PANAX PHARMACEUTICAL COMPANY LTD.
--------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 19, 1996
--------------------------------------------
To the Shareholders:
The Annual Meeting of Shareholders of Panax Pharmaceutical
Company Ltd., a New York corporation (the "Company"), will be
held at the offices of the Company at 425 Park Avenue, 27th
Floor, New York, New York on Thursday, December 19, 1996, at
10:00 A.M., local time, for the following purposes:
(1) To elect eight Directors of the Company, each of whom is to
hold office until the next Annual Meeting of Shareholders
and until the due election and qualification of his or her
successor.
(2) To consider a proposal to amend the Company's Stock Option
Plan.
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record at the close of business on
November 8, 1996, will be entitled to notice of, and to vote at,
the meeting or any adjournments thereof.
If you cannot personally attend the meeting, it is requested
that you promptly fill in, sign, and return the proxy submitted
to you herewith.
By order of the Board of Directors
/x/ NORMAN EISNER
--------------------------
NORMAN EISNER
Secretary
Dated: November 8, 1996
<PAGE> 1
PANAX PHARMACEUTICAL COMPANY LTD.
PROXY STATEMENT
This proxy statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Panax
Pharmaceutical Company Ltd., a New York corporation (the
"Company"), to be voted at the Annual Meeting of Shareholders
(the "Meeting") scheduled to be held at the offices of the
Company at 425 Park Avenue, 27th Floor, New York, New York, on
Thursday, December 19, 1996, at 10:00 A.M., local time, and at
any adjournment thereof.
Only shareholders of record as of the close of business on
November 8, 1996, are entitled to notice of and to vote at the
Meeting or any adjournment thereof. On that date, the Company
had outstanding 3,135,710 shares of Common Stock, par value
$.0001 per share (the "Common Stock"). The presence in person or
by proxy of the holders of a majority of such shares shall
constitute a quorum for the transaction of business at the
Meeting. Each share is entitled to one vote.
Each form of proxy which is properly executed and returned
to the Company will be voted in accordance with the directions
specified thereon, or, if no directions are specified, will be
voted for (i) the election as Directors of the persons named
herein under the caption "Election of Directors" and (ii) the
proposal to amend the Company's Stock Option Plan to increase by
300,000 the number of shares subject to the Plan. Any
shareholder giving a proxy may revoke it at any time before it is
exercised. Such revocation may be effected by voting in person
or by proxy at the Meeting, by returning to the Company prior to
the Meeting a proxy bearing a later date, or by otherwise
notifying the Secretary of the Company in writing prior to the
Meeting.
The address of the Company's executive offices is 425 Park
Avenue, 27th Floor, New York, New York 10022, and its telephone
number is (212) 319-8300. This proxy statement and the
accompanying proxy are first being distributed to the
shareholders of the Company on or about November 18, 1996.
PRINCIPAL SHAREHOLDERS
No person beneficially owns at least 5% of the oustanding
shares of common stock of the Company as of November 8, 1996, see
"Securities Ownership of Directors and Executive Officers" for
the ownership of shares by Directors and Executive officers and
members of their families.
ELECTION OF DIRECTORS
The Board of Directors recommends the election of the eight
nominees for Directors listed below. The Directors to be elected
are to hold office until the next Annual Meeting of Shareholders
and until their respective successors are elected and shall have
qualified. If for any reason any of said nominees shall become
unavailable for election, proxies will be voted for a substitute
nominee designated by the Board, but the Board has no reason to
believe that this will occur. Directors of the Company are
elected by a plurality of the votes cast at a meeting of
shareholders.
<PAGE> 2
Information Concerning Nominees
The name and age of each nominee and the year he or she
became a Director of the Company, according to information
furnished by each, is as follows:
<TABLE>
<CAPTION>
Name Age First Became a Director
- ------------------------------- ----- -------------------------
<S> <C> <C>
Dr. Armen L.Takhtajan 86 1993
Dr. Taffy James Williams* 47 1995
Dr. Tanya G.Akimova* 43 1993
Norman Eisner* 75 1993
J. R. LeShufy* 73 1995
Bernard Nagelberg* 44 1993
Dr. Leonid Shpilenya 50 1993
David Zaretsky* 67 1993
</TABLE>
* Member of the Executive Committee which is authorized when
the Board of Directors is not meeting to act on behalf of the
Board on all matters, subject to limitations imposed by the
Business Corporation Law of New York.
