its manufacturing
division.
Edward J. Marteka 57 Class A Director and President of the Company. He has 1995
served as President and a Director of the Company's
subsidiary, American Health Products Corporation ("AHPC")
since its incorporation in 1988. In addition to serving as
President of the Company, Mr. Marteka is President of AHPC
and responsible for its overall operations. From 1968 to
1988, Mr. Marteka held various positions with Baxter
Healthcare Corporation, most recently serving as Vice
President of its International Division.
George Jeff Mennen 53 Class A Director of the Company. Mr. Mennen heads the G.J. 1994
Mennen Group, a consulting firm specializing in family-owned
businesses. Mr. Mennen had a distinguished career at The
Mennen Company including being the Vice Chairman of the
company. The Mennen Company was founded by Mr. Mennen's
great grandfather in 1878 and remained privately owned until
it was sold in 1992 to Colgate-Palmolive.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Year First
Became A
Name Age Principal Occupation(s) During Past 5 Years Director
---- --- ------------------------------------------- --------
<S> <C> <C> <C>
Cheng Soon Teoh 47 Class A Director of the Company. He currently serves as the 1995
Senior Vice President, Mergers and Acquisitions of MBf
Holdings. Prior to this, Mr. Teoh was with the Central Bank
of Malaysia for 17 years and has held directorships in
several companies.
CLASS B DIRECTORS
-----------------
Robert J. Simmons 52 Mr. Simmons is currently President of RJS HealthCare,
Inc., a healthcare consulting company, founded in 1990.
He served as executive vice president at Baxter
International, Inc. from 1987 until founding RJS in 1990.
Mr. Simmons joined Baxter after serving over 20 years at
American Hospital Supply Corporation. His last position
at American Hospital Supply Corporation was vice president
of corporate marketing.
Donald Arnwine 63 Mr. Arnwine is President of Arnwine Associates, a company
he formed in 1989 to provide specialized advisory services
to the health care industry. From 1961 to 1972, Arnwine
served as Director of the Hospital at the University of
Colorado Medical Center. From 1972 to 1982, he served as
President and CEO of the Charleston Area Medical Center.
Mr. Arnwine became President and CEO of Voluntary
Hospitals of America (VHA) in 1982, and was named Chairman
and CEO in 1985, in which capacity he served until leaving
in 1988 to found Arnwine Associates.
</TABLE>
BOARD MEETINGS AND COMMITTEES
During 1994, the Company's Board of Directors held two meetings. All
other actions by the Board of Directors were taken by unanimous written consent
without a meeting. The Board of Directors has a Compensation Committee which
administers the Company's Omnibus Equity Compensation Plan (the "Plan"). The
Compensation Committee is responsible for reviewing, determining and
establishing the salaries, bonuses and other compensation of the Company's
executive officers. The Board has not delegated its functions to any other
standing committees, and thus has not created audit, executive, nominating or
other similar committees. The Compensation Committee consisted of Tan Sri Dato
(Dr) Hean Heong Loy and Robert H. Book, until Mr. Book resigned in May 1995.
During 1994, all action of the Compensation Committee was taken by unanimous
written consent without a meeting. The Board of Directors appointed George
Jeff Mennen, Teik Hok Loy and Cheng Soon Teoh to the Compensation Committee
with the resignation of Robert H. Book in May 1995 and Tan Sri Dato, (Dr) with
the resignation of Hean Heong Loy. See also "Compensation of Directors and
Executive Officers - Report of the Compensation Committee of the Board of
Directors on Executive Compensation."
6
<PAGE> 9
RECOMMENDATION OF THE BOARD: The Board hereby recommends and
nominates each of Messrs. Tan Sri Dato (Dr) Loy, Teik Hok Loy, Heng Sewn Loi,
Edward J. Marteka, George J. Mennen and Cheng Soon Teoh for election as Class A
Directors, and each of Messrs. Robert J. Simmons and Donald Arnwine for
election as Class B Directors, of the Company to serve until the next annual
meeting of Shareholders or until their respective successors are elected and
qualified.
2. CONCURRENCE IN SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as
independent public accountants for the Company to examine its financial
statements for the year 1995 and has determined that it would be desirable to
request that the Shareholders approve such appointment. Arthur Andersen LLP is
knowledgeable about the Company's operations and accounting practices and is
well qualified to act in the capacity of independent public accountants to the
Company. A representative of Arthur Andersen LLP is expected to be present at
the Meeting and will have the opportunity to make a statement if he or she so
desires. The representative also is expected to be available to respond to
appropriate questions from Shareholders.
RECOMMENDATION OF THE BOARD: The Board considers Arthur Andersen LLP
to be well-qualified and recommends that the Shareholders concur in the
following resolution which will be presented for a vote of the Shareholders at
the Annual Meeting:
RESOLVED, that the Shareholders concur in the appointment, by the
Board, of Arthur Andersen LLP to serve as the independent public accountants
for the Company for 1995.
