<PAGE>
SCHEDULE 14(A)
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[ x ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MENLEY & JAMES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if only than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ x ] 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:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
The fee is calculated at 1/50th of one percent of $13,600,000
(4) Proposed maximum aggregate value of transaction:
$13,600,000
(5) Total fee paid:
$2,720
[ x ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
MENLEY & JAMES, INC.
125 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
January 24, 2000
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
which will be held at the Hotel Inter-Continental New York, 111 East 48th
Street, New York, New York, on Wednesday, February 23, 2000, at 10:00 a.m.
(local time).
The purpose of the meeting is to approve and adopt a dissolution and
liquidation plan for Menley & James. The enclosed proxy statement contains a
discussion of the proposed dissolution. The Board of Directors encourages you to
consider the enclosed materials carefully.
The Board has unanimously voted to approve the dissolution and
liquidation plan and has determined that the dissolution is in the best
interests of Menley & James and its stockholders. The Board unanimously
recommends that you vote for approval and adoption of the dissolution and
liquidation plan.
The affirmative vote of the holders of a majority of the outstanding
shares of common stock entitled to vote is required to complete the dissolution
and liquidation of Menley & James. Warburg, Pincus Investors, L.P. and Lawrence
D. White, who in combination hold a majority of the outstanding common shares,
plan to vote FOR the proposal to dissolve and liquidate Menley & James.
Therefore, their votes, alone, will result in the approval of the dissolution
and liquidation plan.
The notice and proxy statement on the following pages contain important
details concerning the dissolution and liquidation plan. Please complete, sign
and return your proxy card in the enclosed envelope to ensure that your common
shares will be represented and voted at the meeting even if you can not attend.
You are urged to complete, sign and return the enclosed proxy card even if you
plan to attend the meeting.
Sincerely,
Lawrence D. White
President and Chief Executive Officer
You should not send your stock certificates with the enclosed proxy.
After the dissolution and liquidation plan has been approved, you will receive
instructions for surrendering your certificates and receiving your distribution.
<PAGE>
MENLEY & JAMES, INC.
125 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held February 23, 2000
-------------------------
To Our Stockholders:
Notice is hereby given that a special meeting of the stockholders of
Menley and James, Inc., a Delaware corporation, will be held at the Hotel
Inter-Continental New York, 111 East 48th Street, New York, New York, on
Wednesday, February 23, 2000 at 10:00 a.m. (local time) to consider and act on
the following matters:
1. The approval and adoption of a dissolution and liquidation plan
for Menley & James; and
2. The transaction of such other business as may properly come
before the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 14,
2000 as the record date for the purpose of determining stockholders entitled to
notice of and to vote at the meeting or any postponement or adjournment thereof.
A list of such stockholders will be open to your examination during regular
business hours for a period of ten days prior to the meeting at our offices at
125 Strafford Avenue, Suite 300, Wayne, Pennsylvania.
By Order of the Board of Directors,
Lawrence D. White
President and Chief Executive Officer
Wayne, Pennsylvania
January 19, 2000
Whether or not you plan to attend this meeting, please complete, sign
and date the enclosed proxy card and return it in the envelope provided. You may
revoke your proxy at any time prior to its exercise by sending written notice of
revocation to the Secretary of Menley & James prior to the meeting or by
attending the meeting and voting your shares in person.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Summary..........................................................................................................1
Forward-Looking Statements May Prove Inaccurate..................................................................4
The Meeting......................................................................................................5
Date, Time, Place and Purpose of the Meeting............................................................5
Record Date and Shares Entitled to Vote.................................................................5
Quorum..................................................................................................5
Vote Required...........................................................................................5
Shares Committed........................................................................................5
Voting of Proxies.......................................................................................5
Solicitation of Proxies.................................................................................6
Risk Factors Relating to the Dissolution and Liquidation.........................................................7
The Business.....................................................................................................8
Overview of the Business Before the Sale................................................................8
Strategy After the Sale.................................................................................8
The Dissolution..................................................................................................9
General.................................................................................................9
Reasons for the Dissolution and Liquidation; Recommendation of the Board
of Directors...................................................................................9
Distribution of Assets..................................................................................9
Principal Provisions of the Dissolution and Liquidation Plan...........................................10
Sale of Remaining Assets...............................................................................12
Conduct of Menley & James Following Adoption of the Dissolution and Liquidation Plan..................12
Contingent Liabilities; Contingency Reserve; Liquidating Trust.........................................13
Abandonment and Amendment..............................................................................14
Listing and Trading of the Common Shares and Interests in any Liquidating Trust or Trusts..............14
Potential Liability of Stockholders Subsequent to the Dissolution......................................14
Certain Federal Income Tax Consequences................................................................15
No Appraisal Rights....................................................................................17
Regulatory Approvals...................................................................................17
Interest of Certain Persons in the Dissolution.........................................................17
Market Price of Menley and James' Common Equity and Related Stockholder Matters.................................18
Security Ownership of Certain Beneficial Owners and Management..................................................19
Where You Can Find More Information.............................................................................20
Incorporation by Reference......................................................................................20
Annex A: Plan of Dissolution and Liquidation
Annex B-1: Menley & James Annual Report on Form 10-K for the year ended December 31, 1998
Annex B-2: Menley & James Quarterly Report on Form 10-Q for the three- and nine-month
periods ended September 30, 1999
Annex C: Sections 275 through 282 of the Delaware General Corporation Law
</TABLE>
<PAGE>
MENLEY & JAMES, INC.
225 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
PROXY STATEMENT
Dated January 19, 2000
---------------------
SPECIAL MEETING OF STOCKHOLDERS
February 23, 2000
---------------------
SUMMARY
This summary highlights selected information from this document. Because
this is a summary, it may not contain all the information that is important to
you. You should carefully read this entire proxy statement before you decide how
to vote. This proxy statement also includes: (i) our proposed dissolution and
liquidation plan, included as Annex A; (ii) our annual report on Form 10-K for
the year ended December 31, 1998, included as Annex B-1, (iii) our quarterly
report on Form 10-Q for the three- and nine-month periods ended September 30,
1999, included as Annex B-2; and (iv) Sections 275 through 282 of the Delaware
General Corporation Law, included as Annex C.
The Dissolution and Liquidation Plan.
Terms of the dissolution and liquidation plan
If approved, the dissolution and liquidation plan will become effective
when we file a Certificate of Dissolution with the Secretary of State of the
State of Delaware. At that time, we will cease all of our business activities,
but will nevertheless continue, for a term of three years or such longer period
as the Delaware Court of Chancery directs, for the purpose of winding up our
affairs. Thus, we will:
o settle and close our business, including liquidating Menley &
James Laboratories, Inc., which is an inactive subsidiary;
o convert to cash, by sales, as much of our non-cash assets as
possible;
o withdraw from any jurisdiction where we are qualified to transact
business;
o pay or make provisions for the payment of all of our expenses and
liabilities;
o prosecute and defend lawsuits, if any;
o distribute our remaining assets, which should be primarily cash,
but which may consist of other financial assets, to our
stockholders; and
o do any other act necessary to wind up and liquidate our business
and affairs.
The board of directors, which will continue to function and oversee our
liquidation and dissolution, expects to appoint Lawrence D. White, our President
and Chief Executive Officer, to wind up our affairs, including overseeing the
payment of our expenses and liabilities and distribution of our remaining assets
to our stockholders. When the dissolution becomes effective, the size of the
board of directors will be reduced to two members.
<PAGE>
Distribution of Assets
The timing of any distribution to you can not be predicted with
certainty, but it is expected to occur promptly after the effectiveness of the
dissolution. We currently have working capital of approximately $14.1 million
composed primarily of cash and cash equivalents. We will have expenses between
now and the effective time of dissolution that will reduce the amount available
for distribution. Assuming that after paying those expenses we set aside a
contingency reserve of $50,000 for payment of all of our expenses and
liabilities, including expenses in connection with the completion of the plan of
dissolution and liquidation, we estimate that we will distribute approximately
$2.13 per share to our stockholders. If any of the $50,000 set aside in the
contingency reserve is not ultimately required for payment of our expenses and
liabilities, we may, at the discretion of the board of directors, either make a
second distribution to our stockholders of the unused portion of such money or
donate the unused money remaining in the contingency fund to a charitable
organization selected by the board of directors.
If the board of directors deems it appropriate for any reason, we may
transfer any of our unsold assets or cash held for contingencies to one or more
liquidating trusts. Any such liquidating trust would be established for your
benefit, to serve as a temporary repository for the trust property prior to its
disposition and distribution, first to our creditors and to pay expenses
associated with the liquidation and dissolution, and then to you on a pro rata
basis.
You should not send your stock certificates with the enclosed proxy.
After the dissolution and liquidation plan has been approved, you will receive
instructions for surrendering your certificates and receiving your distribution.
Reasons for the Dissolution and Liquidation; Recommendation of the Board of
Directors
The principal reason for the dissolution and liquidation is that we
have been unable, since the sale of substantially all of our assets in November
1998, to effect a suitable business combination with an operating business which
would further enhance stockholder value, and we do not believe that such a
business combination can be achieved in the immediate future. The board of
directors believes that the dissolution and liquidation plan is fair to and in
the best interest of Menley & James and its stockholders. Accordingly, the board
of directors unanimously recommends that you vote for its approval and adoption.
Abandonment and Amendment
The board of directors may abandon or amend the dissolution and
liquidation plan, notwithstanding stockholder approval, to the extent permitted
by the Delaware General Corporation Law.
Listing and Trading of the Common Shares
We intend to close our stock transfer books when the dissolution and
liquidation plan becomes effective and to deregister our common shares which are
currently listed on the Nasdaq Small Cap market.
Potential Liability of Stockholders
Delaware law provides that stockholders who receive a corporate
distribution in connection with a corporation's dissolution may be liable for
claims against the corporation. However, your liability for any claims against
Menley & James after the dissolution is limited to the amount that is actually
distributed to you in the dissolution. We know of no such claims or the basis
for any such claims.
Federal Income Tax Consequences
After the approval of the dissolution and liquidation plan, and until
the liquidation is completed, we will continue to be subject to income tax on
our taxable income. We will recognize gain or loss on the sale of our assets for
cash in anticipation of the liquidating distributions. If we do not sell the
assets,
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<PAGE>
but instead distribute them to you as a liquidating distribution, we will
recognize gain or loss as if such property was sold at its fair market value. It
is unlikely that there will be any material tax payments payable at the
corporate level because of our net operating losses incurred earlier. As a
result of our liquidation, you will recognize gain or loss equal to the
difference between (i) the sum of the amount of cash distributed to you and the
fair market value (at the time of distribution) of property, if any, distributed
to you and (ii) your adjusted tax basis for your common shares.
You are advised to consult with your tax advisors for a more detailed
analysis of any federal, state or local tax consequences to you of the
dissolution and liquidation plan.
No Appraisal Rights
You are not entitled to appraisal rights with respect to the
dissolution and liquidation plan.
The Meeting.
Time, Place, Purpose
A special meeting of the stockholders of Menley & James, Inc.(1) will
be held on February 23, 2000 at 10:00 a.m. (local time) at the Hotel
Inter-Continental New York, 111 East 48th Street, New York, New York, to vote
upon the approval and adoption of the proposed dissolution and liquidation plan,
and to transact such other business as may properly come before the meeting, or
any adjournment thereof. Copies of this Proxy statement, the attached Notice of
Special Meeting of Stockholders and the enclosed form of proxy were first mailed
to our stockholders on or about January 24, 2000.
Shares Entitled to Vote
We had 6,422,840 common shares issued and outstanding, as of the close
of business on January 14, 2000, the record date for determining stockholders
entitled to vote at the meeting. Each common share entitles the holder to one
vote on the proposed dissolution and liquidation plan, and on each other matter
presented for consideration at the meeting. A quorum will be established if a
majority of the common shares issued, outstanding and entitled to vote at the
meeting, are present in person or represented by proxy. Abstentions and broker
non-votes will be counted as present in determining whether the quorum
requirement is satisfied.
Vote Required
The dissolution and liquidation plan will be approved if a majority of
the common shares outstanding on the record date vote for the approval and
adoption of the dissolution and liquidation plan. Abstentions and broker
non-votes will be counted as votes against the approval and adoption of the
dissolution and liquidation plan.
Shares Committed
Warburg, Pincus Investors, L.P. and Lawrence D. White, our President
and Chief Executive Officer, plan to vote their common shares in favor of the
approval and adoption of the dissolution and liquidation plan. In the aggregate,
they beneficially own approximately 52% of the issued and outstanding shares.
Accordingly, their affirmative vote will be sufficient to approve and adopt the
dissolution and liquidation plan regardless of how any other shares are voted.
- --------
(1) References to "Menley & James", "our" and "we" in this proxy statement
include Menley & James, Inc. and its wholly-owned operating subsidiary, Menley &
James Laboratories, Inc., except where the context requires otherwise.
3
<PAGE>
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
We have made forward-looking statements in this document. These are
statements that relate to future events and time periods or our expectations,
including information concerning our dissolution and plans for distribution of
our assets. Also, when used in this information proxy, the words "believes",
"anticipates", "expects", "intends" and similar expressions are intended to
identify forward-looking statements; however, not all forward-looking statement
will contain such expressions. Such statements are not guarantees and involve
risks and uncertainties. For forward-looking statements in this document, we
claim the protection of the safe harbor contained in the Private Securities
Litigation Reform Act of 1995.
Actual results or events in the future may differ materially from those
described in the forward- looking statements for a number of reasons, including:
o the impact of general economic conditions upon the investments
made by us;
o fees and expenses associated with the dissolution of Menley &
James;
o the amount of Menley & James' liabilities which must be satisfied
or reserved as part of the dissolution;
o the amount and nature of any unknown contingent liabilities of
Menley & James;
o the market value of Menley & James' remaining assets; and
o the other items detailed under the caption "Risk Factors Relating
to the Dissolution" in this Proxy statement.
4
<PAGE>
THE MEETING
Date, Time, Place and Purpose of the Meeting.
The meeting to consider the proposed plan of dissolution and
liquidation will be held on Wednesday, February 23, 2000, at the Hotel
Inter-Continental New York, 111 East 48th Street, New York, New York, at 10:00
a.m. (local time) to consider the proposed plan of dissolution and liquidation.
You also may be asked to vote on adjournment of the meeting if a motion to
adjourn the meeting is properly brought. Ernst & Young LLP, our independent
auditor, is not expected to have a representative present at the Meeting.
Record Date and Shares Entitled to Vote.
Only holders of common shares of record as of the close of business on
January 14, 2000, will be entitled to vote at the meeting on the plan of
dissolution and liquidation. As of the record date, 6,422,840 common shares were
issued and outstanding and entitled to vote. Each common share entitles its
holder to one vote on the plan of dissolution and liquidation and on any other
matter to come before the meeting.
Quorum.
A quorum will be established if the holders of a majority of the common
shares issued and outstanding as of the record date are present in person or
represented by proxy. Abstentions and broker non-votes will be counted as
present in determining whether the quorum requirement is satisfied. A broker
non-vote occurs when a broker or other nominee holding shares for a beneficial
owner does not vote on a proposal because the broker or nominee does not have
discretionary voting power and the beneficial owner has not checked one of the
boxes on the proxy card.
Vote Required.
The dissolution and liquidation plan will be approved if a majority of
the 6,422,840 common shares outstanding on the record date vote to adopt the
dissolution and liquidation plan. Accordingly, abstentions and broker non-votes
will have the same effect as a vote against the approval and adoption of the
dissolution and liquidation plan.
Shares Committed.
Warburg, Pincus Investors, L.P. and our President and Chief Executive
Officer, Lawrence D. White, plan to vote their respective common shares in favor
of the approval and adoption of the dissolution and liquidation plan. Warburg,
Pincus and Mr. White beneficially own, in the aggregate, approximately 52% of
the issued and outstanding common shares. Therefore, their affirmative vote will
be sufficient to approve and adopt the dissolution and liquidation plan and no
further action on the part of any other stockholder will be required.
Voting of Proxies.
Proxies in the enclosed form, which are properly completed, executed
and returned and not revoked prior to exercise, will be voted as directed. If a
proxy is executed and returned without instructions as to how it is to be voted,
it will be voted against the approval and adoption of the dissolution and
liquidation plan. If you give a proxy, you may revoke the proxy at any time
before it is voted at the meeting by:
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o giving written notice to the Secretary of Menley & James;
o delivering a later-dated proxy; or
o voting in person at the meeting.
Solicitation of Proxies.
This proxy statement, the attached notice of the meeting and the
accompanying proxy card are first being mailed to you on or about January 24,
2000. The enclosed form of proxy is solicited by the board of directors. The
cost of preparing this proxy statement and all other costs in connection with
the solicitation of proxies will be borne by Menley & James. Our officers and
employees may solicit proxies by personal interview, mail, telegraph or
telephone. Brokers, bankers and other nominees will be reimbursed for
out-or-pocket and other reasonable clerical expenses incurred in obtaining
instructions from beneficial owners of common shares.