Armen L. Takhtajan, Ph.D., Chairman of the Board of the
Company since August 1993, is a world leading expert in
systematic and evolutionary botany who has made a substantial
contribution to the understanding of biological diversity and the
relationships among plants. Dr. Takhtajan had been from 1973 to
1987 the Director of the Komarov Botanical Institute in St.
Petersburg, Russia. Since 1987, he has been a scientific
consultant to the Institute. He is a member of the Science
Academies of Russia and Armenia, a foreign member of the U.S.
National Academy of Sciences, a member of the Finnish, Norwegian
and Polish Academies of Science, the German Academy Leopoldina, a
Fellow of the Linnean Society in London, and a past president of
the International Association for Plant Taxonomy. He has written
numerous books and hundreds of scientific papers on plant
taxonomy.
Taffy James Williams, Ph.D., President, Chief Executive
Officer and a Director, holds a Ph.D. degree from the University
of South Carolina. He had been from May 1992 until he entered
the employ of the Company in June 1995, Vice President, Research
of Magainin Pharmaceuticals, Inc., where he directed research on
new classes of pharmacological agents for topical and systemic
use. Prior thereto he had been for approximately 14 years
employed by the Naval Medical Research Institute, initially as a
principal investigator and then Director of its Septic Shock
Research Program. His duties included the direction and
supervision of basic and applied research in gram-negative sepsis
and septic shock research in surgery, pulmonology, critical care,
pathology, microbiology, biochemistry, immunology and molecular
biology. Dr. Williams served on the Institute's Scientific
Advisory Board.
<PAGE> 3
Tanya G. Akimova, Ph.D., Vice President, Research
Administration, and a Director since July 1993, holds a Ph.D.
Degree in Linguistics from St. Petersburg University in Russia
and an M.S. degree in Management and Policy from W. Averell
Harriman School for Management and Policy, SUNY at Stony Brook.
From 1990, until becoming an officer of the Company, she was
employed part-time as an interpreter and translator for a joint
venture. She had been a Senior Researcher in the Institute of
Linguistics at the Russian Academy of Sciences in St. Petersburg
from 1979 to 1990, and a Professor of Linguistics at St.
Petersburg University from 1977 to 1980.
Norman Eisner, Vice President, Chief Financial Officer,
Treasurer and Secretary and a Director since May 1993, was, until
1986, Chief Executive Officer and Chairman of Lincoln Graphics
Arts, Inc., a graphic arts company which he founded in 1950.
Since 1986, he has been an independent investor and a participant
in several venture capital and leveraged buy-out transactions.
He has also been an executive officer and a director of several
privately held corporations, including International Business
Partners, Inc. ("IBP") since 1990, Amercom Funding Ltd.
("Amercom") since January 1992, and EPR Inc. ("EPR"), formerly
Environmental Protection Group. Ltd., which is engaged in the
production and sale of a patented particulate collection device,
since August 1992.
J. R. LeShufy, Vice President, Investor Relations since
September 1994, and a Director since December 1995 has been an
independent investor and business consultant for more than five
years and has been an officer of Amercom since January 1992.
Since 1995, Mr. LeShufy also has been President of Trilenium
Corporation, a company involved in Internet - related technology.
Bernard Nagelberg, Vice President, Finances, and a Director
since May 1993, has been, since 1983, an independent investor and
business consultant. He has also been an officer of several
privately held corporations, including IBP since 1990 and Amercom
since January 1992.
Leonid S. Shpilenya, M.D., Ph.D., Vice-President, Russian
Operations and a Director since August 1993, holds a medical
degree and a Ph.D. degree in Psychopharmacology from the Medical
Military Academy, St. Petersburg. Dr. Shpilenya is the Head of
the St. Petersburg Hospital for Drug Abuse and member of the City
Healthcare Committee on Drug and Alcohol Abuse. He is also
Professor of Psychiatry at the St. Petersburg School for
Postgraduate Medical Education after having been, for ten years,
Professor of Psychiatry at the Medical Military Academy in St.
