<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-
12
..........Transderm Laboratories Corporation.................
(Name of Registrant as Specified in Its Charter)
..........Transderm Laboratories Corporation.................
(Name of Person(s) Filing Proxy Statement)
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 material:
<PAGE>
...............................................................
[ ]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>
<PAGE>
TRANSDERM LABORATORIES CORPORATION
1212 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 12, 1997
To the Stockholders of Transderm Laboratories Corporation:
Notice is hereby given that the Annual Meeting of
Stockholders of Transderm Laboratories Corporation (the
"Company") will be held at the Boardroom of the American Stock
Exchange, 86 Trinity Place, New York, New York, on May 12, 1997,
at 11:30 A.M. (local time) for the following purposes:
1. To elect nine directors.
2. To transact any such other business as may come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on
April 2, 1997 as the record date for determining stockholders
entitled to notice of and to vote at the meeting.
A proxy and return envelope are enclosed for your
convenience.
By Order of the Board of Directors
Robert D. Speiser,
President
April 7, 1997
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, A
RETURN ENVELOPE REQUIRING NO POSTAGE IF MAILED IN THE UNITED
STATES IS ENCLOSED FOR YOUR CONVENIENCE. PROMPT RETURN OF THE
PROXY WILL ASSURE A QUORUM AND SAVE THE COMPANY UNNECESSARY
EXPENSE.
<PAGE>
<PAGE>
TRANSDERM LABORATORIES CORPORATION
1212 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
_________________
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of
Transderm Laboratories Corporation, a Delaware corporation (the
"Company"), in connection with the solicitation of proxies by the
Board of Directors for use at the annual meeting of stockholders
of the Company (the "Meeting") to be held on May 12, 1997 and any
adjournment or adjournments thereof. A copy of the notice of
meeting accompanies this Proxy Statement. It is anticipated that
the mailing of this Proxy Statement and the enclosed proxy will
commence on April 9, 1997.
Only stockholders of record at the close of business on
April 2, 1997, the record date for the Meeting, will be entitled
to notice of and to vote at the Meeting. On the record date, the
Company had outstanding for purposes of voting at the Meeting
40,000,000 shares of common stock, par value $.001 per share (the
"Common Stock").
Directors of the Company are elected by a plurality vote of
the outstanding shares of Common Stock present and entitled to
vote at the Meeting. Action on any other matter is approved by a
majority vote of the outstanding shares of Common Stock present
and entitled to vote at the Meeting. Health-Chem Corporation
("Health-Chem"), the owner of 90% of the Company's Common Stock,
has indicated its intention to vote for the nine nominees for the
Board of Directors named herein, thereby assuring the election of
these nominees. See "Security Ownership of Certain Beneficial
Owners and Management."
Stockholders who execute proxies may revoke them by giving
written notice to the Secretary of the Company at any time before
such proxies are voted or by submitting a duly executed proxy
bearing a later date. Attendance at the Meeting shall not have
the effect of revoking a proxy unless the stockholder so
attending shall, in writing, so notify the Secretary of the
Meeting at any time prior to the voting of the proxy.
The Board of Directors does not know of any matter that is
expected to be presented for consideration at the Meeting other
than as is described in this Proxy Statement. However, if other
matters properly come before the Meeting, the persons named in
the accompanying proxy intend to vote thereon in accordance with
their judgment.
All proxies received pursuant to this solicitation will be
voted except as to matters where authority to vote is
specifically withheld and, where a choice is specified as to the
proposal, they will be voted in accordance with such
<PAGE>
specification. If no instructions are given, the proxy will be
voted for the nominees for election as directors of the Company
listed below. Abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a
quorum but will not be treated as votes cast for purposes of any
of the matters to be voted on at the meeting.
The address of the Company's principal executive office is
1212 Avenue of the Americas, New York, New York 10036.
<PAGE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-laws of the Company provide that the Board of Directors
may, from time to time, fix the number of directors constituting
the Board of Directors to be not less than two and not more than
ten. The Board of Directors currently consists of nine members.
At the Meeting, nine directors are to be elected to serve until
the next annual meeting of stockholders or until their respective
successors are elected and qualified. Set forth below are the
names of the nominees for director, their ages, principal
occupations and professional experience for at least the previous
five years. All of the nominees are currently directors of the
Company. It is the intention of the persons named in the
enclosed proxy to vote for the election as directors of the
persons named in the table below unless a contrary direction is
indicated on the enclosed proxy. If any such nominee should
become unavailable for any reason, which the Board of Directors
has no reason to anticipate, the persons named in the enclosed
proxy reserve the right to substitute another person of their
choice in his or her place. The holders of Common Stock are
entitled to one vote per share. The election of each director
will require the affirmative vote of a plurality of the votes
cast at the Meeting.
