<PAGE>
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 (S) 240.14a-11(c) or (S) 240.14a-12
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CROWN LABORATORIES, INC.
----------------------------------------------
Name of Registrant as Specified in Its Charter
N/A
------------------------------------------------------------------
Name of Person(s) Filing Proxy Statement, if Other Than Registrant
---------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CROWN LABORATORIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 16, 1997
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of CROWN LABORATORIES, INC., will be held
at the Monte Carlo Resort and Casino, 3770 Las Vegas Blvd. South, Las Vegas,
Nevada 89109, on September 16, 1997, at 10:00 a.m. local time, for the following
purposes:
(1) To approve amendments to the Certificate of Incorporation which create
a classified Board of Directors, provide for removal of members of the
Board of Directors from office only for cause, and effect related
matters.
(2) To elect seven members to the Board of Directors to serve staggered
three-year terms of office and, in any event, until their respective
successors shall be elected and qualified.
(3) To approve amendments to the Certificate of Incorporation to remove
the designations of the Company's Series A and Series B Preferred
Stock.
(4) To transact such other business and to consider and take action upon
any and all matters that may properly come before the Meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on August 20, 1997, as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Meeting. For ten days prior to the Meeting, a complete list
of shareholders entitled to vote at the Meeting will be available for
examination by any shareholder for any purpose germane to the Meeting during
ordinary business hours at the Company's executive offices, located at 6780
Caballo Street, Las Vegas, Nevada 89119.
All shareholders are invited to attend the Meeting in person.
By Order of the Board of Directors
Craig E. Nash
Chairman of the Board
Las Vegas, Nevada
August 21, 1997
- --------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
CROWN LABORATORIES, INC.
6780 CABALLO STREET
LAS VEGAS, NV 89119
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 16, 1997
The enclosed proxy is solicited by and on behalf of the Board of Directors
("Board") of Crown Laboratories, Inc. (the "Company") in connection with the
Annual Meeting of Shareholders to be held on September 16, 1997, at the Monte
Carlo Resort and Casino, 3770 Las Vegas Blvd. South, Las Vegas, Nevada 89109,
at 10:00 a.m. local time.
The Company's executive offices are located at 6780 Caballo Street, Las Vegas,
Nevada 89119, telephone number (702) 696-9300. It is expected that this Proxy
Statement, the Notice of the Annual Meeting and accompanying proxy card will
first be mailed to shareholders on or about August 21, 1997.
In addition to the election of the members of the Board ("Proposal Two"), the
shareholders are being asked to approve amendments to the Company's Certificate
of Incorporation ("Proposal One"). On August 7, 1997, the Company's Board
passed resolutions declaring the advisability of amendments to the Certificate
of Incorporation (the "Classified Board Amendments"). The Board believes that
the Classified Board Amendments, which, among other things, provide that the
members of the Board will be divided into one or more "classes" of directors and
that members of the Board may be removed from office only for cause, are
advisable at this time. The shareholders are also being asked to approve
amendments to the Company's Certificate of Incorporation to remove the
designations of the Company's Series A and Series B Preferred Stock ("Proposal
Three," see Appendix A). The Company intends to restate its Certificate of
Incorporation after the foregoing Certificate amendments are adopted.
As detailed below, the proposed Classified Board Amendments are designed to
protect the Company from unfair attempts by third parties to take control of the
Company which are not in the best interests of all of the Company's
shareholders. In this regard, the Classified Board Amendments will complement
the Company's Shareholder Rights Plan, adopted in May 1997. As more fully
discussed below, the Board believes that adoption of the Classified Board
Amendments at this time is in the best interests of the Company and the
shareholders. Accordingly, the Company hereby submits the Classified Board
Amendments to the shareholders for their approval and recommends that the
shareholders vote "FOR" adoption of the Classified Board Amendments.
Reference is made to the Company's Annual Report on Form 10-KSB, 10-KSB/A1 and
10-KSB/A2 for the fiscal year ended December 31, 1996, a copy of which is
enclosed herewith, for information concerning the Company, its common stock, par
value $.001 per share ("Common Stock"), the beneficial ownership of the Common
Stock by the principal holders thereof, and the market for the Company's Common
Stock.
INFORMATION CONCERNING SOLICITATION AND VOTING
Shareholders are requested to complete, date and sign the accompanying proxy
card and return it promptly to the Company. Any proxy given may be revoked by a
shareholder at any time before it is voted at the Annual Meeting and all
adjournments thereof by filing with the Secretary of the Company a notice in
writing revoking it, or by duly executing and submitting a
<PAGE>
proxy bearing a later date. Written requests revoking a proxy should be directed
to: Corporate Secretary, Crown Laboratories, Inc., 6780 Caballo Street, Las
Vegas, NV 89119. Proxies may also be revoked by any shareholder present at the
Annual Meeting who expresses a desire to vote such shares in person. Subject to
such revocation, all proxies duly executed and received prior to, or at the time
of, the Annual Meeting will be voted in accordance with the specification on the
proxy card. If no specification is made, proxies will be voted in favor of the
proposals contained therein.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others forwarding the solicitation
material to beneficial owners of Common Stock. In addition to the use of the
mail, directors, officers, regular employees and certain shareholders of the
Company may solicit proxies personally, by telephone, telegraph or by telecopy.
