<PAGE> 1
SCHEDULE 14A
(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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Xechem International Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Shefsky & Froelich Ltd., Suite 2500, 444 N. Michigan Ave., Chicago, IL 60611
Attn: Dennis B. O'Boyle
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
XECHEM INTERNATIONAL, INC.
100 JERSEY AVENUE, BUILDING B
SUITE 310
NEW BRUNSWICK, NEW JERSEY 08901-3279
(908) 247-3300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Common and Class A Preferred Stockholders of Xechem International, Inc.:
Notice is hereby given that the annual meeting of stockholders (the
"Meeting" or the "Annual Meeting") of Xechem International, Inc., a Delaware
corporation (the "Corporation"), will be convened at The Hyatt Regency, Two
Albany Street, New Brunswick, New Jersey, on June 11, 1997, at 10:00 a.m.
Eastern Daylight Savings Time (the "Meeting Date"). All holders of Common
Stock, par value $.00001 per share, and Class A Preferred Stock, par value
$.00001 per share, of the Corporation (the "Stockholders") are entitled to
attend the Meeting. The Annual Meeting will be held for the following
purposes:
(1) To elect three directors to hold office until the next annual
meeting of stockholders or otherwise as provided in the
Corporation's By-Laws;
(2) To vote to approve an increase in the number of shares of
Common Stock which may be issued under the Xechem
International, Inc. Amended and Restated Stock Option Plan;
(3) To concur in the selection of Moore Stephens P.C. as the
Corporation's independent auditor for the fiscal year ending
December 31, 1997; and
(4) To transact any other business as may properly come before the
Meeting, or any adjournment or postponement thereof.
Only Stockholders of record at the close of business on April 25, 1997
are entitled to receive notice of the Meeting and to vote at the Meeting or any
adjournment or postponement thereof (the "Eligible Holders"). A list of
Eligible Holders will be available for inspection at the Corporation's office
for at least 10 days prior to the Meeting.
By order of the Board of Directors:
Ramesh C. Pandey, Ph.D.
President and Chief Executive Officer
<PAGE> 3
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS OF
XECHEM INTERNATIONAL, INC.
JUNE 11, 1997
This proxy statement (the "Proxy Statement") is furnished to the
holders (the "Stockholders") of shares of Common Stock (the "Common Stock"),
par value $.00001 per share, and Class A Preferred Stock (the "Class A
Preferred Stock"), par value $.00001 per share (together, the Common Stock and
Class A Preferred Stock are referred to as the "Shares"), of Xechem
International, Inc., a Delaware corporation (the "Corporation"), in connection
with the solicitation of proxies by the Corporation's board of directors (the
"Board") for use at the annual meeting of Stockholders (the "Meeting" or the
"Annual Meeting"). The Corporation's By-Laws (the "By-Laws") require the
directors to call and hold an annual meeting of stockholders each year. The
Annual Meeting will be convened on June 11, 1997, at approximately 10:00 a.m.
Eastern Daylight Savings Time, and any adjournment or postponement thereof.
Copies of this Proxy Statement, and the enclosed form of proxy were first sent
or given to Stockholders on or about May 30, 1997. Stockholders who wish to
attend the Meeting should contact the Corporation at (908) 247-3300 so that
arrangements can be made.
The Corporation will bear all costs in connection with the
solicitation of proxies, including the cost of preparing, printing and mailing
this Proxy Statement. In addition to the use of the mails, proxies may be
solicited by the Corporation's director, officers or employees. None of these
individuals will be additionally compensated, but they may be reimbursed for
out-of-pocket expenses in connection with the solicitation. Arrangements will
also be made with brokerage houses, banks or other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of the Shares held of record by those persons, and the Corporation may
reimburse these custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses incurred in connection therewith.
Shares represented by properly executed proxies in the accompanying
form received by the Board prior to the Annual Meeting will be voted at the
Annual Meeting. Shares not represented by properly executed proxies will not
be voted. If a Stockholder specifies a choice with respect to any matter to be
acted upon, the Shares represented by that proxy will be voted as specified.
If the Stockholder does not specify a choice, in an otherwise properly executed
proxy, with respect to any proposal referred to therein, the Shares represented
by that proxy will be voted with respect to that proposal in accordance with
the recommendations of the Board described herein. A Stockholder who signs and
returns a proxy in the accompanying form may revoke it by: (i) giving written
notice of revocation to the Corporation before the proxy is voted at the Annual
Meeting; (ii) executing and delivering a later-dated proxy; or (iii) attending
the Annual Meeting and voting the Shares in person.
The close of business on April 25, 1997 has been fixed as the date for
determining those Stockholders entitled to notice of and to vote at the Annual
Meeting (the "Record Date"). On the Record Date, the Corporation had
91,507,839 shares of Common Stock and 2,500 shares of Class A Preferred Stock
outstanding. The Common Stock and the Class A Preferred Stock entitle the
holders thereof to one vote per share and 1,000 votes per share, respectively,
at the Annual Meeting. Only Stockholders of
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record as of the Record Date will be entitled to vote at the Annual Meeting.