Name Age(1) Principal Occupation
Thomas J. Atkins, Ph.D. 50 Vice President of the
Company and Vice
President-Research and
Development of Hercon
Laboratories
Corporation
Joyce F. Brown, Ph.D. 50 Psychologist and
Professor of Clinical
Psychology at the
Graduate School and
University Center of The
City University of New
York
Michael J. Campbell 41 Senior Vice President and
Senior Creative Director
of Battan, Barton,
Durstin & Osbourne
David N. Dinkins 69 Professor in the Practice
of Public Affairs at the
Columbia University
School of International
and Public Affairs<PAGE>
<PAGE>
Name Age(1) Principal Occupation
Ester R. Fuchs, Ph.D. 45 Director of The Barnard-
Columbia Center for Urban
Policy of Columbia
University
Donald E. Kauffman, Jr. 42 Vice President of the
Company and Vice
President-Manufacturing
of Hercon Laboratories
Corporation
Murray Lieber 58 Vice President of the
Company and Vice
President-Marketing of
Hercon Laboratories
Corporation
Marvin M. Speiser(2) 71 President of Health-Chem
Corporation
Robert D. Speiser(2) 43 President and Chief
Executive Officer of the
Company and Hercon
Laboratories Corporation
and Executive Vice
President of Health-Chem
Corporation
(1)Age as of March 1, 1997.
(2)Marvin M. Speiser is the father of Robert D. Speiser.
The following are summaries of the business experience
during at least the last five years of each of the persons
nominated for election as a director of the Company.
Thomas J. Atkins, Ph.D. has been Vice President and a
director of the Company and Vice President-Research and
Development of the Company's 98.5% owned subsidiary Hercon
Laboratories Corporation ("Hercon Laboratories") since March
1996. Prior to joining Hercon Laboratories and since 1995, Dr.
Atkins served as Vice President, Research and Development for
Medisorb Technologies International, L.P. ("Medisorb"). From
1988 to 1994, he served as Director, Polymer Research and Drug
Delivery Systems for Stolle Research & Development Corporation
("Stolle"). Both Medisorb and its parent, Stolle, are engaged in
research and manufacturing of controlled release drug delivery
systems. Dr. Atkins is the author of numerous publications and
the named inventor on numerous United States and foreign patents.
Joyce F. Brown, Ph.D., has served as a director of the
<PAGE>
Company since July 1995. Dr. Brown is a psychologist and has
served as a professor of Clinical Psychology at the Graduate
School and University Center of The City University of New York
since January 1994. From January 1993 to December 1993, Dr.
Brown served as Deputy Mayor for Public and Community Affairs for
The City of New York. Prior thereto, Dr. Brown held a number of
senior administrative posts at The City University of New York
including serving as Acting President of Baruch College, Vice
Chancellor for Student Affairs and Urban Programs and Vice
Chancellor for Urban Affairs and Development.
Michael J. Campbell has served as a director of the Company
since July 1995. Mr. Campbell is Senior Vice President and
Senior Creative Director of the advertising firm Battan, Barton,
Durstin & Osbourne ("BBDO"). Mr. Campbell has been with BBDO
since 1986.
David N. Dinkins has served as a director of the Company
since April 1996. Mr. Dinkins has served as a Professor in the
Practice of Public Affairs at the School of International and
Public Affairs at Columbia University since 1994. The 106th
Mayor of the City of New York, from 1990 to 1993, Mr. Dinkins
served as President of the Borough of Manhattan from 1986 to
1989. He served as New York City Clerk from 1975 to 1985 and as
President of the New York City Board of Elections from 1972-1973.
Mr. Dinkins began his career in public service in 1966 in the New
York State Assembly. Mr. Dinkins maintained a private law
practice from 1956 to 1975.
Ester R. Fuchs, Ph.D., has served as a director of the
Company since July 1995. Dr. Fuchs is the Director of The
Barnard-Columbia Center for Urban Policy of Columbia University.
Dr. Fuchs has served as Associate Professor in the Department of
Political Science at Barnard College, Columbia University and a
member of the graduate faculty of Columbia University's
Department of Political Science and School of International and
Public Affairs since 1992. For ten years prior thereto, Dr.
Fuchs served as an Assistant Professor at Barnard.
Donald E. Kauffman, Jr. has been Vice President and a
director of the Company since July 1995 and Vice President-
Manufacturing of Hercon Laboratories since July 1987. Mr.
Kauffman joined Hercon Laboratories in June 1976 and has served
in various positions prior to becoming Vice President.