The Board will present for a vote at the Annual Meeting the following matters
(i) the approval of amendments to the Company's Certificate of Incorporation to,
among other things, create a Classified Board and provide for removal of members
of the Board only for cause (Proposal One), (ii) the election of seven members
to the Board to serve staggered three-year terms of office (Proposal Two), (iii)
the approval of amendments to the Company's Certificate of Incorporation to
remove the designations of the Company's Series A and Series B Preferred Stock
(Proposal Three), and (iv) to transact such other business and take action upon
any and all matters that may properly come before the meeting or any adjournment
thereof.
SHAREHOLDERS' VOTING RIGHTS
Only holders of record of the Company's Common Stock, at the close of business
on August 20, 1997, will be entitled to notice of, and to vote at, the Annual
Meeting. As of August 20, 1997, there were [ ] shares of Common Stock
-------
outstanding. Neither the Company's Certificate of Incorporation nor its By-laws
provide for cumulative voting rights with respect to any of the matters
contained in this Proxy Statement. No other class of equity security of the
Company, including the Company's Series E Preferred Stock, is entitled to vote
on the Proposals set forth in this Proxy Statement.
VOTES REQUIRED FOR APPROVAL
As provided by the Company's Certificate of Incorporation, By-laws and
applicable Delaware law, each share of the Company's Common Stock entitles its
holder to one vote on any matter that properly comes before the shareholders of
the Company and requires a vote of the shareholders.
With respect to Proposals One (the Classified Board Amendments) and Three
(additional amendments to the Certificate of Incorporation), assuming a quorum
is present, the affirmative vote of the holders of a majority of the Company's
outstanding Common Stock entitled to vote is required for approval of each
Proposal. With respect to Proposal Two, the election of directors, assuming a
quorum is present, the seven candidates receiving the highest number of votes
are elected. A quorum is the presence in person or by proxy of shares
representing a majority of the outstanding shares of Common Stock. Subject to
the right of revocation, all proxies duly executed will be voted in accordance
with the specifications on the proxy card. If no specification is made, proxies
will be voted in favor of each of the Proposals.
Abstentions will be counted for purposes of determining the presence or absence
of a quorum and the total number of votes cast with respect to a proposal.
Shares held of record by a broker or its nominee ("Broker Shares") that are
voted on any matter are included in determining the absence or presence of a
quorum; however, Broker Shares that are not voted
2
<PAGE>
on any matter will not be included in determining the total number of votes cast
on the matter. Since only a plurality is required for the election of directors,
abstentions or broker non-votes will have no effect on the election of directors
(except for purposes of determining whether a quorum is present).
Messrs. Craig E. Nash, Scott O. Nash and Christopher C. Demetree are the
Company's (i) Chairman of the Board and Chief Executive Officer, (ii) President
and (iii) Secretary and National Account Executive, respectively. Messrs. Nash,
Nash and Demetree directly own, in the aggregate, 29.32% of the Company's
outstanding Common Stock as of the date of this Proxy Statement. On June 13,
1997, Christopher Demetree and certain family members filed a Schedule 13-D,
indicating that certain of Mr. Demetree's family members have granted proxies
covering an additional 1.2% of the Company's outstanding Common Stock to Mr.
Demetree, giving him the right to vote such shares. Christopher Demetree has
advised the Company that he will vote all shares directly owned, or subject to
such proxies in favor of the director nominees named in this Proxy Statement, in
favor of the proposed Classified Board Amendments, and in favor of the other
proposed amendments to the Certificate of Incorporation. In addition, Messrs.
Craig and Scott Nash have advised the Company that they will vote all of the
shares directly owned by each of them in favor of the director nominees named in
this Proxy Statement, in favor of the proposed Classified Board Amendments, and
in favor of the other proposed amendments to the Certificate of Incorporation.
* * * * *
MATTERS TO BE ACTED UPON BY SHAREHOLDERS
PROPOSAL ONE
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CREATE A CLASSIFIED BOARD, PROVIDE FOR REMOVAL OF ITS MEMBERS
FROM OFFICE ONLY FOR CAUSE, AND EFFECT RELATED MATTERS.
OPERATION OF, AND REASONS FOR, THE CLASSIFIED BOARD AMENDMENTS
The Board has approved and declared advisable amendments to the Certificate of
Incorporation to classify the Board and to effect related matters.
Among other things, the Certificate of Incorporation would be amended (i) to
classify the Board into three classes as nearly equally as possible, each of
which, after an interim arrangement, will serve for three years with one class
being elected each year; (ii) to provide that directors may be removed only for
cause and only with the approval of the holders of at least 66-2/3% of the
voting power of all shares entitled to vote for the election of directors,
voting as a single class; (iii) to provide that any vacancy on the Board may be
filled by the majority of directors then in office, even though less than a
quorum, and that members of each class shall hold office until their successor
has been duly elected and qualified; and (iv) to set the minimum and maximum
number of directors on the Board, at three and eleven, respectively
(collectively, the "Classified Board Amendments"). The full text of the
Classified Board Amendments is set forth in Appendix A hereto.