The presence of a majority of the total amount of votes allocable to
outstanding shares of Common Stock and Class A Preferred Stock, represented in
person or by proxy at the Annual Meeting, will constitute a quorum. If a
quorum is present and any votes are cast in favor of the nominees, they will be
elected directors of the Corporation. Accordingly, abstentions and broker
non-votes will not affect the outcome of the election. All other matters to be
voted on will be decided by the affirmative vote of a majority of the Shares
present or represented at the Meeting and entitled to vote. On any such
matter, an abstention will have the same effect as a negative vote and Shares
held by brokers will not be considered entitled to vote on matters as to which
the brokers have not received authority to vote from beneficial owners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the total voting stock (including the Common Stock and
the Class A Preferred Stock) as of May 23, 1997 by: (i) each Stockholder known
by the Corporation to beneficially own in excess of 5% of the outstanding
shares of Common Stock or Class A Preferred Stock; (ii) each director and
director nominee; and (iii) all directors, director nominees and executive
officers, as a group. All of the outstanding Class A Preferred Stock is owned
by Dr. Ramesh C. Pandey. Except as otherwise indicated in the footnotes to the
table, the persons named below have sole voting and investment power with
respect to the shares beneficially owned by such persons.
<TABLE>
<CAPTION>
CLASS A PREFERRED
COMMON STOCK STOCK
------------ ----------------------
NUMBER OF PERCENT NUMBER OF PERCENT PERCENT OF
NAME AND ADDRESS SHARES OF CLASS SHARES OF CLASS VOTING STOCK(1)
- ---------------- ------ -------- ------ --------- ------------
<S> <C> <C> <C> <C> <C>
The Edward A. Blech Trust (2) 45,000,000 (3) 49.2% 0 --- 47.9%
David Blech (4) 45,000,000 (3)(5) 49.2% 0 --- 47.9%
Michael G. Jesselson 12/18/80 6,250,000 (7) 6.8% 0 --- 6.6%
Trust (6)
Benjamin J. Jesselson 12/18/80 6,250,000 (7) 6.8% 0 --- 6.6%
Trust (6)
Michael G. Jesselson (6) 15,020,000 (8) 16.4% 0 --- 16.0%
Dr. Ramesh C. Pandey (9) 23,821,945 (10) 26.0% 2,500 100% 28.0%
Stephen F. Burg (9) 1,000 (11) * 0 --- *
Dr. Frank Pilkiewicz (9) 0 ---- 0 --- ---
All directors, director 23,822,945 (11) 26.0% 2,500 100% 28.0%
nominees and
executive officers
as a group
(three persons)
* Less than 1%
</TABLE>
(1) Gives effect to the voting rights of 2,500 shares of Class A Voting
Preferred Stock, all of which are owned by Dr. Pandey.
(2) The address of The Edward A. Blech Trust is 418 Avenue I, Brooklyn,
New York 11230.
(3) As reported in a Schedule 13D filed jointly by Mr. Blech and the
Trust.
(4) The address of Mr. Blech is 225 Lafayette Street, New York, New York
10012.
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<PAGE> 5
(5) Includes shares owned by the Trust.
(6) The address of each of the Michael G. Jesselson 12/18/80 Trust, the
Benjamin J. Jesselson 12/18/80 Trust and Michael G. Jesselson is
1301 Avenue of the Americas, Suite 4101, New York, New York 10019.
(7) As reported in a Form 3 filed by Mr. Jesselson.
(8) Includes shares owned by the Michael G. Jesselson 12/18/80 Trust, the
Benjamin J. Jesselson 12/18/80 Trust and the Jesselson Grandchildren
Trust.
(9) The address of each of Dr. Pandey, Mr. Burg and Dr. Pilkiewicz is c/o
Xechem International, Inc., 100 Jersey Avenue, Building B, Suite
310, New Brunswick, New Jersey 08901.
(10) Does not include the Pandey Options (as defined in "Certain
Relationships and Related Transactions"), which presently are not
exercisable and will not be exercisable within 60 days from
April 25, 1997.
(11) Includes 1,000 subject to an option which is exercisable within 60
days from April 25, 1997.
On November 18, 1996, the Company entered into and closed the initial
stage of Blech Purchase Agreement dated November 18, 1996 wherein the
Corporation agreed to issue up to a total of 110,000,000 shares of Common Stock
to David Blech or his designee. See "Certain Relationships and Related
Transactions." Additional issuances under the Blech Purchase Agreement were
closed at various dates through April 14, 1997. As a result of such issuances,
Blech has the ability to control the election of the Board of Directors, as
well as a contractual right to have his nominees elected to the Board.
Accordingly, Blech has obtained the power to control the affairs of the
Company. The Corporation is not aware of any other arrangements, the operation
of which may at a subsequent date, result in a change of control of the
Corporation.
MATTERS TO BE CONSIDERED BY STOCKHOLDERS
1. ELECTION OF DIRECTORS
Three individuals will be elected at the Annual Meeting to serve as
directors of the Corporation until the next annual meeting of stockholders or
otherwise as provided in the By-Laws. Unless instructions to the contrary are
given, the persons named as proxy voters in the accompanying proxy, or their
substitutes, will vote for the following nominees for directors with respect to
all proxies received by the Corporation. If any of the nominees should become
unavailable for any reason, the votes will be cast for a substitute nominee
designated by the Board. The board of directors have no reason to believe that
the nominees named will be unable to serve, if elected.