If you do not expect to attend the meeting in person, we urge you to
complete, sign, date and return the enclosed proxy in the envelope provided. We
ask your cooperation in mailing your proxy promptly, no matter how large or how
small your holdings may be.
6
<PAGE>
RISK FACTORS RELATING TO THE DISSOLUTION AND LIQUIDATION
In addition to the information included elsewhere in this proxy
statement, you should consider the following risk factors carefully before you
decide whether to vote in favor of the proposal to adopt the dissolution and
liquidation plan. Keep these risk factors in mind when you read forward-looking
statements elsewhere in this proxy statement. Future events and circumstances
could differ significantly from those anticipated in the forward-looking
statements.
Liabilities--You could be liable if the contingency reserve is insufficient to
satisfy our liabilities.
We will pay our expenses and fixed or other known liabilities. We will
set aside assets in a contingency reserve which we believe to be adequate for
payment of any remaining liabilities. There can be no assurance that the
contingency reserve will, in fact, be sufficient. You could be held liable for
payment to our creditors for your pro rata share of a deficiency, if:
o we fail to create an adequate contingency reserve for payment of
our expenses and liabilities; or
o the contingency reserve and assets held in a liquidating trust
are less than the amount ultimately found payable for expenses
and liabilities, in the event that we transfer our assets to a
liquidating trust.
In no event would the amount of your liability exceed the amount of your
distribution from Menley & James or the trust.
Distributable Cash--The amount of cash you receive in the distribution could be
less than that expected and/or the distribution could be delayed.
Once we have paid or made provision for payment of all of our expenses
and liabilities, we intend to distribute our remaining funds to you as promptly
as practicable. A creditor of Menley & James might obtain an injunction against
our making distributions to you under the dissolution and liquidation plan on
the grounds that the amounts to be distributed are needed to provide for the
payment of our expenses and liabilities, if:
o a court holds that we have failed to make adequate provision for
our expenses and liabilities; or
o the amount ultimately required to be paid in respect of our
expenses and liabilities exceeds the amount available from the
contingency reserve and the assets of any liquidating trust.
Any such action could delay and/or substantially diminish the distributions to
be made to you under the dissolution and liquidation plan.
Consummation of the dissolution and liquidation plan--The board of directors may
amend, modify or abandon the dissolution and liquidation plan even if you
approve it.
Even if you approve the dissolution and liquidation plan, the board of
directors has reserved the right, in its sole discretion, to amend, modify or
abandon the dissolution if it determines that such action would be in our best
interests. The board of directors' action would not require any approval on your
part, insofar as the action is permitted under Delaware law. If abandoned, our
dissolution and liquidation would be void.
The Distribution--You have no appraisal rights.
Neither Delaware law, our Certificate of Incorporation nor our Bylaws
give you any right to dissent from the dissolution or seek an independent
appraisal of our value in connection with our dissolution. If you approve the
dissolution and liquidation plan, you will be bound to accept any consideration
we receive for the liquidation of any of our remaining assets and the
consideration we give you in the distribution that results.
7
<PAGE>
THE BUSINESS
Overview of the Business Before the Sale.
Menley & James is a Delaware corporation that was incorporated in 1990.
The mailing address of our principal executive office is: 225 Strafford Avenue,
Suite 300, Wayne, Pennsylvania, 19087. Our telephone number is: (610) 975-4540.
Until November 1998, we produced and marketed a diverse portfolio of
over-the-counter pharmaceutical and toiletry products. These brands were sold in
drug stores, supermarkets and other mass merchandisers throughout the United
States. We began our operations with 32 brands which we acquired from SmithKline
Beecham Corporation
Our strategy was to systematically develop and execute targeted
programs for specific brands so as to identify a product that would provide
sufficient sales response to become our lead product. Through strategic
ventures, we developed three new brands: Derifil, Humibid and Capasaicin. During
1997, we focused our development and marketing efforts on the brands Benzedrex,
Derifil and Humibid Guaifenesin Plus. In 1998, we focused on marketing the
brands Albolene, Benzedrex and Humidbid. We devoted significant time and
resources to expanding the business through acquisitions. However, we concluded
that continued focus on the retail over-the-counter pharmaceutical and toiletry
marketplace would not be the best way to increase stockholder value and began to
solicit prospective purchasers to acquire the business.
On November 23, 1998, we sold substantially all of our assets to Numark
Laboratories, Inc. Under the terms of the sale, Numark paid us $13.43 million in
cash and assumed substantially all of our liabilities. The only assets and
liabilities which we retained were our office lease and certain automobile and
equipment leases, certain insurance policies, the corporate names, "Menley &
James, Inc." and "Menley & James Laboratories, Inc." and approximately $2.0
million in cash to pay costs and expenses associated with the sale, including
employee severance payments.
Strategy After the Sale.
Our production and marketing operations ended upon the consummation of
the sale to Numark. We presently have no operating business. Since the sale, we
sought to combine with an operating business, outside of the over-the-counter
pharmaceutical and toiletry business, in an effort to further enhance
stockholder value. Our intention was to use our remaining cash together with
additional equity or debt, or a combination of these, to achieve a business
combination.
Since the sale, with the assistance of consultants, Mr. White
administered our affairs, including financial reporting matters, general
administrative concerns and the payment of retained liabilities. Additionally,
he pursued opportunities to effect a business combination with a new operating
business at the direction of our board of directors and with the assistance of
Warburg, Pincus. Since the sale, we have had discussions with several parties
concerning potential combinations, but to date no definitive credible
transaction has been made available to us involving a potential business
combination which we believe presents a better alternative to liquidation of
Menley & James at this time.
8
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THE DISSOLUTION
General.
The material features of the dissolution and liquidation plan are
summarized below. A copy of the dissolution and liquidation plan is attached as
Annex A to this proxy statement. You are urged to read the dissolution and
liquidation plan in its entirety.
Reasons for the Dissolution and Liquidation; Recommendation of the Board of
Directors.
Our board of directors believes that the dissolution and liquidation
plan is fair to and in the best interest of Menley & James and its stockholders.
Accordingly, on November 30, 1999, the board of directors approved and adopted
the dissolution and liquidation plan and unanimously recommended that you vote
to approve and adopt the dissolution and liquidation plan.
The principal reason for adopting the dissolution and liquidation plan
is that we have been unable, since the sale of substantially all of our assets
in November 1998, to effect a suitable business combination which would further
enhance stockholder value and we do not believe that such a business combination
can be achieved in the immediate future. We have had discussions with several
parties concerning potential combinations, but to date no definitive credible
transaction has been made available relating to a potential business combination
which we believe presents a better alternative to liquidation of Menley & James
at this time. The board of directors also considered other factors, including:
o Upon completion of the dissolution, you will receive a
distribution of your pro rata share of the net assets of Menley &
James. The dissolution would provide liquidity to you.
o By dissolving now, we avoid the substantial increase in
regulation and additional expenses of compliance with the
Investment Company Act of 1940. Currently, we rely on the
transient investment company exemption under Rule 31-2 of the
1940 Act. If we do not dissolve and liquidate, we may be required
to register as an investment company under the 1940 Act.
The board of directors recommends that you vote FOR approval and
adoption of the dissolution and liquidation plan.
Distribution of Assets.
The dissolution and liquidation plan provides for the payment of all
remaining expenses and liabilities of Menley & James and the distribution of its
remaining assets to you. We intend to convert all cash equivalent assets to
cash, and distribute solely cash to you. It is possible that we may determine
that it is preferable to distribute the cash equivalents in lieu of converting
them to cash prior to distribution. The amount that will be available for
distribution to you will depend upon the amount of expenses that we will incur
prior to the time of dissolution, the amount we realize in disposing of
property, if any, and the amounts we spend settling any claims that may be made
against us. Claims, liabilities and expenses from operation (including operating
costs, salaries, income taxes, payroll and local taxes and miscellaneous office
expenses) will continue to occur following approval of the dissolution and
liquidation plan, and we anticipate that expenses for professional fees and
other expenses of liquidation will be significant. These expenses will reduce
the amount of assets available for ultimate distribution to you.
9
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At this point the board of directors cannot predict with certainty the
precise timing of any distributions to you but it is expected to occur promptly
after the effectiveness of the dissolution. We currently have working capital of
approximately $14.1 million, comprised primarily of cash and cash equivalents.
Assuming a contingency reserve of $50,000, we estimate we will distribute
approximately $2.13 per share to our stockholders. The amount and timing of the
distribution will be determined by the board of directors, in its sole
discretion, and will depend on the amounts deemed necessary by the board of
directors to pay or provide for all of our expenses and liabilities. The costs
of investigating and defending any claims, even if the claim was determined to
have no merit, would also decrease the amount available for distribution.
If any portion of the $50,000 set aside in the contingency reserve is
not ultimately required for payment of our expenses and liabilities, we may, at
the discretion of the board of directors, either make a second distribution to
our stockholders of the unused money or donate the unused money to a charitable
organization.
You should not send your stock certificates with the enclosed proxy.
After the dissolution and liquidation plan has been approved, you will receive
instructions for surrendering your certificates and receiving your distribution.
Principal Provisions of the Dissolution and Liquidation Plan.
Once the dissolution and liquidation plan is effective, the steps below
will be completed at such times as the board of directors, in its absolute
discretion, deems necessary, appropriate or advisable. The dissolution and
liquidation plan permits the board of directors to instruct our officers to
delay the taking of any of the following steps until we have performed such
actions as the board of directors or such officers determine to be necessary,
appropriate or advisable to maximize the value of our assets upon liquidation;
provided that such steps may not be delayed longer than is permitted by
applicable law.
1) A Certificate of Dissolution will be filed with the State of Delaware
pursuant to Section 275 of the Delaware General Corporation Law. Our
dissolution will become effective upon such filing or upon such later
date as may be specified in the Certificate of Dissolution, but in no
event later that 90 days after the filing. Pursuant to Delaware law,
Menley & James will continue to exist for three years after the
effective date of the dissolution or for such longer period as the
Delaware Court of Chancery shall direct, for the purpose of
prosecuting and defending suits, whether civil, criminal or
administrative, by or against us, and enabling us to close our
business, to dispose of and convey any remaining property, to
discharge our liabilities and to distribute to you the remaining
assets, but not for the purpose of continuing our business.
2) From and after the effective date of the dissolution, to the extent we
have not already done so, we will cease all of our business activities
and shall withdraw from any jurisdiction in which we are qualified to
do business, except and insofar as necessary for the proper winding up
of Menley & James pursuant to Delaware law.
3) If any of our assets or property remain to be sold, our officers will
negotiate and consummate the sales of all such remaining assets and
property insofar as the board of directors deems such sales necessary,
appropriate or advisable.
4) The dissolution and liquidation plan provides that the board of
directors will liquidate our assets in accordance with applicable
provisions of the Delaware General Corporation Law, including Sections
280 or 281. Without limiting its flexibility, the board of directors
may, at its option, instruct our officers to follow procedures set
forth in Sections 280 and 281(a) of the Delaware General Corporation
Law which instruct such officers to:
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(i) give notice of the dissolution to all persons having a
claim against Menley & James and provide for the rejection
of any such claims in accordance with Section 280;
(ii) offer to any claimant on a contract whose claim is
contingent, conditional or unmatured, security in an
amount sufficient to provide compensation to the claimant
if the claim matures, and petition the Delaware Court of
Chancery to determine the amount and form of security
sufficient to provide compensation to any such claimant
who rejects such offer in accordance with Section 280;
(iii) petition the Delaware Court of Chancery to determine the
amount and form of security which would be reasonably
likely to be sufficient to provide compensation for
o claims that are the subject of pending litigation
against Menley & James, and
o claims that have not been made known to us at the time
of dissolution, but are likely to arise or become known
within five years (or longer in the discretion of the
Delaware Court of Chancery), each in accordance with
Section 280;
(iv) pay, or make adequate provision for payment of, all claims
made against us and not rejected, in accordance with
Section 280;
(v) post all security offered and not rejected and all
security ordered by the Delaware Court of Chancery in
accordance with Section 280; and
(vi) pay, or make adequate provision for payment of, all other
claims that are mature, known and uncontested or that have
been finally determined to be owing by Menley & James.
Notwithstanding the foregoing, we are not required to follow the
procedures described in Section 280, and your adoption of the
dissolution and liquidation plan constitutes full and complete
authority for the board of directors and our officers, without
further stockholder action, to proceed with our dissolution and
liquidation in accordance with any applicable provision of
Delaware law, including, without limitation, Section 281(b) of
the Delaware General Corporation Law.
5) We may, from time to time, make liquidating distributions of the
remaining funds and any unsold assets of Menley & James, if any, in
cash or in kind, to the holders of record of common shares at the
close of business on the effective date of the dissolution. Such
liquidating distributions, if any, will be made to the holders of
common shares on a pro rata basis; provided that in the opinion of the
board of directors adequate provision has been made for the payment,
satisfaction and discharge of all our known, unascertained or
contingent debts, obligations and liabilities (including costs and
expenses incurred and anticipated to be incurred in connection with
the sale of any assets remaining after the sale). All determinations
as to the time for and the amount and kind of distribution to
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stockholders will be made by the board of directors in its absolute
discretion and in accordance with Section 281.
6) If deemed necessary by the board of directors for any reason, we may,
from time to time, transfer any of our unsold assets to one or more
trusts established for the benefit of stockholders (subject to the
claims of creditors) which property would thereafter be sold or
distributed on terms approved by its trustees. If all of our assets
are not sold or distributed prior to the third anniversary of the
effective date of the dissolution, or such longer period as the
Delaware Court of Chancery may direct, we will transfer in final
distribution all remaining assets to a trust. The board of directors
may also elect in its discretion to transfer the contingency reserve,
if any, to such a trust. The trusts are referred to as "liquidating
trusts." We would not make any transfers to liquidating trusts prior
to receiving any necessary government approval for the transfer.
The dissolution and liquidation plan authorizes the board of directors
to appoint one or more individuals or entities to act as trustee or
trustees of the liquidating trust or trusts and to cause Menley &
James to enter into a liquidating trust agreement or agreements with
such trustee or trustees on such terms and conditions as may be
approved by the board of directors. Your approval of the dissolution
and liquidation plan also will constitute your approval of any such
appointment and any liquidating trust agreement or agreements. Further
information relating to liquidating trusts, the appointment of
trustees and the liquidating trust agreements, is detailed under the
caption "Contingent Liabilities; Contingency Reserve; Liquidating
Trusts."
7) Menley & James will close its stock transfer books and discontinue
recording transfers of common shares on the effective date of the
dissolution, at which time common shares and stock certificates
evidencing the common shares will be treated as no longer outstanding.
Sale of Remaining Assets.
We sold substantially all of our assets for cash in the sale to Numark
in November 1998. To the extent that any other assets remain to be sold, they
represent an insignificant portion of our assets. The dissolution and
liquidation plan gives the board of directors, to the fullest extent permitted
by law, the authority to sell all or any portion of such remaining assets before
or after the effective date of the dissolution. Your approval of the dissolution
and liquidation plan will also constitute, to the fullest extent permitted by
law, approval of our sale of any of such assets on such terms and conditions as
the board of directors in its absolute discretion may determine.
Conduct of Menley & James Following Adoption of the Dissolution and
Liquidation Plan.
Following the effective date of the dissolution, our activities will be
limited to winding up our affairs, paying or making provisions for expenses and
liabilities, taking such action as may be necessary to preserve the value of our
assets, and distributing our assets in accordance with the dissolution and
liquidation plan. The size of the board of directors will be reduced to two
members. We will seek to distribute or liquidate all of our assets in such
manner and upon such terms as the board of directors determines to be in the
best interests of our creditors and stockholders.
Pursuant to the dissolution and liquidation plan, we will continue to
indemnify our officers and directors, as well as our employees and agents, in
accordance with our Restated Certificate of Incorporation and Bylaws and any
contractual arrangements, for actions taken in connection with the dissolution
and liquidation plan and the winding up of our affairs. The board of directors,
in its
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discretion, is authorized to obtain and maintain insurance as may be necessary,
appropriate or advisable to cover our indemnification obligations under the
dissolution and liquidation plan.
Contingent Liabilities; Contingency Reserve; Liquidating Trust.
Under Delaware law, we are required, in connection with our
dissolution, to the fullest extent possible, to pay or provide for payment of
all of our liabilities and obligations. Following the effective date of the
dissolution, we will pay all expenses and fixed and other known liabilities, and
will set aside a contingency reserve of $50,000 which we believe to be adequate
for payment of any unknown liabilities or contingencies.