Petersburg. Dr. Shpilenya is the author of more than 140
scientific publications related to psychopharmacology,
psychosomatic disorders, and disaster psychiatry and holds a
number of patents in the area of psychopharmacology. He is a
member of various professional societies and has participated in
and organized several international conferences on drug abuse.
David Zaretsky, a Director of the Company, has been an
independent investor and consultant for more than 20 years. He
has been an officer and a director of several privately held
corporations, including IBP since 1990, Amercom since January
1992 and EPR since August 1992. Mr. Zaretsky is a graduate of
Harvard Law School and a member of the Bar of Washington, D.C.
and of New York.
<PAGE> 4
Meetings and Committees
During the fiscal year ended June 30, 1996 ("Fiscal 1996"),
the Board of Directors held two meetings. Its Executive Committee
consists of Messrs. Eisner, LeShufy, Nagelberg and Zaretsky and
Drs. Akimova and Williams. The Company's Stock Option Committee
consists of Messrs. Eisner and LeShufy and Dr. Williams and an
Audit Committee, appointed in October 1995, consists of Messrs.
LeShufy, Nagelberg and Zaretsky. Including meetings in which
members acted by unanimous written consent, the Executive
Committee held six meetings, the Stock Option Committee held one
meeting, and the Audit Committee did not hold any meetings during
the year ended June 30, 1996. No member of a Committee failed to
attend or participate in less than 75% of the meetings of his or
her committee.
Directors' Compensation
The Company does not pay fees to its Directors. It
reimburses those who are not employees of the Company for their
expenses incurred in attending meetings.
EXECUTIVE COMPENSATION
Dr. Williams is employed pursuant to an agreement, dated June
4, 1995 providing for his full time employment as President and
Chief Executive Officer of the Company at an annual salary of
$165,000 for the first year with the salary for each of the
following years of the term to be determined by the Board of
Directors but to be not less than the salary for the preceding 12 month
period. The agreement provides for a three year term,
subject to earlier termination by Dr. Williams either upon six
months prior notice, or in the event of a default by the Company
upon 30 days prior notice if the default remains uncured or, by
the Company either upon three days prior notice with the Company
obligated for additional salary for a four month period or
immediately upon cause. Pursuant to the agreement, Dr. Williams
received a non-accountable expense allowance of 10% of his base
salary for the first 12 months of his employment. The Board of
Directors in December 1995 also awarded Dr. Williams a bonus of
$8,250.
Pursuant to the agreement, the Company granted Dr. Williams
on June 9, 1995 a five-year option under the Stock Option Plan to
purchase 100,000 shares of the Company's Common Stock at a price
of $1.125 per share (the closing sales price on the Nasdaq
SmallCap stock market on that date). The option is exercisable
in installments - with respect to 50,000 shares immediately, with
respect to an additional 25,000 shares after June 9, 1996 and with
respect to the balance, or 25,000 shares, after June 9, 1997. In
June 1996, the Company's Board of Directors increased Dr. Williams
salary to $185,000 per annum effective June 15, 1996 and granted a
ten-year option under the Stock Option Plan to purchase 60,000
shares of the Company's common stock at a price of $0.875 per
share (the closing price on the Nasdaq SmallCap stock market on
that date) exercisable in three installments - 20,000 shares on
each of the first, second and third anniversaries of June 15,
1996.