The nominees for director are as follows:
Ramesh C. Pandey, Ph.D., age 58, is the founder of the Corporation.
He has been Chief Executive Officer and President and a director of the
Corporation's subsidiary, Xechem, Inc. (the "Subsidiary"), since its formation
in 1990 and the Chief Executive Officer, President, and Chairman of the Board
of Directors of the Corporation since its formation in February 1994. From
1984 to March 1990, Dr. Pandey was the President and Chief Scientist of the
Corporation's predecessor, Xechem Inc., formerly a subsidiary of
Fujisawa/LyphoMed, Inc. Dr. Pandey served as a visiting Professor at the
Waksman Institute of Microbiology at Rutgers University from 1984 to 1986. Dr.
Pandey has also served as scientist, consultant, and research associate for
several universities and private laboratories. Dr. Pandey has published
numerous articles in professional publications, such as the Journal of
Antibiotics, the Journal
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<PAGE> 6
of the American Chemical Society and the Journal of Industrial Microbiology.
Dr. Pandey is a member of the editorial board of the Journal of Antibiotics and
of several professional societies.
Stephen F. Burg, age 59, since 1986 has been chief executive officer
of El Dorado Investments, which offers corporate growth strategies for public
and private companies, nationally and internationally. From 1978 to 1986, Mr.
Burg was Vice President-Corporate Acquisitions for Evans Products Company and
from 1973 to 1978 was Corporate Director-Acquisitions and Human Services for
Jack August Enterprises.
Frank G. Pilkiewicz, age 50, provides consulting services to the
biotechnology and pharmaceutical industries. From November 1992 to November
1995, Dr. Pilkiewicz was Chief Scientific Officer and Executive Vice President
for Research and Development and a member of the Board of Directors of
OncoTherapeutics, Inc. From September 1986 to November 1992, he was employed
by The Liposome Company, Inc., with the last position as Vice President of
Research & Development. From 1979 to 1986, Dr. Pilkiewicz was a Senior
Research Investigator in the Department of Cell Biology in the Squibb Institute
for Medical Research.
The Corporation's By-Laws do not require that the directors meet any
specific number of times during the year. Such meetings may be held either in
person or by telephonic conference. The Board met seven times during the year
ended December 31, 1996.
The Board has an audit committee presently consisting of Dr. Pandey
which was formed on May 26, 1995. The audit committee reviews with the
Corporation's independent public accountants the scope and timing of their
audit services and any other services they are asked to perform, the
accountants report on the Corporation's financial statements following
completion of their audit and the Corporation's policies and procedures with
respect to internal accounting and financial controls. In addition, the audit
committee makes annual recommendations to the Board for the appointment of
independent accountants for the ensuing year.
The audit committee held two meetings during the year ended December
31, 1996.
The Board has a stock option committee presently consisting of Dr.
Pandey which was formed on May 26, 1995. The stock option committee
administers the Xechem International, Inc. Amended and Restated Stock Option
Plan (the "Plan") and reviews and recommends to the Board stock options to be
granted.
The stock option committee held two meetings during the year ended
December 31, 1996.
The Board has a compensation committee presently consisting of Dr.
Pandey which was formed on May 26, 1995. The compensation committee reviews
and recommends to the Board the compensation and benefits of all officers of
the Corporation and reviews general policy matters relating to compensation and
benefits of employees of the Corporation.
The compensation committee held no meetings during the year ended
December 31, 1996.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more
than ten percent of a registered class of the Corporation's equity securities,
to file initial statements of beneficial ownership (Form 3), and statements of
changes in beneficial ownership (Forms 4 or 5), of Common Stock and other
equity securities of the
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<PAGE> 7
Corporation with the U.S. Securities and Exchange Commission (the "SEC") and
the National Association of Securities Dealers, Inc. (the "NASD"). The SEC
requires officers, directors and greater than ten percent stockholders to
furnish the Corporation with copies of all these forms filed with the SEC or
the NASD.
To the Corporation's knowledge, based solely on its review of the
copies of these forms received by it, or written representations from certain
reporting persons that no additional forms were required for those persons, the
Corporation believes that all filing requirements applicable to its officers,
director, and greater than ten percent beneficial owners were complied with,
except that David Blech and The Edward A. Blech Trust (the "Trust"), which
became reporting persons on November 18, 1996, did not file a Form 3 reporting
their ownership of the Corporation's securities (a Form 5 was later filed).
RECOMMENDATION OF THE BOARD: The Board hereby recommends and
nominates Dr. Pandey, Mr. Burg and Dr. Pilkiewicz for election as directors of
the Corporation by the Stockholders at the Annual Meeting to serve until the
next annual meeting of stockholders or as otherwise provided in the By-Laws.
The three nominees receiving the highest vote totals will be elected
directors of the Corporation. Accordingly, abstentions and broker non-votes
will not affect the outcome of the election.
2. APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK WHICH
MAY BE ISSUED UNDER THE XECHEM INTERNATIONAL, INC. AMENDED AND
RESTATED STOCK OPTION PLAN
The Plan amends and restates the 1993 Xechem, Inc. Stock Option and
Incentive Plan, the obligations under which the Corporation assumed as part of
the Corporation's organization and prior to its April 26, 1994 public offering.