The Classified Board Amendments are being presented to the shareholders as a
single proposal. As more fully discussed below, the Board believes that these
amendments, taken together, will increase the likelihood of continuity and
stability in the composition of the Board and in the policies formulated by the
Board, and, at the same time, effectively reduce the possibility that a third
party could, in the future, effect or threaten to effect a sudden or surprise
3
<PAGE>
change in majority control of the Company's Board without the approval of the
incumbent Board.
Delaware law permits, but does not require, a classified board of directors
whereby the directors are divided into as many as three classes with staggered
terms of office and only one class of directors stands for election each year.
If Proposal One is approved, the classified Board would be divided into three
classes designated Class I, Class II and Class III. The initial term of office
for members of Class I will expire at the annual meeting of shareholders in
1998; the initial term of office for members of Class II will expire at the
annual meeting of shareholders in 1999; and the initial term of office for
members of Class III will expire at the annual meeting of shareholders in 2000.
As a result, shareholders will elect approximately one-third of the Board at
each annual meeting. Proposal Three of this Proxy Statement addresses which
directors will serve in each of three classes.
The Board believes that a classified Board will permit it to focus more
effectively on Board composition and continuity and facilitate the passing of
experience and institutional knowledge from existing Board members to new Board
members. In addition, the Board believes that a classified Board would
effectively reduce the possibility that a third party could effect a sudden or
surprise change in control of the Company's Board. A classified Board would
permit the Board and management sufficient time to review an acquisition
proposal made by a third party, consider alternatives and pursue, if possible, a
better transaction for shareholders. Without a classified Board, the
possibility that an acquirer of a significant or controlling interest in the
Company would be able to replace the Board and management would undercut the
Company's ability to negotiate effectively.
With respect to the removal of directors and the filling of vacancies, the
Classified Board Amendments will restrict the ability of a third party to remove
incumbent directors and simultaneously gain control of the Board by filling the
vacancies created by removal with its own nominees. The Company's By-laws
currently contain a similar provision for removal of directors and the filling
of vacancies. However, since the By-laws may be amended by the affirmative vote
of a majority of the votes represented by the issued and outstanding shares of
the Company entitled to vote at a meeting called for such purpose, these
provisions would not adequately ensure the continuity and stability of the
Board.
Because the Classified Board Amendments will increase the amount of time
required for a takeover bidder to obtain control without the cooperation of the
Board, even if the takeover bidder were to acquire a majority of the Company's
outstanding Common Stock, these amendments could discourage certain tender
offers that shareholders might feel would be in their best interests. Because
tender offers for control usually involve a purchase price above the current
market price, these amendments could also discourage open market purchases by a
potential takeover bidder. Such tender offers or open market purchases could
increase the market price of the Company's stock, enabling shareholders to sell
their shares at a price higher than which would otherwise prevail. In addition,
the Classified Board Amendments could make the Company's Common Stock less
attractive to persons who invest in securities in anticipation of an increase in
price if a takeover attempt develops. Finally, because the Board has the power
to retain and discharge management, these amendments could have the effect of
perpetuating incumbent management.
The foregoing summary of Proposal One is qualified in its entirety by reference
to the full text of the Classified Board Amendments as set forth in Appendix A.
VOTE REQUIRED
Approval of the Classified Board Amendments requires the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock
entitled to vote thereon.
4
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" PROPOSAL ONE
* * * * *
PROPOSAL TWO
ELECTION OF DIRECTORS
Seven directors, constituting the entire Board, are to be elected at the Annual
Meeting to hold office for the terms set forth below, and in each case, until
their respective successors have been elected and shall qualify. Subject to the
approval by the shareholders of the Classified Board Amendments, the Company's
Board will automatically, without further action by the shareholders, be
classified as set forth in the following table:
<TABLE>
<CAPTION>
CLASS TERM NAME OF DIRECTOR
- --------- ----------------------- -----------------------------------
<S> <C> <C>
Class I Term expires at the Dr. Linda Carrick and Lee A. Hooker
1998 Annual Meeting
Class II Term expires at the Herbert G. Altman and Arthur
1999 Annual Meeting M. Berkowitz
Class III Term expires as the Christopher C. Demetree, Craig E.
2000 Annual Meeting Nash, and Scott O. Nash
</TABLE>
Beginning with the Company's Annual Meeting in 1998, directors will be elected
to succeed those directors whose terms then expire, and each person so elected
will serve for a three-year term.
Once a classified Board is established, the Company's Certificate of
Incorporation and applicable Delaware law will operate to permit the
shareholders to remove directors from office only for cause, at a meeting of
shareholders called for that purpose, but only by the affirmative vote of the
holders of at least 66-2/3% of the voting power of all shares of the Company
entitled to vote generally in the election of directors, voting together as a
single class (See "Proposal One").