Murray Lieber has been Vice President and a director of the
Company since July 1995 and Vice President-Marketing of Hercon
Laboratories since June 1992. From September 1989 to June 1992,
he was Vice President, Account Supervisor at Klemtner
Advertising, a pharmaceutical advertising agency. Mr. Lieber was
Vice President of Diversified Health Affiliates, Inc., a
pharmaceutical and health care consulting firm, from January 1988
to September 1989. Prior thereto, Mr. Lieber held positions in
marketing and business development at companies including Berlex
<PAGE>
Laboratories (a division of Schering AG), Roche Laboratories, and
Warner Chilcott Laboratories (a division of Warner Lambert
Company).
Marvin M. Speiser has served as President and Chairman of
the Board of Directors of Health-Chem since January 1969. He has
been a director of the Company since its inception.
Robert D. Speiser has served as President and a director of
the Company since its inception on April 7, 1989. He has also
been the Executive Vice President of Health-Chem since April 1,
1994 and President of Hercon Laboratories since May 1990. From
October 1986 to March 1994, he served as Senior Vice President of
Health-Chem. Mr. Speiser also served as President of Union
Broach Corporation, a former Health-Chem subsidiary, from January
1983 through November 1993. Prior to 1986, he served as Vice
President of Health-Chem. Mr. Speiser is an attorney.
Directors' Fees, Committees and Meetings
The Company does not compensate its employee directors for
services rendered as directors. Non-employee directors receive
$1,250 per month and an additional fee of $500 for each meeting
of the Board of Directors attended and $500 for each committee
meeting attended that is independently scheduled. Non-employee
directors were also reimbursed for expenses incurred in attending
such meetings.
During 1996, the Board of Directors held four meetings and
acted by unanimous consent on one occasion. During such period
no director participated in fewer than 75% of the aggregate of
the number of meetings (including actions by unanimous consent)
of the Board of Directors and committees thereof of which such
director was a member. The Board of Directors has an Audit
Committee and a Compensation Committee. The Committees receive
their authority and assignments from the Board of Directors and
report to the Board. The Audit and Compensation Committees are
currently composed of Joyce F. Brown, Michael J. Campbell and
Ester R. Fuchs, who are non-employee directors.
The Audit Committee, among other things, is empowered to
recommend to the Board of Directors the engagement of the
independent auditors and to review the scope and procedures of
the activities of the independent auditors and their reports on
their audits. The Audit Committee meets periodically with the
independent auditors and management to review their work and
confirm that they are properly discharging their
responsibilities. The Audit Committee met once during 1996.
The Compensation Committee is empowered to make
recommendations to the Board of Directors relating to the overall
compensation arrangements for senior management of the Company
and to make recommendations to the Board of Directors pertaining
to any compensation plans in which officers and directors of the
<PAGE>
Company are eligible to participate. The Compensation Committee
is also responsible for the administration of the Company's 1996
Performance Equity Plan. The Compensation Committee met once and
acted by unanimous consent on another occasion during 1996.
The Company does not have a standing nomination committee.
EXECUTIVE OFFICERS
The following are the executive officers of the Company:
Officers Position Age(1)
Robert D. Speiser President 43
Thomas J. Atkins, Ph.D. Vice President 50
Ronald J. Burghauser Controller, Treasurer and 36
Secretary
Donald E. Kauffman, Jr. Vice President 42
Murray Lieber Vice President 58
(1) As of March 1, 1997
The following is a summary of the business experience during
at least the last five years of the executive officer of the
Company who is not also a director or nominee for election as
director. Each of the officers serves at the discretion of the
Board of Directors of the Company or its subsidiary, as the case
may be, from the date of his election until the next annual
meeting of the Board of Directors of the Company or its
subsidiary or until his successor is elected and qualified,
subject to earlier termination by removal or resignation.
Ronald J. Burghauser, a certified public accountant, has
served as Controller of the Company and Hercon Laboratories since
June 1995 and was elected Treasurer and Secretary of the Company
in July 1995. Prior thereto and since January 1990, Mr.
Burghauser served as Controller for Adell Plastics, Inc. a
Baltimore, Maryland plastics manufacturer. From 1982 to 1989,
Mr. Burghauser was employed by Ernst & Young, Baltimore,
Maryland, as an Audit Manager.
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
(a) As of February 28, 1997, other than as set forth in the
following table, the Company knows of no other person or "group"
(as that term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) who beneficially owns more than 5% of any
class of the Company's voting securities. The following table
contains, as to each class of the Company's voting securities,
the name and address of each such 5% beneficial owner, the amount
of securities of such class beneficially owned, and the percent
of such class beneficially owned.