The affirmative vote of a majority of the votes cast by Shareholders
present in person or by proxy and eligible to vote at the Meeting, a quorum
being present, is required for the adoption of the foregoing resolution. For
purposes hereof, the holders of Series A Common Stock and Common Stock vote as
a single class. It is, therefore, expected that this resolution will be
adopted.
3. REINCORPORATION IN MARYLAND
The Board has unanimously approved the Reincorporation pursuant to
which the Company's state of incorporation will be changed from Oklahoma to
Maryland. The primary reason for the Reincorporation from Oklahoma to Maryland
is the elimination of franchise taxes imposed by Oklahoma on corporations
organized under its laws. Under Oklahoma law, a franchise tax is imposed on
corporations based, in part, on their outstanding capital stock and assets.
Maryland does not impose this type of tax or any similar tax. Additionally,
because the Reincorporation will result in a one-for-ten stock split,
management believes the current market price of per share of the Company's
Common Stock should increase. This increase will assist in maintaining the
inclusion of the Company's Common Stock for quotation on the Nasdaq SmallCap
Market. See "Certain Relationships and Related Transactions."
GENERAL
If the shareholders approve the Reincorporation, the Company will form
a wholly-owned Maryland subsidiary, which will also be named MBf USA, Inc. (the
"Maryland Sub"). The Company will then be merged into the Maryland Sub and the
Maryland Sub will succeed to all of the Company's business activities. The
existing shareholders of the Company will become shareholders of the Maryland
Sub and the Company will cease to exist. The Reincorporation will not result
in any change in the business, management, assets, liabilities or net worth of
the Company. The Company will continue to maintain its executive offices at
the same location it currently occupies.
7
<PAGE> 10
The Company is incorporated in the State of Oklahoma and the Maryland
Sub is incorporated in the State of Maryland. Copies of the Articles of
Incorporation (the "Maryland Sub Articles") and the Bylaws (the "Maryland Sub
Bylaws") of the Maryland Company can be obtained on request addressed to the
Secretary of the Company. (See discussion below under caption "Comparison of
Rights of Shareholder of the Company and Maryland Sub.")
In connection with the Reincorporation, shareholder will receive one
share of the Maryland Sub Common Stock or Series A Common Stock for every ten
shares of Common Stock or Series A Common Stock held by such Shareholder prior
to the Reincorporation. As a result of the Reincorporation, shares of Common
Stock underlying the Company's outstanding options and warrants will be
adjusted to reflect the one-for-ten stock split effected with the
Reincorporation. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR
COMPANY STOCK CERTIFICATES FOR MARYLAND SUB STOCK CERTIFICATES, ALTHOUGH
SHAREHOLDERS MAY EXCHANGE THEIR CERTIFICATES IF THEY WISH. Following the
Reincorporation, previously outstanding Company stock certificates will
constitute "good delivery" in connection with sales through a broker, or
otherwise, of Maryland Sub Common Stock. Shares of the Maryland Sub Common
Stock will be listed on the Nasdaq SmallCap Market under the symbol "MBFAC".
Upon completion of the Reincorporation, the number of authorized shares of the
Maryland Sub will consist of 40,000,000 shares of Common Stock ($0.01 par value
per share) and 1,252,537.4 shares of Series A Common Stock ($0.01 par value per
share).
If approved by the shareholders, it is anticipated that the
Reincorporation will be effected as soon after such approval as is practicable.
The Plan of Merger provides that the Reincorporation may be abandoned by the
Board after approval by the shareholders and prior to the effective time of the
Reincorporation. However, the Board presently intends to proceed with the
Reincorporation following shareholder approval.
Since the primary purpose of the Reincorporation is to minimize the
Company's potential tax liability, the proposed Maryland Sub Articles and
Maryland Sub Bylaws contain provisions substantially similar to the ones
governing the Company in Oklahoma. The Board has concluded that the cost
savings of the Reincorporation and the similarities between the Company and the
Maryland Sub make the Reincorporation advantageous to the Company shareholders.
If the Company is reincorporated as a Maryland corporation, the
Maryland General Corporation Law ("MGCL") will provide the Company's officers
and Directors greater protection from personal liability than that provided
under the Oklahoma General Corporation Act ("OGCA"). In addition, Directors of
the Maryland Sub, may under appropriate circumstances, be indemnified for
settlements of derivative suits while Directors of the Company may not be
indemnified for settlements of derivative suits. Such increased in protection
from liability and availability of indemnification create a conflict of
interest for the Board in recommending the Reincorporation to the Company's
shareholders. However, such a potential benefit to Directors is incidental to
the principal objectives of the Reincorporation.
FEDERAL INCOME TAX CONSEQUENCES
The Reincorporation provided for in the Plan of Merger is intended to
be a tax-free reorganization under the Internal Revenue Code of 1986.