It is the intention of the persons named in the enclosed proxy to vote the
shares covered by each proxy for the election of all the nominees named in the
table below. Although the Board does not anticipate that any nominees will be
unavailable for election, in the event of such occurrence the proxies will be
voted for such substitute, if any, as the Board may designate. There is no
cumulative voting for the election of members of the Board.
The following table sets forth information with respect to nominees:
5
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
- --------------------------- --- ---------------------------------- ---------
<S> <C> <C> <C>
Craig E. Nash 43 Chairman of the Board and 1980*
Chief Executive Officer
Scott O. Nash 43 Vice Chairman of the Board and 1980*
President of the Company
Christopher C. 33 Director of National Accounts of 1992
Demetree the Company,
Vice President of Demetree
Brothers, Inc.
Lee A. Hooker 51 Owner and Chief Executive Officer 1994
of American Benefits
Counselor/Hooker Associates
Arthur M. Berkowitz 56 Agent for The Equitable Life 1994
Assurance Society of the United
States
Linda Carrick, 43 Clinical Director, Surgical 1994
Ph.D. Nursing for the Hospital of the
University of Pennsylvania
Herbert G. Altman 60 Senior Vice President, Chief
Financial Officer, Director
Spectro Industries, Inc.
</TABLE>
- ----------
* Includes the Company's predecessors.
CRAIG E. NASH has been the Chairman of the Board and Chief Executive Officer of
the Company since September 1991 and has held such position or similar positions
since February 1980. He also is the Senior Marketing Executive of the Company.
Mr. Nash has sixteen years experience in pharmaceutical and food-products
marketing. Mr. Nash attended the University of Southern California.
SCOTT O. NASH has been President and Vice Chairman of the Board of the Company
since September 1991 and has held these or similar positions since February
1980. Mr. Nash has sixteen years experience in pharmaceutical and food-products
manufacturing and operations. Mr. Nash attended the University of Southern
California. Messrs. Craig and Scott Nash are twin brothers.
CHRISTOPHER C. DEMETREE has been a Director of the Company since December 1992
and prior to that a major investor in the Company. Mr. Demetree is a National
Accounts Executive for Crown and prior to that was Vice President of Demetree
Brothers, Inc., a Florida-based fully-integrated property management and
investment company, and was responsible for many aspects of the management of
Demetree Brothers, Inc. His duties primarily include planning and developing
real estate developments, including permits, sales pro formas and construction
budgets. Mr. Demetree holds a B.S. degree in Industrial Management from Georgia
Institute of Technology.
LEE A. HOOKER became a director of the Company in February 1994. Mr. Hooker is
the owner and Chief Executive Officer of American Benefits Counselor/Hooker
Associates, a brokerage firm for employee benefits to the healthcare industry.
He has been involved with the medical industry for more than twenty-five years.
Mr. Hooker holds a B.S. in Business Administration from Columbia Union College
and an M.S. in Business Administration from Pepperdine University.
6
<PAGE>
ARTHUR M. BERKOWITZ became a director of the Company in June 1994. Mr.
Berkowitz has been an agent for the Equitable Life Assurance Society of the
United States for the past 18 years. He is currently a Benefits Consultant to
many large corporations. Mr. Berkowitz was an engineer with The General
Electric Company for 12 years. Mr. Berkowitz is a life member of the Million
Dollar Round Table, a Director of the Philadelphia Friends of ALS, and
comptroller of the Germantown Jewish Centre of Philadelphia. Mr. Berkowitz has
a B.S. degree in Mathematics from St. Lawrence University and B.Ae and M.Ae in
Aeronautical Engineering from Rensselaer Polytechnic Institute.
DR. LINDA CARRICK, PH.D. became a director of the Company in June 1994. Dr.
Carrick has been in the nursing field since 1975. She has been Clinical
Director, Surgical Nursing for the Hospital of the University of Pennsylvania,
where she also served as interim Vice President of Nursing. She is a member of
several professional organizations, including the American Association of
Critical Care Nursing, The Nursing Association, Association of Nurse
Executives, and the American Society of Parenteral and Enteral Nutrition. She
also completed a Wharton Nurse Executive Fellowship. Dr. Carrick holds a B.S.
degree in Nursing from Villanova University, an M.S. degree in Surgical,
Cardiovascular Nursing and a Ph.D. in Healthcare from The University of
Pennsylvania. From September 1995 to the present Dr. Carrick has been an
Assistant Professor at the University of Pennsylvania.
HERBERT G. ALTMAN subject to approval by the shareholders, will become a
director of the Company in September, 1997. Mr. Altman is a consultant and
private investor. He has been active in the pharmaceutical distribution
business, serving as Senior Vice President, Chief Financial Officer, and
Director of Spectro Industries, Inc., an American Stock Exchange company for 17
years and for 5 years, as Vice President, Finance of McKesson Drug Company,
Jenkintown, a division of McKesson Corporation. Prior thereto, he was active as
a partner in a Philadelphia-based Certified Public Accounting firm. Mr. Altman
holds a B.S. Degree from the Wharton School of Finance.
DIRECTORS' REMUNERATION
Each of the current outside members of the Board, Vincent Casella, Lee A.