The actual amount of the contingency reserve has been based upon
estimates and opinions of management and the board of directors and derived from
review of our estimated expenses, including without limitation, anticipated
compensation payments, estimated legal and accounting fees, rent, payroll and
other taxes payable, miscellaneous office expenses and expenses accrued in our
financial statements. There can be no assurance that the contingency reserve, in
fact, will be sufficient. After the liabilities, expenses and obligations
(whether known or unknown) for which the contingency reserve had been
established have been satisfied in full, we may distribute any remaining portion
of the contingency reserve to the holders of common shares on a pro rata basis.
If this is not economically feasible, the board of directors may, at its
discretion, donate the unused portion of the contingency reserve to a charitable
organization of its choice.
If deemed necessary, appropriate or desirable by the board of directors
for any reason, we may, from time to time, transfer any of our unsold assets to
one or more liquidating trusts established for your benefit (subject to
creditors claims), which property would thereafter be sold or distributed on
terms approved by our trustees. If all of our assets (other than the contingency
reserve) are not sold or distributed prior to the third anniversary of the
effective date of the dissolution, we may transfer in final distribution such
remaining assets to a liquidating trust. The board of directors may also elect
in its discretion to transfer the contingency reserve, if any, to such a
liquidating trust. We would not make any transfers to liquidating trusts prior
to receiving any necessary government approval for the transfer.
The purpose of a liquidating trust would be to distribute such property
or to sell such property on terms satisfactory to the liquidating trustees, and
distribute the proceeds of such sale after paying the liabilities of Menley &
James, if any, assumed by the trust, to you. Any liquidating trust acquiring all
of our unsold assets will assume all of our liabilities and obligations and will
be obligated to pay any of our expenses and liabilities which remain
unsatisfied. If the contingency reserve transferred to the liquidating trust is
exhausted, such expenses and liabilities will be satisfied out of the
liquidating trust's other unsold assets.
If assets are transferred to a liquidating trust, we would distribute
to you beneficial interest in any of the liquidating trust or trusts. We
anticipate that the interests in any such trusts will not be transferable. For
federal income tax purposes you would be deemed to have received your pro rata
share of property transferred to the liquidating trust or trusts. Additionally,
as long as you hold the beneficial interest in the trust, you will take into
account for tax purposes your allocable portion of any income, gain or loss
realized by such liquidating trust or trusts.
The dissolution and liquidation plan authorizes the board of directors
to appoint one or more individuals or entities to act as trustee(s) of the
liquidating trust(s) and to cause Menley & James to enter into a liquidating
trust agreement or agreements with such trustee(s) on such terms and conditions
as may be approved by the board of directors. It is anticipated that the board
of directors will select such trustee(s) on the basis of the experience of such
individual or entity in administering and disposing of assets and discharging
liabilities of the kind to be held by the liquidating trust(s) and the ability
of such
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individual or entity to serve the best interests of our creditors and you. We
have not determined whether it would require that a majority of the trustees be
independent of our management. Your approval of the dissolution and liquidation
plan will also constitute your approval of any such appointment and any
liquidating trust agreement(s).
We have no present plans to use a liquidating trust or trusts because
we have already sold substantially all of our assets for cash and transferred
substantially all of our liabilities in the sale, and, therefore, no liquidating
trust may be required. However, the board of directors believes the flexibility
provided by the dissolution and liquidation plan with respect to the liquidating
trusts to be advisable. Any trust would be evidenced by a trust agreement
between Menley & James and the trustees. The purpose of the trust would be to
serve as a temporary repository for the trust property prior to its disposition
or distribution, first to our creditors and to pay the expenses associated with
the liquidation and dissolution, and then to you, on a pro rata basis. The
transfer to the trust and distribution of interests therein to you would enable
us to divest ourselves of the trust property. Pursuant to the trust agreement,
the trust property would be transferred to the trustees immediately prior to the
distribution of interests in the trust to you, to be held in trust for the
benefit of your beneficiaries subject to the terms of the trust agreement and
claims of creditors. We anticipate that the interest would be evidenced only by
the records of the trust and there would be no certificates or other tangible
evidence of such interests, and that you would not be required to pay any cash
or other consideration for the interests to be received in the distribution or
to surrender or exchange common shares in order to receive the interests. It is
further anticipated, although not required, that pursuant to the trust
agreements:
o approval of a majority of the trustees would be required to take
any action; and
o the trust would be irrevocable and would terminate after the
earlier of
- the trust property having been fully distributed,
- a majority of the trustees having approved of such
termination, or
- a specified number of years having elapsed after the creation
of the trust.
Abandonment and Amendment.
Under the dissolution and liquidation plan, the board of directors may
modify, amend or abandon the dissolution and liquidation plan, notwithstanding
stockholder approval, to the extent permitted by Delaware law. We will not
amend, modify, or abandon the dissolution and liquidation plan under
circumstances that would require additional stockholder solicitations under
Delaware law or the federal securities laws without complying with Delaware law
and the federal securities laws.
Listing and Trading of the Common Shares and Interests in Any Liquidating Trust
or Trusts.
We currently intend to close our stock transfer books on the effective
date of the dissolution and, at such time, to cease recording stock transfers
and issuing stock certificates (other than replacement certificates).
Accordingly, it is expected that trading in our common shares will cease on and
after such date, and our common shares will be de-listed on the Nasdaq Small Cap
market. Additionally, we expect to deregister our common shares under Rule 12g-4
of the Securities Exchange Act of 1934 in connection with our anticipated formal
winding up and dissolution. Upon such deregistration, we will no longer be
required to file reports with the Securities and Exchange Commission
The interest in any liquidating trust for your benefit is not expected
to be transferable.
Potential Liability of Stockholders Subsequent to the Dissolution.
Following the liquidation and dissolution of Menley & James, it is
possible that some claims may still exist which could be asserted against us.
Delaware law provides that, if the assets of a corporation are distributed in
connection with the dissolution of a corporation, a stockholder may be liable
for
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claim(s) against the corporation. Your potential liability for any such claims
against Menley & James would be limited to the lesser of (i) your pro rata share
of the such claims, or (ii) the actual amount distributed to you in connection
with the dissolution. Your aggregate liability for any claims against Menley &
James, after it is dissolved, will not exceed the amount actually distributed to
you in the dissolution.
Certain Federal Income Tax Consequences.
Introduction. The following is a summary of the material Federal income
tax consequences of the dissolution and liquidation plan to Menley & James and
the stockholders who are individuals residing in one or more states and are
citizens of the United States. This summary is based on the Internal Revenue
Code of 1986, as amended, U.S. Treasury Regulations promulgated under the
Internal Revenue Code, existing administrative interpretations and court
decisions, all of which are subject to change. Any such changes may be applied
retroactively. Furthermore, this summary does not purport to discuss all aspects
of Federal income taxation that may be applicable to corporations, nonresident
foreigners or other stockholders who are individuals for Federal income tax
purposes but are not taxed as United States citizens, nor does it address any
aspects of state, local or foreign tax laws.
This summary assumes that we will dissolve substantially in accordance
with the dissolution and liquidation plan. We have not requested a ruling from
the IRS or obtained an opinion of counsel with respect to the anticipated tax
treatment of the dissolution and liquidation plan. If any of the conclusions
stated under "Certain Federal Income Tax Consequences" proves to be incorrect,
the result could be increased taxation at the corporate and/or stockholder
level, thus reducing the benefit to the creditors and possibly you and Menley &
James from the liquidation.
This summary is included for general information purposes only and does
not purport to be a complete analysis or description of all potential Federal
income tax consequences of our dissolution. In addition, the following
discussion does not address tax consequences which may vary with, or are
contingent on, individual circumstances. Accordingly, this summary does not
constitute legal advice to any stockholder. You are urged to consult with your
own tax advisor regarding the specific consequences of the dissolution and
liquidation plan, including the federal, state, local and foreign tax
consequences of the Menley & James dissolution that may be applicable to you.
Consequences to Menley & James. After the approval of the dissolution and
liquidation plan and until the liquidation is completed, we will continue to be
subject to income tax on our taxable income. We will recognize gain or loss on
sales of our property pursuant to the dissolution and liquidation plan. Upon
distributions, if any, of property to you pursuant to the dissolution and
liquidation plan, we will recognize gain or loss as if such property was sold to
the you at its fair market value, unless certain exceptions to the recognition
of loss apply. As it is anticipated that no such exception will apply, we should
recognize gain or loss on any distribution of property to you pursuant to the
dissolution and liquidation plan.
We may discharge our liabilities at less than the face amount of such
liabilities. Our discharge of liabilities, at less than face amount, will result
in our realization of income to the extent of the excess of the face amount of
the liabilities over the amount paid in satisfaction thereof. However, it is
unlikely there will be any material tax payments payable by us at the corporate
level because of the net operating losses we have previously incurred.
Consequences to Stockholder. As a result of our liquidation, you will
recognize gain or loss equal to the difference between (i) the sum of the amount
of cash distributed to you and the fair market value (at the time of
distribution) of property distributed to you, and (ii) your adjusted tax basis
for your shares
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of stock. Your adjusted tax basis in your shares will depend upon various
factors, including your cost and the amount and nature of any distributions you
received from us with respect to the stock.
Liquidating distributions made by Menley & James will be allocated
proportionately to each common share you own. The value of each liquidating
distribution will be applied against and reduce your tax basis in your shares of
stock. Gain will be recognized by reason of a liquidating distribution only to
the extent that the aggregate value of such distributions received by a you with
respect to a share exceeds your adjusted tax basis for that share. Any loss will
generally be recognized if the aggregate value of the liquidating distributions
with respect to a share is less than your tax basis for that share.
A loss can be claimed in the year that all distributions have occurred,
other than de minimis distributions. If we retain only the expected $50,000 for
the contingency reserve, a loss could be claimed for the year in which we
distribute the $2.13 per share, even though there is the potential for a second
distribution in a subsequent year. A capital gain is long term if the stock is
held for more than one year when the initial liquidating distribution is
received. The maximum federal income tax rate applicable to individuals is
generally 20%. The gain or loss you recognize will be capital gain or loss
provided you hold the shares as capital assets. Deductions for capital losses,
whether short or long term, are subject to various limitations.
In the unlikely event that we make any distribution of property other
than cash, your tax basis in such property immediately after the distribution
will be the fair market value of such property as of the time of distribution.
The gain or loss realized upon the your future sale of that property will be
measured by the difference between your tax basis in the property at the time of
such sale and the sales proceeds.
After the close of our taxable year, we will provide you and the IRS with
a statement of the amount of cash distributed to you and our best estimate as to
the value of the property, if any, distributed to you during that year. In the
case of property, we will determine the fair market value based upon reports by
independent appraisers or such other evidence as we shall elect. There is no
assurance that the IRS will not challenge such valuation. As a result of such a
challenge, the amount of gain or loss recognized by you might be changed.
Distributions of property other than cash to you could result in your tax
liability exceeding the amount of cash you received, requiring you to meet the
tax obligations from other sources.
While we have no present plans to do so, it is possible that we may
transfer certain assets, including the contingency reserve to a liquidating
trust, and distribute to you a beneficial ownership in the trust. For federal
income tax purposes you would be deemed to have received your pro rata share of
the property transferred by us to the trust, and the rules described above for
the calculation of gain or loss would apply. Additionally, as a beneficial owner
of the liquidating trust, you would, on a general basis, take into account for
federal income tax purposes your allocable portion of any income gain or loss
realized by the trust.
Any distribution made pursuant to the dissolution and liquidation plan
will be subject to the information reporting rules issued by the Internal
Revenue Service, and the back-up withholding rules of the Code. We will be
required to withhold 31% of any liquidating distributions to be made to you
unless you have provided us with the appropriate documentation (generally a W-9)
to preclude such withholding, or you are exempt from back-up withholding without
the need to provide us with documentation.
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No Appraisal Rights.
You are not entitled to dissenters' or appraisal rights with respect to
the dissolution and liquidation plan under the applicable provisions of Delaware
law, our Restated Certificate of Incorporation or our Bylaws.
Regulatory Approvals.
Menley & James is not subject to any federal or state regulatory
approvals required to consummate the dissolution, other than the filing of this
Proxy statement with the SEC and compliance with the securities or blue sky laws
of various states, and the applicable laws of the State of Delaware governing
the dissolution of corporations, to which we expect to comply in the ordinary
course.
Interest of Certain Persons in the Dissolution.
All of our officers and directors own common shares and/or options to
purchase common shares and, to that extent, their interest in the dissolution is
the same as yours. After the dissolution becomes effective, Lawrence D. White,
our President and Chief Executive Officer, shall be compensated at a rate of
$2500 per year and $100 per hour for his services in performance of acts
necessary to wind up and liquidate our business and affairs.
Additionally, Mr. White has a severance agreement with Menley & James
under which he is entitled to severance pay and other benefits upon his
termination of employment. Following his termination, he is entitled to a lump
sum payment of one year's base salary at the rate in effect immediately before
the date of termination. If he has not secured other full-time employment by the
first anniversary of the date of termination, he is entitled to additional
monthly payments equal to his monthly base salary in effect immediately before
the date of termination, beginning on the first anniversary of his date of
termination and continuing until the earlier of his securing full-time
employment or the expiration of six months. Mr. White's health and life
insurance benefits will also continue for eighteen months following his
termination unless he receives health and life insurance benefits from another
employer.
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MARKET PRICE OF MENLEY AND JAMES' COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our common shares are traded under the symbol "MENJ." From January 21,
1992 until November 10, 1994, our common shares were traded on the Nasdaq
National Market System. As a result of our aggregate market value, trading with
respect to our common shares moved to the Nasdaq SmallCap Market on November 11,
1994. The following table shows the quarterly high and low closing bids for our
common shares on the Nasdaq SmallCap Market. Prices represent quotations between
dealers without adjustment for retail markups, markdowns and commissions and may
not necessarily represent actual transactions.
Quarter ended High Low
- ------------- ---- ---
March 31, 1997............................ $ 1 9/16 $ 1 5/32
June 30, 1997............................. 1 3/8 1 1/4
September 30, 1997........................ 1 29/32 1 5/16
December 31, 1997......................... 1 3/4 1 3/16
March 31, 1998............................ 1 7/16 1 3/16
June 30, 1998............................. 1 17/32 1 5/16
September 30, 1998........................ 2 1/4 1 1/2
December 31, 1998......................... 2 9/32 1 13/32
March 31, 1999............................ 2 11/32 2 1/32
June 30, 1999............................. 2 23/32 2
September 30, 1999........................ 2 7/8 2 5/16
December 31, 1999......................... 2 3/8 2
Through January 14, 2000.................. 2 1/4 2
On January 14, 2000, the last reported closing price of our common shares
on the Nasdaq SmallCap Market was $2.00 per share. As of January 14, 2000, there
were approximately 61 holders of record of our common shares.
We have never paid cash dividends on our capital stock and do not
anticipate ever paying cash dividends.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of November 30,
1999, regarding the beneficial ownership of common shares by (i) each person
known by Menley & James to be the beneficial owner of more than 5% of the
outstanding shares of common stock, (ii) each director of Menley & James, (iii)
each of the named executive officers, and (iv) all directors and named executive
officers of Menley & James as a group. As of such date, there were 6,376,320
common shares outstanding. Except as otherwise noted, the named beneficial owner
has sole voting and investment power with respect to the common shares.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name and Address of Beneficial Ownership of Class
- ---------------- ----------------------- --------
<S> <C> <C>
Warburg, Pincus Investors, L.P. (1) ........................ 3,020,478 47.4%
466 Lexington Avenue
New York, New York 10017
James E. Thomas (1) ....................................... 3,020,478 47.4%
466 Lexington Avenue
New York, New York 10017
Peter J. Carr .............................................. 160,046 2.5%
James T. McMillan, II (2) ................................. 145,000 2.3%
Bruce W. Simpson (3) ...................................... 60,000 0.9%
Lawrence D. White ........................................ 295,121 4.6%
Greg L. Kearl ............................................. 235,416 3.7%
Harvey Houtkin (4) ......................................... 344,511 5.4%
160 Summit Avenue
Montvale, New Jersey 07645
All named executive officers and directors as a group (6
persons) (5) ............................................... 3,916,061 60.3%
</TABLE>
- -----------------------------
(1) Warburg, Pincus Investors, L.P. ("Warburg, Pincus") is a Delaware limited
partnership engaged in making venture capital and related investments. The
sole general partner of Warburg, Pincus is Warburg, Pincus & Co., a New
York general partnership ("WP"). E.M. Warburg, Pincus & Co., LLC ("EMW
LLC") manages Warburg, Pincus. The members of EMW LLC are substantially the
same as the partners of WP. Lionel I. Pincus is the managing partner of WP
and the managing member of EMW LLC and may be deemed to control both WP and
EMW LLC. Mr. Thomas, a director of Menley & James, is a Managing Director
and member of EMW LLC and a general partner of WP. As such, Mr. Thomas may
be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Securities Exchange Act of 1934 (the "Exchange Act"))
in an indeterminate portion of the common shares beneficially owned by
Warburg, Pincus. All of the common shares indicated as owned by Mr. Thomas
are owned directly by Warburg, Pincus and are included because of Mr.