Under a Management Services Agreement dated December 31, 1993
and amended as of September 30, 1994, Amercom has provided and is
to provide for the term of the Agreement, advice with respect to
strategic planning, financial matters, merger and acquisition
policies, executive employment and investor relations and the
<PAGE> 5
performance of services as executive officers or comparable
services of Messrs. Eisner, LeShufy, Nagelberg and Zaretsky, all
of whom, along with Dr. Michael Gurvitch and Mr. Francis
Renkowicz, former officers and directors, are the sole
stockholders and officers or directors of Amercom, or in the event
any of the foregoing individuals is unable to perform such duties,
a reasonably capable replacement, subject to the approval of a
majority of the Company's directors. Each such officer may be
required under the agreement to provide services for up to 20
hours per five consecutive business days and up to an aggregate of
75 hours per 20 consecutive business days. Pursuant to the
agreement, Amercom provided through February 1, 1995, the initial
closing date of the public sale of the Company's Units, each
consisting of one share of Common Stock and one Common Stock
Purchase Warrant (the "IPO Closing") certain administrative
services, executive offices and facilities in New York City.
Under the agreement, Amercom is to receive (i) a fee for the year
ended June 30, 1994 of $112,500 payable after and subject to the
Company achieving net income for a fiscal year of at least
$500,000 as determined in accordance with generally accepted
accounting principles, (ii) no fee for the period July 1, 1994 up
to the IPO Closing and (iii) thereafter, a fee at the rate of
$8,333.33 per month. For the period from the IPO Closing through
June 30, 1995, and for the year ended June 30, 1996, Amercom
earned fees of $42,000 and $100,000, respectively. The Agreement
expires on February 1, 1998. The Agreement may not be renewed
unless the fees payable during the extended term are payable from
either revenues generated by the Company or the proceeds of the
sale of equity or long term indebtedness by the Company subsequent
to the IPO Closing. Amercom is also to receive standard fees
(reduced by any of such fees paid to third parties) for any
acquisition or disposition of companies or assets of businesses
and certain other matters.
During the term of the Management Services Agreement, the
Company will not pay any compensation or fees to Amercom or any
officers, directors or affiliates of Amercom who are also
officers, directors or affiliates of the Company except pursuant
to the Management Services Agreement. Amercom has agreed that any
executive office and administrative facilities and services it
furnishes after the IPO Closing will be at its cost, provided that
the amount of such costs when added to the other general and
administrative expenses (exclusive of travel expenses and the
management services fee) for that fiscal year of the Company will
not exceed $120,000. Amercom has agreed that such cost will be
competitive with the cost of similar offices, facilities and
services available from nonaffiliated persons.
Drs. Takhtajan and Shpilenya, each of whom reside in Russia,
are employed on a part-time basis in the performance of research
and development pursuant to five year employment agreements,
subject to earlier termination by either the Company or the
employee on at least six months prior notice. In the event of a
termination by the employee prior to the end of the initial five
year term, the employee will be required to return to the Company
the shares of Common Stock he acquired at the time of his initial
employment. Under the Company's agreement with the Komarov
Institute, with which Dr. Alexey Shavarda, Vice President,
Chemistry, of the Company is employed and for which Dr. Takhtajan
acts as a consultant, the respective portions of the year during
which those individuals will be engaged in the operations of the
Company are determined by mutual agreement between the Company and
the Komarov Institute. The annual compensation for the three
officers has been less than $50,000 per annum in the aggregate,
which reflects the materially lower compensation rates for
professionals in Russia than the prevailing rates for comparable
scientific personnel in the United States.
The Company has an employment agreement with Dr. Akimova,
providing for her employment through December 31, 1996 with
compensation commencing January 1, 1994 of $56,000 per annum
subject to a cost-of-living adjustment on July 1, 1996. The
agreement provides for the deferral of compensation of $28,000 for
<PAGE> 6
the six months ended June 30, 1994 until the Company achieves net
income for a fiscal year of at least $500,000 as determined in
accordance with generally accepted accounting principles. The
Board of Directors increased Dr. Akimova's compensation to $61,141
per annum effective June 15, 1996 and granted her a ten-year
option under the Stock Option Plan to purchase 10,000 shares at a
price of $0.875 per share (the closing price on the Nasdaq SmallCap
stock market on that day) exercisable in three equal installments - one
third of the shares on each of the first, second and third anniversaries of
June 15, 1996.
Summary Compensation Table
The following table sets forth the compensation paid or
accrued by the Company during the fiscal years ended June 30, 1996
and June 30, 1995 to the Company's Chief Executive Officer and
President (no other executive officer received compensation in
excess of $100,000 during either year).