Hooker, Arthur M. Berkowitz, and Dr. Linda Carrick, Ph.D., have received options
to purchase 50,000 shares of Common Stock at exercise prices ranging from $1.275
to $2.50 per share. Of the options received, options to purchase 25,000 shares
of Common Stock vested immediately and options to purchase 25,000 shares of
Common Stock will vest on different schedules ranging between the thirteenth to
the twenty-third month of their term. Additionally, Lee A. Hooker, Arthur M.
Berkowitz, Dr. Linda Carrick, and Myles Cane, a former director, have received
options to purchase 10,000 shares of Common Stock at an exercise price of $2.44
per share and Vincent Casella have received options to purchase 50,000 shares of
Common Stock at an exercise price of $1.275 per share.
Additionally, beginning on July 27, 1995, Arthur Berkowitz receives $1,500 per
month, for serving as Chairman of the Audit Committee of the Company's Board.
Vincent Casella has informed the Company that he does not intend to stand for
reelection to the Board at the Annual Meeting.
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and any persons who own more than ten percent
of the registered class of the Company's equity securities to file various
reports with the Securities Exchange Commission and the American Stock Exchange,
Inc. concerning the holdings of and transactions in the Common Stock and other
equity securities of the Company. Copies of these filings must be furnished to
the Company. Based on a review of the copies of such forms
7
<PAGE>
furnished to the Company, and written representations from the Company's
directors and executive officers, the Company believes that Mr. Craig Nash filed
his May and December 1996 Form 4 Statement after the required filing date. The
Company believes that Mr. Christopher Demetree filed his June 1996 Form 4 after
the required filing date. The Company believes that Arthur Berkowitz, Lee A.
Hooker and Dr. Linda Carrick filed their September 1996 Form 4 Statements after
the required filing date.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" ELECTING THE NOMINEES
* * * * * *
PROPOSAL THREE
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
REMOVE THE DESIGNATIONS OF THE COMPANY'S SERIES A AND
SERIES B PREFERRED STOCK.
On August 7, 1997, the Board adopted resolutions declaring the advisability of
amendments to the Company's Certificate of Incorporation to delete Articles Five
and Six, the designations of the Company's Series A and Series B preferred
stock, in their entirety. Since the designation of the Series A and Series B
series of preferred stock, no shares of either Series A or Series B preferred
stock have been issued by the Company. The Board has determined not to issue
any shares of such series of preferred stock in the future and, therefore, has
resolved to delete the designations of Series A and Series B preferred stock
from the Company's Certificate of Incorporation, subject to shareholder
approval. Accordingly, the Company hereby submits the amendments set forth in
Appendix A to the shareholders for their approval and recommends that the
shareholders vote "FOR" adoption of the proposed amendments.
VOTE REQUIRED
Approval of Proposal Three requires the affirmative vote of the holders of
a majority of the outstanding shares of the Company's Common Stock entitled to
vote thereon.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL THREE
* * * * * *
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding ownership of the
Common Stock of the Company as of June 30, 1997, by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock of the Company, (ii) each director of the Company, (iii) the Chief
Executive Officer and President, and (iv) all executive officers, and directors
of the Company as a group. Each person has sole investment and voting power
with respect to the shares indicated, subject to community property laws where
applicable, except as otherwise indicated below.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER/(1)/ SHARES/(2)/ CLASS
- ----------------------------------- ----------- ----------
<S> <C> <C>
CRAIG E. NASH/(3)/ 2,260,014 11.3%
SCOTT O. NASH 2,656,267 13.2%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER/(1)/ SHARES/(2)/ CLASS
- ----------------------------------- ----------- ----------
<S> <C> <C>
CHRISTOPHER C. DEMETREE/(4)/ 965,575 4.8%
LEE A. HOOKER 126,478 *0.63%
ARTHUR M. BERKOWITZ/(5)/ 271,029 1.35%
LINDA CARRICK, PH.D. 126,500 *0.63%
VINCENT J. CASELLA 643,850 3.20%
HERBERT G. ALTMAN 288,411 1.44%
ALL OFFICERS AND DIRECTORS 7,148,647 35.6%
AS A GROUP (8 PERSONS)
NORTH AMERICAN HOLDINGS 800,050 3.99%
7800 E. UNION, DENVER, CO 82037
GIFFORD FUND, LTD./(6)/ 263,963 SEE FOOTNOTE
CHARLOTTE HOUSE, CHARLOTTE STREET
P.O. BOX N9204, NASSAU, BAHAMAS
</TABLE>
- ----------
* Less than 1%
/(1)/ The address of each of the directors, and executive officers, is c/o Crown
Laboratories, Inc., 6780 Caballo Street, Las Vegas, Nevada 89119.
/(2)/ The amounts in this column include outstanding options and warrants to
acquire shares that are currently exercisable or exercisable within 60
days of June 30, 1997, and shares issued under employment agreements, even
though the shares may not yet have vested.
/(3)/ Includes 400,000 shares owned by Craig Nash's wife. Mr. Nash disclaims
beneficial ownership.