Thomas' affiliation with Warburg, Pincus. Mr. Thomas disclaims "beneficial
ownership" of these common shares within the meaning of Rule 13d-3 under
the Exchange Act, except to the extent of his indirect pecuniary interest.
(2) Includes (i) 85,000 common shares held by the James T. McMillan, II Trust,
and (ii) 60,000 common shares issuable upon exercise of options which are
currently exercisable.
(3) Represents 60,000 common shares issuable upon exercise of options which are
currently exercisable.
(4) Based on the Schedule 13G filed by Harvey Houtkin on April 30, 1999, this
includes shares owned by Mr. Houtkin's wife, as to which Mr. Houtkin
disclaims beneficial ownership.
(5) Includes 120,000 common shares issuable upon exercise of options which are
currently exercisable.
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WHERE YOU CAN FIND MORE INFORMATION
Menley & James files annual, quarterly and special reports, proxy
statements and other information with the SEC. These materials contain
additional information about Menley & James. You can read and copy these
materials at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for
more information about the SEC's public reference rooms. Some of this
information may also be accessed electronically through the SEC's Internet site
at http://www.sec.gov. Reports, proxy statements, and other information
concerning Menley & James may also be inspected at the offices of the National
Association of Security Dealers, Inc., 1735 "K" Street, N.W., Washington, D.C.
20006.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
proxy statement, which means we can disclose important information by referring
you to other documents filed separately with the SEC. Information incorporated
by reference is considered part of this proxy statement, except to the extent
that the information is superceded by information in this proxy statement. This
proxy statement incorporates by reference the information contained in the
following documents previously filed by Menley & James with the SEC (SEC file
number 0-19788):
I. Menley & James Annual Report on Form 10-K for the year ended
December 31, 1998 (a copy of which is attached hereto as Annex
B-1);
II. Menley & James Quarterly Report on Form 10-Q for the three months
ended March 31, 1999;
III. Menley & James Quarterly Report on Form 10-Q for the three months
ended June 30, 1999; and
IV. Menley & James Quarterly Report on Form 10-Q for the three months
ended September 30, 1999 (a copy of which is attached hereto as
Annex B-2).
We also incorporate by reference the information contained in all other
documents we file with the SEC after the date of this proxy statement and before
we file the Certificate of Dissolution with the State of Delaware.
If you are a Menley & James stockholder and would like to receive a copy
of any document incorporated by reference into this proxy statement (which will
not include any of the exhibits to the documents other than those exhibits that
are themselves specifically incorporated by reference into this proxy
statement), you should write to Lawrence D. White, President and Chief Executive
Officer, Menley & James, Inc., 125 Strafford Avenue, Suite 300, Wayne,
Pennsylvania 19087, or call him at (610) 975-4540.
Menley & James has not authorized anyone to give information different
from the information contained in (or incorporated by reference into) this proxy
statement. This proxy statement is dated January 19, 2000. You should not assume
that the information contained in this proxy statement is accurate as of any
later date, and the mailing of this proxy statement to you shall not create any
implication to the contrary.
20
<PAGE>
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MENLEY & JAMES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF MENLEY & JAMES, INC.
IN CONNECTION WITH THE
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 23, 2000
The undersigned stockholder of Menley & James hereby appoints Lawrence D.
White and Peter J. Carr, or either of them, the true and lawful attorneys,
agents and proxies of the undersigned, each with full power of substitution to
vote all the shares of the Company's common stock, par value $.01 per share,
which the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Menley & James to be held on February 23, 2000, and at any
adjournment or postponement of such meeting, with all powers which the
undersigned would possess if personally present, in the manner indicated on the
reverse side of this proxy and upon such other business as may lawfully come
before the meeting. IF NO DIRECTION AS TO THE MANNER OF VOTING THE PROXY IS
MADE, THE PROXY WILL BE VOTED AGAINST ITEM 1 AS INDICATED ON THE REVERSE SIDE
HEREOF.
(Continued on reverse side)
- ---------------------------- FOLD AND DETACH HERE ------------------------------
If no direction is made, this proxy will be voted against proposal 1.
Please mark your votes as indicated in this example [ x ]
1. The approval and adoption of the Plan of Dissolution and Liquidation,
involving the proposed complete dissolution and liquidation of Menley &
James.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: _________________, 2000
- ------------------------------
(Signature)
- ------------------------------
(Signature if held jointly)
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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<PAGE>
- ----------------------------- FOLD AND DETACH HERE -----------------------------
ADMISSION TICKET
Special Meeting
of
Menley & James, Inc.
Wednesday, February 23, 2000
10:00 a.m.
Hotel Inter-Continental New York
111 East 48th Street
New York, New York
- --------------------------------------------------------------------------------
Agenda
* Proposal to approve & adopt the Plan of Liquidation and
Dissolution
* Discussion on matters of current interest
* Informal discussion among stockholders in attendance
- --------------------------------------------------------------------------------
22
<PAGE>
ANNEX A
MENLEY & JAMES, INC.
PLAN OF DISSOLUTION AND LIQUIDATION
This Plan of Dissolution and Liquidation (the "Plan") is
intended to accomplish the complete liquidation and dissolution of Menley &
James, Inc., a Delaware corporation (the "Company"), in accordance with Section
275 and other applicable provisions of the General Corporation Law of Delaware
("DGCL") and in accordance with Sections 331 and 336 of the Internal Revenue
Code of 1986, as amended (the "Code").
1. Approval and Adoption of Plan
This Plan shall be effective when all of the following steps
have been completed:
(a) Resolutions of the Company's Board of Directors (the
"Board"). The Company's Board shall have adopted a resolution or resolutions
with respect to the following:
(i) Complete Liquidation and Dissolution: The
Board shall determine that it is deemed advisable for the Company to be
liquidated completely and dissolved.
(ii) Adoption of the Plan: The Board shall approve
this Plan as the appropriate means for carrying out the complete liquidation and
dissolution of the Company.
(iii) Sale of Assets: The Board shall determine
that, as part of the Plan, it is deemed expedient and in the best interests of
the Company to sell all or substantially all of the Company's assets in order to
facilitate liquidation and distribution to the Company's creditors and
stockholders, as appropriate.
(b) Adoption of This Plan by the Company's Common
Stockholders. The holders of a majority of the outstanding shares of common
stock of the Company, par value $0.01 per share (the "Common Stock"), entitled
to vote shall have adopted this Plan, including the dissolution of the Company
and those provisions authorizing the Board to sell all or substantially all of
the Company's assets, by written consent or at a special meeting of the
stockholders of the Company called for such purpose by the Board.
2. Dissolution and Liquidation Period
Once the Plan is effective, the steps set forth below shall be
completed at such times as the Board, in its absolute discretion, deems
necessary, appropriate or advisable. Without limiting the generality of the
foregoing, the Board may instruct the officers of the Company to delay the
taking of any of the following steps until the Company has performed such
actions as the Board or such officers determine to be necessary, appropriate or
advisable for the Company to maximize the value of the Company's assets upon
liquidation; provided that such steps may not be delayed longer than is
permitted by applicable law.
<PAGE>
(a) The filing of a Certificate of Dissolution of the
Company, (the "Certificate of Dissolution") pursuant to Section 275 of the DGCL
specifying the date (no later than ninety (90) days after the filing) upon which
the Certificate of Dissolution will become effective (the "Effective Date"), and
the completion of all actions that may be necessary, appropriate or desirable to
dissolve and terminate the corporate existence of the Company;
(b) The cessation of all of the Company's business
activities and the withdrawal of the Company from any jurisdiction in which it
is qualified to do business, except and insofar as necessary for the sale of its
assets and for the proper winding up of the Company pursuant to Section 278 of
the DGCL;
(c) The negotiation and consummation of sales of all of
the assets and properties of the Company, including the assumption by the
purchaser or purchasers of any or all liabilities of the Company, insofar as the
Board of the Company deems such sales to be necessary, appropriate or advisable;
(d) The full payment and discharge, or creation of a
contingency reserve which will adequately provide for the full payment, of all
claims and obligations of the Company, including those that likely to arise or
become known to the Company within ten years after the Effective Date. If there
are insufficient assets to pay all claims and obligations in full, claims and
obligtions shall be paid or provided for according to their priority, and among
claims of equal priority, ratably to the extent of assets legally available
therefore.
(e) The distribution of the remaining funds of the
Company and the distribution of remaining unsold assets of the Company, if any,
to its stockholders.
If the Board determines to follow the procedures described in
Section 280 of the DGCL, then the additional steps set forth below shall, to the
extent necessary or appropriate, be taken:
(i) The giving of notice of the dissolution to
all persons having a claim against the Company and the rejection of any such
claims in accordance with Section 280 of the DGCL;
(ii) The offering of security to any claimant on
a contract whose claim is contingent, conditional or unmatured in an amount the
Company determines is sufficient to provide compensation to the claimant if the
claim matures, and the petitioning of the Delaware Court of Chancery to
determine the amount and form of security sufficient to provide compensation to
any such claimant who has rejected such offer in accordance with Section 280, of
the DGCL;
(iii) The petitioning of the Delaware Court of
Chancery to determine the amount and form of security which would be reasonably
likely to be sufficient to provide compensation for (i) claims that are the
subject of pending litigation against the Company, and (ii) claims that have not
been made known to the Company or, that have not arisen, but are
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<PAGE>
likely to arise or become known within five (5) years after the date of
dissolution (or longer in the discretion of the Delaware Court of Chancery),
each in accordance with Section 280 of the DGCL;
(iv) The payment, or the making of adequate
provision for payment, of all claims made against the Company and not rejected,
in accordance with Section 280 of the DGCL;
(v) The posting of all security offered and not
rejected and all security ordered by the Court of Chancery in accordance with
Section 280 of the DGCL; and
(vi) The payment, or the making of adequate
provision for payment, of all other claims that are mature, known and
uncontested or that have been finally determined to be owing by the Company.
Notwithstanding the foregoing, the Company shall not be
required to follow the procedures described in Section 280 of the DGCL, and the
adoption of the Plan by the Company's Common stockholders shall constitute full
and complete authority for the Board and the officers of the Company, without
further stockholder action, to proceed with the dissolution and liquidation of
the Company in accordance with any applicable provision of the DGCL, including,
without limitation, Section 281(b) thereof.
3. Authority of Officers and Directors
After the Effective Date, the Board and the officers of the
Company shall continue in their positions for the purpose of winding up the
affairs of the Company as contemplated by Delaware law. The Board may appoint
officers, hire employees and retain independent contractors in connection with
the winding up process, and is authorized to pay to the company's officers,
directors and employees, or any of them, compensation or additional compensation
above their regular compensation, in money or other property, in recognition of
the extraordinary efforts they, or any of them, will be required to undertake,
or actually undertake, in connection with the successful implementation of this
Plan. Adoption of this Plan by holders of a majority of the outstanding shares
of Common Stock shall constitute the approval of the Company's stockholders of
the Board's authorization of the payment of any such compensation.
The adoption of the Plan by the Company's common stockholders
shall constitute full and complete authority for the Board and the officers of
the Company, without further stockholder action, to do and perform any and all
acts and to make, execute and deliver any and all agreements, conveyances,
assignments, transfers, certificates and other documents of any kind and
character which the Board or such officers deem necessary, appropriate or
advisable: (i) to sell, dispose, convey, transfer and deliver the assets of the
Company, whether before or after the Effective Date, (ii) to satisfy or provide
for the satisfaction of the Company's obligations in accordance with Sections
280 and 281 of the DGCL, (iii) to distribute all of the remaining funds of the
Company and any unsold assets of the Company to the Company's common
stockholders, and (iv) to dissolve the Company in accordance with the laws of
the State of Delaware and cause its withdrawal from all jurisdictions in which
it is authorized to do business.
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<PAGE>
4. Conversion of Assets Into Cash or other Distributable Form
Subject to approval by the Board, the officers, employees and
agents of the Company, shall, as promptly as feasible and whether before or
after the Effective Date, proceed to collect all sums due or owing to the
Company, to sell and convert into cash any and all corporate assets and, out of
the assets of the Company, to pay, satisfy and discharge or make adequate
provision for the payment, satisfaction and discharge of all debts and
liabilities of the Company pursuant to Section 2 above, including all expenses
of the sale of assets and of the liquidation and dissolution provided for by the
Plan.
5. Contingency Reserve
It is specifically contemplated that the Board may establish a
contingency reserve of $50,000 ("Contingency Reserve") for the payment of
expenses and liabilities, including expenses in connection with completion of
the Dissolution Plan. If any of the money set aside in the Contingency Reserve
is not ultimately required for payment of Company expenses and liabilities, the
Company may, in the absolute discretion of the Board, either make a second
distribution to its stockholders of the unused portion of such money or donate
the unused portion of the money to a charitable organization.
6. Professional Fees and Expenses
It is specifically contemplated that the Board may authorize
the payment of a retainer fee to a law firm or law firms selected by the Board
for legal fees and expenses of the Company, including, among other things, to
cover any costs payable pursuant to the indemnification of the Company's
officers or members of the Board provided by the Company pursuant to its
Certificate of Incorporation and Bylaws or the DGCL or otherwise.
In addition, in connection with and for the purpose of
implementing and assuring completion of this Plan, the Company may, in the
absolute discretion of the Board, pay any brokerage, agency and other fees and
expenses of persons rendering services to the Company in connection with the
collection, sale, exchange or other disposition of the Company's property and
assets and the implementation of this Plan.
7. Indemnification
The Company shall continue to indemnify its officers,
directors, employees and agents in accordance with its Certificate of
Incorporation and Bylaws and any contractual arrangements, for actions taken in
connection with this Plan and the winding up of the affairs of the Company. The
Board, in its absolute discretion, is authorized to obtain and maintain
insurance as may be necessary, appropriate or advisable to cover the Company's
obligations hereunder.
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<PAGE>
8. Liquidating Trust
The Board may establish a Liquidating Trust (the "Liquidating
Trust") and distribute assets of the Company to the Liquidating Trust. The
Liquidating Trust may be established by agreement with one or more Trustees
selected by the Board. If the Liquidating Trust is established by agreement with
one or more Trustees, the trust agreement establishing and governing the
Liquidating Trust shall be in form and substance determined by the Board. In the
alternative, the Board may petition the Delaware Court of Chancery for the
appointment of one or more Trustees to conduct the liquidation of the Company
subject to the supervision of the Court. Whether appointed by an agreement or by
the Court, the Trustees shall in general be authorized to take charge of the
Company's property, and to collect the debts and property due and belonging to
the Company, with power to prosecute and defend, in the name of the Company, or
otherwise, all such suits as may be necessary or proper for the foregoing
purposes, and to appoint an agent under it and to do all other acts which might
be done by the Company that may be necessary, appropriate or advisable for the
final settlement of the unfinished business of the Company.
9. Liquidating Distributions
Liquidating distributions, in cash or in kind, shall be made
after the adoption of the Plan by the holders of record, at the close of
business on the date of the filing of a Certificate of Dissolution of the
Company as provided in Section 2 above, of outstanding shares of stock of the
Company, pro rata in accordance with the respective number of shares then held
of record; provided that in the opinion of the Board adequate provision has been
made for the payment, satisfaction and discharge of all known, unascertained or
contingent debts, obligations and liabilities of the Company (including costs
and expenses incurred and anticipated to be incurred in connection with the sale
of assets and complete liquidation of the Company). All determinations as to the
time for and the amount and kind of distributions to stockholders shall be made
in the exercise of the absolute discretion of the Board and in accordance with
Section 281 of the DGCL.
Any assets distributable to any creditor or stockholder of the
Company who is unknown or cannot be found, or who is under a disability and for
whom there is no legal representative, shall escheat to the state or be treated
as abandoned property pursuant to applicable state law.
10. Amendment, Modification or Abandonment of Plan
If for any reason the Company's Board determines that such
action would be in the best interests of the Company, it may amend, modify or
abandon the Plan and all action contemplated thereunder, notwithstanding
stockholder approval, to the extent permitted by the DGCL; provided, however,
that the Company will not amend to modify the Plan under circumstances that
would require additional stockholder approval under the DGCL and the federal
securities laws without complying with the DGCL and the federal securities laws.
Upon the abandonment of the Plan, the Plan shall be void.
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<PAGE>
11. Cancellation of Stock and Stock Certificates
After known liabilities of the Company have been paid to the
full extent possible, and the remaining assets of the Company have been
distributed to the stockholders, the stockholders shall surrender any and all
certificates representing the stock of this Company and shall have no further
rights against the Company, whether arising out of each stockholder's status as
a stockholder or as a creditor of the Company.
Following the dissolution of the Company, the Company's stock
transfer books shall be closed and the Company's capital stock and stock
certificates evidencing the Company's Common Stock will be treated as no longer
being outstanding.