Accordingly, no gain or loss will be recognized by the Company shareholders as
a result of the consummation of the Reincorporation, and no gain or loss will
be recognized by the Company. Each former holder of Common Stock and/or Series
A Common Stock will have a basis in Maryland Sub Common Stock and/or Series A
Common Stock received pursuant to the Reincorporation equal to ten times the
basis such holder had in the Company's Common Stock and/or Series A Common
Stock prior to the Reincorporation. Each shareholder's holding period with
respect to
8
<PAGE> 11
the Maryland Sub Common Stock and/or Series A Common Stock will include the
period during which such holder held the corresponding Company Common Stock
and/or Series A Common Stock, provided the latter was held as a capital asset
at the time of consummation of the Reincorporation. The Company has not
obtained a ruling from the Internal Revenue Service with respect to the tax
consequences of the Reincorporation.
The foregoing is a summary of the federal tax consequences.
Shareholders should consult their own tax advisers regarding the tax
consequences of the Reincorporation under the laws of any state or other
jurisdiction.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF THE COMPANY AND MARYLAND SUB
The major difference between the Company and the Maryland Sub with
respect to shareholders' position of ownership and control is the difference in
the right of large shareholders to effect a business combination with the
Company or the Maryland Sub, as the case may be. Prior to the Reincorporation,
the Company was governed by Section 1090.3 of the OGCA, which provides that
certain business combinations between a corporation and a shareholder
beneficially owning 15% or more of such corporation's outstanding voting stock
(an "Interested Shareholder") or an entity controlled by such shareholder are
prohibited for a period of three years after the date such shareholder became
an Interested Shareholder unless prior to becoming an Interested Shareholder
the corporation's board of Directors approves the transaction pursuant to which
such person became an Interested Shareholder or the business combination is
approved by the board of Directors and at least two-thirds of the outstanding
voting stock. The MGCL provides that an "Interested Shareholder" is one that
beneficially owns 10% or more of a corporation's outstanding voting stock and
prohibits an Interested Shareholder from effecting a business combination with
such corporation for a period of five years after becoming an Interested
Shareholder unless the board of Directors approves the transaction pursuant to
which such shareholder became an Interested Shareholder. Thereafter, a
business combination must be approved by 80% of the corporation's outstanding
voting stock and two-thirds of the outstanding voting stock not owned by the
Interested Shareholder unless certain conditions are met.
RECOMMENDATION OF THE BOARD: The Board unanimously recommends a vote
for the merger of the Company into the Maryland Sub for the purpose of
reincorporating the Company in the State of Maryland.
EXECUTIVE OFFICERS
The following table sets forth information with respect to the
executive officers of the Company. Each officer is appointed by the Board of
Directors of and serves until his successor is elected and qualified or until
his death, resignation or removal by the Board of Directors. The executive
officers of the Company are Edward J. Marteka, President; Stephen K.H. Tan,
Chief Financial Officer and Secretary; and Robert C. Carter, Controller and
Assistant Secretary. The biography of Mr. Marteka is set forth above.
9
<PAGE> 12
<TABLE>
<CAPTION>
Year First
Became An
Name Age Principal Occupation(s) During Past Five Years Officer
---- --- ---------------------------------------------- ---------------
<S> <C> <C> <C>
Stephen K.H. Tan 39 Chief Financial Officer and Secretary of the 1995
Company. He was engaged by MBf Holdings Bhd as
CFO of the Trading Division in December, 1994,
and was transferred to the United States in
September, 1995. In 1981, Mr. Tan graduated in
London as a Certified Accountant, and had worked
in England, New Zealand, and Malaysia as
financial accountant, business consultant and
auditor with various organizations and government
bodies for the past 16 years.
Robert C. Carter 34 Controller and Assistant Secretary of the 1995
Company. Mr. Carter joined the Company in
March 1992 as the Controller and became the
Assistant Secretary in May 1995. From February
1987 to March 1992, Mr. Carter was a CPA with
Clifton, Gurderson & Co.
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
A. DIRECTOR COMPENSATION
Directors are not separately compensated for serving on the Board of
Directors, except that each director is presently entitled to receive stock
options under the Plan to purchase 10,000 shares of the Company's Common Stock
in connection with his election. The Company's prior practice was to grant to
each director, upon his election, options under the Plan to purchase three
tenths of one percent (.3%) of the outstanding shares of Common Stock. Heng
Sewn Loi and Teik Hok Loy were each granted options in April 1994 for 90,000
shares at an exercise price of $1.31. George Jeff Mennen received an option in
October 1994 to purchase 10,000 shares of the Common Stock of the Company at an
exercise price of $1.75 under the Plan in connection with his election to the
Company's Board of Directors. Under the terms of the Plan, the Compensation
Committee of the Board may determine the exercise price for options granted to
Directors for a period of up to six months from the date of the grant. All
Director options are immediately exercisable for a period of ten years from the
date of grant.