<TABLE>
<CAPTION>
Long -Term
Annual Compensation Compensation
----------------------------- ------------
Name and Principal Other Securities
Capacities in Compen- Underlying
which Served Year Salary Bonus sation(2) Options
- --------------------- ----- ------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Taffy James
Williams (1) . . . . 1996 $165,833 $8,250 $16,500 60,000
Chif Executive Office
and President
</TABLE>
(1) Dr. Williams entered the Company's employ on June 5, 1995.
(2) Represents a nonaccountable expense allowance equal to 10% of
the base salary through June 5, 1996.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information with respect to
the beneficial ownership of shares of Common Stock as of November
8, 1996 of the President and Chief Executive Officer, each
Director, who is also a nominee for Director, and each shareholder
of the Company known to the Company to be a beneficial owner of
more than 5% of the outstanding shares of Common Stock, and all
executive officers and Directors as a group. The number of shares
beneficially owned is determined under the rules of the Securities
and Exchange Commission and the information is not necessarily
indicative of beneficial ownership for any other person. Under
such rules, "beneficial ownership" includes shares as to which the
undersigned has sole or shared voting power or investment power
and shares which the undersigned has the right to acquire within
60 days of November 8, 1996 through the exercise of any stock
option or other right. Unless otherwise indicated, the named
person has sole investment and voting power with respect to the
shares set forth in the table.
<PAGE> 7
<TABLE>
<CAPTION>
Percentage of
Number of Shares Outstanding
Name and Address Beneficially Owned(1) Shares
- ------------------------- --------------------- --------------
<S> <C> <C>
Taffy James Williams* 80,000(2) 2.5%
Tanya G. Akimova* 150,000(3) 4.8
Norman Eisner* 95,000(4) 3.0
J.R. LeShufy* - (5) **
Bernard Nagelberg* 60,000(6) 1.9
Leonid S. Shpilenya
56 Kondratievsky Pr.
Apt. 24
St. Petersburg, Russia 60,000 1.9
Arment L. Takhtajan
2 Roentgen Street, Apt25
St. Petersburg, Russia 40,000(7) 1.3
David Zaretsky* 20,000(8) **
All Directors and
Executive Officers as
a Group (12 persons) 507,000(2)-(9) 15.9
</TABLE>
* His or her address is c/o the Company, 425 Park Avenue, New
York, New York 10022.
** Less than one percent
(1) Unless otherwise indicated, the persons named in the table
above have sole voting and investment power with respect to
all shares beneficially owned by them, subject to applicable
community property laws.
(2) Includes 75,000 shares subject to options which are exer
cisable within 60 days.
(3) Does not include 40,000 shares owned by her husband, who is a
son of Dr. Takhtajan. Dr. Akimova disclaims beneficial
ownership of the shares owned by her husband.
<PAGE> 8
(4) Does not include 30,000 shares owned by each of Mr. Eisner's
two adult children, as to which shares Mr. Eisner disclaims
beneficial ownership.
(5) Does not include 120,000 shares owned by his wife and 40,000
shares owned by their adult daughter, as to which shares Mr.
LeShufy disclaims beneficial ownership.
(6) Does not include the 100,000 shares owned by his wife, as to
which shares he disclaims beneficial ownership, but includes
20,000 shares owned by each of two minor children.
(7) Does not include 40,000 shares owned by his wife, and 40,000
owned by each of three adult children, one of whom is the
husband of Dr. Akimova. Dr. Takhtajan disclaims beneficial
ownership of such shares.
(8) Does not include 46,668 shares owned by his wife, and 46,666
shares owned by each of their two adult children. Mr.
Zaretsky disclaims beneficial ownership of the shares owned
by his wife and children.
(9) Includes 75,000 shares subject to options held by Dr.
Williams which are exercisable within 60 days and 2,000
shares owned by Dr. Krell, Senior Vice President, Research &
Development for the Company.