12. Liquidation under Section 331 and 336.
It is intended that this Plan shall be a plan of complete
liquidation within the terms of Sections 331 and 336 of the Code. The Plan shall
be deemed to authorize such action as, in the opinion of counsel for the
Company, may be necessary to conform with the provisions of said Sections 331
and 336.
13. Filing of Tax Forms
The appropriate officer of the Company is authorized and
directed, within thirty (30) days after the effective date of the Plan, to
execute and file a United States Treasury Form 966 pursuant to Section 6043 of
the Code and such additional forms and reports with the Internal Revenue Service
as may be appropriate in connection with this Plan and the carrying out thereof.
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<PAGE>
ANNEX B-1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number: 000-19788
MENLEY & JAMES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2621602
(State of incorporation) (I.R.S. Employer Identification No.)
125 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
(Address of principal executive offices)
Registrants telephone number: (610) 975-4540
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant, as of March 19, 1999, was $5,170,823.
The number of shares of the registrants common stock, par value $.01
per share, outstanding as of March 19, 1999, was 6,169,040.
Documents Incorporated by Reference:
Document Part(s) Into Which Incorporated
(1) Proxy Statement to be used in Part III
connection with the Annual Meeting of
Stockholders to be held May 19, 1999
(the Proxy Statement). With the
exception of the pages of the Proxy
Statement specifically incorporated by
reference herein, the Proxy Statement
is not deemed to be filed as a part of
this Form 10-K.
<PAGE>
Important Factors Relating to Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-K
and those that may be made in the future by or on behalf of Menley & James,
Inc., we note that there are various factors that could cause actual results to
differ materially from those set forth in any such forward-looking statements.
Among the most significant of these factors are:
o the operations and financial condition of any company
that we might acquire or with which we might merge;
o our ability to raise additional cash if it is necessary
to consummate an acquisition or infuse capital into a
new business;
o our lack of experience in any new business in which we
might engage; and
o the attendant risks inherent in establishing a new line
of business.
Accordingly, there can be no assurance that the forward-looking statements
contained in this Annual Report will be realized or that actual results will not
be significantly higher or lower. The inclusion of the forward-looking
statements contained in this Annual Report should not be regarded as a
representation by Menley & James, Inc. or any other person that the
forward-looking statements contained in this Annual Report will be achieved. In
light of the foregoing, readers of this Annual Report are cautioned not to place
undue reliance on the forward-looking statements contained herein.
Item 1. Business(1)
Overview
Menley & James, Inc., a Delaware corporation, was incorporated in 1990.
Until November 1998, we produced and marketed a diverse portfolio of
over-the-counter pharmaceutical and toiletry products. These brands were sold in
drug stores, supermarkets and other mass merchandisers throughout the United
States. We began our operations in 1990, with 32 brands which we acquired from
SmithKline Beecham Corporation.
Our strategy was to systematically develop and execute targeted
programs for specific brands so as to identify a product that would provide
sufficient sales response to become our lead product. Through strategic
ventures, we developed three new brands: Derifil, Humibid and Capasaicin. During
1997, we focused our development and marketing efforts on the brands Benzedrex,
Derifil and Humibid Guaifenesin Plus. In 1998, we focused on marketing the
brands Albolene, Benzedrex and Humibid. We devoted significant time and
resources to expanding the business through acquisitions. However, we concluded
that continued focus on the retail over-the-counter pharmaceutical and toiletry
marketplace
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(1) References to Menley & James, our and we in this report include
Menley & James, Inc. and its wholly-owned operating subsidiary, Menley & James
Laboratories, Inc., except where the context requires otherwise.
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<PAGE>
would not be the best way to increase stockholder value and began to solicit
prospective purchasers to acquire the business.
On November 23, 1998, we sold substantially all of our assets to Numark
Laboratories, Inc. Under the terms of the sale, Numark paid us $13.43 million in
cash and assumed substantially all of our liabilities. The only assets and
liabilities which Menley & James retained were our office lease and certain
automobile and equipment leases, certain insurance policies, the corporate names
Menley & James, Inc. and Menley & James Laboratories, Inc. and approximately
$2.0 million in cash to pay costs and expenses associated with the sale,
including employee severance payments.
At December 31, 1998, as a result of the sale, we had the following:
o approximately $14 million in cash;
o no debt;
o an estimated $5.6 million of net operating loss
carry-forwards and an estimated $24.1 million in
capital loss carry-forwards, which may be used to
offset future taxable income, if any; and
o 6,163,520 outstanding common shares.
The foregoing description of the sale is qualified in its entirety by
the full text of the Asset Purchase Agreement, dated as of August 21, 1998 (as
amended, the Agreement) between Menley & James and Numark, which is incorporated
by reference into this Form 10-K as set forth under it in Exhibits 2.1, 2.2, and
2.3.
Strategy of Post-Sale Menley and James
Consummation of the sale terminated Menley & James production and
marketing operations. We presently have no operating business. Since the sale,
we have been seeking to effect a business combination, outside of the
over-the-counter pharmaceutical and toiletry business, with an operating
business in an effort to maximize stockholder value.
Of the various methods and forms by which we may structure a business
combination, we are considering using a merger, an exchange of capital stock, an
acquisition of assets, a strategic investment in a minority interest or other
similar business combination. The actual form and structure of a business
combination will depend upon numerous factors pertaining to the new operating
business and its stockholders as well as potential tax and accounting treatments
afforded the business combination. Additionally, any business combination in
which we might participate will depend on the availability of attractive
candidates and our ability to finance any such business combination. We intend
to use our remaining cash, together with additional equity or debt, or a
combination of these, to achieve a business combination. The amount and nature
of any borrowings we make will depend on a number of considerations including
our capital requirements, our perceived ability to service such debt and
prevailing conditions in the financial markets and the general economy.
Lawrence D. White is Menley & James sole employee. With the assistance
of consultants, he is administering our affairs, including financial reporting
matters, general administrative concerns and the payment of retained
liabilities. Additionally, he is implementing our strategy of pursuing a
business combination with a new operating business at the direction of the Board
of Directors and with the assistance of Warburg, Pincus Investors, L.P. Since
the sale, Menley & James has contacted
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<PAGE>
approximately 35 underwriters, reviewed approximately 150 withdrawn or postponed
initial public offerings and contacted 20 of these firms, attended the
Mid-Atlantic Venture Fair, identified approximately 225 prospective venture
capital firms which may have access to potential candidates for a business
combination and contacted 18 of them, and reviewed and rejected more than 20
specific business proposals. Thus far, we have made no agreements, commitments
or understandings with any candidates for a business combination.
Executive Officer of Menley & James
Since the sale in November, 1998, Mr. White has been our sole employee
and executive officer. Mr. White, age 53, serves as our President and Chief
Executive Officer, offices he has held since Menley & James inception in 1990.
From January 1986 to May 1990 he was Vice President of Marketing and Sales for
SmithKline Consumer Products, a division of SmithKline Beecham Corporation.
Prior to working at SmithKline Beecham Corporation, Mr. White was at Revlons
Norcliff Thayer Division as Vice President of Marketing from 1982 to 1985, as
Director of Brand Management from 1981 to 1982, as Marketing Group Director from
1978 to 1981, and as a Brand Manager from 1977 to 1978.
Mr. White was selected by and serves at the discretion of the Board of
Directors.
Factors Which May Affect Results
Menley & James ability to acquire and to successfully and profitably
operate a new operating business, if any, will be subject to various risk
factors including the following:
No Operating History. Risks, expenses, problems and delays, with no
assurance of profitability, are inherent in our establishment of a new line of
business in which we have no operating history.
Acquisition Risks. The success of Menley & James acquisition strategy
is dependent on the operations, financial condition and management of the
companies with which we may merge or which we may acquire. In order to effect an
acquisition, we may incur indebtedness which we will need to repay. If we make
an investment by acquiring a minority interest in a business, then we will lack
control over the operations and strategy of the business.
Unspecified Business Risks. Until we have identified the business
opportunities in which we will attempt to obtain an interest, we cannot describe
the specific risks presented by such business. If we combine with a financially
unstable company or an entity in its early stage of development or growth, we
will be subject to the risks inherent in the business and operations of such
companies. If we combine with an entity in an industry characterized by a high
level of risk, we will be subject to the currently unascertainable risks of that
industry. Our new operating business may involve an unproven product, technology
or marketing strategy, the ultimate success of which can not be assured. Our
investment in a business opportunity may be highly illiquid and could result in
a total loss if the opportunity is unsuccessful.
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<PAGE>
Need for Additional Financing. We may need to raise additional cash to
consummate a business combination or infuse capital into a new operating
business. Our limited resources and lack of operating history may make it
difficult to borrow funds on commercially acceptable terms. The incurrence of
debt would likely subject us to restrictive financial covenants as well as the
risk of interest rate fluctuations and the possible insufficiency of Menley &
James cash flow to pay principal and interest. If we issue additional common
shares to raise additional funds, the interests of current shareholders would be
diluted and stockholders of a new operating business could possibly obtain a
controlling interest in Menley & James. Alternately, if we issue preferred
stock, the preferred stockholders may have rights or privileges senior to those
of the holders of our common shares.
Regulation. Menley & James does not intend to become an investment
company and is currently relying on the transient investment company one-year
exemption under Rule 3a-2 of the Investment Company Act of 1940. However, if we
do not acquire a new operating business within one year of the sale and continue
to invest the net proceeds of the sale in investment securities, we may be
required to register as an investment company under the 1940 Act. If we are a
registered investment company, we will be subject to a substantial increase in
the regulation of Menley & James and to the additional expenses of compliance.
Limited Management Resources and Experience. Menley & James is
currently managed solely by Mr. White, assisted by consultants on an as needed
basis. Our success will depend on our ability to attract and retain key
management and other personnel with the expertise required in connection with
the growth and development of a new operating business.
Scarcity of and Competition for Business Combinations. Many competitors
in the business of seeking mergers with and acquisitions of small private
entities have greater financial, technical, human and other resources than
Menley & James.
No Agreement for Business Combination or Other Transaction. Menley &
James may not be successful in concluding a favorable business combination and
there is no assurance that any such business combination will yield a financial
return to our stockholders.
Possible lack of Diversification. Our possible failure or inability to
diversify our business activities may subject us to the risk of economic
fluctuations within a particular business or industry.
Tax Considerations. The anticipated income tax benefit of our net
operating loss carry-forwards and capital loss carry-forwards may not be
realized or may be decreased if the time period in which they may be used
expires, or there is a change in control of Menley & James.
Limited Public Market for Common Shares. The market price of our common
shares could fluctuate significantly and there is no assurance that an active
trading market for our common shares will be developed or maintained.
-5-
<PAGE>
Certain Anti-takeover Provisions. Menley & James charter and by-laws
include certain provisions which may have the effect of delaying, deterring or
preventing a future takeover or change in control absent approval of the Board
of Directors. Our issuance of preferred stock could also make it more difficult
for a third party to acquire a majority of the outstanding common shares and
discourage a third party from attempting to do so. Finally, anti-takeover
provisions of the Delaware General Corporation Law which restrict an interested
stockholder from engaging in a business combination could delay or prevent a
change in control of Menley & James.
Available Information
We file proxy statements, reports and other information with the
Securities and Exchange Commission (SEC). You may read and copy any materials we
file with the SEC at the SECs Public Reference Room at 450 Fifth Street, N.W.
Washington, D.C. 20549. For more information on the operation of the Public
Reference Room you may call the SEC at 1-800-SEC-0330. Some of this information
may also be accessed through the SECs Internet address at http://www.sec.gov.
Item 2. Properties.
Because of our limited need for office space after the sale, we lease
office space in Wayne, Pennsylvania for our corporate offices on a short-term
basis.
Item 3. Legal Proceedings.
There are no legal proceedings pending against Menley & James or to
which Menley & James is a party. To the knowledge of management, no such
proceedings are threatened or contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
On November 23, 1998, Menley & James stockholders held a special
meeting to consider whether to adopt and approve the agreement with Numark. Of
the 6,163,520 common shares outstanding, 4,575,146 shares were present at the
meeting. The stockholders voted to adopt and approve the Agreement as follows:
4,529,306 shares in favor; 43,415 shares against; and 2,425 shares abstaining.
-6-
<PAGE>
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters.
Our common shares are traded under the symbol MENJ. From January 21,
1992 until November 10, 1994, our common shares were traded on the Nasdaq
National Market System. As a result of our aggregate market value, trading with
respect to our common shares moved to the Nasdaq SmallCap Market on November 11,
1994. The following table shows the quarterly high and low closing bids for our
common shares on the Nasdaq SmallCap Market. Prices represent quotations between
dealers without adjustment for retail markups, markdowns and commissions and may
not necessarily represent actual transactions.
Quarter ended High Low
------------- ---- ---
March 31, 1997.................. $ 1 9/16 $ 1 5/32
June 30, 1997................... 1 3/8 1 1/4
September 30, 1997.............. 1 29/32 1 5/16
December 31, 1997............... 1 3/4 1 3/16
March 31, 1998.................. 1 7/16 1 3/16
June 30, 1998................... 1 17/32 1 5/16
September 30, 1998.............. 2 1/4 1 1/2
December 31, 1998............... 2 9/32 1 13/32
On March 19, 1999, the last reported closing price of our common shares
on the Nasdaq SmallCap Market was $2 5/32 per share. As of March 19, 1999, there
were approximately 69 holders of record of our common shares.
We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future. Any future
determinations to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of any
future business combination with a new operating business, capital requirements
and such other factors as the Board of Directors deems relevant.
-7-
<PAGE>
Item 6. Selected Consolidated Financial Data.
The following table sets forth our consolidated financial data for each
of the years ended December 31, 1994 through 1998, which have been derived from
Menley & James audited consolidated financial statements. The information set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and related notes thereto appearing elsewhere in this
report.
SELECTED FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
Consolidated Income Data:
<S> <C> <C> <C> <C> <C>
Net sales.................................... $18,843 $14,395 $14,297 $14,446 $11,554
Cost of goods sold........................... 8,840 7,101 6,850 6,894 5,581
-------- -------- -------- -------- ---------
Gross profit................................. 10,003 7,294 7,447 7,552 5,973
Selling, general and administrative
expenses.................................... 7,595 4,914 5,463 6,079 5,646
Gain on sale of brand........................ 619 -- -- -- --
Valuation adjustment......................... 12,845 -- -- -- --
Depreciation and amortization................ 1,818 1,569 1,536 1,367 1,245
-------- -------- -------- -------- ---------
Income (loss) from operations................ (11,636) 811 448 106 (918)
Loss on disposal............................. -- -- -- -- 5,696
Interest (expense) income.................... (588) (237) (70) 73 197
-------- -------- -------- -------- ---------
Income (loss) before income taxes (12,224) 574 378 179 (6,417)
Provision for income taxes................... 657 455 416 426 698
-------- -------- -------- -------- ---------
Net income (loss) applicable to common
shares...................................... $(12,881) $ 119 $ (38) $ (247) $ (7,115)
======== ======== ======== ======== =========
Per share of common stock(1):
Basic income (loss) per share................ $(2.10) $ 0.02 $ (0.01) $ (0.04) $ (1.15)
======== ======== ======== ======== =========
Weighted average common shares
outstanding................................ 6,148 6,148 6,148 6,151 6,163
======== ======== ======== ======== =========
At December 31,
-----------------------------------------------------------
Consolidated Balance Sheet Data:
Working capital.............................. $ 7,022 $ 6,697 $ 7,086 $ 8,372 $13,972
Total assets................................. 27,473 24,755 23,527 22,453 14,257
Long-term debt (excluding current portion) 3,100 1,005 36 -- --
Stockholders' equity......................... 21,086 21,205 21,167 20,930 13,972
</TABLE>
(1) Amounts presented assuming dilution would remain the same.
-8-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Menley & James commenced operations on May 29, 1990 with the
acquisition from SmithKline Beecham of the trademarks, product formulations and
production methodologies, packaging artwork and related inventories for
thirty-two over-the-counter pharmaceutical and toiletry products.
Effective November 23, 1998, we sold substantially all of our assets
and assigned substantially all of our liabilities to Numark for a purchase price
of $13,430,000. The sale resulted in a loss to us totaling approximately $6.4
million, which is comprised of pretax charges of $1.6 million for severance and
transaction-related costs, and a $4.1 million write-down to their net realizable
value of all assets sold and a provision for a valuation allowance for
previously recorded deferred tax assets totaling $0.7 million.
Results of Operations
As a result of the sale, the statements in this section may not be
meaningful in assessing the financial condition of Menley & James. Investors
should read the section entitled Factors Which May Impact Results for a
discussion concerning risks facing Menley & James future business.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales for the year ended December 31, 1998 were $11.6 million
compared to $14.4 million for the year ended December 31, 1997. The sales
decrease reflects approximately five weeks less of operations in 1998. Also, net
sales for the 1998 period reflect the continued erosion of a specific group of
our brands due to trade destocking and competitive pressure. Increased sales
from products we had marketed under agreements with three pharmaceutical firms
and sales from our other brands have largely offset the net sales decline of
this specific group of products.