B. EXECUTIVE COMPENSATION
The following table discloses the compensation awarded to or earned
by, during the Company's last three fiscal years, the Chief Executive Officer
and the other executive officer as of the end of fiscal year 1994 whose
aggregate annual salary and bonus exceeded $100,000:
10
<PAGE> 13
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Fiscal Other Annual Stock All Other
Name & Principal Position Year Salary Bonus Compensation Options Compensation
------------------------- ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Book (1) (4) 1994 -- $150,000 -- 1,000,000 --
Chairman and Chief
Executive Officer 1993 -- -- -- 72,322 --
1992 -- -- -- -- --
William C. Willis, Jr.(2)(3) 1994 $185,000 $ 82,344 -- 510,000 --
President and Chief
Operating Officer 1993 -- -- -- -- --
1992 -- -- -- -- --
</TABLE>
- ---------------
(1) On May 31, 1995, Robert H. Book resigned from the Company. Pursuant
to the terms set forth in an agreement by and between Mr. Book and the
Company, the Company paid to Mr. Book severance in the amount of
$300,000. Mr. Book's options terminated pursuant to an agreement
dated May 31, 1995 by and between Mr. Book and the Company.
(2) On May 31, 1995, William C. Willis, Jr. resigned from the Company.
Pursuant to the terms set forth in an agreement by and between Mr.
Willis and the Company, the Company paid to Mr. Willis severance in
the amount of $220,000. Mr. Willis' options terminated pursuant to an
agreement dated May 31, 1995 by and between Mr. Willis and the
Company.
(3) Edward J. Marteka became President and a Class A Director of the
Company in May 31,1995.
(4) Heng Sewn Loi became Chairman and a Class A Director of the Company in
May 31, 1995.
Employment Agreements
On April 1, 1994, the Company entered into an Employment Agreement
with Edward J. Marteka (the "Agreement"). The Agreement, as amended on January
1, 1995 [and as of May 31, 1995], provides for Mr. Marteka to serve as
President of the Company (since May 31, 1995) and American Health Products
Corporation; (ii) a base salary of $150,000 per year ($137,500 prior to January
1, 1995) paid by the Company and (iii) non-qualified stock options to purchase
350,000 shares of the Company's Common Stock under the Company's Omnibus Equity
Compensation Plan, exercisable commencing April 1, 1994 (50,000 shares);
200,000 shares April 1, 1995 and 100,000 shares April 1, 1996 at an exercise
price of $1.1875, the closing price of the common stock is reported on the
Nasdaq Stock Market on the day the options were granted by the Compensation
Committee; (iv) life and medical insurance, automobile allowance and other
additional customary benefits. The amended Agreement also granted additional
non-qualified stock options to Mr. Marteka as follows: (i) 10,000 shares upon
his appointment as Class A Director (ii) 140,000 shares of the Company's Common
Stock under the Company's Omnibus Equity Compensation Plan, exercisable
commencing July 21, 1995 (70,000 shares); and 70,000 shares July 21, 1996, at
an exercise price of $0.78; the closing price of the Common Stock as reported
on the Nasdaq Stock Market on the day the options were granted by the
Compensation Committee.
11
<PAGE> 14
On September 1, 1995, the Company entered into an Employment Agreement
with Mr. Loi Heng Sewn (the "Loi Agreement"). The Loi Agreement provided for
Mr. Loi, to serve as Chairman of the Company; (i) a base salary of $140,000 per
year and (ii) non-qualified stock options to purchase 400,000 shares of the
Company's Common Stock under the Company's Omnibus Equity Compensation Plan,
exercisable commencing July 21, 1995 (200,000 shares); and 200,000 shares of
Common Stock July 21, 1996 at an exercise price of $0.78, the closing price of
the Common Stock as reported on the Nasdaq Stock Market on the day the options
were granted by the Compensation Committee; (iii) life and medical insurance,
automobile allowance, furnished living, dependent tuition allowance, home leave
and family travel, provided fund relocation, tax equalization settlement, U.S.
legal and taxation matters and other additional customary benefits. In 1994
Mr. Loi Heng Sewn received an option to purchase 100,000 shares of the
Company's Common Stock in connection with his appointment to the Board of
Directors.
On April 7, 1994, the Company entered into an Employment Agreement
with William C. Willis, Jr. (the "Willis Agreement"). The Willis Agreement
provided for (i) Mr. Willis to serve as President and Chief Operating Officer
of the Company; (ii) a base salary of $185,000 per year; (iii) non-qualified
stock options to purchase 500,000 of the Company's Common Stock under the
Company's Omnibus Equity Compensation Plan, exercisable commencing one year
after the date of grant at an exercise price of $1.1875, the closing price of
the Common Stock as reported on the Nasdaq Stock Market on the date the options
were granted by the Compensation Committee; and (iv) life and medical
insurance, an automobile allowance and other additional customary benefits.
The Willis Agreement was terminated by the Company effective May 31, 1995 upon
resignation of Mr. Willis as a Director and executive officer of the Company.