<PAGE>
<PAGE>
<TABLE> Number of Shares
<CAPTION> Beneficially Owned
<S> as of
Title of Class Name and address February 28, Percent
of Beneficial Owner 1997 (1) of Class
<C> <C> <C>
Common Stock Health-Chem Corporation 36,000,000 90.00%
Common Stock Robert D. Speiser(2) 10,156,340(3) 20.31%
Common Stock Marvin M. Speiser(2)(7) 7,520,362(4) 16.71%
Common Stock Laura G. Speiser(2)(7) 7,520,362(5) 16.71%
Common Stock Marvin M. Speiser 7,520,362(6) 16.71%
1996 Trust (2)(7)
________________________
/TABLE
<PAGE>
<PAGE>
(1) The information concerning security holders is based upon
information furnished to the Company by such security holder.
Except as otherwise indicated, all of the shares are owned of
record and beneficially and the persons identified have sole
voting and investment power with respect thereto.
(2) Address is c/o Health-Chem Corporation, 1212 Avenue of the
Americas, New York, NY 10036.
(3) Includes the following shares of Common Stock: (i) 8,826
shares held by Smith Barney as custodian for the IRA of Robert D.
Speiser; (ii) 5,000,000 shares issuable upon exercise of
currently exercisable stock options; (iii) 144,185 shares held in
the Marvin M. Speiser 1996 Trust (the "1996 Trust"), of which
Laura G. Speiser (the wife of Marvin M. Speiser) and Robert D.
Speiser serve as trustees; and (iv) 5,000,000 shares issuable to
the 1996 Trust upon exercise of currently exercisable stock
options. Robert D. Speiser disclaims beneficial ownership of the
shares of Common Stock referenced in (iii) and (iv) above.
(4) Includes the following shares of Common Stock: (i) 188,475
shares owned by Lauralei Investors, Inc. ("Lauralei"), of which
Marvin M. Speiser and Laura G. Speiser are the sole stockholders;
(ii) 144,185 shares held by the 1996 Trust; (iii) 220,307 shares
held by the Laura G. and Marvin M. Speiser Trust (the "1995
Trust"), of which Laura G. Speiser and Marvin M. Speiser serve as
trustees; and (iv) 274,343 shares of Common Stock owned by Laura
G. Speiser. Marvin M. Speiser disclaims beneficial ownership of
the shares of Common Stock referenced in (iv) above.
(5) Includes the following shares of Common Stock: (i) 188,475
shares owned by Lauralei; (ii) 144,185 shares held by the 1996
Trust; (iii) 220,307 shares held by the 1995 Trust; (iv)
5,000,000 shares issuable to the 1996 Trust upon exercise of
currently exercisable stock options; and (v) 1,693,052 shares of
Common Stock owned by Marvin M. Speiser. Laura G. Speiser
disclaims beneficial ownership of the shares of Common Stock
referenced in (i) and (v) above.
(6) Includes the following shares of Common Stock: (i) 220,307
shares of Common Stock held by the 1995 Trust; (ii) 188,475
shares of Common Stock owned by Lauralei; (iii) 5,000,000 shares
issuable to the 1996 Trust upon exercise of currently exercisable
stock options; (iv) 1,693,052 shares of Common Stock owned by
Marvin M. Speiser; and (v) 274,343 shares of Common Stock owned
by Laura G. Speiser. The 1996 Trust disclaims beneficial
ownership of the shares of Common Stock referenced in (i), (ii),
(iv) and (v) above.
(7) May be deemed to beneficially own, as of February 28, 1997,
an aggregate of 2,769,567 shares or 34.03% of the common stock of
Health-Chem.
<PAGE>
(b) As of February 28, 1997, each director of the Company, each
of the Company's current executive officers named in the Summary
Compensation Table below and all directors and officers of the
Company, as a group, beneficially owned the following amounts
(and percentages) of each class of the voting securities of the
Company.<PAGE>
<PAGE>
<TABLE> Number of Shares
<CAPTION> Beneficially Owned
<S> Name of as of Percent of
Title of Class Beneficial Owner February 28, 1997 (1) Class
<C> <C> <C>
Common Stock Thomas J. Atkins 0 0
Common Stock Ronald J. Burghauser 424 *
Common Stock Joyce F. Brown 0 0
Common Stock Michael J. Campbell 0 0
Common Stock David N. Dinkins 0 0
Common Stock Ester R. Fuchs 1,626 *
Common Stock Donald E. Kauffman, Jr. 0 0
Common Stock Murray Lieber 3,534 *
Common Stock Marvin M. Speiser 7,520,362(2) 16.71%
Common Stock Robert D. Speiser 10,156,340(3) 20.31%
Common Stock All directors and
officers as a group
(10 Persons) 12,538,101(4) 25.08%
* Indicates ownership of less than one percent (1%) of class.