The purpose of the Plan is to encourage ownership of Common Stock by the
Corporation's key employees, non-employee directors and advisors, including
members of the Company's Scientific Adversary Board, in order to attract such
persons, to induce such persons to remain in the employ of the Corporation or
its affiliates, or to serve as an advisor to the Corporation, and to provide
additional compensation for such persons to promote the success of the
Corporation or its affiliates. Key employees include employees who are also
officers or directors of the Corporation or its affiliates.
The decision to grant options to these individuals is intended to
reward them for their services to the Corporation without burdening the
Corporation with significant increases in direct compensation. Since its
inception, the Corporation's directors, key employees and advisors have been
endeavoring to reach the Corporation's objectives of developing a more
efficient drug discovery process and niche generic drugs, as well as
commercializing and marketing such drugs. Through their efforts, the
Corporation believes that significant progress has been made toward these
objectives. The Board believes that the ability to achieve these objectives is
best served by the alignment of the financial success of the Corporation's
directors and key employees with that of its Stockholders.
Stockholder approval of this amendment to the Plan is sought to
continue to qualify the Plan under Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and thereby render certain transactions
under the Plan exempt from certain provisions of Section 16 of the Exchange
Act.
As of the date of this Proxy Statement, the Company has granted
options for 599,500 shares of Common Stock available for issuance under the
Plan. The Board has authorized an increase of 2,000,000 shares of Common Stock
for issuance under the Plan, for a total of 2,600,000 shares. The Board
believes
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<PAGE> 8
that it is in the best interests of the Corporation and the Stockholders to
increase the number of shares of Common Stock which may be issued under the
Plan in order to continue to attract key persons to the Corporation and reward
them for their efforts. With the exception of increasing the number of shares
of Common Stock which may be issued under the Plan, the Board is not seeking
Stockholder approval of any other provisions of the Plan. Therefore, the Board
recommends that the Stockholders vote to increase the number of shares of
Common Stock which may be issued under the Plan.
General
The Plan grants the Board authority to issue options to purchase up to
600,000 shares (to be increased to 2,600,000 shares) of Common Stock and any
other stock or security resulting from adjustments or substitutions as
described in the Plan. The Common Stock will be reserved and available for
purchase upon the exercise of options granted under the Plan.
The Plan provides for the issuance of incentive options under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonstatutory options which are not intended to be incentive stock options under
Section 422 of the Code. The decision as to whether incentive options or
nonstatutory options will be issued to recipients is solely within the
discretion of the Board. The Board will administer the Plan and have the
authority to determine, among other things, the individuals to be granted
incentive options or nonstatutory options, the exercise price at which the
Common Stock may be acquired, the number of shares subject to each option and
the exercise period of each option. The Board will also be authorized to
construe and interpret the Plan and to prescribe additional terms and
conditions of exercise in option agreements and provide the form of option
agreement to be utilized with the Plan.
Incentive options terminate not more than ten years from the date of
grant; however, such options terminate not more than five years from the date
of grant if such options are required to have an exercise price of at least
110% of fair market value. Nonstatutory options terminate not more than eleven
years from the date of grant.
Options will not be transferable except by will or by the laws of
descent and distribution, and are exercisable during an optionee's lifetime
only by the optionee or the appointed guardian or legal representative of the
optionee. Upon the (i) death or permanent and total disability of an optionee,
or (ii) termination of employment with the Corporation, then any unexercised
options to acquire Common Stock will be exercisable at any time within six
months in the case of (i) and 30 days in the case of (ii) (but in no case
beyond the expiration date specified in the option agreement).
The Plan requires the optionee to pay, at the time of exercise, for
all shares acquired on exercise in cash, Common Stock or other forms of
consideration acceptable to the Board.
If the Corporation declares a stock dividend, splits its stock,
combines or exchanges its Common Stock, or engages in any other transactions
which result in a change in capital structure, such as a merger, consolidation,
dissolution, liquidation or similar transaction, the Board may adjust or
substitute, as the case may be, the number of shares of Common Stock available
for issuance upon exercise of options granted under the Plan, the number of
shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any
other characteristics of the options as the Board deems necessary to equitably
reflect the effects of those changes on the option holders.
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<PAGE> 9
The Corporation has granted options for a total of 599,500 shares
under the Plan. Included in the count are options to purchase 118,500 shares
granted to former directors and a former executive officer of the Company and
options to purchase 481,000 shares granted to other employees of the Company.
Pursuant to the terms of the grants, the options for shares granted
under the Plan vest and are exercisable in installments as follows: (i) to the
extent of 20% of the number of shares of Common Stock, commencing on the first
anniversary of the date of grant; and (ii) to the remaining 80% of shares, an
additional 20% commencing on each of the second through the fifth anniversary
of the date of grant. Aggregated Option Exercises in Fiscal 1996 and Fiscal
Year-End Option Values
The following table provides information on option exercises during
the year ended December 31, 1996 by the Company's present director and the
value of such party's unexercised options as of December 31, 1996.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 12/31/96 at 12/31/96 (1)
Share
Name Acquired Value
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
(#) ($)
<S> <C> <C> <C> <C> <C> <C>
Dr. Ramesh C. Pandey 0 0 0 707,000(2) 0 $633,649
</TABLE>
(1) Represents the excess, if any, of the closing price of the Common
Stock as quoted on the Nasdaq SmallCap on December 31, 1996 ($.91)
over the exercise price of the options, multiplied by the corresponding
number of underlying shares.