The Company did not enter into any employment agreements with Robert
H. Book.
OPTION GRANTS IN FISCAL 1994
<TABLE>
<CAPTION>
Option/SAR Grants in 1994
-------------------------
Potential Realized Alternative
Value at Assumed Annual to (f) and
Individual Rates of Stock Price (g): Grant
Grants Appreciation for Option Date Value
Term
- ------------------------------------------ --------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
% of Total
Number of Options/
Securities SARs
Underlying Granted to
Options/ Employees Exercise Grant Date
SARs In Fiscal or Base Expiration Present
Name Granted Year Price on Date 5% ($) 10% ($) Value $
---- ------- ------ ----- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert H. 1,000,000 40.2% $.94 1/21/04 $2,520,908 $3,831,665
Book(1)
William C.(2)
Willis 500,000 20.1% 1.19 4/06/04 1,260,454 1,915,832
William C.(2)
Willis 10,000 .4% 1.19 4/15/04 25,209 38,317
</TABLE>
- ---------------
(1) Mr. Book's options terminated on May 31, 1995 pursuant to an agreement
dated May 31, 1995 by and between Mr. Book and the Company.
(2) Mr. Willis' options terminated on May 31, 1995 pursuant to an
agreement dated May 31, 1995 by and between Mr. Willis and the
Company.
12
<PAGE> 15
AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal
1994 by the executive officers named in the summary compensation table and the
value of such officers' unexercised stock options as of December 31, 1994. As
referenced above, all such options were terminated effective May 31, 1995.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at 12/31/94 at 12/31/94
- -------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert H.
Book -0- -0- 1,072,322 -0- $1,742,525 -0-
William C.
Willis, Jr. -0- -0- 10,000 500,000 $16,250 $812,500
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors is comprised of
the following Class A Directors: Tan Sri Dato (Dr.) Hean Heong Loy who was
appointed by the Board of Directors in June 1992 and served in that capacity
until May 1995. Robert H. Book, Chairman and Chief Executive Officer of the
Company and who was appointed to the Compensation Committee in October 1994 and
served in that capacity until May 1995. In May 1995, George Jeff Mennen, Teik
Hok Loy and Cheng Soon Teoh were appointed to the Compensation Committee by the
Board of Directors. The Committee oversees administration of the Company's
Omnibus Equity Compensation Plan (the "Plan"). The purpose of the Plan is to
attract and retain capable and experienced officers and employees by
compensating them with equity-based awards whose value is connected to the
continued growth and profitability of the Company. Under the Plan, awards may
be made in the form of stock options or restricted stock. Apart from the Plan,
the Company has not developed any formalized compensation policy or program.
In general, the Company compensates executive officers and senior management
through salary, bonus (where appropriate) and the grant of stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Tan Sri Dato (Dr.) Hean Heong Loy has a substantial ownership interest
in MBf Holdings Berhad, which owns MBf Rubber Products Sdn. Bhd. ("MBf
Rubber") and MBf Factors. MBf Rubber supplies latex examination gloves to
American Health Products ("AHPC"), and MBf Factors provides certain financial
services to AHPC. Teik Hok Loy is the son of Tan Sri Dato Loy and alternate
CEO and Director of MBf Holdings Berhad. Cheng Soon Teoh currently serves as
the Vice President of Mergers and Acquisitions for MBf Holdings Berhad.
Accordingly, these members should not be considered as an independent director
when serving on the Compensation Committee.
13
<PAGE> 16
STOCK PERFORMANCE CHART
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock for each of
the Company's last five fiscal years with the cumulative total return (assuming
reinvestment of dividends) of (i) the NASDAQ Stock Market-US Index and (ii) a
peer group selected by the Company in good faith. The peer group consists of
American Shared Hospital Services, Daxor Corp., DVI Inc., Hemacare Corp.,
Medical Sterilization Inc., National Home Health Care Inc., Prime Medical
Services Inc. and Psicor Inc.
[STOCK PERFORMANCE GRAPH -- DATA ON NEXT PAGE]
- ---------------
* $100 invested on December 31, 1989 in Stock or Index - including reinvestment
of dividends. Fiscal year ending December 31.
14
<PAGE> 17
<TABLE>
CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------
<CAPTION>
12/89 12/90 12/91 12/92 12/93 12/94
<S> <C> <C> <C> <C> <C> <C>
MBf USA, INC . . . . . . . . . . . $100 $35 $159 $93 $65 $96
Peer Group . . . . . . . . . . . . 100 59 97 102 94 90
Nasdaq Stock . . . . . . . . . . . 100 85 136 159 181 177
Market-US Index
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June, 1995, the Company announced a restructuring plan which
included the resignations of the Chairman/CEO, President/COO, and CFO effective
as of May 15, 1995. The Board of Directors filled the vacancies of its
executive management team by electing Mr. Heng Sewn Loi from MBf Holdings as
its Chairman. Mr. Loi was formerly the President of MBf Holdings manufacturing
division. Edward J. Marteka was named President of the Company while retaining
his responsibilities as President of AHPC, which he co-founded. The Board of
Directors directed the Company to focus on its core businesses and to exit the
nutritional products business which had contributed to significant losses, as
sales were negligible and the entry costs were very high. Furthermore, the use
of AHPC cash flow for startup of the nutritional products business was limiting
AHPC's ability to purchase glove inventory.