/TABLE
<PAGE>
<PAGE>
(1) The information concerning security holders is based upon
information furnished to the Company by such security holder.
Except as otherwise indicated, all of the shares are owned of
record and beneficially and the persons identified have sole
voting and investment power with respect thereto.
(2) See footnote (4) to the table under (a) above for the
number of shares with respect to which Marvin M. Speiser has the
right to acquire beneficial ownership and as to the beneficial
ownership of certain other shares.
(3) See footnote (3) to the table under (a) above for the
number of shares with respect to which Robert D. Speiser has the
right to acquire beneficial ownership and as to the beneficial
ownership of certain other shares.
(4) Includes 10,000,000 shares of Common Stock issuable upon
the exercise of stock options which are currently exercisable or
exercisable within 60 days.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers, directors and persons who
beneficially own more than 10% of the Company's Common Stock to
file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports filed by such
persons.
Based solely on the Company's review of such reports furnished
to the Company, and written representations from certain
reporting persons, the Company believes that all such filing
requirements were complied with during or in respect of the year
ended December 31, 1996.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the
compensation of each of the Chief Executive Officer and the other
most highly-compensated executive officers of the Company whose
annual salary and bonus, if any, exceeded $100,000 for services
in all capacities to the Company during the last three fiscal
years.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S>
Long-term All Other
Compensation Compensa-
Name and Principal Annual Compensation Other Annual Awards tion
Position Year Salary Bonus Compensation(1)Options(2) (1)(3)
<C> <C> <C> <C> <C> <C>
Robert D. Speiser(4) 1996 $138,400 $--- $ 990 0 $ 212
President 1995 137,124 --- 3,641 5,000,000(5) 217
1994 132,247 39,540 3,505 20,000 214
Murray Lieber 1996 $140,000 $--- 600 1,000,000 $ 1,350
Vice President 1995 130,000 5,000 706 0 1,296
1994 121,031 30,415 742 7,500 1,179
Thomas J. Atkins 1996 $104,500 $--- $48,144 250,000 557
Vice President
/TABLE
<PAGE>
<PAGE>
(1) Does not include information with respect to personal
benefits provided to the named individuals which do not exceed
disclosure thresholds established under Securities and Exchange
Commission rules.
(2) For 1994, includes options to purchase common stock of the
Company's parent, Health-Chem.
(3) Represents the term cost value of all excess group life
insurance policies on behalf of the named individuals.
(4) Amounts included under Annual Compensation, Other Annual
Compensation and All Other Compensation represent the portion of
the compensation paid by Health-Chem pursuant to its employment
arrangements with Mr. Speiser and which have been allocated to
the Company. See "Employment Agreement; Options to Purchase
Common Stock" and "Certain Transactions with Parent Corporation."
(5) Represents an option to purchase Common Stock of the Company
granted in accordance with Mr. Speiser's employment agreement
with Health-Chem. See "Employment Agreement; Options to Purchase
Common Stock."<PAGE>
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> Potential Realizable
<S> Value at Assumed
Annual Rates of
Individual Grants Stock
% of Total Price Appreciation
Options Options Exercise for
Granted Granted in or Base Price Expiration Option Term (1)
Name (#)(1) Fiscal Year ($/Sh) Date 5%($) 10%($)
<C> <C> <C> <C> <C> <C>
Thomas J.
Atkins 250,000 17.9 .125 12/11/06 19,653 49,804
Murray
Lieber 1,000,000 71.4 .125 11/18/06 78,612 199,218
(1) The assumed rates are compounded annually for the full
term of the options.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
CAPTION>
<S>
Number of Securities Value of
Underlying Unexercised Unexercised
Options In-the-Money
at Options at
Shares Acquired 12/31/96(#) 12/31/96($)(2)
on Value Exercisable/ Exercisable/
Name Exercises (1)(#) Realized Unexercisable Unexercisable
($)(1)
<C> <C> <C> <C>
Robert D.
Speiser --- --- 5,000,000/ 0 125,000/0
Thomas J. --- --- 0/ 250,000 0/0
Atkins
Murray --- --- 0/1,000,000 0/0
Lieber
(1) No named executive officer exercised any stock options during the fiscal year ended
December 31, 1996.
(2) Based upon the last sales price of the Company's Common Stock reported as traded in
1996 on the National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") Bulletin Board minus the option exercise price.