Compliance with Section 16(a) of The Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934 (the
"Exchange Act") and the rules of the Securities and Exchange
Commission (the "Commission") thereunder require the Company's
Directors and officers, and any persons who own more than ten
percent of the Company's Common Stock (collectively, "Reporting
Persons"), to file reports of their ownership and changes in
ownership of Common Stock with the Commission. Reporting Persons
are also required to furnish the Company with copies of all
Section 16(a) reports they file.
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Company under Rule 16a-3(d), during the
year ended June 30, 1996, no person who was a director, officer or
beneficial owner of more than 10% of the Common Stock of the
Company ("10% owner") failed to file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act of 1934
except Form 4 reports of Dr. Williams, Dr. Akimova and Dr.
Shavarda as to receipt of stock options and a Form 3 report for
Dr. Krell with respect to his beneficial ownership.
CERTAIN TRANSACTIONS
During the period May through July 1993, shortly following
the formation of the Company, the Company issued an aggregate of
1,800,000 shares of its Common Stock at a price of $.0005 per
shares as follows: (i) an aggregate of 1,625,000 shares to the
following persons, who are officers, Directors, former Directors,
or members of their respective families--Messrs. Eisner, LeShufy,
Nagelberg, Renkowicz and Zaretsky, Drs. Akimova, Shavarda,
Shpilenya and Takhtajan; and Drs. Michael Gurvitch and Rudolf
Kamelin; (ii) 65,000 shares to Larry Scott Simon, Lorance Hockert
<PAGE> 9
and Michael Metz; (iii) 40,000 shares to each of Dr. Walter H.
Lewis and Dr. William Scott Chilton, former members of the
Company's Scientific Advisory Board; and (iv) 30,000 shares to Dr.
Konstantin Gurevich. The Company sold at a price of $.0005 per
share 100,000 shares in July 1993 to the Komarov Institute, with
which Drs. Takhtajan, Kamelin and Shavarda are associated, and
100,000 shares in August 1993 to the Center for Efferent Therapy,
with which Dr. Shpilenya is associated, as part of long term
agreements employing their respective services and facilities. In
December, 1995 and in January, 1996, the Center and Dr. Kamelin
respectively, returned their shares, an aggregate of 180,000, to
the Company.
See "Executive Compensation" for information as to the man-
agement services agreement between the Company and Amercom, with
which Messrs. Eisner, LeShufy, Nagelberg, Renkowicz and Zaretsky
and Dr. Gurvitch are affiliated.
From the proceeds from the initial public offering of its
Common Stock and Common Stock Purchase Warrants, the Company in
February 1995 repaid 4% demand loans aggregating to $44,000 along
with interest aggregating to $696 to Messrs. Eisner, LeShufy,
Nagelberg, Renkowicz and Zaretsky, and Dr. Gurvitch, each of whom
advanced $5,000, and IBP, which is an affiliate of the foregoing
individuals other than Dr. Gurvitch and which advanced $14,000.
Amercom provided office facilities and other general and
administrative services to the Company through July 26, 1995. The
related costs to the Company for the period from the IPO Closing
through July 26, 1995 aggregated to $24,000.
On July 27, 1995, the Company moved its principal executive
and administrative offices to 425 Park Avenue, New York, New York
under a sublease expiring April 2000 which provides for a base
rent of $195,300 per year plus operating costs, insurance and
taxes. A portion of the offices and facilities and certain
services of the Company's administrative personnel is made
available to Amercom and other companies affiliated with Messrs
Eisner, LeShufy, Nagelberg and Zaretsky (namely ProChem Ltd.,
Scentech Corp., Trilenium Corp., IBP, and ITD, Inc. which along
with Amercom are hereinafter referred to as the "Cost-Sharing
Affiliates") pursuant to a cost-sharing agreement with the
Company. The agreement provides that the Company will make
available up to 50% of the office space to the Cost-Sharing
Affiliates who are to reimburse the Company for up to 60% of the
rental obligation. Under the agreement, the Cost-Sharing
Affiliates bear a portion of the cost of providing the furniture
and equipment and administrative services to the Cost-Sharing
Affiliates based on a reasonable method of allocation determined
by the Company with any dispute as to the reasonableness of the
method to be settled by the auditors of the Company's financial
statements for the year in which the costs were incurred.