(2) These options were issued in exchange for the capital stock of the
Subsidiary in the reorganization of the Company. These options are
exercisable upon the Company attaining specific financial goals.
Discussion of Federal Income Tax Consequences
The following summary of tax consequences is not comprehensive and is
based on laws and regulations in effect on May 27, 1997. These laws and
regulations are subject to change on a retroactive basis.
The grant of a nonqualified option under the Plan is not a taxable
event and the Corporation is not entitled to a deduction upon such grant. Upon
exercise of a nonqualified option, participants will be taxed at ordinary
income rates on the difference between the exercise price of the option and the
fair market value of the Common Stock issued pursuant to such exercise. Fair
market value generally will be determined on the date of exercise (or in the
case where a sale of property could subject a transferor to suit under Section
16(b) of the Securities Exchange Act of 1934, the later of the date of exercise
and the date which is six months and one day after the date on which the option
was granted, unless the participant elects to be taxed based on the fair market
value at the date of exercise). The Corporation will receive a corresponding
deduction for the amount of income recognized by a participant upon exercise of
an option in the same year the participant recognizes income in connection with
the exercise of an option. The participant, generally, will have a tax basis
for the Common Stock acquired equal to the fair
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<PAGE> 10
market value of the Common Stock at the date of exercise. Any gain or loss
realized upon the subsequent sale of the Common Stock issued upon exercise of a
nonqualified option will be taxed at either long-term or short-term capital
gain (or loss) rates, depending on the selling stockholder's holding period.
The subsequent sale would have no tax consequences for the Corporation.
The recipient of an incentive stock option generally will not
recognize any income upon its grant or upon its exercise if no disposition of
the Common Stock received upon exercise is made within two years from the date
of grant or within one year after the acquisition of the Common Stock. The
excess of the fair market value of the Common Stock over the exercise price of
the Common Stock received upon the exercise of an incentive stock option,
however, is a tax preference item in the year of exercise which may subject the
recipient to an alternative minimum tax. Upon a subsequent sale of Common
Stock acquired pursuant to exercise of an incentive stock option, if the
foregoing holding periods are met, the recipient will recognize a long-term
capital gain upon the difference between the sale price and the exercise price,
and the Corporation will receive no deduction from taxable income. If these
holding periods are not met, the recipient generally will realize ordinary
income to the extent of the difference between the exercise price and the fair
market value of the Common Stock on the date the option is exercised. However,
if the disposition is by a sale or exchange at a price less than the fair
market value of the Common Stock on the date of exercise, then, in general, the
amount of ordinary income is limited to the gain recognized on such sale or
exchange. If the sale price exceeds the fair market value of the Common Stock
on the date of exercise, such excess will be a long-term or short-term capital
gain, depending on the employee's holding period for the Common Stock being
sold. The Corporation will have a deduction in an amount equal to the ordinary
income recognized by the optionee.
RECOMMENDATION OF THE BOARD: The Board recommends that the
Stockholders concur in the following resolution which will be presented for a
vote of the Stockholders at the Annual Meeting:
RESOLVED, that the Xechem International, Inc. Amended and Restated
Stock Option Plan be amended to increase the number of shares of Common Stock
which may be issued under such plan from 600,000 shares to 2,600,000 shares.
The affirmative vote of a majority of the votes cast by Stockholders
present in person or by proxy and eligible to vote at the Meeting, a quorum
being present, is required for the adoption of the foregoing resolution.
3. SELECTION OF INDEPENDENT AUDITOR
The Corporation's financial statements, including those for the fiscal
year ended December 31, 1996, are included in the Annual Report furnished to
all Stockholders. The year-end statements have been audited by the independent
firm of Moore Stephens P.C. (formerly known as Mortenson and Associates, P.C.)
which has served as the Corporation's independent auditor since its formation
in February 1994. The total fees paid or accrued to Moore Stephens P.C. in
connection with the 1996 audit are approximately $18,000. The Board believes
that Moore Stephens P.C. is knowledgeable about the Corporation's operations
and accounting practices and is well qualified to act in the capacity of
independent auditor. Therefore, the Board has selected Moore Stephens P.C. as
the Corporation's independent auditor to examine its financial statements for
the fiscal year ended December 31, 1997. Although the selection of an auditor
does not require a Stockholder vote, the Board believes it is desirable to
obtain the concurrence of the Stockholders to this selection. Due to the
difficulty and expense involved in retaining another independent firm on short
notice, the Board does not contemplate appointing another
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<PAGE> 11
firm to act as the Corporation's independent auditor for fiscal year 1997 if
the Stockholders do not concur in the appointment of Moore Stephens P.C.
Instead, the Board will consider the vote as advice in making its selection of
an independent auditor for the following year.