</TABLE>
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT; OPTIONS TO PURCHASE COMMON STOCK
In April 1995, Health-Chem entered into a five-year Employment
Agreement with Robert D. Speiser which provided for an initial
base annual salary of $223,668 ($104,000 in respect of services
as an officer of the Company's Hercon Laboratories subsidiary)
plus an annual bonus determined by the Health-Chem Board at least
equal to ten percent of the amount by which pretax net income of
Hercon Laboratories for a calendar year exceeds the average of
Hercon Laboratories' pretax net income, as defined, for the prior
two calendar years, and for similar benefits, vacation and
perquisites as that made available to comparable executives of
Health-Chem. The Employment Agreement also provides for minimum
yearly salary increases of 4% on each September 1 during the
employment period. Mr. Speiser received 5% salary increases on
each of September 1, 1995 and 1996. The Employment Agreement
further provides that upon retirement on or after January 1, 2010
(the "retirement date"), Robert D. Speiser will be entitled to
receive an annual supplemental pension benefit equal to 60% of
his final base salary, which for this purpose will be the highest
nominal annual salary paid to him during his employment. The
supplemental pension will be payable for a period of ten (10)
years beginning on the retirement date, or if later, the January
1 following termination of employment. In the event of
termination of employment prior to the retirement date, the
amount of the supplemental pension payable on that date will be
prorated based on the period of employment from December 31, 1994
to the date of termination. No proration will be applied,
however, if Mr. Speiser's employment is involuntarily terminated
(as described below). An actuarially reduced supplemental
pension benefit may be paid if the benefit is commenced upon
termination of employment prior to the retirement date.
Pursuant to the Employment Agreement, Health-Chem caused the
Company to grant to Robert D. Speiser an option to purchase
5,000,000 shares of Common Stock of the Company, at an exercise
price of $.10 per share, which option became exercisable in full
on November 13, 1996, the first anniversary of the date of grant,
and will expire ten (10) years from the date of grant, subject
to earlier termination on the first anniversary of termination of
Mr. Speiser's employment due to death or disability, or in
circumstances that do not qualify as involuntary termination
under the Employment Agreement. In the event of involuntary
termination, the option will terminate on the earlier of the
fifth anniversary of such termination of employment or ten (10)
years from the date of grant. Finally, if within 18 months
following the termination of his employment with Health-Chem or
any of its subsidiaries, Robert D. Speiser accepts employment
with a competitor or otherwise engages in competition with the
business of the Company, Health-Chem or any of their
subsidiaries, any unexercised options at that time will be
forfeited and he will be obligated to pay the Company with
respect to any exercised options, the economic value realized or
obtained at the time of exercise.
<PAGE>
Robert D. Speiser is entitled to continue to receive the
salary, bonus and other compensation provided for under the
Employment Agreement for a period of five (5) years following an
involuntary termination of his employment during the term of the
Employment Agreement. Robert D. Speiser's employment will be
deemed to have been involuntarily terminated if his employment is
terminated by Health-Chem for reasons other than cause, which is
defined to mean certain felony convictions or the willful and
continued failure to substantially perform duties. Mr. Speiser's
employment will be deemed to have been involuntarily terminated
in the event of his resignation following a breach of the
Employment Agreement by Health-Chem, a material diminution of his
duties and responsibilities, a change in his primary employment
location to a place outside the New York City metropolitan area,
or for any reason within one year following a Change in Control.
For purposes of the Employment Agreement, a "Change in Control"
is defined to include (i) the acquisition of beneficial ownership
of 25% of the combined voting power of Health-Chem securities,
(ii) the first purchase of Health-Chem common stock pursuant to a
tender or exchange offer, (iii) the approval by Health-Chem
stockholders of a merger or consolidation in which Health-Chem is
not the surviving corporation or a sale or disposition of
substantially all of Health-Chem's assets or a plan of
liquidation or dissolution, or (iv) a change in the composition
of the Board of Health-Chem by more than one-third (1/3) in any
two-year period other than directors nominated by the existing
Board. The Employment Agreement also provides that Robert D.
Speiser will be entitled to supplemental compensation to mitigate
the effect of any excise taxes to which he may be subject as a
result of a Change in Control.
In April 1995, Health-Chem also entered into a similar
Employment Agreement with Marvin M. Speiser, including the same
provisions regarding (i) the grant of an option to acquire shares
of the Company's Common Stock on a fully-diluted basis and (ii)
the payment of a portion of his bonus based on the increase in
pretax net income, as defined, for Hercon Laboratories under the
same terms as set forth above for Robert D. Speiser. Pursuant to
this Employment Agreement, Health-Chem caused the Company to
grant Marvin M. Speiser an option, in November 1995, to purchase
up to 5,000,000 shares of Common Stock of the Company at an
exercise price of $.10 per share on substantially the same terms
and conditions as set forth above for Robert D. Speiser.