/(4)/ Includes 22,384 shares owned by Christopher Demetree's wife. The Company
has been advised that, on June 13, 1997, Christopher C. Demetree filed a
Schedule 13D with the Securities and Exchange Commission on behalf of
himself and certain family members ("Reporting Persons") reporting
beneficial ownership of, in the aggregate, 1,753,915 shares of the
Company's Common Stock. The Reporting Persons disclaimed in the Schedule
13D that they acted as a "group" for purposes of acquiring, holding,
voting or disposing of shares of the shares of Common Stock beneficially
owned by each of the Reporting Persons.
/(5)/ Includes shares held by a profit sharing plan and a family trust.
/(6)/ The Gifford Fund presently holds $3 million in face value of Series E
Preferred Stock. The Series E Preferred Stock provides for conversion into
Crown Laboratories, Inc., Common Stock based upon market prices. If
converted, the Gifford Fund, Ltd., may become a holder of more than 5% of
the common shares outstanding of Crown Laboratories, Inc., depending upon
the market price of the shares at time of conversion.
INFORMATION CONCERNING THE BOARD
AND CERTAIN COMMITTEES THEREOF
The Board appointed an Audit Committee and a Compensation Committee on April 1,
1994, but it does not have a Nominating Committee. The functions of the Audit
Committee include recommending to the Board the independent auditors; reviewing
and approving the planned scope of the annual audit, proposed fee arrangements
and the results of the annual audit;
9
<PAGE>
reviewing the adequacy of accounting and financial controls; reviewing the
independence of the independent auditors; approving all assignments to be
performed by the independent auditors; and instructing the independent auditors,
as deemed appropriate, to undertake special assignments. The current members of
the Audit Committee are Arthur Berkowitz and Dr. Linda Carrick. During 1996,
five meetings of the Audit Committee were held.
The current members of the Compensation Committee are Lee Hooker and Arthur
Berkowitz. The functions of the Compensation Committee are to approve or
recommend the approval to the Board of the compensation and the remuneration
arrangements for directors and senior management. During 1996, two meetings of
the Compensation Committee were held.
The Board held a total of 6 meetings during the fiscal year ending December 31,
1996. Each Director attended more than 75% of the aggregate number of meetings
of the Board and committee meetings.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------- --- ----------------------------------------
<S> <C> <C>
Craig E. Nash 43 Chairman of the Board and
Chief Executive Officer
Scott O. Nash 43 Vice Chairman of the Board and President
Calvin T. Mathews 53 Chief Financial Officer
</TABLE>
For the biographies of Messrs. Nash and Nash see "Election of Directors."
CALVIN T. MATHEWS has been Chief Financial Officer since April 1997. Mr.
Mathews has over 25 years of experience in various areas of general and
financial management in the investment management industry and money center and
regional banks. Prior to joining the Company, he served as Director of Mergers
and Acquisitions for FundMinder, Inc., a California-based investment management
firm. Prior to joining FundMinder, Inc., he served as Chief Executive Officer
of Schabacker Investment Management. In addition, Mr. Mathews served as
President and Chief Financial Officer for Crown Laboratories from June 30, 1990
to September 30, 1993. A graduate of the University of Mississippi, he also
holds a M.A. degree from Indiana University and an MBA received from the
University of Chicago. Mr. Mathews also serves on the Board of Directors of
Optelecom, Inc. (OTC:OPTG), a provider of optical communications and laser
systems.
EXECUTIVE COMPENSATION AND OTHER MATTERS
No executive officer of the Company earned or was awarded compensation in excess
of $100,000 during 1996. The following table sets forth the cash and non-cash
compensation for each of the last three fiscal years ended December 31, 1994,
1995, and 1996 awarded to or earned by the Chief Executive Officer for services
in all capacities rendered to the Company and its subsidiaries.
10
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------- ------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION YEAR SALARY COMPENSATION/(2)/ AWARD OPTIONS
- --------------------------- ---- ----------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Craig E. Nash 1996 $70,000 $0 $0 0
Chief Executive 1995 $78,771 0 0 0
Officer 1994 $51,329/(1) (2)/ 0 0 0
</TABLE>
/(1)/ Includes 1,665,545 shares granted under Mr. Craig Nash's employment
agreement with a nominal fair market value on the date of the employment
agreement. All Common Stock issued to Craig Nash were ascribed a nominal
value by the Company and its investment adviser, given the inherent
uncertainty as to the ability of the Company to raise capital and continue
in existence as of the dates such shares were issued. Of the amount above,
all shares are vested.
/(2)/ The Company provided automobile allowances to certain of its employees,
including certain persons who are executive officers of the Company,
(including Mr. Nash), based upon the job requirements of each employee. No
amounts with respect to the personal use of automobiles, if any, have been
included in the above table. The Company has concluded that the aggregate
amounts of such personal benefits, which cannot be specifically or
precisely ascertained, did not in any event exceed, as to any executive
officer, either the lesser of $50,000 or 10% of his cash compensation for
the last fiscal year, and that the information set forth in the foregoing
table is not rendered materially misleading by virtue of the omission of
the value of such personal benefits.
The following table gives certain information regarding options held on December
31, 1996.