<PAGE> 10
PROPOSAL TO AMEND THE STOCK OPTION PLAN
The Company's 1993 Stock Option Plan (the "Plan") provides
for the granting of options to acquire a maximum of 500,000 shares
of the Company's Common Stock to employees, officers and
non-employee directors of, and consultants to the Company. The
Board of Directors in November 1996 through its Executive
Committee amended the Plan, subject to approval of its
shareholders, to increase the number of shares subject to the Plan
to 800,000. As of November 8, 1996, there were outstanding
options to purchase 418,000 shares of Common Stock. Of the options
outstanding, options for an aggregate of 246,000 shares are held
by directors and officers of the Company and options for 172,000
shares are held by consultants to the Company. The exercise
prices of outstanding options range from $0.875 to $1.25 (after
an amendment to consultants' option with respect to 57,000 shares
which reduced the exercise price from $5.00 to $1.125, the closing
sales price on the Nasdaq SmallCap stock market on the date of
this amendment).
The Plan authorizes the grant to key employees and non-employee
Directors of, and consultants to, the Company and any
subsidiaries of either, options which qualify as incentive stock
options ("ISOs") within the meaning of Section 422(A)(b) of the
Internal Revenue Code of 1954, as amended, or nonqualified stock
options ("NQSOs").
The approval of the holders of a majority of the shares of
Common Stock outstanding is required to approve the amendment to
the Plan. The Board of Directors believes that the granting of
options is important as a method of assisting the Company to
attract and retain key personnel, independent Directors and
consultants without the cash costs which are associated with other
incentive compensation plans and, accordingly, the authority to
grant additional options for this purpose will be beneficial to
the Company and stockholders. The Board of Directors recommends a
vote "FOR" the proposal.
No options granted under the Plan have been exercised. The
following table reflects information with respect to options which
have been granted to the Chief Executive Officer during the year
ended June 30, 1996 the only executive officer who received
remuneration in excess of $100,000 for the year.
<TABLE>
<CAPTION>
Number of % of Total
Shares Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted Fiscal Year Price Date
- ------------------ ----------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Taffy James
Williams . . . . 60,000(1) 41% $0.875 6/15/2006
</TABLE>
(1) The options are exercisable in installments - 20,000 shares
in each of the first, second and third anniversaries of the
date of grant, June 15, 1996.
<PAGE> 11
The following table provides information related to the
options held by Dr. Taffy Williams as of June 30, 1996
<TABLE>
<CAPTION>
Number of Value of
Underlying Unexercised
Securities in-the-Money
Unexercised Options at Fiscal
Options Year End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
- ---------------------------- --------------- ----------------
<S> <C> <C>
Taffy James Williams 75,000/85,000 $0/$0
</TABLE>
(1) Based on the closing sales price for the Company's common
stock on June 30, 1996 of $0.875.
The following table sets forth other pertinent information as
of November 8, 1996 with respect to options granted under the Plan
since the inception of the Plan (no options have been exercised).
<TABLE>
<CAPTION>
All Other
Current All Current
Executive Non-Employee
Taffy J. Officers Directors
Williams as a Group as a Group Employees
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Option Granted . . . 160,000 86,000 - - (1)
Average exercise
price . . . . . . $ 1.03 $0.985 - -
Options exercised. . None None - -
Average exercise
price . . . . . . - - - -
Shares Sold . . . . - - - -
Options Unexercised
as of 11/13/96 . . 160,000 86,000 - -
</TABLE>
(1) Does not include options to purchase 57,000 shares which were
granted to consultants with an exercise price of $5.00 per
share which price was reduced on May 31, 1995 to $1.125 per
share, the closing sales price of the Common Stock on the
Nasdaq SmallCap Stock Market that date.
The Plan permits the granting of ISOs or NQSOs, at the
discretion of the Stock Option Committee. The Committee presently
consists of Messrs. Eisner and LeShufy and Dr. Williams. Subject
to the terms of the Plan, the Board or the Stock Option Committee
determines the terms and conditions of options granted under the
Plan.