<PAGE>
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the change in the cumulative
total stockholder return on the Company's Common Stock since
November 28, 1995 (the date public trading of the Company's stock
commenced) through the fiscal year ended December 31, 1996, with
the cumulative total return of the Russell 2000 Stock Index and
the NASDAQ Pharmaceutical Index. The graph assumes a $100
investment on November 28, 1995 and the reinvestment of any and
all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
TRANSDERM LABORATORIES CORPORATION,
RUSSELL 2000 STOCK INDEX and the NASDAQ PHARMACEUTICAL INDEX
11/28/95 12/31/95 12/31/96
Transderm Laboratories
Corporation $100.00 $300.00 $100.00
Russell 2000 Stock Index $100.00 $115.36 $115.48
NASDAQ Pharmaceutical Index $100.00 $102.64 $119.68
<PAGE>
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is composed of three independent outside directors
of the Company. During 1996, the Committee met on one occasion
(and acted by consent on one occasion) to carry out its
responsibilities including the administration of compensation
matters for senior executives of the Company, consistent with the
relevant policies of the Company's parent, Health-Chem
Corporation ("Health-Chem").
In administering compensation matters, the Committee has
focused on the compensation of Company executives: on a
competitive basis with other comparably sized and managed
companies; in a manner consistent and supportive of overall
Company objectives; and, through a compensation plan which is
intended to balance the longer and shorter-term strategic
initiatives of the Company. Consistent with compensation program
objectives identified in last year's Compensation Committee
Report, the Committee intends that the executive compensation
program will:
1. reward executives for strategic management and
enhancement of stockholder value;
2. reflect each executive's success at resolving key
operational issues;
3. facilitate both the short and long-term planning
process; and
4. attract and retain key executives believed to be
critical to the long-term success of the Company.
The Company's compensation program for executive officers
generally consists of a fixed base salary, performance-related
bonus awards and long-term incentive compensation in the form of
stock options. In addition, Company executives are able to
participate in various benefit plans generally available to other
full-time employees of the Company, and in certain instances,
Health-Chem.
In reviewing the Company and executives' performance of the
past fiscal year, the Committee took into consideration, among
other things, the following performance factors in making its
compensation recommendations: the lack of profitability of the
Company, due primarily to extraordinary legal expenses, and the
desire to attract and retain key personnel.
Compensation of the Company's Chief Executive Officer,
Robert D. Speiser, is governed largely by the terms of an
employment agreement entered into with the Company's parent,
Health-Chem, in 1995. For a more complete description of this
employment agreement see "Executive Compensation-Employment
Agreement; Options to Purchase Common Stock" elsewhere in this
Proxy Statement.
<PAGE>
Base Salary
An executive's base salary is intended to provide a
competitive remuneration for services provided to the Company
over a one-year period or such longer period as may be covered
under employment agreements. Base salaries are set at levels
designed to attract and retain the most appropriately qualified
individuals for each of the key management level positions within
the Company.
Short-Term Incentives
Short-term incentives are paid primarily to recognize
specific operating performance achieved within the last fiscal
year. Since such incentive payments are related to a specific
year's performance, the Committee understands and accepts that
such payments may vary considerably from one year to the next.
The Company's bonus program ties executive compensation directly
to operating profitability. Depending on management level and
seniority, certain executives are able to earn a percentage of
the improvement in operating profitability over the average for
the preceding two calendar years. Based on this formula, no
bonus payments were paid to the named executives for the fiscal
year 1996.
Long-Term Incentives
The Committee recognizes the value of stock option grants in
motivating long-term decision making. In 1996, options to
acquire up to 1,400,000 shares of Common Stock were granted under
the 1996 Performance Equity Plan, including options for 1,250,000
shares to two named executive officers, Dr. Atkins and Mr.
Lieber (250,000 shares and 1,000,000 shares, respectively).
These options, which vest over five years, have an exercise price
of $0.125 per share, which was the last sale price as reported on
the NASDAQ Bulletin Board prior to each grant. In determining
the size of the grants, the Committee took into account such
factors as tenure with the Company, management responsibilities
and the general competitive environment for executive talent
within the industry.