Representatives of Moore Stephens P.C. are expected to be present at
the Meeting and will have the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD: The Board considers Moore
Stephens P.C. to be well- qualified and recommends that the Stockholders concur
in the following resolution which will be presented for a vote of the
Stockholders at the Annual Meeting:
RESOLVED, that the Stockholders concur in the appointment, by the
Board, of Moore Stephens P.C. to serve as the Corporation's independent auditor
for the fiscal year ended December 31, 1997.
The affirmative vote of a majority of the votes cast by Stockholders
present in person or by proxy and eligible to vote at the Meeting, a quorum
being present, is required for the adoption of the foregoing resolution.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
A. DIRECTOR COMPENSATION
Directors serve without compensation for such services.
B. EXECUTIVE COMPENSATION
Set forth below is information concerning the compensation for 1994,
1995 and 1996 for the Corporation's President and Chief Executive Officer, who
is the only executive officer of the Corporation whose compensation exceeded
$100,000 during such years:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION ALL OTHER
COMPENSATION
OTHER AWARDS PAYOUTS
ANNUAL RESTRICTED SECURITIES LONG TERM
YEAR SALARY BONUS COMPENSATION STOCK UNDERLYING INCENTIVE
AWARDS OPTIONS PLAN PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dr. Ramesh Pandey 1994 $137,846 0 $7,978 0 0 0 0
1995 $139,525 0 $7,072 0 0 0 0
1996 $118,365 0 $13,375 0 0 0 0
</TABLE>
Employment Agreements.
Ramesh C. Pandey is employed pursuant to an agreement which provides for a
base salary of $140,000 per year, subject to an annual increase in proportion
to the increase in the consumer price index, such bonuses as a majority of the
disinterested members of the Board of Directors may determine, and a royalty of
2 1/2% of the Corporation's net profits before taxes with respect to any
products developed by the Corporation or its affiliates during the term of the
agreement. The royalty will be payable to Dr.
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<PAGE> 12
Pandey or his estate so long as the Corporation continues to sell such
products, notwithstanding any termination of the agreement. The agreement
provides for a ten year term, but permits either party to terminate the
agreement after five years; if the Corporation terminates the agreement, Dr.
Pandey will be entitled to receive severance equal to his compensation for the
two years prior to termination. Dr. Pandey has agreed not to engage in certain
business activities (generally similar to those currently engaged in by the
Corporation) for six months (four months, in certain cases) after the
termination of his employment with the Corporation. If there is a change in
the beneficial ownership of 20% or more of Xechem's capital stock, Dr. Pandey
may, at any time within one year after such event, terminate the agreement, in
which event his noncompete and confidentiality agreement terminate and all
indebtedness of the Corporation to Dr. Pandey shall accelerate. Dr. Pandey has
agreed and approved the transactions contemplated by the Blech Purchase
Agreement (see "Certain Relationships and Related Transactions") and,
accordingly, such transactions do not and will not result in a "Change of
Control" as defined in the Employment Agreement. In August 1996, due to the
financial constraints of the Company, Dr. Pandey's salary was reduced by 54%.
In November 1996, 50% of the reduction was restored and in February 1997, Dr.
Pandey was returned to full salary. The reduction in salary was not accrued
and will not be paid to Dr. Pandey.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 25, 1994, Dr. Ramesh C. Pandey, the Corporation's Chairman of the
Board and Chief Executive Officer, exchanged the capital stock of the
Subsidiary for 2,800,000 shares of the Corporation's Common Stock, 2,500 shares
of Class A Preferred Stock, and the Pandey Options. On the same date, Dr.
Pandey exchanged $107,000 of indebtedness of the Subsidiary for 1,070 shares of
Class B. Preferred Stock and $517,451 of indebtedness of the Subsidiary
(including accrued interest) for a note of the Corporation in the same amount.
Pursuant to the Blech Purchase Agreement, Dr. Pandey subsequently exchanged
such Class B Preferred Stock and note for other equity securities of the
Corporation.
From December 1989 to October 1990, Dr. Pandey was a minority stockholder
and director of Advanced Molecular Technologies, Inc., a Washington-based
corporation ("AMT") formed to gather paclitaxel bark in the Pacific Northwest
for sale. Dr. Pandey had no involvement in AMT's day-to-day activities, and
believes he was asked to serve on its board of directors to add academic
credibility to its efforts. Ocean Marine Services ("Ocean Marine") claimed to
have made an investment of $225,000 in AMT in 1990. AMT subsequently ceased
operations. In January 1991, Ocean Marine filed a lawsuit against Dr. Pandey
and others in Federal District Court in Washington State, alleging breaches of
state and federal securities laws in connection with Ocean Marine's investment
and seeking rescission and damages. Dr. Pandey denied any wrongdoing in
connection with the litigation. However, given the time and expense associated
with a Washington-based lawsuit and the uncertainties of litigation, an
out-of-court settlement was reached in late 1992 by Dr. Pandey, with no finding
of wrongdoing by Dr. Pandey. Although the Corporation was not a party to such
proceedings, and Dr. Pandey received a general release from Ocean Marine, the
Corporation has agreed to indemnify Dr. Pandey against any future claims by
Ocean Marine.