<PAGE> 12
ISOs may be granted to individuals who, at the time of grant,
are employees of the Company or its affiliates. NQSOs may be
granted to non-employee directors, employees, consultants and
other agents of the Company or its affiliates.
The Plan requires, except as indicated below, an exercise
price for ISOs and for NQSOs that is not less than 100% of the
fair market value per share at the date of grant and a term for
both ISOs and NQSOs which does not exceed ten years from the date
of grant. An ISO granted to a person owning more than 10% of the
voting stock of the Company may not provide for an exercise price
less than 110% of the fair market value per share at the date of
grant and a term longer than five years.
An optionee whose relationship with the Company or any
related corporation ceases for any reason (other than termination
for cause, death or total disability, as such terms are defined in
the Plan) may exercise options in the three-month period following
such cessation (unless such options terminate or expire sooner by
their terms), or during such longer period determined by the Stock
Option Committee in the case of NQSOs.
Options are non-transferable with certain exceptions. The
Board has certain rights to suspend, amend or terminate the Plan
provided shareholder approval is obtained.
The Company in April 1995 granted non-transferable two-year
options to purchase 100,000 shares of Common Stock to a non-affiliated
person for consulting services. The option was
exercised with respect to 50,000 shares at a price of $.10 per
share. The remaining options which are exercisable at $3.00 per
share during the second year were canceled by mutual agreement.
In October 1995, the Company granted to D.H. Blair and Co.,
Inc., ("Blair"), an investment banker, pursuant to a two-year
agreement employing Blair as a financial advisor and requiring it
to perform certain investment banking services, a five-year
Warrant to purchase 320,000 shares of the Company's Common Stock
at a price of $1.00 per share, exercisable after April 1, 1996.
The closing sales price of the Common Stock on the Nasdaq SmallCap
Stock Market for the Common Stock on the date of the consultant
agreement was $1.125 per share.
ANNUAL REPORT
The Annual Report of the Company to the shareholders for the
year ended June 30, 1996, including financial statements, is being
mailed to shareholders with this proxy material.
On written request, the Company will provide without charge
to each record or beneficial holder of the Common Stock as of
November 8, 1996, a copy of the Company's Annual Report on Form
10-KSB for the year ended June 30, 1996, as filed with the
Securities and Exchange Commission. Requests should be addressed
to Norman Eisner, Secretary, c/o Panax Pharmaceutical Company
Ltd., 425 Park Avenue, 27th Floor, New York, New York 10022.
<PAGE> 13
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company.
In addition to the use of the mails, proxies may be solicited
personally or by telephone or telegraph, by officers, Directors
and regular employees of the Company, who will not be specially
compensated for this purpose. The Company will also request
record holders of Common Stock who are securities brokers,
custodians, nominees and fiduciaries to forward soliciting
material to the beneficial owners of such stock, and will
reimburse such brokers, custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in forwarding soliciting
material.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Richard A. Eisner & Company, LLP, certified
public accountants, which has audited the Company's financial
statements as of June 30, 1996 and for the year then ended, has
been selected by management to audit the Company's financial
statements for the current fiscal year. A representative of
Richard A. Eisner & Company, LLP is expected to be present or
available by telephone at the Meeting with an opportunity to make
a statement to the shareholders if he desires to do so, and will
respond to appropriate questions.
OTHER MATTERS
The Company is unaware of any matters, other than those
mentioned above, which will be brought before the Meeting for
action. However, if any other matters properly come before the
Meeting, it is the intention of the persons named in the
accompanying form of proxy to vote such proxy in accordance with
their judgment on such matters.
Any proposals intended to be presented by shareholders at the
Annual Meeting of Shareholders to be held in 1997 must be received
by the Company for inclusion in the Company's proxy material no
later than July 8, 1997.
It is important that your proxy be returned promptly no
matter how small or large your holding may be. Shareholders who
do not expect to attend in person are urged to execute and return
the enclosed form of proxy.
November 8, 1996
/x/Norman Eisner
----------------------
Norman Eisner, Secretary