AGGREGATE OPTION EXERCISES/(1)/ AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE
AT FY-END MONEY OPTIONS AT FY-END
----------------------------------------------- --------------------------------------------------
NAME OF INDIVIDUAL EXERCISABLE UNEXERCISABLE EXERCISABLE/(3)/ UNEXERCISABLE
- --------------------------- ----------------------- ------------------------- -------------------------- -----------------------
<S> <C> <C> <C> <C>
Craig E. Nash/(2)/ 768,028 - $364,813 -
Chief Executive Officer
</TABLE>
/(1)/ No options were exercised in 1996.
/(2)/ The options granted under the 1992 Stock Option Plan can be amended by the
Board and are exercisable at $1.275 per share through November
18, 2003.
/(3)/ Based on the market price on December 31, 1996.
* * * * * *
The Company in January 1993 entered into a five-year employment agreement with
Craig Nash, who receives a current base salary per annum of $70,000 increasing
to $110,000 by year five. Mr. Nash has temporarily waived salary increases
which would provide for current compensation of $100,000 base salary under the
terms of his employment contract. The
11
<PAGE>
Company can terminate such employment for cause (as defined) on 90 days notice.
If the individual is terminated by the Company during the term of the employment
agreement, he will receive certain termination compensation of twenty-four
months of base salary.
Each employment agreement referred to above prohibits the individual from
directly or indirectly competing with the Company for a period of three years
after separation from the Company, and binds the individual to certain
confidentiality agreements.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
In order for a shareholder proposal to be included in the Board's Proxy
Statement for the next Annual Meeting of Shareholders, such proposal must be
received at 6780 Caballo Street, Las Vegas, Nevada 89119, Attention: Corporate
Secretary, no later than the close of business on April 21, 1998. Only proper
proposals which comply with all applicable statutes and regulations, and are
timely received, will be included in the Proxy Statement.
INDEPENDENT AUDITORS
The Board has selected Arthur Andersen LLP as independent auditors for the
Company for the current fiscal year. Arthur Andersen LLP has been the Company's
auditor since 1993. Arthur Andersen LLP does not have and has not had at any
time any direct or indirect financial interest in the Company and does not have
and has not had at any time any connection with the Company in the capacity of
promoter, underwriter, voting trustee, director, officer, or employee. Neither
the Company nor any officer or director of the Company has or has had any
interest in Arthur Andersen LLP. Representatives of Arthur Andersen LLP will
not be present at the Annual Meeting.
12
<PAGE>
ANNUAL REPORT
The Company's 1996 Annual Report on Form 10-KSB, 10-KSB/A1 and 10-KSB/A2
containing its financial statements for the fiscal year ended December 31, 1996,
is enclosed with the Proxy Statement. Any shareholder who does not receive a
copy of such Annual Report to shareholders may obtain a copy, including the
financial statements thereto, but excluding exhibits, by writing to the Company
addressed as follows: Attention: Corporate Secretary, Crown Laboratories,
Inc., 6780 Caballo Street, Las Vegas, NV 89119.
OTHER MATTERS
As of the date of this Proxy Statement, the Board does not know of any other
matters which will be brought before the Annual Meeting. However, if any other
matter properly comes before the Meeting, or any adjournment thereof, the person
or persons voting the proxies will vote on such matters in accordance with their
best judgment and discretion.
By Order of the Board of Directors
Craig E. Nash
Chairman of the Board
Las Vegas, Nevada
August 21, 1997
13
<PAGE>
APPENDIX A
PROPOSAL ONE
CLASSIFIED BOARD AMENDMENTS
"ARTICLE NINE. The business and affairs of the Corporation shall be managed by
------------
and under the direction of the Board of Directors. The Board of Directors may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute or this Certificate of Incorporation
directed or required to be exercised or done by the stockholders.
SECTION 1. Number of Directors. The number of directors of the Corporation
-------------------
shall be fixed in the manner provided in the By-laws of the Corporation;
provided however, that the number shall not be less than three (3) and not
more than eleven (11).
SECTION 2. Classes and Terms of Directors. The directors shall be divided
------------------------------
as nearly equal in number as possible into three classes designated Class I,
Class II and Class III, and no class shall include less than one director.
The initial term of office for members of Class I shall expire at the annual
meeting of stockholders in 1998; the initial term of office for members of
Class II shall expire at the annual meeting of stockholders in 1999; and the
initial term of office for members of Class III shall expire at the annual
meeting of stockholders in 2000. At each annual meeting of stockholders
following such initial classification and election, directors elected to
succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders
after their election, and shall continue to hold office until their
respective successors are elected and qualified. In the event of any
increase in the number of directors fixed by the Board of Directors, the
additional directors shall be so classified that all classes of directors
have as nearly equal numbers of directors as may be possible. In the event
of any decrease in the number of directors, all classes of directors shall
be deemed equally as nearly as may be possible.