Cost of goods sold for the year ended December 31, 1998 was $5.6
million, or 48% of net sales, which, as a percentage of net sales, is comparable
to the year ended December 31, 1997 cost of goods sold of 48% of net sales.
Selling, general and administrative expenses were $5.7 million for the
year ended December 31, 1998, compared to $6.1 million for the prior year. The
decrease of $433 thousand is primarily the result of the fact that we completed
the sale of our operating business effective November 23, 1998.
A pretax loss of $5.7 million on the sale of our assets has been
recorded in our financial statements for the year ended December 31, 1998, which
is comprised of pretax charges of $1.6 million for severance and
transaction-related costs, and a $4.1 million write-down to their net realizable
value of assets which were sold.
At December 31, 1998, we had a net operating loss carryforward for
federal income tax purposes of approximately $5.6 million which will expire in
the years 2005 through 2008 and a capital loss carryforward of approximately
$24.1 million. We recognized $698 thousand in tax expense, mostly noncash, for
the year ended December 31, 1998 which primarily represents a provision for a
valuation allowance against previously recorded net deferred tax assets. As of
December 31, 1998, we have
-9-
<PAGE>
recorded valuation allowances for any deferred tax assets in our consolidated
balance sheet as their realization is not assured.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales for the year ended December 31, 1997 were $14.4 million
compared to $14.3 million for the comparable period of 1996. Sales for 1997
benefitted from our sales and marketing agreements entered into during 1996.
These agreements include Humibid Guaifenesin Plus, a nonprescription formulation
of the Rx drug, Humibid; Derifil, an internal deodorant; and Capsaicin, a
generic version of Zostrix cream. Net sales for these brands totaled $1.7
million, an increase of $762 thousand over the year ended December 31, 1996. Net
sales of our remaining brands decreased $612 thousand compared to 1996. The
decline in sales is due to continued competition and trade destocking pressures.
Cost of goods sold for the year 1997 was $6.9 million, or 48% of net
sales, which is comparable to the 1996 cost of goods sold of $6.9 million, or
48% of net sales in 1996.
Selling, general and administrative expenses were $6.1 million, or 42%
of net sales for the year ended December 31, 1997, as compared to $5.5 million
or 38% for the prior year. The $616 thousand increase in expense is primarily a
result of an increase in Benzedrex advertising costs along with marketing costs
associated with the products under the our sales and marketing agreements. Our
sales force, and our network of independent brokers, work directly with the
major retail customers to focus marketing support behind individual Menley &
James products at the retail store level.
At December 31, 1997, we had a net operating loss carryforward for
federal income tax purposes of approximately $5.7 million which may be used to
offset future taxable income. These net operating loss carryforwards will expire
during the years 2005 through 2008. We recognized $426 thousand in tax expense,
mostly noncash, for the year ended December 31, 1997. The effective tax rate
exceeded the statutory federal tax rate primarily as a result of the
amortization of product lines and trade names, which is not deductible for tax
purposes. We had net deferred tax assets of $692 thousand in our consolidated
balance sheet as of December 31, 1997, which is primarily made up of two items,
net operating loss carryforwards and future deductible expenses.
Impact of Inflation
We believe that, to date, inflation has not had a significant impact on
our operations.
Liquidity and Capital Resources
At December 31, 1998, we had working capital of $14 million. Working
capital was primarily provided by the net proceeds from the sale of assets to
Numark. We have no bank debt outstanding at December 31, 1998.
At the present time, we have minimal cash requirements and operating
activities. Our strategic focus in the year ahead is to effect a business
combination with a new operating business which Menley & James believes has
potential to increase stockholder value. It is anticipated that Menley & James
would use cash, equity, debt or a combination of these to achieve a business
combination. We may borrow funds to increase the amount of capital available for
a business combination or otherwise finance the operation of the new operating
business. Cash of $13.4 million is invested in short-term highly liquid funds.
-10-
<PAGE>
Impact of Year 2000
We are currently not engaged in any substantial business operations,
and management, therefore, does not believe that computer problems associated
with the change of year to the year 2000 will have any material effect on our
operations. However, the possibility exists that we may merge with or acquire a
business that will be negatively affected by the Year 2000" problem. The effect
of such issues on us in the future can not be predicted with any accuracy until
such time as we identify a merger or acquisition target.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
-11-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Menley & James, Inc.
We have audited the accompanying consolidated balance sheets of Menley
& James, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders equity, and cash flows for each of the
three years in the period ended December 31, 1998. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Menley & James, Inc. at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
------------------------------
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 11, 1999
-12-
<PAGE>
MENLEY & JAMES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
-------- --------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents................................................ $ 2,879 $ 14,062
Accounts receivable, net of allowances of $464 in 1997 2,474 --
Inventory................................................................ 2,844 --
Prepaid expenses......................................................... 1,006 195
Deferred tax asset....................................................... 692 --
-------- --------
Total current assets..................................................... 9,895 14,257
Property and equipment, net.................................................. 1,435 --
Product lines, trade names and packaging designs, net 11,123 --
-------- --------
Total assets............................................................. $ 22,453 $ 14,257
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................................... $ 840 $ 16
Accrued expenses......................................................... 647 269
Current maturities of long-term debt..................................... 36 --
-------- --------
Total current liabilities................................................ 1,523 285
Preferred stock, $1 par value, authorized 5,000,000 shares,
none issued and outstanding.............................................. -- --
Stockholders' equity:
Common stock, $.01 par value, authorized 15,000,000 shares, issued and
outstanding was 6,163,520 shares in 1997 and 1998 62 62
Additional paid-in capital............................................... 45,463 45,620
Accumulated deficit...................................................... (24,595) (31,710)
-------- --------
Total stockholders' equity .................................................. 20,930 13,972
-------- --------
Total liabilities and stockholders' equity .............................. $ 22,453 $ 14,257
======== ========
</TABLE>
See accompanying notes.
-13-
<PAGE>
MENLEY & JAMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Net sales............................................... $14,297 $14,446 $11,554
Cost of goods sold...................................... 6,850 6,894 5,581
-------- --------- ---------
Gross profit............................................ 7,447 7,552 5,973
Selling, general and administrative expenses 5,463 6,079 5,646
Depreciation and amortization........................... 1,536 1,367 1,245
-------- --------- ---------
Income (loss) from operations........................... 448 106 (918)
Loss on disposal........................................ -- -- 5,696
Interest (expense) income............................... (70) 73 197
-------- --------- ---------
Income (loss) before income taxes ...................... 378 179 (6,417)
Provision for income taxes.............................. 416 426 698
-------- --------- ---------
Net loss................................................ $ (38) $ (247) $ (7,115)
======== ========= =========
Basic loss per share ................................... $ ( 0.01) $ (0.04) $ (1.15)
======== ========= =========
Diluted loss per share.................................. $ ( 0.01) $ (0.04) $ (1.15)
======== ========= =========
Weighted average number of common shares
outstanding - basic................................... 6,148 6,151 6,163
======== ========= =========
Weighted average number of common shares
outstanding - diluted................................. 6,148 6,151 6,163
======== ========= =========
</TABLE>
See accompanying notes.
-14-
<PAGE>
MENLEY & JAMES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995................ $ 61 $45,454 $(24,310) $ 21,205
Net loss.............................. (38) (38)
------- -------- -------- -------
Balance, December 31, 1996................ 61 45,454 (24,348) 21,167
Net loss.............................. (247) (247)
Exercise of stock options 1 9 10
------- -------- -------- -------
Balance, December 31, 1997 62 45,463 (24,595) 20,930
------- -------- -------- -------
Net loss.............................. (7,115) (7,115)
Employee stock options................ 157 157
------- -------- -------- -------
Balance, December 31, 1998 $ 62 $ 45,620 $(31,710) $13,972
======= ======== ======== =======
</TABLE>
See accompanying notes.
-15-
<PAGE>
MENLEY & JAMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1997 1998
-------- -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss ............................................... $ (38) $ (247) $ (7,115)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Loss on disposal .................................. -- -- 5,696
Depreciation and amortization ..................... 1,536 1,367 1,245
Compensation expense .............................. -- -- 157
Amortization of deferred financing costs .......... 38 28 --
Deferred income taxes ............................. 427 373 692
Changes in operating assets and liabilities:
Accounts receivable ............................. 412 247 300
Inventory ....................................... 423 558 (775)
Prepaid expenses ................................ (77) (428) 657
Accounts payable ................................ 294 (269) (565)
Accrued expenses ................................ (32) 106 (1,236)
-------- -------- --------
Net cash provided by (used in) operating activities .. 2,983 1,735 (944)
Cash flows provided by (used in) investing activities:
Proceeds from Sale, net of cash sold .............. -- -- 12,344
Property purchases, net of capital lease obligation (314) (397) (181)
-------- -------- --------
Net cash provided by (used in) investing activities (314) (397) 12,163
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock, net ....... -- 10 --
Repayment of borrowings ........................... (1,452) (674) (36)
-------- -------- --------
Net cash provided by (used in) financing activities (1,452) (664) (36)
Net increase in cash ...................................... 1,217 674 11,183
Cash and cash equivalents, beginning of year .............. 988 2,205 2,879
-------- -------- --------
Cash and cash equivalents, end of year .................... $ 2,205 $ 2,879 $ 14,062
======== ======== ========
</TABLE>
See accompanying notes.
-16-
<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Basis of Presentation
Menley & James, Inc. ("the Company") and its wholly owned subsidiary,
Menley & James Laboratories, Inc. were incorporated in Delaware in 1990. Prior
to November 23, 1998, the Company, through Menley & James Laboratories, Inc.,
marketed and distributed a portfolio of over-the-counter pharmaceutical and
toiletries products to drugstores, supermarkets, and other mass merchandisers
throughout the United States. Effective November 23, 1998, the Company sold
substantially all of its assets and assigned substantially all of its
liabilities to Numark Laboratories, Inc. for a purchase price of $13,430,000
(the Sale).
The Sale resulted in a loss to the Company totaling approximately $6.4
million, which is comprised of pretax charges of $1.6 million for severance and
transaction-related costs and a $4.1 million write-down to their net realizable
value of all assets sold and a provision for a valuation allowance for
previously recorded deferred tax assets totaling $0.7 million.
At December 31, 1998, the Company had no operating business.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Menley & James Laboratories, Inc. All
material intercompany transactions and accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when products are shipped. Provisions for
estimated returns and cash discounts are made when revenues are recognized.
Cash Equivalents
Cash equivalents consist of highly liquid temporary cash investments
with original maturities of less than three months when purchased which are
valued at cost plus accrued interest, which approximate market value.
Inventories
Inventories at December 31, 1997 are stated at the lower of cost or
market by the first-in, first-out method.
Product Lines, Trade Names and Packaging Designs
Substantially all of the product lines and trade names were recorded at
the time of the acquisition in 1990 and allocated among the brands based on
valuations performed at that time.
Packaging designs were being amortized over five years. Product lines
and trade names were being amortized over fourteen years. Accumulated
amortization at December 31, 1997 was $9.8 million. Amortization expense
relating to product lines, trade names and packaging designs was $1.2 million,
$1.1 million and $965 thousand for the years 1996, 1997 and 1998, respectively.
-17-
<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2 - Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment as of December 31, 1997 was carried at cost less
accumulated depreciation. Depreciation was computed using the straight-line
method over the estimated useful lives of the assets. Accumulated depreciation
at December 31, 1997 was $1.9 million. Depreciation expense was $380,000,
$280,000 and $275,000 for years 1996, 1997 and 1998, respectively.
Consumer Promotions
The estimated redemption value of coupons was charged to marketing and
promotion expense when the coupons were distributed to the consumer. The
incremental product cost of "two-for-one" or "bonus pack" offers was charged to
advertising and promotion expense as sales of the related product occurred.
Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Stock-Based Compensation.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for our employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. The
effect of applying Statement No. 123's fair value method to the Company's
stock-based awards results in pro forma net loss and loss per share that are not
materially different from amounts reported.
Note 3 - Inventories
Inventories at December 31, 1997 consist of the following (in thousands):
Raw materials............................. $ 1,095
Work in process........................... 280
Finished goods............................ 1,469
-------
$ 2,844
=======
Note 4 - Long-Term Debt
The Company leased computer equipment under a capital lease which was
recorded at its fair market value. As of December 31, 1997, the Company had
current obligations under a capital lease which totaled $36 thousand. This lease
was canceled by the Company during 1998.
The Company had no long-term debt at December 31, 1997 or 1998.
At December 31, 1997, there was no amount outstanding under the
Companys revolving credit facility which was terminated on November 23, 1998,
the date of the Sale.
Interest payments for the years 1996, 1997 and 1998 were approximately
$103,000, $5,000 and $0, respectively.
-18-
<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5 - Income Taxes
Significant components of the Company's deferred tax assets and
liabilities at December 31, were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ -------
Deferred tax liabilities:
<S> <C> <C> <C>
Prepaid expenses and other ...................................................... $ 155 $ 282 $ --
Amortization of organizational costs and
packaging designs ............................................................. 348 255 --
Depreciation .................................................................... 309 231 --
-------- -------- --------
Total deferred tax liabilities .................................................... 812 768 --
-------- -------- --------
Deferred tax assets:
Net operating loss carryforwards ................................................ 2,768 2,317 1,993
Capital loss carryforwards ...................................................... -- -- 9,162
Promotional expenses ............................................................ 174 157 --
Nondeductible allowances and reserves ........................................... 245 220 --
Other ........................................................................... 80 75 71
-------- -------- --------
Total deferred tax assets ......................................................... 3,267 2,769 11,226
Valuation allowance for deferred tax assets ....................................... (1,390) (1,309) (11,226)
-------- -------- --------
Deferred tax assets, net of valuation allowance ................................... 1,877 1,460 --
-------- -------- --------
Net deferred tax assets ........................................................... $ 1,065 $ 692 $ --
======== ======== ========
</TABLE>
Significant components of the provision for income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ -------
Current:
<S> <C> <C> <C>
Federal ....................................................................... $ 9 $ 25 $ --
State ......................................................................... (20) 28 6
-------- -------- --------
Total current ..................................................................... (11) 53 6
Deferred .......................................................................... 427 373 692
-------- -------- --------
Provision for income taxes ...................................................... $ 416 $ 426 $ 698
======== ======== ========
</TABLE>
The reconciliation between the Company's provision for income taxes and
the U.S. federal statutory tax rates is (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Tax at U.S. statutory rates ..................................................... $ 129 $ 61 $ (2,182)
State taxes, net of federal tax benefit ......................................... 19 94 (1)
Product lines and other amortization
not deductible for tax ........................................................ 375 339 292
Tax loss in excess of book loss on sale of business ............................. -- -- (6,819)
Change in federal valuation allowance ........................................... -- (81) 9,311
Other ........................................................................... (107) 13 97
-------- -------- --------
Provision for income taxes ...................................................... $ 416 $ 426 $ 698
======== ======== ========
</TABLE>
The Company has approximately $5.6 million of tax return net operating
loss carryforwards currently available on an unlimited basis to offset federal
net taxable income and a $24.1 million capital loss carryforward. These loss
carryforwards expire in the years 2005 through 2008.
-19-
<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6 - Leases
Rental expense for operating leases for the years 1996, 1997 and 1998
was $150,000, $158,000 and $151,000 respectively.
Note 7 - Common Stock and Stock Options
In 1991, the Board of Directors adopted, and the stockholders approved,
a stock option plan which authorized the grant of stock options with respect to
380,000 shares of the Company's common stock and granted options to purchase
289,180 shares of common stock at an exercise price of $7.89 per share. On
February 1, 1996, 224,960 options were revalued reducing the exercise price from
$7.89 per share to $1.25 per share, which reflected the share price at the close
of business February 1, 1996. During 1996, options were granted to purchase
15,000 and 30,000 shares of common stock at exercise prices of $1.19 and $1.56,
respectively. During 1997, options were granted to purchase 30,000 shares of
common stock at an exercise price of $1.38 per share. Additionally, during 1997,
options to purchase 15,000 shares of common stock were exercised at an exercise
price of $0.69 per share and options to purchase 30,000 shares of common stock
expired. During 1998, options were granted to purchase 30,000 shares of common
stock at an exercise price of $1.50 per share and options to purchase 7,600
shares at $1.25 per share were forfeited. Additionally, pursuant to the Sale,
the life of options to purchase 179,360 shares of common stock held by employees
was extended such that they will remain exercisable for a period of one year
after the termination of the employees. This change resulted in $156,940 of
compensation expense which was recorded in the loss on the Sale. At December 31,
1998, 307,360 options are outstanding, vested and exercisable at prices ranging
from $1.25 to $1.56 per share.