Key components of the restructure charge included costs related to
exiting from the nutritional product business, executive management changes,
and closing of the executive office in New Jersey. The restructure charge
includes provisions for personnel severance and work force reductions,
relocation and related costs, the write down of intangible and other assets,
costs associated with the removal of the nutritional vitamin product lines, and
other costs associated with the execution of the restructure. The
restructuring resulted in a one-time charge of $1,954,591 in the second quarter
of 1995 of which approximately $775,000 was included in accrued liabilities at
June 30, 1995, and is expected to be paid over the next twelve months.
In July 1995, AHPC amended its credit facility loan agreement with
Bank Bumiputra Malaysia Berhad ("BBMB") which allowed for AHPC to begin
utilization of an amended BBMB credit facility. The amended credit facility
waives certain of the financial covenant requirements until December 31, 1996.
The Company has guaranteed the BBMB credit facility and has pledged its assets
in connection therewith. The amended BBMB agreement (i) decreases the
revolving line of credit from $6,000,000 to $1,600,000; (ii) decreases the
letter of credit commitment from $1,800,000 to $1,400,000; and (iii) decreases
the standby letter of credit commitment from $200,000 to $100,000 and deletes
the term loan commitment. It transferred $4,825,000 of the outstanding
revolving line of credit balance into a new non-revolving Converted R.C.
Commitment, which along with the amounts described above, are evidenced by a
single credit note in the aggregate amount of $7,925,000. The Converted R.C.
Commitment portion of the amended credit note requires quarterly principal
payments totalling $482,500 in 1996 and $723,750 in 1997. AHPC may increase
the revolving line of credit up to $2,000,000 as principal payments are made on
the Converted R.C. Commitment. The Company was required to make a capital
contribution to AHPC in an amount sufficient to cause its net worth to increase
to $3,000,000. In connection therewith, on September 29, 1995 MBf
International loaned the Company $1,200,000 which the Company then contributed
to AHPC in exchange for 7% cumulative preferred stock. See below regarding the
subsequent
15
<PAGE> 18
conversion of the MBf Holdings loan into Common Stock of the Company on October
30, 1995. The credit facility limits the ability of AHPC to pay dividends.
In August 1995, Nasdaq notified the Company that as of June 30, 1995,
it had failed to meet the minimum capital and surplus requirements for
continued inclusion for quotation in the Nasdaq SmallCap Market System under
the Nasdaq by-laws. The Company was granted an exception from such
requirements, effective October 13, 1995, subject to the Company effecting the
reincorporation described elsewhere in this Proxy Statement as soon as
practicable and taking the steps set forth below on or before November 30,
1995. All steps except the Reincorporation were completed on or about October
30, 1995. In the interim, the Company's Common Stock will continue to be
included for quotation in The Nasdaq SmallCap Market System under the trading
symbol of MBFAC. There can be no assurance that Nasdaq will extend the
exception if there is a delay in the Meeting.
The Company's inability to meet Nasdaq's minimum capital and surplus
requirements is due primarily to one-time restructuring charges associated with
the discontinuance of its unprofitable nutritional product business, severance
payments related to the Company's recent management restructuring, larger than
anticipated startup costs associated with launching its condom line, and a
reduction in profit margins due to the doubling of latex prices in the past
year.
As referenced above, MBf International, the majority shareholder of
the Company, loaned $1,200,000 to the Company, which the Company then
contributed to AHPC in exchange for its 7% Cumulative Preferred Stock effective
as of September 29, 1995. MBf International agreed to accept 2,509,804 shares
of the Company's Common Stock having a value of $1,200,000 in satisfaction of
the Company's indebtedness to MBf International, which transaction was
effective as of October 30, 1995.
The Company also has entered into a Stock Acquisition Agreement with
MBf International dated as of October 30, 1995 whereby MBf International
exchanged its beneficial interest in 1,365 shares of common stock (par value
Indonesian Rupiah 2,167,000 each equivalent to $1,000 US Dollars each) of P.T.
MBf Buana Multicorpora ("MBf Rubber"), an Indonesian company which owns a new,
modern latex glove plant located in Indonesia expected to become operational by
the fourth quarter of 1995, and a non-interest bearing demand note with a face
value of $737,769 (the "Note"), which Note is expected to be outstanding for
three years and will be guaranteed by MBf Holdings Berhad, the parent company
of MBf International Ltd., for 2,550,720 shares of Common Stock, par value
$0.01 per share of the Company having an aggregate value of $1,219,563. The
shares were held in trust by MBf Holdings Berhad for the benefit of MBf
International and represent seventy percent (70%) of the outstanding common
stock of MBf Rubber.