On October 12, 1994, counsel for Ocean Marine Services ("Ocean Marine")
requested additional information from Dr. Pandey, alleging that it would not
have entered into a settlement agreement in 1992 had it known that discussions
were ongoing with Regal One Corporation regarding a possible business
transaction. In April 1995 Ocean Marine instituted an action against Dr.
Pandey seeking to set aside the settlement agreement based upon its assertion
that such discussions were not disclosed to it, and seeking remedies under
applicable state and federal securities laws, including interest, attorneys
fees and costs, which were alleged to have cumulated over $525,000 by April 20,
1996, and which could include additional attorneys fees, interest and costs
through the determination of such action. Dr. Pandey denied
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<PAGE> 13
that any wrongdoing had occurred. However, the Corporation determined that it
was in the Corporation's best interest to settle such action, given the cost of
defending such action, together with the possibility, however remote, that an
adverse outcome could have a material adverse effect on the Corporation. In
addition, the Corporation determined that the time and effort necessary to
defend such action would detract from Dr. Pandey's ability to exert full time
efforts in executing the Corporation's business plan. Accordingly, the lawsuit
was settled in May 1996 by the payments of $115,000 and issuance of 25,000
shares of unregistered Common Stock to the plaintiffs (subject to piggyback
registration rights), pursuant to its indemnification obligation to Dr. Pandey.
During 1994, Dr. Pandey transferred the stock of Xechem Laboratories to the
Corporation, in exchange for reimbursement of the amount Dr. Pandey
contributed to Xechem Laboratories to pay its organizational and related
expenses (approximately $5,000). Xechem Laboratories is presently inactive.
Subject to obtaining necessary regulatory approvals in India, Dr. Pandey
has transferred his interest in Xechem India to the Corporation for no
consideration other than reimbursement of amounts (equal to approximately
$5,000) Dr. Pandey advanced for organizational expenses. Dr. Pandey's
brothers own the remaining equity in Xechem India, some or all of which the
Corporation anticipates will be made available to other, unrelated, persons in
India. Both of Dr. Pandey's brothers and Mr. Anil Sharma, a chartered
accountant, serve as directors of Xechem India. No compensation is paid to Dr.
Pandey, his relatives or Mr. Anil Sharma for service as directors.
In connection with the Corporation's private offering completed in February
1996, for every three shares of Common Stock sold by the Corporation, the
Corporation purchased for nominal consideration one share of Common Stock from
Dr. Pandey. The maximum number of shares subject to purchase by the
Corporation from Dr. Pandey was 400,000 shares for an aggregate purchase price
of $4.00. The Corporation purchased 66,055 of such shares from Dr. Pandey.
Effective June 25, 1996, an entity wholly-owned by Dr. Pandey became a
member of Vineyard Productions, L.L.C. ("Vineyard"), which in June 1994
acquired the building in which the Corporation leases its offices. Prior to
making such investment, Dr. Pandey informed the Board of Directors of the
opportunity for such investment, and the Board determined that the Corporation
was not interested in such opportunity and approved Dr. Pandey making the
investment. The Corporation's lease was entered into prior to that date (with
a prior owner of the building) and has not been modified subsequent thereto.
The Corporation paid Vineyard $110,491 in 1996, including $21,705 subsequent to
June 25, 1996.
On November 18, 1996, the Corporation entered into and closed the initial
stage of a Stock Purchase Agreement (the "Blech Purchase Agreement") with David
Blech or his designees ("Blech") providing for the sale of up to 55,000 shares
of Class C Series 2 Voting Cumulative Preferred Stock (the "Series 2 Preferred
Shares") for a purchase price of $100 per share ($5,500,000 in the aggregate),
or the underlying shares of Common Stock, over approximately nine months. At
the initial closing, The Edward A. Blech Trust (the "Trust") purchased 5,000
Series 2 Preferred Shares for $500,000. The Trust purchased an additional
5,000 Series 2 Preferred Shares on December 30, 1996; 5,000 Series 2 Preferred
Shares on January 8, 1997; and 7,500 Series 2 Preferred Shares on February 7,
1997. The Blech Purchase Agreement was amended, effective March 27, 1997, to
modify the dates for closing of other purchases of portions of the shares
issuable thereunder. Pursuant to the Blech Purchase Agreement, on February 7,
1997, Dr. Ramesh Pandey, the Corporation's Chairman and Chief Executive
Officer, exchanged certain indebtedness owed by the Corporation to him and the
1,070 shares of Class B Preferred Stock of the Corporation held by him for
13,180 shares of Series 3 Preferred Shares. Pursuant to their terms, effective
February 8, 1997, the then outstanding 22,500 Series 2 Preferred Shares and
13,180 Series 3 Preferred Shares were converted into 45,000,000 and 21,088,000
shares of Common Stock, respectively. Under the
11
<PAGE> 14
Blech Purchase Agreement, as amended, Blech has the right to purchase an
additional 25,000,000 shares of Common Stock on or before April 30, 1997,
20,000,000 shares of Common Stock on or before June 2, 1997, and a final
10,000,000 shares on or before July 15, 1997.
Two other trusts, not otherwise affiliated with Blech, each purchased
5,000,000 shares of Common Stock on March 27, 1997 and Blech purchased a
further 5,000,000 shares of Common Stock on April 14, 1997. On May 1, 1997,
Blech sold (at his cost) his 5,000,000 shares to the two referenced
unaffiliated trusts and a third unaffiliated trust.