Note 8 - Commitments
The Company had license and sales and marketing agreements to
manufacture and/or market certain products. Under these agreements, the Company
was required to pay royalties based upon various percentages of net sales and/or
net profits. Additionally, pursuant to the above agreements, the Company was
entitled to receive monies based on losses, if any, incurred during the year on
certain of the products. Net sales of all products under agreements, for the
years ended 1996, 1997 and 1998 were equal to 9.3%, 12.5% and 11.7%,
respectively, of total net sales. Royalty expense, net, for the years 1996, 1997
and 1998 was $23,000, $578,000 and $615,000, respectively.
Note 9 - Supplemental Information
Advertising expense for the years 1996, 1997 and 1998 was $613,000,
$1.0 million and $713,000, respectively.
-20-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning directors, appearing under the caption Item 1.
Election of Directors in Menley & James Proxy Statement (the Proxy Statement) to
be filed with the SEC in connection with the Annual Meeting of Stockholders
scheduled to be held on May 19, 1999, and information concerning executive
officers, appearing under the caption Item 1. Business - Executive Officer of
Menley & James in Part I of this Form 10-K, are incorporated herein by reference
in response to this Item 10.
Item 11. Executive Compensation.
The information concerning executive compensation contained in the
section titled Executive Compensation and Related Information in the Proxy
Statement is incorporated herein by reference in response to this Item 11.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information concerning security ownership of certain beneficial
owners and management contained in the section titled Security Ownership of
Certain Beneficial Owners and Management in the Proxy Statement is incorporated
herein by reference in response to this Item 12.
Item 13. Certain Relationships and Related Transactions.
The information concerning certain relationships and related
transactions contained under the caption Certain Relationships and Related
Transactions in the Proxy Statement is incorporated herein by reference in
response to this Item 13.
-21-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Exhibits
(1) The following Consolidated Financial Statements of Menley & James,
Inc. are included in Item 8 of this report:
Consolidated Balance Sheets as of December 31, 1997 and 1998.
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998.
Consolidated Statements of Stockholders Equity for the years
ended December 31, 1996, 1997 and 1998.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998.
Notes to Consolidated Financial Statements.
(2) The following Consolidated Financial Statement Schedule of Menley &
James, Inc. as required by Item 8 of Form 10-K and Item 14(d) of Form
10-K for the years ended December 31, 1996, 1997 and 1998 is filed as
part of this report:
Page Schedule
---- --------
25 Schedule II -- Valuation and Qualifying
Accounts and Reserves.
All schedules other than the above have been omitted, because they are
not required or the information to be set forth therein is included in
the financial statements or in the notes thereto.
(3) Listing of Exhibits (An exhibit index immediately preceding the
exhibits indicates the page number where each exhibit can be found;
Menley & James will furnish, upon request, any exhibit listed herein
upon the payment of a fee not to exceed reasonable expenses incurred
by Menley & James in furnishing such exhibit):
2.1 Asset Purchase Agreement dated as of August 21, 1998 by and
among Menley & James, Inc., Menley & James Laboratories,
Inc. and Numark Laboratories, Inc. ( Incorporated by
reference to the Companys Quarterly Report on Form 10-Q
filed November 16, 1998. Commission File No. 000-19788).
2.2 Amendment No. 1 to Asset Purchase Agreement dated as of
October 13, 1998 by and among Menley & James, Inc., Menley &
James Laboratories, Inc. and Numark Laboratories, Inc.
(Incorporated by reference to the Companys Quarterly Report
on Form 10-Q filed November 16, 1998. Commission File No.
000-19788).
2.3 Amendment No. 2 to Asset Purchase Agreement dated as of
November 11, 1998 by and among Menley & James, Inc., Menley
& James Laboratories, Inc. and Numark Laboratories, Inc.
(Incorporated by reference to the Quarterly Report of Menley
& James, Inc. on Form 10-Q filed November 16, 1998.
Commission File No. 000- 19788).
*3.1 Restated Certificate of Incorporation of Menley & James,
Inc., as amended on March 19, 1991.
-22-
<PAGE>
*3.2 By-Laws of Menley & James, Inc., amended as of November 26,
1991.
*4.1 Specimen Stock Certificate for Common Stock $.01 par value.
*10.2 1991 Stock Option Plan of Menley & James, Inc., as amended
and restated by Amendment 1998-1 on September 9, 1998
(Incorporated by reference to the Quarterly Report of Menley
& James, Inc. on Form 10-Q filed November 16, 1998.
Commission File No. 000-19788).**
*10.9 Form of Agreement, dated as of November 20, 1991, by and
between Menley & James, Inc. and Warburg, Pincus Investors,
L.P.
10.22 Severance Agreement, dated as of September 24, 1998 between
Menley & James, Inc. and Greg L. Kearl (Incorporated by
reference to the Quarterly Report of Menley & James, Inc. on
Form 10-Q filed November 16, 1998. Commission File No. 000-
19788).**
10.23 Severance Agreement, dated as of October 15, 1995, between
Menley & James, Inc. and Lawrence D. White. (Incorporated by
reference to the Annual Report of Menley & James, Inc. on
Form 10-K filed March 27, 1996. Commission File No. 000-
19788).**
10.26 Letter, dated as of February 13, 1996, repricing outstanding
stock options under the Company's 1991 Stock Option Plan.
(Incorporated by reference to the Annual Report of Menley &
James, Inc. on Form 10-K filed March 27, 1996. Commission
File No. 000-19788).**
10.27 Form of Director Stock Option Agreement. (Incorporated by
reference to the Annual Report of Menley & James, Inc. on
Form 10-K filed March 28, 1997. Commission File No.
000-19788).**
10.29 Stockholders Agreement dated as of August 21, 1998 by an
among Warburg, Pincus Investors, L.P., Lawrence D. White and
Numark Laboratories, Inc. (Incorporated by reference to the
Quarterly Report of Menley & James, Inc. on Form 10-Q filed
November 16, 1998. Commission No. 000-19788).
*22.1 List of Subsidiaries.
27.1 Financial Data Schedule for the year ended December 31,
1998, submitted electronically to the Securities and
Exchange Commission.
* Filed as an exhibit to the Registration Statement on Form S-1, Registration
No. 33-44260, declared effective by the Securities and Exchange Commission
on January 17, 1992, which is incorporated by reference herein.
** Management contract or compensatory benefit plan or arrangement.
(b) Report filed on Form 8-K during the last quarter of 1998:
On December 3, 1998, Menley & James, Inc. filed a Current Report
on Form 8-K regarding the consummation of the sale and assignment
of substantially all of the assets of Menley and James on
November 23, 1998, pursuant to the Asset Purchase Agreement dated
August 21, 1998, and related amendments by and among Menley &
James, Inc., Menley & James Laboratories, Inc. and Numark
Laboratories, Inc.
(c) Exhibits -- The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules -- The response to this portion of
Item 14 is submitted as a separate section of this report.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MENLEY & JAMES, INC.
/s/ Lawrence D. White
--------------------------------------
Lawrence D. White
President and Chief Executive Officer
Date: March 23, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Lawrence D. White Director, Chairman of the Board, March 23, 1999
- ---------------------------- President and Chief Executive Officer
(Lawrence D. White) (Principal Executive Officer)
/s/ Greg L. Kearl Director, Secretary and Treasurer March 23, 1999
- ----------------------------
(Greg L. Kearl)
/s/ Peter J. Carr Director March 23, 1999
- ----------------------------
(Peter J. Carr)
/s/ James T. McMillan, II Director March 23, 1999
- ----------------------------
(James T. McMillan, II)
/s/ Bruce W. Simpson Director March 23, 1999
- ----------------------------
(Bruce W. Simpson)
/s/ James E. Thomas Director March 23, 1999
- ----------------------------
(James E. Thomas)
</TABLE>
-24-
<PAGE>
SCHEDULE II
MENLEY & JAMES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
The Company's valuation accounts were as follows:
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions Period
---------- ---------- ---------- ----------
For the year ended December 31, 1996
Deducted from asset accounts:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts ........... $ 170 $ 50 $ 208 $ 12
Reserve for cash discounts ................ 48 328 330 46
Reserve for returns and allowances ........ 435 1,938 1,907 466
Reserve for inventory obsolescence ........ 5 112 112 5
Valuation allowance for deferred tax assets 1,390 -- -- 1,390
----- ----- ------- ------
Totals .................................. $ 2,048 $ 2,428 $ 2,557 $ 1,919
======= ======= ======= =======
For the year ended December 31, 1997
Deducted from asset accounts:
Allowance for doubtful accounts ........... $ 12 $ 38 $ 24 $ 26
Reserve for cash discounts ................ 46 331 329 48
Reserve for returns and allowances ........ 466 1,558 1,634 390
Reserve for inventory obsolescence ........ 5 257 201 61
Valuation allowance for deferred tax assets 1,390 -- 81 1,309
----- ----- ------- ------
Totals .................................. $ 1,919 $ 2,184 $ 2,269 $ 1,834
======= ======= ======= =======
For the year ended December 31, 1998
Deducted from asset accounts:
Allowance for doubtful accounts ........... $ 26 $ -- $ 26 $ --
Reserve for cash discounts ................ 48 261 309 --
Reserve for returns and allowances ........ 390 1,168 1,558 --
Reserve for inventory obsolescence ........ 61 74 135 --
Valuation allowance for deferred tax assets 1,309 9,917 -- 11,226
----- ----- ------- ------
Totals ................................... $ 1,834 $11,420 $ 2,028 $11,226
======= ======= ======= =======
</TABLE>
In 1996 and 1997, deductions from the allowance for doubtful accounts
represent uncollectible accounts written off, net of recoveries. Deductions from
the reserve for cash discounts represent discounts taken by customers during the
periods. Deductions from the reserve for returns and allowances represent claims
authorized during the periods. Deductions from the reserve for inventory
obsolescence represent inventories written off. In 1998, deductions also include
the write off of valuation allowances related to assets sold.
-25-
<PAGE>
ANNEX B-2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
Commission file number: 000-19788
MENLEY & JAMES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2621602
(State of incorporation) (I.R.S. Employer Identification No.)
125 Strafford Avenue, Suite 300
Wayne, Pennsylvania 19087
(Address of principal executive office)
Registrant's telephone number: (610) 975-4540
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
The number of shares of the registrant's common stock, par value $.01
per share, outstanding as of October 28, 1999, was 6,266,320.
<PAGE>
MENLEY & JAMES, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 1. Financial Statements (unaudited).
Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998................................ 3
Condensed Consolidated Statements of Operations - Three and Nine Months
Ended September 30, 1999 and 1998....................................... 4
Consolidated Statements of Stockholders' Equity
September 30, 1999 and December 31, 1998................................ 5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998........................... 6
Notes to Condensed Consolidated Financial Statements.......................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 9
Item 2. Changes in Securities............................................. 9
Item 3. Defaults Upon Senior Securities................................... 9
Item 4. Submission of Matters to a Vote of Security Holders............... 9
Item 5. Other Information................................................. 9
Item 6. Exhibits and Reports on Form 8-K.................................. 9
Signature..................................................................... 9
</TABLE>
-2-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents .............................. $ 14,043 $ 14,062
Other current assets ................................... 158 195
-------- --------
Total current assets ............................... 14,201 14,257
-------- --------
Total assets ....................................... $ 14,201 $ 14,257
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................... $ 24 $ 16
Accrued expenses ....................................... 34 269
-------- --------
Total current liabilities .............................. 58 285
Preferred stock, $1 par value, authorized 5,000,000
shares, none issued and outstanding
Stockholders' equity:
Common stock, $.01 par value, authorized 15,000,000
shares, issued and outstanding 6,263,280 shares in
1999 and 6,163,520 in 1998 ......................... 63 62
Additional paid-in capital ............................. 45,744 45,620
Accumulated deficit .................................... (31,664) (31,710)
-------- --------
Total stockholders' equity .................................. 14,143 13,972
-------- --------
Total liabilities and stockholders' equity ............. $ 14,201 $ 14,257
======== ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
-------- --------- -------- ----------
<S> <C> <C> <C> <C>
Net sales................................................. $ $ 3,557 $ $ 10,479
Cost of goods sold........................................ 1,734 4,952
-------- --------- -------- ----------
Gross profit.............................................. 1,823 5,527
Selling, general and administrative expenses.............. 144 1,292 409 4,812
Depreciation and amortization............................. 328 995
-------- --------- -------- ----------
Income (loss) from operations............................. (144) 203 (409) (280)
Interest income........................................... 158 42 456 122
Loss on sale.............................................. 6,632 6,632
-------- --------- -------- ----------
Income (loss) before income taxes......................... 14 (6,387) 47 (6,790)
Provision for income taxes................................ 1,283 698
-------- --------- --------- ----------
Net income (loss)......................................... $ 14 $ (7,670) $ 47 $ (7,488)
======== ========= ======== ==========
Basic income (loss) per share............................. $ 0.00 $ (1.24) $ 0.01 $ (1.21)
======== ========= ======== ==========
Diluted income (loss) per share........................... $ 0.00 $ (1.24) $ 0.01 $ (1.21)
======== ========= ======== ==========
Weighted average number of common shares
outstanding - basic.................................... 6,247 6,163 6,200 6,163
======== ========= ======== ==========
Weighted average number of common shares
outstanding - diluted.................................. 6,356 6,242 6,297 6,208
======== ========= ======== ==========
</TABLE>
See accompanying notes.
-4-
<PAGE>
MENLEY & JAMES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998................ $ 62 $ 45,620 $ (31,710) $ 13,972
Net income............................. 47 47
Exercise of stock options.............. 1 123 124
------------- ----------- ------------ ----------
Balance, September 30, 1999............... $ 63 $ 45,743 $ (31,663) $ 14,143
============= =========== =========== ==========
</TABLE>
See accompanying notes.
-5-
<PAGE>
MENLEY & JAMES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1999 1998
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income .......................................... $ 47 $ (7,488)
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization ................ 995
Allowance for accounts receivable ............ 13
Amortization of deferred financing costs
Deferred income taxes (benefit) .............. 692
Loss on sale ................................. 6,632
Changes in operating assets and liabilities: :
Accounts receivable ....................... (287)
Inventory ................................. (215)
Prepaid expenses .......................... 37 678
Accounts payable .......................... 8 (78)
Accrued expenses .......................... (235) (239)
-------- --------
Net cash (used) provided by operating activities ....... (143) 703
Cash flows used in investing activities:
Other, principally property purchases, net .......... (170)
Cash flows used in financing activities:
Repayment of borrowings ............................. (36)
Proceeds from issuance of common stock .............. 124
-------- --------
Net increase (decrease) in cash ........................ (19) 497
Cash and cash equivalents, beginning of period ......... 14,062 2,879
-------- --------
Cash and cash equivalents, end of period ............... $ 14,043 $ 3,376
======== ========
</TABLE>
See accompanying notes.
-6-
<PAGE>
MENLEY & JAMES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1998.
Operating results for the three-month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
NOTE A - INCOME TAXES
The effective tax rate used is based on the estimated effective tax rate
for the full year and is less than the statutory federal tax rate primarily as a
result of the use of net operating loss carryforwards.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Menley & James commenced operation on May 29, 1990 with the acquisition
from SmithKline Beecham of the trademarks, product formulations and production
methodologies, packaging artwork and related inventories for thirty-two
over-the-counter pharmaceutical and toiletry products.
Effective November 23, 1998, we sold substantially all of our assets
and assigned substantially all of our liabilities to Numark Laboratories, Inc.
for a purchase price of $13,430,000.
Results of Operations
Consummation of the sale terminated Menley & James' production and
marketing operations. We presently have no operating business. Since the sale,
we have been seeking to effect a business combination, outside of the
over-the-counter pharmaceutical and toiletry business, with an operating
business in an effort to increase stockholder value.
Selling, general and administrative expenses for the three and nine
month periods ending September 30, 1999, were $144 thousand and $409 thousand
compared to $1.3 million and $4.8 million for the respective 1998 periods. The
decrease is the result of the fact that we completed the sale of our operating
business effective November 23, 1998.
-7-
<PAGE>
Interest income of $158 thousand and $456 thousand, respectively, for
the quarter and nine months ending September 30, 1999, result from the
investment in short-term highly liquid funds.
At December 31, 1998, we had a net operating loss carryforward for
federal income tax purposes of approximately $5.6 million which will expire in
the years 2005 through 2008 and a capital loss carryforward of approximately
$24.1 million.
Impact of Inflation
We believe that, to date, inflation has not had a significant impact on
our operations.
Liquidity and Capital Resources
At September 30, 1999, we had working capital of $14.1 million. Working
capital was primarily provided by the net proceeds from the sale of assets to
Numark.