On August 16, 1995, MBf International announced that it had sold
shares of its subsidiary, MBf Health, to Perusahaam Intan Emas Sdn Bhd ("PIE")
for approximately $1,250,000, subject to an option to repurchase the issued
shares. In connection with the sale, an agreement has been executed between
MBf Health and AHPC calling for the purchase of product by AHPC according to a
predetermined formula. AHPC will continue purchasing the majority of its
powered latex examination gloves from the MBf Health factory at least until the
MBf Rubber factory is operational. The Company intends to continue to purchase
non-powered gloves from other sources. The Company does not expect the sale of
MBf Health to have a significant impact on its operations.
On February 27, 1992, the Company's subsidiary, AHPC, entered into a
non-assignable distributorship agreement ("Distributorship Agreement") with
MBf Health and MBf Rubber Products Industries, a Malaysian company ("MBf RPI"),
both subsidiaries of MBf Holdings. The Distributorship Agreement provides that
AHPC will have exclusive marketing rights in North America and South America
for latex gloves manufactured and supplied by MBf Health and MBf RPI. Such
marketing rights include
16
<PAGE> 19
the grant to AHPC of an exclusive, nontransferable license to use the
"Glovetex" and "Dermatex" trademarks, labels, copyrights and other advertising
materials of MBf Health and MBf RPI during the five (5) year term of the
Distributorship Agreement. Pursuant to the Agreement, MBf Health and MBf RPI
must supply to AHPC such quantity of gloves as will meet AHPC's reasonable
requirements, which gloves are to be sold at prices stated in MBf Health's and
MBf RPI's published price lists. Such prices can be adjusted by MBf Health or
MBf RPI upon 30 days' prior written notice.
On December 30, 1993, the Company purchased the rights to the Condom
License Agreement ("License Agreement") dated December 31, 1992, with Playboy
Enterprises, Inc. ("PEI") from MACC Trading Limited, an affiliate of MBf
Holdings. The License Agreement with PEI grants to the Company the right to
sell condoms in packaging bearing the Playboy(R) name and rabbit-head logo
throughout the world, excluding the United States and Western Europe, for a
period of fifteen (15) years. As consideration for awarding these rights, PEI
received a signing fee of $300,000 payable in twelve (12) quarterly
installments commencing on September 30, 1993, and royalties (a) during the
first three (3) license years only, of zero percent (0%) on the first
$1,000,000 and ten percent (10%) thereafter of net sales with minimum
guaranteed royalties of $200,000, $250,000 and $300,000 in years one (1), two
(2), and three (3), respectively, and (b) commencing with the fourth license
year, of ten percent (10%) on net sales. The signing fee and royalty payments
have been guaranteed for the first three (3) license years by MBf Holdings.
The Company agreed to pay MACC Trading Limit $1,750,000 and assume royalty and
signing fee obligations to PEI amounting to $375,000 for the rights to this
License Agreement and for approximately $261,000 in condom inventory. On
February 18, 1994, the Company made the $600,000 downpayment to MACC Trading
Limited in accordance with the License Agreement. The remaining balance due to
MACC Trading Limited is payable in sixty (60) equal monthly installments of
$19,167 with interest on the unpaid balance at the prime rate. By mutual
agreement MACC Trading Limited agreed to defer the commencement of the monthly
installments and the related interest thereon and no payments have been made by
the Company to date. In December 1994, the Company made a short-term loan to
MACC Trading Limited in the principal amount of $1,500,000 with interest
payable at four (4%) percent over prime. This loan was repaid to the Company
by the end of the second quarter of 1995.
Pursuant to the terms of a Stock Exchange Agreement dated as of
February 23, 1994 ("LSI Agreement"), the Company completed the sale of eighty
percent (80%) of its wholly owned subsidiary, Laboratory Specialists, Inc.
("LSI"), to Arthur R. Peterson, Jr., its President, for approximately $2.5
million, comprised of cash, notes and 1.3 million shares of the Company's
Common Stock. In addition, the Company transferred to LSI all of the Company's
rights to the AWARE home drug testing kit ("AWARE") which received limited "in
medical offices only" prescription approval by the FDA in January 1994. The
Company will receive royalties on the AWARE product for a period of five (5)
years. As a result of the transaction, the Company is no longer in the drug
testing business.
Pursuant to the terms of a Stock Exchange Agreement dated as of July
12, 1994 ("LSAI Agreement"), the Company exchanged 706,244 shares of the
preferred stock of LSI (valued at $706,244) for 239,405 shares of common stock
of a newly formed corporation, Laboratory Specialists of America Inc. ("LSAI")
contingent upon LSAI successfully completing an initial public offering
("IPO"). In September 1994, LSAI successfully completed its IPO and currently
sells under the symbol ("LABZ") on the Nasdaq Small Cap Market System. The
Company has agreed not to sell any of its shares of LSAI stock prior to July 8,
1996 without the prior consent of LSAI and certain of its officers and
directors. Thereafter, such shares will be eligible for sale under Rule 144 of
the Securities Act of 1933, as amended. As a result of the transaction, the
Company is no longer a shareholder of LSI.