Pursuant to the Blech Purchase Agreement, the Corporation, Dr. Pandey and
Blech have also entered into a stockholders' agreement, which, among other
things: (i) generally prohibits the sale of any of Dr. Pandey's shares of
capital stock of the Corporation for a period of five years, except with the
consent of Blech; (ii) provides Blech with the right to sell his pro rata
portion (relative to the holdings of Dr. Pandey) of any proposed sale of
shares by Dr. Pandey, and a reciprocal right in favor of Dr. Pandey to sell his
pro rata portion of any shares sold by Blech; (iii) requires Blech to vote for
Dr. Pandey as a director of the Corporation, and to use his efforts to cause
Dr. Pandey to remain Chairman, President and chief executive officer of the
Corporation; (iv) requires the Corporation and its directors (subject to their
fiduciary duties to the Corporation and the shareholders of the Corporation) to
take such actions as Blech may request to elect his nominees to constitute a
majority of the directors of the Corporation (to date, Blech has not exercised
such right); and (v) provides for certain demand and piggyback registration
rights in favor of Blech.
The Corporation is obligated to pay a commission of $50,000 and issued an
option to purchase 200,000 shares of Common Stock to Kensington Wells
Incorporated ("KWI") for introducing Mr. Blech to the Corporation.
The Corporation has received an opinion from The Griffing Group, Inc., an
independent valuation and financial advisory firm, as to the fairness of the
above transactions, from a financial point of view, to the shareholders of the
Corporation.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 1997 Annual Meeting of Stockholders must be
received by the Corporation at its executive office in New Brunswick, New
Jersey, on or prior to January 29, 1998 for inclusion in the Corporation's
proxy statement for that meeting. Any stockholder proposal must also meet the
other requirements for stockholder proposals as set forth in the rules of the
U.S. Securities and Exchange Commission relating to stockholder proposals.
12
<PAGE> 15
OTHER MATTERS
As of the date of this Proxy Statement, no business, other than that
discussed above, is to be acted upon at the Meeting. If other matters not
known to the Board should, however, properly come before the Meeting, the
persons appointed by the signed proxy intend to vote it in accordance with
their best judgment.
Xechem International, Inc.
By the Order of the Board of Directors
Ramesh C. Pandey, Ph.D.
President and Chief Executive Officer
New Brunswick, New Jersey
May 30, 1997
A COPY OF THE XECHEM INTERNATIONAL, INC. 1996 ANNUAL REPORT ON FORM 10-KSB
FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION WILL BE SUPPLIED TO
STOCKHOLDERS WITHOUT CHARGE. REQUESTS FOR THE REPORT SHOULD BE DIRECTED TO:
Xechem International, Inc.
100 Jersey Avenue, Building B, Suite 310
New Brunswick, New Jersey 08901-3279
YOUR VOTE IS IMPORTANT. THE PROMPT RETURN OF
PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. PLEASE PROMPTLY
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY
IN THE ENCLOSED ENVELOPE.
13
<PAGE> 16
XECHEM INTERNATIONAL, INC.
100 JERSEY AVENUE, BUILDING B, SUITE 310
NEW BRUNSWICK, NEW JERSEY 08901
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Dr. Ramesh C. Pandey and Leonard A.
Mudry, and each of them, as Proxies, with the power to appoint their
substitutes, and hereby authorizes them to represent and to vote, as designated
below, all the Shares of Common Stock and Class A Preferred Stock of Xechem
International, Inc. (the "Corporation") held of record by the undersigned on
April 25, 1997, at the Annual Meeting of Stockholders when convened on June 11,
1997, or any adjournment thereof.
1. ELECTION OF DIRECTORS--PROPOSAL, to elect three Directors to hold office
until the next Annual Meeting of Stockholders, or otherwise as provided in the
Corporation's Certificate of Incorporation (check one box):
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as withheld in the space provided below) to vote for any of the nominees listed below
</TABLE>
NOMINEES: Dr. Ramesh C. Pandey, Stephen F. Burg and Dr. Frank Pilkiewicz
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
________________________________________________________________________________
2. STOCK OPTION PLAN--PROPOSAL to approve an increase in the number of shares
of Common Stock which may be issued under the Xechem International, Inc.
Amended and Restated Stock Option Plan (check one box):
[ ] FOR [ ] AGAINST [ ] ABSTAIN
CONTINUED ON THE REVERSE SIDE.
3. SELECT AUDITOR--PROPOSAL to concur in the selection of Moore Stephens P.C.
as the Corporation's independent auditor for the fiscal year ending December
31, 1997 (check one box); and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER BUSINESS--In their discretion, the Proxies are authorized to transact
any other business as may properly come before the Meeting, or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
_______________________________________
Signature Date
_______________________________________
Signature Date
NOTE: Sign exactly as name appears to
the left. If joint tenant, both should
sign, of attorney, executor,
administrator, trustee or guardian,
give full title as such. If a
corporation, please sign corporate name
by President or authorized officer. If
a partnership, sign in full
partnership name by authorized person.