Chief Executive Officer
Pursuant to his employment agreement with the Company, as of
September 1, 1996, Mr. Robert D. Speiser, Chief Executive
Officer, received an increase in his base salary of 5% over the
prior year's level, adjusted proportionately for the balance of
1996, which was consistent with salary increases both Company-
wide and within the Health-Chem consolidated group. Pursuant to
his employment agreement, the amount of any bonus for Mr. Speiser
is based on the improvement in earnings over the average earnings
for the preceding two calendar years within the Company's Hercon
Laboratories subsidiary. On this basis, Mr. Speiser received no
bonus payment for 1996. The Committee did not consider any grant
of option to Mr. Speiser in 1996.
The Committee believes that Mr. Speiser's compensation
reflects his contribution to the Company and the achievement of
specific long-term and short-term objectives of the Company.
<PAGE>
Compensation Committee,
JOYCE F. BROWN
MICHAEL J. CAMPBELL
ESTER R. FUCHS
CERTAIN TRANSACTIONS WITH PARENT CORPORATION
In 1996, the Company paid Health-Chem $682,500 in interest
under a $7,000,000 principal amount 9% Subordinated Promissory
Note due March 31, 1999. This note was issued to Health-Chem at
the closing of the transactions under the 1995 Plan of
Reorganization and Asset Exchange Agreement (the "1995 Plan of
Reorganization").
In 1996, the Company paid Health-Chem $741,000 as dividends
in respect of shares of the Company's 7% Redeemable Preferred
Stock $10.00 par value (the "Preferred Stock") and $500,000 in
redemption of 50,000 shares of Preferred Stock. One million
shares of Preferred Stock were originally issued to Health-Chem
at the closing under the 1995 Plan of Reorganization. The
Company is required to redeem 100,000 shares of Preferred Stock
at par on March 31 of each year from 1997 through 2004 and
150,000 shares of Preferred Stock at par on March 31, 2005.
In 1996, the Company reimbursed Health-Chem $998,000
pursuant to a Corporate Services Agreement entered into in
connection with the 1995 Plan of Reorganization. Under this
agreement, Health-Chem provides or otherwise makes available to
the Company certain general corporate services provided by
Health-Chem's corporate staff, including but not limited to,
accounting, tax, corporate communications, legal, data
processing, purchasing, human resources, financial and other
administrative staff functions, and arranges for administration
of insurance and employee benefit programs. The Company
reimburses Health-Chem for the actual out-of-pocket cost to
Health-Chem or, for those services not directly attributable to
the Company, reimburses Health-Chem based upon a method
(allocation based upon the Company's net sales as a percentage of
Health-Chem's consolidated net sales) which is considered by the
Company to be reasonable. The agreement has an initial term
expiring on December 31, 1997 and will automatically renew for
successive one-year terms unless notice of non-renewal is given
by either party.
Pursuant to a Tax Sharing Agreement also entered into in
connection with the 1995 Plan of Reorganization, the Company is
required to pay Health-Chem as it uses Health-Chem's net
operating loss and tax credit carryforwards to offset future
taxable income. In 1996, the amount of such payment was $410,000
and at December 31, 1996, the maximum amount of such future
payments was $393,000.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand, L.L.P., independent public accountants,
currently audit the Company's books and records.
<PAGE>
Representatives of Coopers & Lybrand, L.L.P. are expected to
be present at the Meeting, will be given the opportunity to make
a statement if they so desire, and are expected to be available
to respond to appropriate questions.
ANNUAL REPORT TO STOCKHOLDERS
A copy of the Company's 1996 Annual Report has been mailed
to stockholders of record at the close of business on April 2,
1997 together with this Notice of Meeting and Proxy Statement.
The Company files an annual report on Form 10-K with the
Securities and Exchange Commission which includes additional
information concerning the Company and its operations. This
report, except for exhibits, will be furnished to stockholders,
without charge, upon written request to the Secretary of the
Company.
COST OF SOLICITATION
The Company will bear the cost of the Meeting and the cost
of soliciting proxies, including the cost of mailing the proxy
material. In addition to solicitation by mail, directors,
officers, and regular employees of the Company (who will not be
specifically compensated for such services) may solicit proxies
by telephone or otherwise. Arrangements will be made with
brokerage houses and other custodians, nominees, and fiduciaries
to forward proxies and proxy material to their principals, and
the Company will reimburse them for their reasonable expenses
incurred in connection therewith.
STOCKHOLDER PROPOSALS
Stockholders of the Company wishing to include proposals in
the proxy material in relation to the annual meeting of the
Company to be held in 1998 must submit the same in writing so as
to be received at the principal executive office of the Company
on or before November 14, 1997. Such proposals must also meet
the other requirements of the rules of the Securities and
Exchange Commission relating to stockholder proposals.
By Order of the Board of Directors,
Robert D. Speiser
President
New York, New York