SECTION 3. Newly-Created Directorships and Vacancies. Subject to the
-----------------------------------------
rights of the holders of any class of Common Stock or Series of Preferred
Stock then outstanding, newly created directorships resulting from any
increase in the number of directorships resulting from any increase in the
number of directors or any vacancies in the Board of Directors resulting
from death, resignation, retirement, disqualification, removal from office
or any other cause may be filled by the Board of Directors, provided that a
quorum is then in office and present, or by a majority of the directors then
in office, if less than a quorum is then in office, or by the sole remaining
director. Directors elected to fill a newly created directorship or other
vacancies shall hold office for the remainder of the full term of the class
of directors in which the new directorship was created or the vacancy
occurred and until such director's successor has been elected and has
qualified.
SECTION 4. Removal of Directors. Subject to the rights of the holders of
--------------------
the Common Stock or any series of Preferred Stock then outstanding, the
directors or any director may be removed from office at any time, but only
for cause, at a meeting called for that purpose, and only by the affirmative
vote of the holders of at least 66-2/3% of the voting power of all shares of
the Corporation entitled to vote generally in the election of directors,
voting together as a single class.
SECTION 5. Rights of Holders of Preferred Stock. Notwithstanding the
------------------------------------
foregoing provisions of this ARTICLE NINE, whenever the holders of any one
or more series of Preferred Stock issued by the Corporation shall have the
right, voting separately by series, to elect directors at an annual or
special meeting of the stockholders, the election, term of office, filing of
vacancies and other features of such directorships shall
<PAGE>
be governed by the rights and preferences of such Preferred Stock as set
forth in this Certificate of Incorporation or in the resolution or
resolutions of the Board of Directors relating to the issuance of such
Preferred Stock.
SECTION 6. Written Ballot Not Required. Election of directors need not be
---------------------------
by written ballot."
2
<PAGE>
PROPOSAL THREE
REMOVAL OF DESIGNATION OF SERIES A AND SERIES B PREFERRED STOCK
"That the Certificate of Incorporation is hereby amended:
A. by deleting Articles FIVE and SIX relating to the Corporation's
Series A and Series B Preferred Stock in their entirety; and
B. by redesignating Articles Seven, Eight, Nine, and Ten of the
Corporation's Certificate of Incorporation as Articles Five, Six,
Seven, and Eight, respectively."
3
<PAGE>
CROWN LABORATORIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS ON SEPTEMBER 16, 1997
THE UNDERSIGNED HEREBY APPOINTS CRAIG E. NASH AND SCOTT O. NASH, OR EITHER OF
THEM WITH FULL POWER OF SUBSTITUTION TO EACH OF THEM, AS PROXIES TO REPRESENT
THE UNDERSIGNED AT THE ANNUAL MEETING OF SHAREHOLDERS OF CROWN LABORATORIES,
INC., TO BE HELD AT 10:00 A.M., LOCAL TIME, SEPTEMBER 16, 1997, AT MONTE CARLO
RESORT & CASINO, 3770 LAS VEGAS BLVD. SOUTH, LAS VEGAS, NEVADA 89109, AND AT ANY
ADJOURNMENT THEREOF AND TO VOTE ALL SHARES OF STOCK WHICH THE UNDERSIGNED MAY BE
ENTITLED TO VOTE AT SUCH MEETING IN THE FOLLOWING MANNER:
(1) TO APPROVE PROPOSAL ONE TO AMEND THE CERTIFICATE OF
--------- INCORPORATION TO ADOPT A CLASSIFIED BOARD OF DIRECTORS.
(2) FOR ALL NOMINEES LISTED BELOW EXCEPT AS SET FORTH TO THE
--------- CONTRARY BELOW.
WITHHOLDING AUTHORITY TO VOTE FOR ALL NOMINEES AS
--------- SET FORTH BELOW.
CLASS I. DIRECTORS: DR. LINDA CARRICK AND LEE A. HOOKER
CLASS II. DIRECTORS: HERBERT G. ALTMAN AND ARTHUR M. BERKOWITZ
CLASS III. DIRECTORS: CHRISTOPHER C. DEMETREE, CRAIG E. NASH AND SCOTT O. NASH
INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME:
(3) TO APPROVE PROPOSAL THREE TO AMEND THE CERTIFICATE OF
--------- INCORPORATION TO ELIMINATE THE DESIGNATIONS OF SERIES A AND
SERIES B PREFERRED STOCK.
(4) TO VOTE WITH DISCRETIONARY AUTHORITY UPON ANY OTHER BUSINESS
--------- WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE BOARD OF
DIRECTORS NOMINEES AND FOR THE CLASSIFIED BOARD AND OTHER AMENDMENTS.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF THE ANNUAL MEETING
OF SHAREHOLDERS AND PROXY STATEMENT DATED AUGUST 21, 1997.
Date , 1997.
--------------
- ------------------------ ------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
THIS PROXY SHOULD BE SIGNED EXACTLY AS YOUR NAME APPEARS HEREON. JOINT OWNERS
SHOULD BOTH SIGN. IF SIGNED BY EXECUTORS, ADMINISTRATORS, TRUSTEES AND OTHER
PERSONS SIGNING IN REPRESENTATIVE CAPACITY, THEY SHOULD GIVE FULL TITLES.
PLEASE COMPLETE, DATE, AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