In 1994, AHPC purchased substantially all of its inventories from MBf
Health and MBf RPI. MBf Health and MBf RPI are manufacturing subsidiaries of
MBf International. Prices charged by MBf and
17
<PAGE> 20
its affiliates are subject to change and, due to the guaranteed income
provisions of the Amended Share Exchange Agreement, are not the same as prices
which would be charged by unrelated parties. Credits against purchases to
enable the Company to meet the pretax earnings requirements of the Amended
Share Exchange Agreement were $3,106,372 in 1994. Amounts due from/to MBf
Health and MBf RPI primarily arise from purchases of inventories and credits
received under the Amended Share Exchange Agreement. The guaranteed income
provisions of the Amended Share Exchange Agreement terminated December 31,
1994.
Some of the inventory purchases from affiliates were financed in 1992
through another MBf Holdings subsidiary, MBf Factors. In 1994, amounts due to
MBf Factors bore interest at nine percent (9%) per annum and were generally due
within 120 days. Interest expense in 1994 payable by the Company to MBf
Factors amounted to $66,181.
During 1994, the Company purchased substantially all of its inventory
related to its latex condom products from MBf Personal Care, which is a wholly
owned subsidiary of MBf Capital, an affiliate of MBf International.
In October 1994, pursuant to two debenture and warrant purchase
agreements between the Company and two trusts established by George S. Mennen,
the Company issued, and each trust purchased, a convertible subordinated
debenture in the amount of $1,000,000 payable in seven years with interest at
one and one-half percent (1.5%) over the prime rate. Each debenture is
convertible into Common Stock of the Company at a conversion price of $2.50 per
share. In addition, each trust received a warrant exercisable over five years
to purchase 75,000 shares of the Common Stock of the Company at an exercise
price of $2.25 per share.
Proceeds from these debentures were used to fund the Playboy condom
inventory, nutritional products inventory and start-up expenses associated with
both products. For the period ended June 30, 1995 the Company incurred
interest expense of $103,995 on this indebtedness.
In December 1994, the Company loaned to an affiliate, MACC Trading
Limited, on a short term basis the principal amount of $1,500,000. This loan
was secured by the Company's obligation to MACC Trading Limited under the
party's December 30, 1993 purchase agreement for the acquisition by the Company
of the Playboy condom license rights from MACC Trading Limited. This loan bore
interest at the rate of four percent (4%) over prime. On May 5, 1995, the
Company and MBf Holdings (the parent company of MACC Trading) entered into an
agreement allowing the Company's subsidiary AHP to offset the MACC Trading
receivable along with the accrued interest thereon ($1,572,688) against the
trade payable balance owed by AHPC to MBf Health. Therefore, the $1,500,000
receivable from MACC Trading was considered as effectively paid on May 5, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires certain officers, directors and beneficial owners of more than 10% of
the Company's Common Stock to file reports of ownership and changes in their
ownership of the equity securities of the Company with the Securities and
Exchange Commission and the Nasdaq Stock Market. Based solely on a review of
the reports and representations furnished to the Company during the last fiscal
year, the Company believes that each of these persons is in compliance with all
applicable filing requirements except that the Initial Statement of Beneficial
Ownership on Form 3 was inadvertently filed in the month following the month in
which the reporting event occurred for each of William C. Willis, Jr., Mark L.
Saginor and W. Daniel Johnson.
18
<PAGE> 21
SHAREHOLDER PROPOSALS
Shareholder proposals for the 1996 Annual Meeting of Shareholders must
be received by the Company at its executive office in Itasca, Illinois, on or
prior to March 1, 1996 for inclusion in the Company's proxy statement for that
meeting. Any shareholder proposal must also meet the other requirements for
shareholder proposals as set forth in the rules of the U.S. Securities and
Exchange Commission relating to shareholder proposals.
REQUESTS FOR DOCUMENTS
Any requests for documents or other information should be directed to
Robert Carter, Controller, (708) 285-9191. The Company will forward such
documents, via first class mail, within one business day of receipt of a
Shareholder's written request therefor. All documents subsequently filed on
behalf of the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, prior to December 11, 1995 shall
be deemed to be incorporated by reference into this Proxy Statement.
OTHER MATTERS
As of the date of this Proxy Statement, no business, other than that
discussed above, is to be acted upon at the Meeting. If other matters not
known to the Board of Directors should, however, properly come before the
Meeting, the persons appointed by the signed proxy intend to vote it in
accordance with their best judgment.
MBf USA, INC.
By the Order of the Board of Directors
Edward J. Marteka
President
Itasca, Illinois
November 12, 1995
YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF
PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE.
19