At the present time, we have minimal cash requirements and operating
activities. Since the November 1998 divestiture of our operating assets, our
strategic focus has been to effect a business combination with a new operating
business which Menley & James believes has potential to increase stockholder
value. It is anticipated that Menley & James would use cash, equity, debt or a
combination of these to achieve a business combination. We may borrow funds to
increase the amount of capital available for a business combination or otherwise
finance the operation of the new operating business. Cash of $13.95 million is
invested in short-term highly liquid funds. No assurance can be given that we
will effect any such business combination or that, if one is effected, it will
increase stockholder value.
Impact of Year 2000
We are currently not engaged in any substantial business operations,
and management, therefore, does not believe that computer problems associated
with the change of year to the year 2000 will have any material effect on our
operations. However, the possibility exists that we may merge with or acquire a
business that will be negatively affected by the "Year 2000" problem. The effect
of such issues on us in the future can not be predicted with any accuracy until
such time as we identify a merger or acquisition target.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
-8-
<PAGE>
PART II
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits None
b. Reports on Form 8-K
The registrant was not required to file any current reports on
Form 8-K during the three months ended September 30, 1999.
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MENLEY & JAMES, INC.
Date: November 5, 1999 /s/ Lawrence D. White
--------------------------------------
Lawrence D. White
President and Chief Executive Officer
-9-
<PAGE>
ANNEX C
DELAWARE GENERAL CORPORATION LAW
SECTIONS 275 THROUGH 282 OF SUBCHAPTER X
ss. 275. Dissolution generally; procedure.
(a) If it should be deemed advisable in the judgment of the board of directors
of any corporation that it should be dissolved, the board, after the adoption of
a resolution to that effect by a majority of the whole board at any meeting
called for that purpose, shall cause notice to be mailed to each stockholder
entitled to vote thereon of the adoption of the resolution and of a meeting of
stockholders to take action upon the resolution.
(b) At the meeting a vote shall be taken upon the proposed dissolution. If a
majority of the outstanding stock of the corporation entitled to vote thereon
shall vote for the proposed dissolution, a certification of dissolution shall be
filed with the Secretary of State pursuant to subsection (d) of this section.
(c) Dissolution of a corporation may also be authorized without action of the
directors if all the stockholders entitled to vote thereon shall consent in
writing and a certificate of dissolution shall be filed with the Secretary of
State pursuant to subsection (d) of this section.
(d) If dissolution is authorized in accordance with this section, a certificate
of dissolution shall be executed, acknowledged and filed, and shall become
effective, in accordance with ss. 103 of this title. Such certificate of
dissolution shall set forth:
(1) The name of the corporation;
(2) The date dissolution was authorized;
(3) That the dissolution has been authorized by the board of directors
and stockholders of the corporation, in accordance with subsections (a) and (b)
of this section, or that the dissolution has been authorized by all of the
stockholders of the corporation entitled to vote on a dissolution, in accordance
with subsection (c) of this section; and
(4) The names and addresses of the directors and officers of the
corporation.
(e) The resolution authorizing a proposed dissolution may provide that
notwithstanding authorization or consent to the proposed dissolution by the
stockholders, or the members of a nonstock corporation pursuant to ss. 276 of
this title, the board of directors or governing body may abandon such proposed
dissolution without further action by the stockholders or members.
(f) Upon a certificate of dissolution becoming effective in accordance with ss.
103 of this title, the corporation shall be dissolved.
ss. 276. Dissolution of nonstock corporation; procedure.
(a) Whenever it shall be desired to dissolve any corporation having no capital
stock, the governing body shall perform all the acts necessary for dissolution
which are required by ss. 275 of this title to be performed by the board of
directors of a corporation having capital stock. If the members of a corporation
having no capital stock are entitled to vote for the election of members of its
governing body, they shall perform all the acts necessary for dissolution which
are required by ss. 275 of this title to be
<PAGE>
performed by the stockholders of a corporation having capital stock. If there is
no member entitled to vote thereon, the dissolution of the corporation shall be
authorized at a meeting of the governing body, upon the adoption of a resolution
to dissolve by the vote of a majority of members of its governing body then in
office. In all other respects, the method and proceedings for the dissolution of
a corporation having no capital stock shall conform as nearly as may be to the
proceedings prescribed by ss. 275 of this title for the dissolution of
corporations having capital stock.
(b) If a corporation having no capital stock has not commenced the business for
which the corporation was organized, a majority of the governing body or, if
none, a majority of the incorporators may surrender all of the corporation
rights and franchises by filing in the office of the Secretary of State a
certificate, executed and acknowledged by a majority of the incorporators or
governing body, conforming as nearly as may, be to the certificate prescribed by
ss. 274 of this title.
ss. 277. Payment of franchise taxes before dissolution or merger.
No corporation shall be dissolved or merged under this chapter until all
franchise taxes due to or assessable by the State including all franchise taxes
due or which would be due or assessable for the entire calendar month during
which the dissolution or merger becomes effective have been paid by the
corporation.
ss. 278. Continuation of corporation after dissolution for purposes of suit and
winding up affairs.
All corporations, whether they expire by their own limitation or are otherwise
dissolved, shall nevertheless be continued, for the term of 3 years from such
expiration or dissolution or for such longer period as the Court of Chancery
shall in its discretion direct, bodies corporate for the purpose of prosecuting
and defending suits, whether civil, criminal or administrative, by or against
them, and of enabling them gradually to settle and close their business, to
dispose of and convey their property, to discharge their liabilities and to
distribute to their stockholders any remaining assets, but not for the purpose
of continuing the business for which the corporation was organized. With respect
to any action, suit or proceeding begun by or against the corporation either
prior to or within 3 years after the date of its expiration or dissolution, the
action shall not abate by reason of the dissolution of the corporation; the
corporation shall, solely for the purpose of such action, suit or proceeding, be
continued as a body corporate beyond the 3-year period and until any judgments,
orders or decrees therein shall be fully executed, without the necessity for any
special direction to that effect by the Court of Chancery.
ss. 279. Trustees or receivers for dissolved corporations; appointment; powers;
duties.
When any corporation organized under this chapter shall be dissolved in any
manner whatever, the Court of Chancery, on application of any creditor,
stockholder or director of the corporation, or any other person who shows good
cause therefor, at any time, may either appoint 1 or more of the directors of
the corporation to be trustees, or appoint 1 or more persons to be receivers, of
and for the corporation, to take charge of the corporation's property, and to
collect the debts and property due and belonging to the corporation, with power
to prosecute and defend, in the name of the corporation, or otherwise, all such
suits as may be necessary or proper for the purposes aforesaid, and to appoint
an agent or agents under them, and to do all other acts which might be done by
the corporation, if in being, that may be necessary for the final settlement of
the unfinished business of the corporation. The powers of the trustees or
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receivers may be continued as long as the Court of Chancery shall think
necessary for the purposes aforesaid.
ss. 280. Notice to claimants; filing of claims.
(a) (1) After a corporation has been dissolved in accordance with the procedures
set forth in this chapter, the corporation or any successor entity may give
notice of the dissolution, requiring all persons having a claim against the
corporation other than a claim against the corporation in a pending action, suit
or proceeding to which the corporation is a party to present their claims
against the corporation in accordance with such notice. Such notice shall state:
a. That all such claims must be presented in writing and must
contain sufficient information reasonably to inform the corporation or successor
entity of the identity of the claimant and the substance of the claim;
b. The mailing address to which such a claim must be sent;
c. The date by which such a claim must be received by the
corporation or successor entity, which date shall be no earlier than 60 days
from the date thereof; and
d. That such claim will be barred if not received by the date
referred to in subparagraph c. of this subsection; and
e. That the corporation or a successor entity may make
distributions to other claimants and the corporation's stockholders or persons
interested as having been such without further notice to the claimant; and
f. The aggregate amount, on an annual basis, of all
distributions made by the corporation to its stockholders for each of the 3
years prior to the date the corporation dissolved.
Such notice shall also be published at least once a week for 2 consecutive weeks
in a newspaper of general circulation in the county in which the office of the
corporation's last registered agent in this State is located and in the
corporation's principal place of business and, in the case of a corporation
having $10,000,000 or more in total assets at the time of its dissolution, at
least once in all editions of a daily newspaper with a national circulation. On
or before the date of the first publication of such notice, the corporation or
successor entity shall mail a copy of such notice by certified or registered
mail, return receipt requested, to each known claimant of the corporation
including persons with claims asserted against the corporation in a pending
action, suit or proceeding to which the corporation is a party.
(2) Any claim against the corporation required to be presented pursuant
to this subsection is barred if a claimant who was given actual notice under
this subsection does not present the claim to the dissolved corporation or
successor entity by the date referred to in subparagraph (1)c. of this
subsection.
(3) A corporation or successor entity may reject in whole or in part,
any claim made by a claimant pursuant to this subsection by mailing notice of
such rejection by certified or registered mail, return receipt requested, to the
claimant within 90 days after receipt of such claim and, in all events, at least
150 days before the expiration of the period described in ss. 278 of this title;
provided however, that
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in the case of a claim filed pursuant to ss. 295 of this title against a
corporation or successor entity for which a receiver or trustee has been
appointed by the Court of Chancery the time period shall be as provided in ss.
296 of this title, and the 30-day appeal period provided for in ss. 296 of this
title shall be applicable. A notice sent by a corporation or successor entity
pursuant to this subsection shall state that any claim rejected therein will be
barred if an action, suit or proceeding with respect to the claim is not
commenced within 120 days of the date thereof, and shall be accompanied by a
copy of ss. ss. 278-283 of this title and, in the case of a notice sent by a
court-appointed receiver or trustee and as to which a claim has been filed
pursuant to ss. 295 of this title, copies of ss. ss. 295 and 296 of this title.
(4) A claim against a corporation is barred if a claimant whose claim
is rejected pursuant to paragraph (3) of this subsection does not commence an
action, suit or proceeding with respect to the claim no later than 120 days
after the mailing of the rejection notice.
(b) (1) A corporation or successor entity electing to follow the procedures
described in subsection (a) of this section shall also give notice of the
dissolution of the corporation to persons with contractual claims contingent
upon the occurrence or nonoccurrence of future events or otherwise conditional
or unmatured, and request that such persons present such claims in accordance
with the terms of such notice. Provided however, that as used in this section
and in ss. 281 of this title, the term "contractual claims" shall not include
any implied warranty as to any product manufactured, sold, distributed or
handled by the dissolved corporation. Such notice shall be in substantially the
form, and sent and published in the same manner, as described in subsection
(a)(1) of this section.
(2) The corporation or successor entity shall offer any claimant on a
contract whose claim is contingent, conditional or unmatured such security as
the corporation or successor entity determines is sufficient to provide
compensation to the claimant if the claim matures. The corporation or successor
entity shall mail such offer to the claimant by certified or registered mail,
return receipt requested, within 90 days of receipt of such claim and, in all
events, at least 150 days before the expiration of the period described in ss.
278 of this title. If the claimant offered such security does not deliver in
writing to the corporation or successor entity a notice rejecting the offer
within 120 days after receipt of such offer for security, the claimant shall be
deemed to have accepted such security as the sole source from which to satisfy
the claim against the corporation.
(c) (1) A corporation or successor entity which has given notice in accordance
with subsection (a) of this section shall petition the Court of Chancery to
determine the amount and form of security that will be reasonably likely to be
sufficient to provide compensation for any claim against the corporation which
is the subject of a pending action, suit or proceeding to which the corporation
is a party other than a claim barred pursuant to subsection (a) of this section.
(2) A corporation or successor entity which has given notice in
accordance with subsections (a) and (b) of this section shall petition the Court
of Chancery to determine the amount and form of security that will be sufficient
to provide compensation to any claimant who has rejected the offer for security
made pursuant to subsection (b)(2) of this section.
(3) A corporation or successor entity which has given notice in
accordance with subsection (a) of this section shall petition the Court of
Chancery to determine the amount and form of security which will be reasonably
likely to be sufficient to provide compensation for claims that have not been
made known to the corporation or that have not arisen but that, based on facts
known to the corporation
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or successor entity, are likely to arise or to become known to the corporation
or successor entity within 5 years after the date of dissolution or such longer
period of time as the Court of Chancery may determine not to exceed 10 years
after the date of dissolution. The Court of Chancery may appoint a guardian ad
litem in respect of any such proceeding brought under this subsection. The
reasonable fees and expenses of such guardian, including all reasonable expert
witness fees, shall be paid by the petitioner in such proceeding.
(d) The giving of any notice or making of any offer pursuant to this section
shall not revive any claim then barred or constitute acknowledgment by the
corporation or successor entity that any person to whom such notice is sent is a
proper claimant and shall not operate as a waiver of any defense or counterclaim
in respect of any claim asserted by any person to whom such notice is sent.
(e) As used in this section, the term "successor entity" shall include any
trust, receivership or other legal entity governed by the laws of this State to
which the remaining assets and liabilities of a dissolved corporation are
transferred and which exists solely for the purposes of prosecuting and
defending suits, by or against the dissolved corporation, enabling the dissolved
corporation to settle and close the business of the dissolved corporation, to
dispose of and convey the property of the dissolved corporation, to discharge
the liabilities of the dissolved corporation and to distribute to the dissolved
corporation's stockholders any remaining assets, but not for the purpose of
continuing the business for which the dissolved corporation was organized.
(f) The time periods and notice requirements of this section shall, in the case
of a corporation or successor entity for which a receiver or trustee has been
appointed by the Court of Chancery, be subject to variation by, or in the manner
provided in, the Rules of the Court of Chancery.
ss. 281. Payment and distribution to claimants and stockholders.
(a) A dissolved corporation or successor entity which has followed the
procedures described in ss. 280 of this title:
(1) Shall pay the claims made and not rejected in accordance
with ss. 280(a) of this title,
(2) Shall post the security offered and not rejected pursuant
to ss. 280(b)(2) of this title,
(3) Shall post any security ordered by the Court of Chancery in any
proceeding under ss. 280(c) of this title, and
(4) Shall pay or make provision for all other claims that are mature,
known and uncontested or that have been finally determined to be owing by the
corporation or such successor entity.
Such claims or obligations shall be paid in full and any such provision for
payment shall be made in full if there are sufficient assets. If there are
insufficient assets, such claims and obligations shall be paid or provided for
according to their priority, and, among claims of equal priority, ratably to the
extent of assets legally available therefor. Any remaining assets shall be
distributed to the stockholders of the dissolved corporation; provided, however,
that such distribution shall not be made before the expiration of 150 days from
the date of the last notice of rejections given pursuant to ss. 280(a)(3) of
this title. In the absence of actual fraud, the judgment of the directors of the
dissolved corporation or the governing
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persons of such successor entity as to the provision made for the payment of all
obligations under paragraph (4) of this subsection shall be conclusive.
(b) A dissolved corporation or successor entity which has not followed the
procedures described in ss. 280 of this title shall, prior to the expiration of
the period described in ss. 278 of this title, adopt a plan of distribution
pursuant to which the dissolved corporation or successor entity (i) shall pay or
make reasonable provision to pay all claims and obligations, including all
contingent, conditional or unmatured contractual claims known to the corporation
or such successor entity, (ii) shall make such provision as will be reasonably
likely to be sufficient to provide compensation for any claim against the
corporation which is the subject of a pending action, suit or proceeding to
which the corporation is a party and (iii) shall make such provision as will be
reasonably likely to be sufficient to provide compensation for claims that have
not been made known to the corporation or that have not arisen but that, based
on facts known to the corporation or successor entity, are likely to arise or to
become known to the corporation or successor entity within 10 years after the
date of dissolution. The plan of distribution shall provide that such claims
shall be paid in full and any such provision for payment made shall be made in
full if there are sufficient assets. If there are insufficient assets, such plan
shall provide that such claims and obligations shall be paid or provided for
according to their priority and, among claims of equal priority, ratably to the
extent of assets legally available therefor. Any remaining assets shall be
distributed to the stockholders of the dissolved corporation.
(c) Directors of a dissolved corporation or governing persons of a successor
entity which has complied with subsection (a) or (b) of this section shall not
be personally liable to the claimants of the dissolved corporation.
(d) As used in this section, the term "successor entity" has the meaning set
forth inss.280(e) of this title.
(e) The term "priority," as used in this section, does not refer either to the
order of payments set forth in subsection (a)(l)-(4) of this section or to the
relative times at which any claims mature or are reduced to judgment.
ss. 282. Liability of stockholders of dissolved corporations.
(a) A stockholder of a dissolved corporation the assets of which were
distributed pursuant to ss. 281(a) or (b) of this title shall not be liable for
any claim against the corporation in an amount in excess of such stockholder's
pro rata share of the claim or the amount so distributed to such stockholder,
whichever is less.
(b) A stockholder of a dissolved corporation the assets of which were
distributed pursuant to ss. 281(a) of this title shall not be liable for any
claim against the corporation on which an action, suit or proceeding is not
begun prior to the expiration of the period described in ss. 278 of this title.
(c) The aggregate liability of any stockholder of a dissolved corporation for
claims against the dissolved corporation shall not exceed the amount distributed
to such stockholder in dissolution.
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